Federal Loan HELP!! New Advice-Please..Multiple options

[jypat84]

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Hello guys..thanks in advance

Im going into FM and my total loan balance including interest as of today is $395,799!!😱 Yes I know..but I needed it...

I have Direct(subsidized and unsubsidized), Federal Staford(subsidized and unsubsidized), Direct PLUS and Federal PLUS

Interest rate are 6.8% and 8.5% for the PLUS ( I think)

I know I have several options..IBR+PSLF Vs..standard payment..and many more....

I am not interested in the IBR....too many things plus not sure how it will be in the future..

Would you consolidate or not consolidate and take the standard payment and pay off hte higher interest rates...

but on the side note...My school has tons of PCL(Primary care loans) available on a fixed rate of 5%..and no interest collection during 12 month grace and all...but you can't pay off all loans in less than 10 years...it has to be between 10 and 25 years...school will try to convert all my loans if possible..i do not know yet waiting to apply but want to see my options...I can not do PSLF with PCL

My wife and I are planning on budgeting and all and try to pay off ASAP...

My residency salary pre-tax is 50,000...

school hasnt been much help and im trying to read online as much as possible...


My question to you is what would you do? What options would you consider?
Residents what options did you guys choose...

Thanks a lot for all the opinions and suggestions...

 

[Textbookversion]

IBR during residency.

 

[physicsnerd42]

IBR during residency.

This. You can use a loan repayment calculator to help figure things out. Even if you can somehow get all of your loans converted to 5% and repay over 25 years, your monthly payment is still $2,500. That's almost all of your after-tax income during residency. Forget the 5% rate and do IBR for residency. After that, reassess.

 

[IamnotFreud]

IBR during residency.

Exactly. And especially for FM, there are tons of places that pay a LOT of the loan once you start working as part of the compensation package. No need to make yourself miserable during residency to try to pay it off. Also after 120 payments, your loan is forgiven. So I would do that if I were you. If you start paying off after the 6 month grace period, you'll be 30 months in by the time you finish residency, and you'll only need 90 more months and can have a chunk of that paid by your future employer. I would not sweat trying to pay it off early.

 

[jypat84]

THanks for the help guys...

But with IBR..interest is collected through those 3 years of residency...and about the 120 payments..u have to be in partial financial hardship and work for a non-profit organization...

In addition, after residency..the payment increases in IBR also if you income is over what remaining loans you have..you switch from IBR to standard payment...then you are screwed..

Noone has done the PSLF yet since its fairly new and all....

THE primary care loan...you have between 10 years to 25 years to pay off all my loans at 5% fixed...their grace period is 12 months during with No interest is acquired and then you can do deferment for one year again with no interest acquired...also you can make minimum payment of $40/month...

YOu are saying there are jobs out there that pay off some loans in the compensation package..could you send me some examples or links to see that please...

thanks again

 

[Textbookversion]

Your replies come across as borderline illiterate and you seem incapable of understanding our reasoning. Do IBR. End of story. Good luck with residency.

 

[IamnotFreud]

THanks for the help guys...

But with IBR..interest is collected through those 3 years of residency...and about the 120 payments..u have to be in partial financial hardship and work for a non-profit organization...

In addition, after residency..the payment increases in IBR also if you income is over what remaining loans you have..you switch from IBR to standard payment...then you are screwed..

Noone has done the PSLF yet since its fairly new and all....

THE primary care loan...you have between 10 years to 25 years to pay off all my loans at 5% fixed...their grace period is 12 months during with No interest is acquired and then you can do deferment for one year again with no interest acquired...also you can make minimum payment of $40/month...

YOu are saying there are jobs out there that pay off some loans in the compensation package..could you send me some examples or links to see that please...

thanks again

Again while you can do as you think it's best, what makes the most sense is to do IBR, and no, the 120 payment thing is for anyone, you don't have to be in financial hardship or work for a non profit in order to qualify. Once you are done with residency you will have to pay more because your income will increase but ultimately, best thing to do is IBR during residency.

Gl!

 

[Raryn]

Again while you can do as you think it's best, what makes the most sense is to do IBR, and no, the 120 payment thing is for anyone, you don't have to be in financial hardship or work for a non profit in order to qualify. Once you are done with residency you will have to pay more because your income will increase but ultimately, best thing to do is IBR during residency.

Gl!

Not exactly. I'll agree that the guy should do IBR, but your statement isn't completely true.

