Consolidating for REPAYE

[oral&maxillofacialsurgery]

I'm a fourth year dental student starting a 6-year M.D. integrated oral and maxillofacial surgery residency in July - first 2 years in medical school then 4 years of omfs residency. As of now, I'm leaning towards academia over private practice but I cannot ignore the income gap with ~$500k, including accrued interest, in student loans by the time I finish residency so PSLF may be the only financial incentive to stay in academia.

The Health Profession Student Loan is a subsidized federal loan serviced by my dental school with a 5% interest rate but it's not a direct loan that qualifies for REPAYE unless I consolidate with my Direct Loans. However, HPSL allows deferment during residency and the interest is subsidized.

My original plan was to consolidate my HPSL after medical school and start REPAYE during 4 years of residency making qualifying payments towards PSLF. With the latest uncertainty of PSLF, I realize I cannot rely on the PSLF being available in 2029 but should I take the chance to consolidate early and forfeit HPSL subsidized interest during residency in order to make qualifying payments towards PSLF?

Health Professions Student Loan: $143,300
Direct Unsub/Grad Plus: $221,387.86 (principal) + $25,579.91 (accrued interest) = $246,837.00
Expected Medical School Tuition: $40,000/yr x 2 = $80,000 (Direct Loans)

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[SigmaFS]

Here's my recommendations:

1. After DS graduation, immediately consolidate (www.studentloans.gov) your Direct Unsub & Grad Plus Loan and select REPAYE to mitigate interest accrual.
   • Do not include HSPL in this consolidation to retain subsidy.
2. While in MS, take a separate, small DL out. For example, MS1 take out $40k, then MS2 take out $39k and $1k.
   • After completing MS and before starting residency, consolidate MS DLs of $40k and $39k and select REPAYE to mitigate interest accrual.
3. After completing residency, several options:
   • Consolidate the remaining $1k DL with HPSL and select REPAYE to again mitigate interest accrual, or
   • Refi selected loans with a commercial lender in an effort to lower the interest rate, or
   • Select a more conventional repayment option within the federal system (say, the 10 year standard) if your income can support the payment.

Steps 1 & 2 is an attempt to minimize interest accrual. HPSL should be subsidized for the length of MS and residency.

Assumption - You are not married. REPAYE sometimes does not treat married couples kindly.

 

[shaiboy]

Here's my recommendations:

1. After DS graduation, immediately consolidate (www.studentloans.gov) your Direct Unsub & Grad Plus Loan and select REPAYE to mitigate interest accrual.
   • Do not include HSPL in this consolidation to retain subsidy.
2. While in MS, take a separate, small DL out. For example, MS1 take out $40k, then MS2 take out $39k and $1k.
   • After completing MS and before starting residency, consolidate MS DLs of $40k and $39k and select REPAYE to mitigate interest accrual.
3. After completing residency, several options:
   • Consolidate the remaining $1k DL with HPSL and select REPAYE to again mitigate interest accrual, or
   • Refi selected loans with a commercial lender in an effort to lower the interest rate, or
   • Select a more conventional repayment option within the federal system (say, the 10 year standard) if your income can support the payment.

Steps 1 & 2 is an attempt to minimize interest accrual. HPSL should be subsidized for the length of MS and residency.

Assumption - You are not married. REPAYE sometimes does not treat married couples kindly.

May I ask what the purpose of consolidating immediately after DS graduation? Can you not do REPAYE without consolidating your loans?

 

[SigmaFS]

Yes, you can enter REPAYE without consolidation, but not until the end of your grace period. Consolidation allows you to waive your grace period and enter REPAYE approximately 4-6 weeks after submitting a consolidation application.

 

[BorntobeDO?]

May I ask what the purpose of consolidating immediately after DS graduation? Can you not do REPAYE without consolidating your loans?

Its effectively lowering your interest rate to half of what it really is thru the subsidy. Since you have zero income and it pays half of whatever interest is required after the minimum payment, it will make your loans consolidated at say 5.75% more like 2.85% which is probably better even than deferment.