Forbearance vs IBR during residency

[Sister Mary Patrick]

I am a first year resident and have just under $200K in federal loans, currently in forbearance. I have $17K left from undergrad that I am paying off at a low (2%) interest rate. Like many others I'm sure, I am hoping to have my student loans paid off within the first few years after residency, not in 20-30 years. I'm clueless when it comes to finances, however, and am looking for advice on the best next steps to take.

As I mentioned, my federal loans are currently in forbearance. Would it be in my best interest to start one of the IBR programs now? I'm not even sure if this is possible since I am almost a year out of medical school. If I do start an IBR, is it still possible to increase my monthly payments to ultimately cut the number of years I am in repayment?

Lastly, my loans are serviced by Navient. Does anyone have experience with other refinancing options (ie Sofi)? Would this be something recommended?

Thanks in advance!

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[RangerBob]

Everyone's situation is unique, but typically most are best off going on one of the income-contingent repayment plans, if for no other reason, to prevent capitalization of interest. Everyone's interest capitalizes upon the end of their grace period, but if you re-apply for the income-based programs on-time your interest will never capitalize again.

REPAYE also comes with the advantage of the government paying half your unpaid unsubsidized interest. That effectively lowers my average federal loan rate of ~7.2 (too many GradPlus...) to the low 4's or so.

As long as you can afford the monthly payments (10% of your income isn't unreasonable at all), then you can save a lot of money by spending that little bit rather than deferring.

You can always pay more than the minimum payment to speed up repayment. Assuming you already have an emergency fund set aside, if you have extra money left over then certainly paying down your loans is a good idea.

I would not advice consolidating with any companies. First of all, only DRB and LinkCapital will consolidate loans for residents, but even then the rate you get may not be any better than the effective REPAYE interest rate, and you'd lose all federal loan protections and benefits (such as income-based payments, PSLF-eligibility, hassle-free forbearance, etc.). Once you graduate residency and are making a larger salary (which would eliminate the REPAYE interest subsidy), that's usually the time to consolidate--though that assumes you don't end up in a position that's PSLF-eligible.

 

[mvenus929]

Unless you truly can't afford a couple hundred dollars per month for your student loans, there's no reason to put them in forebearance vs in an income based repayment plan. Generally, you apply each year in November or so (because that's when people's grace period ends), which gives you a bit of a buffer after graduating residency and starting your first attending job without having to worry about excessively large payments.