120 payment (=PSLF) is only if you work for a 501(c)(3) corp. Many (most?) residencies count, but definitely not all. That means if you did a 5 year gen surg residency plus a couple years of fellowship, all you'd need to do is find a non-profit to employ you for 3 more years to round out 120 payments.

OTOH, IBR is 240 payments. That one works for you no matter where you are employed.

Either way, whether you have financial hardship is irrelevant.

 

[IamnotFreud]

Not exactly. I'll agree that the guy should do IBR, but your statement isn't completely true.

120 payment (=PSLF) is only if you work for a 501(c)(3) corp. Many (most?) residencies count, but definitely not all. That means if you did a 5 year gen surg residency plus a couple years of fellowship, all you'd need to do is find a non-profit to employ you for 3 more years to round out 120 payments.

OTOH, IBR is 240 payments. That one works for you no matter where you are employed.

Either way, whether you have financial hardship is irrelevant.

Ok, I looked this up again and I think we are both partially wrong. So the loan forgiveness is after 20 years, regardless of where you work. And from what I have researched, the vast majority of residencies do count towards non-profit type employment given how most hospitals are categorized as non-profit agencies.

 

[DrBowtie]

For the OP, it depends on the very specific terms of this PCL that he is talking about.
It also depends on how much his wife makes and their tax filing status (married or married filing separate) which would significantly affect his IBR payments.

 

[Raryn]

Ok, I looked this up again and I think we are both partially wrong. So the loan forgiveness is after 20 years, regardless of where you work. And from what I have researched, the vast majority of residencies do count towards non-profit type employment given how most hospitals are categorized as non-profit agencies.

Public service loan forgiveness is after 10 years. That's PSLF. Requires you to work for a 501(3)(c), which most but NOT all residencies fall under.

Income based repayment is otherwise 20 years.

 

[Slade]

Public service loan forgiveness is after 10 years. That's PSLF. Requires you to work for a 501(3)(c), which most but NOT all residencies fall under.

Income based repayment is otherwise 20 years.

Something you guys are forgetting. The 10 year loan forgiveness plan requires you to pay taxes on the remaining amount in ONE YEAR. If you have 350000$ left (you'll probably have more since your interest will be so high), you have to pay upwards of 100000$ in one year... Good luck with that...

 

[tk0102]

Something you guys are forgetting. The 10 year loan forgiveness plan requires you to pay taxes on the remaining amount in ONE YEAR. If you have 350000$ left (you'll probably have more since your interest will be so high), you have to pay upwards of 100000$ in one year... Good luck with that...

Nope. See Q3: http://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness-common-questions.pdf [PDF Warning]

Q3: Are loan amounts forgiven under PSLF considered taxable by the IRS?
A3: No. According to the IRS, student loan amounts forgiven under PSLF are not considered income for tax purposes. For more information, you should check with the IRS or your tax advisor. (March 14, 2012)​

 

[Textbookversion]

Something you guys are forgetting. The 10 year loan forgiveness plan requires you to pay taxes on the remaining amount in ONE YEAR. If you have 350000$ left (you'll probably have more since your interest will be so high), you have to pay upwards of 100000$ in one year... Good luck with that...

wrong wrong wrong wrong wrong wrong wrong

 

[ryan6285]

As stated above the loans forgiven after 10 years of PSLF are NOT taxable. However the loans forgiven at the end of IBR (is it 20 or 25 years?) ARE taxable.

 

[Slade]

Well that's weird. We were told this very clearly by our financial aid guy during a talk about paying back loans.

 

[Textbookversion]

Well that's weird. We were told this very clearly by our financial aid guy during a talk about paying back loans.

Financial aid people are clueless. Why would you trust someone making <60k a year to tell you how to run your finances?

 

[dpmd]

Obviously the best strategy is to pay of your highest interest rate loans rapidly to avoid accruing a lot more interest, then attack the rest of your loans to pay them off quickly. If you don't have a lot of loans, or if you have a spouse who makes a good amount of money then you could actually make more the the standard repayment (which would pay off your loans in 10 yrs) and pay the loans off fast. However, the majority of students entering residency are not in this position. They can't afford the standard repayment let alone pay anything extra. In that scenario the options are usually to apply for forbearance (but then interest keep accruing and is capitalized yearly, meaning your principal balance grows every year and you are paying interest on your interest) with or without sending in some payments whenever possible (just because you are in repayment does not mean you can't send them money), or to get on some sort of repayment plan. There are a few, but the one that makes the most sense for many people is the IBR. Since the payments are income based it should be a possible to pay them (and if you have extra money you can still send it in), then as your income increases they will adjust your payment upward (but it will never exceed what your standard repayment would have been initially).

