How long will loan repayment take in peds?

[Dancer1986]

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I am wondering about how long it will take me to pay off my student loans? I am starting medical school in the fall and I have no undergrad loans. According to the medical school I am attending's "Estimated Cost of Attendance" I will have around $175,000 in loans by the time I graduate. I plan on specializing in Pediatrics right now, so I am anticipating a post-residency salary of $125,000-$150,000 a year. What are my general options for repayment? About how many years will it take me to pay this off, and at what amont per month? Thanks for the information! 🙂

 

[CrazyPeds527]

Your options are bountiful (SAT word of the day!), but it's hard to determine exact numbers, because it depends on other things:

1) Will you have other debt? (undergrad? credit cards? mortgage? etc?)

2) 10 yr repay, 15 yr repay, 20 yr repay, 25 yr repay? (These are your options...some consolidated loans offer 30 yr)

3) You can (as of now) defer your loans during residency for economic hardship. This means your subsidized loans do not accrue interest, and your unsubsidized will accrue, but you wont be saddled with a big residency payment. Furthermore, some companies allow you to stagger payments so that they are purposefully light in residency. Laws of economic hardship have also recently changed (last month!) and will be different in 2009.

4) Interest rates. Federal student loan rates are currently fixed at 6.8% for the life of your loan. However, with current fed pressure because of the economy, there is talk student loan rates may drop also. For now, plan on 6.8%.

5) Use a loan calculator:
http://www.ed.gov/offices/OSFAP/DirectLoan/calc.html

6) Will you still love Peds as a third year clerk? If not, and you fall in love with say, Radiology, let's face it: repayment is much less of an issue. If you decide to do a peds fellowship? Now, for some fields (cards) $150k can become $200k or more.

7) Your med school will have a financial aid office and AAMC requires you to have an entrance session about loans (likely during orientation), and an exit session (sometime during your 4th year). Talk to them to find out other options.

No worries for right now though, celebrate getting in!! Worry about this in a little while...

 

[bjackrian]

In addition to the standard repayment plans, one of the things in the financial aid bill that (temporarily) took away residency deferement was a new repayment plan that I kind of like for federal loans. Basically they take 10% of your adjusted gross income that is great than 150% of the poverty line and that's your loan payment.

Example (Residency):
Income: $45,000
Poverty line (1 person) $10210
150% poverty line: $15315
Income >150% of poverty line: $29685
Annual Payment: $2968.50
Monthly Payment: $247.38

Example (Post residency)
Salary (pulled out of my rear): $130,000
150% Poverty Line: $15,315
Income >150%: $114,685
Annual Payment: $11,468.50
Monthly Patment: $955.71

The amount that you pay readjusts every year based on your income. I believe you can also start this form of repayment after residency if you choose to defer your loans. You keep paying until the loan is repaid or 25 years of payments--if you still have outstanding debt after 25 years, the government forgives it. You can make additional payments to pay down the loan faster if you choose. This repayment option is generally good for lower paying specialties (since the repayment amount is based solely on your income. Just another example of the multitude of ways to pay back loans.

Also, the federal student loan rate decreased to 6.0% this year and is scheduled to gradually decrease back down to 3.4% by 2012 then rise again to 6.8% under current law. As CrazyPeds mentioned, the laws on this change fairly frequently.

 

[Dancer1986]

Thanks for all of the information, it makes me feel a lot more well informed. Bjackrian, with the plan you described, what is "adjusted gross income"? Is this your pre-tax income or after-tax? Also, do you know what happens if you were to start working part-time or take some time off? Just curious if your monthly payments would still go down to correspond to 10% of your income then? Thanks again!

 

[bjackrian]

Thanks for all of the information, it makes me feel a lot more well informed. Bjackrian, with the plan you described, what is "adjusted gross income"? Is this your pre-tax income or after-tax? Also, do you know what happens if you were to start working part-time or take some time off? Just curious if your monthly payments would still go down to correspond to 10% of your income then? Thanks again!

My understanding is that it's your pre-tax income and the payments are based on the income from your W-2s. So theoretically if you were working part time the payments would decrease. I'm not sure what would happen if you stopped working--I think you have to be making some level of payment for 25 years to qualify for the loan forgiveness so probably going to $0 would not count toward the 25 and you'd have to get an economic hardship deferrment.