For those who work 10 yrs in a nonprofit institution and make 10 yrs worth of IBR payments (capped at the standard repayment) the rest is supposed to get forgiven tax-free, but who knows if they will keep the program in place once hundreds of thousands of dollars of loans are set to be forgiven for a bunch of people. If you never make much money and have made it to 25 yrs of IBR payments, any remaining balance is supposed to be forgiven (who knows if it will really happen) but you pay taxes on that amount. I think it is unlikely that anyone who works full time as a physician would be in this situation since it would mean you are getting paid well below the averages for any specialty.

If your job offers loan repayment, it is likely that it would be taxed as income as well (not saying it wouldn't be good, just that you need to account for that possibility). Changing your loans over to a fixed 5% may be worth it if you think it is unlikely that you would be able to pay off your loan any faster than 10 yrs, but I hate the idea of being locked into a loan that doesn't allow prepayment. It really depends on what your family income versus spending will be.

 

[dpmd]

Well that's weird. We were told this very clearly by our financial aid guy during a talk about paying back loans.

I think you misunderstanding what he was talking about is more likely than the guy being totally clueless. It is info that is readily available in really plain language.

 

[jypat84]

Thanks guys....

But here is my plan and let me know what you think...i know IBR is the way to go but i have doubts about PSLF in the future..like others have mentioned..

the primary care loan with fixed 5% and will pay off in no less then 10 years...
now it has a 12 month grace period with in addition on 3 years of deferment..

also there is no interest acquired during grace or deferment period...

so If i am doing FM 3 years that is 3 years with 0%..during those 3 years I will try to reduce my principal as much as I can...no penalty in paying during grace or deferment period...

after that I will pay it off in 7 years...

 

[Slade]

I think you misunderstanding what he was talking about is more likely than the guy being totally clueless. It is info that is readily available in really plain language.

I e-mailed him and actually a lot of students had brought up the same question. So whether he knew what he was talking about or not, the students all understood the same thing: that PSLF was taxable after 10 years. He's sending out a correction to the whole class, so thanks for the responses guys, it actually helped out a lot of people!

 

[Perrotfish]

Marriage and IBR question: my wife is a resident with debt, I am a resident with a better salary and no debt. She is going into IBR and we are planing to file separately to avoid the marriage penalty. My question: Can I use excess money from my salary to pay down her loans in addition to her IBR minimum, or does that kick her out of IBR? I know the second she's out of IBR her interest starts acruing on all loans, but ideally I'd like to knock out as many grad plus loans as possible.

 

[physicsnerd42]

Marriage and IBR question: my wife is a resident with debt, I am a resident with a better salary and no debt. She is going into IBR and we are planing to file separately to avoid the marriage penalty. My question: Can I use excess money from my salary to pay down her loans in addition to her IBR minimum, or does that kick her out of IBR? I know the second she's out of IBR her interest starts acruing on all loans, but ideally I'd like to knock out as many grad plus loans as possible.

I'm in a somewhat similar situation (married, I'm MD/PhD so getting paid to go to med school, wife is a resident with debt and on IBR). You can pay as much as you like per month, as long as it's at or above the IBR payment. I'm not sure, however, if you can choose which loans to pay down (grad plus vs. unsub vs. sub, etc.), especially if they're consolidated for IBR.

If you file federal taxes married filing separately you won't be able to get the deduction for her student loan interest paid (up to $2500 per year, I believe).

 

[dpmd]

I'm in a somewhat similar situation (married, I'm MD/PhD so getting paid to go to med school, wife is a resident with debt and on IBR). You can pay as much as you like per month, as long as it's at or above the IBR payment. I'm not sure, however, if you can choose which loans to pay down (grad plus vs. unsub vs. sub, etc.), especially if they're consolidated for IBR.

If you file federal taxes married filing separately you won't be able to get the deduction for her student loan interest paid (up to $2500 per year, I believe).

Yeah, there are a few other deductions you end up not being able to take. Perrotfish will have to decide if it is truly better to do that.

 

[VenusinFurs]

Marriage and IBR question: my wife is a resident with debt, I am a resident with a better salary and no debt. She is going into IBR and we are planing to file separately to avoid the marriage penalty. My question: Can I use excess money from my salary to pay down her loans in addition to her IBR minimum, or does that kick her out of IBR? I know the second she's out of IBR her interest starts acruing on all loans, but ideally I'd like to knock out as many grad plus loans as possible.

Did you mean the second she's graduated? Interest still accrues regardless of your repayment plan.

EDIT: @OP: I believe that your PLUS loans can't be included in PLSF.

 

[greg1184]

There is also the new Pay as you Earn option which has lower monthly rates than IBR and is also eligible for PSLF. Either way, this is the route I plan on going with my debt.

 

[Perrotfish]

Did you mean the second she's graduated? Interest still accrues regardless of your repayment plan.

EDIT: @OP: I believe that your PLUS loans can't be included in PLSF.

From the government's IBR site

Interest payment benefit&#8212;If your monthly IBR payment amount doesn't cover the interest that accrues (accumulates) on your loans each month, the government will pay your unpaid accrued interest on your Direct Subsidized Loans or Subsidized Federal Stafford Loans (and on the subsidized portion of your Direct or FFEL Consolidation Loans) for up to three consecutive years from the date you began repaying your loan under IBR

This makes it seem like you want to enroll in IBR even if you plan to repay the loan in ten years. There's no penalty for early repayment, and there's a three year grace period where subsidized loans don't accumulate interest above the absurdly small amount of the IBR payment.

 

[txhorn]

There is also the new Pay as you Earn option which has lower monthly rates than IBR and is also eligible for PSLF. Either way, this is the route I plan on going with my debt.

Same here. Then after residency +/- fellowship, I'll reassess if PSLF will still be worth it (or even in existence) vs taking a private practice job.

 

[mnagali]

I don't mean to threadhijack, but I have a similar question in regards to paying back these student loans.

Like the OP, I'll also be going into FM with a 1st year stipend of $50k and a total loan balance near $400k; however, IBR+PSLF is definitely on my radar. I am currently in the process of signing up for IBR but having some questions about the application.

per http://studentaid.ed.gov

To apply, submit an Income-Based (IBR)/Pay As You Earn/Income-Contingent (ICR) Repayment Plan Request and either:

• a copy of your most recently filed federal income tax return or
• alternative documentation of your income, if you did not file a federal income tax return in the past two years or you've experienced a significant change in your income since you filed your most recent federal income tax return.

I've never had a real income nor have I ever filed income taxes, so it looks like I have to submit my application via snail paper, along with that "alternative documentation of your income".
Would a copy of my resident contract stating my PGY-1 stipend suffice? or do I need something more official?

I know I can't be the only med student who hasn't had a real world job that has encountered this issue with the IBR application 🙂

 

[dpmd]

I don't mean to threadhijack, but I have a similar question in regards to paying back these student loans.

Like the OP, I'll also be going into FM with a 1st year stipend of $50k and a total loan balance near $400k; however, IBR+PSLF is definitely on my radar. I am currently in the process of signing up for IBR but having some questions about the application.

per http://studentaid.ed.gov
I've never had a real income nor have I ever filed income taxes, so it looks like I have to submit my application via snail paper, along with that "alternative documentation of your income".
Would a copy of my resident contract stating my PGY-1 stipend suffice? or do I need something more official?

I know I can't be the only med student who hasn't had a real world job that has encountered this issue with the IBR application 🙂

You could probably free e-file a tax return with your zero income and use that (or just get a paper 1040-EZ and accomplish the same thing). Then it won't seem so new to you next year when you have to file for real.

 

[mnagali]

You could probably free e-file a tax return with your zero income and use that (or just get a paper 1040-EZ and accomplish the same thing). Then it won't seem so new to you next year when you have to file for real.

the problem with that is I'm pretty sure my mom (who I'm living with) has already claimed me as a dependent

 

[Raryn]

You could probably free e-file a tax return with your zero income and use that (or just get a paper 1040-EZ and accomplish the same thing). Then it won't seem so new to you next year when you have to file for real.

Except we're past April 15 at this point.

 

[dpmd]

Doesn't matter if they claimed you as a dependent. There is a box that you would just check and it changes your exemption, but since you have no income it doesn't matter.

You can file a tax return at any time. The only thing you need to do by the tax deadline is pay what you owe (which will be nothing since you have no income). You can even file for precious years (although there is a limit on how long you have to file before you won't get your refund money.

 

[Bacchus]

So it seems the take home point from this is, since I also created a PCL thread elsewhere, just go on with IBR and don't use the PCL. If worse comes to worse, the IBR will forgive a portion of our loans, but it is taxable unlike (hopefully to stay) PSLF.

I'm glad I found this before taking out anymore PCL funds.