IBR and public loan forgiveness

[thorg12]

Hey guys i got some good info over on the financial aid forum and was wondering your guys input. FYI Im starting my EM residency this June.
Im wondering how hard it is to work for a 501 c3 company. most academic ed's are paid by the hospital or med schools so they would qualify. so i get 3 years right away towards public service and would only have to work 7 years for a 501c3 company then all my loans ~250,000 would be gone when Im 36. Or i could go work anywhere i want prob make more but have higher principal and monthly payments and my ten yr repayment be done when im 39.

what are your guys thoughts about the diffuculty in getting a job after residency where my paycheck comes from a 501c3 company and its pay comparison to other jobs available out there?
also whether or not its worth it to do this IBR during residency bc id have to pay 840/month bc my fiance also has loans or should i just let the interest accrue and start paying after residency?
thanks guys

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[tremulousNeedle]

I am in the same boat as you, but there is something else to consider that was mentioned by the financial aid department at my school. They commented that the public service loan forgiveness program can be modified by the legislature at anytime (no one is locked in to the program) and as more and more physicians look to pursue this option, there is the possibility that an income cap will be added to the program so physicians couldn't benefit from it. The reason for this is because the program was never intended for physicians or other professions where you made a lot of money when you were done; it was intended for teachers and social workers (jobs where advanced degree are helpful or necessary, but the final pay is still relatively small). Even though this is a loan forgiveness program, the money owed isn't simply written off, there is a purse set aside to compensate the lenders. As the number of physicians who use this program increases, so will the likelihood that someone in the government will notice and try to change it.

So I guess the take home point is that this loan repayment program may not benefit us in 10 years. My financial aid office said it will be a great deal if it is still around, but to not rely 100% that it will apply to physicians in 10 years.



Edit: At my school's home institution (a non-profit, academic medical center), all of the faculty members are part of one large physician group associated with the college, it is considered a 501c3 company. They were telling me that most of the EM physician companies that are contracted to staff EDs do not qualify as 501c3 companies.

 

[usrael]

i dont think your Pgy8-10 friends can benefit from this as the forgiven loans can only include loans disbursed in 2007 and onwards.

 

[tremulousNeedle]

i dont think your Pgy8-10 friends can benefit from this as the forgiven loans can only include loans disbursed in 2007 and onwards.

Maybe they thought it could be applied retroactively or I misunderstood them, it was a brief conversation. ?? I don't think they were banking on it, just viewing it as a hopeful option. I guess the hope is gone for them.

 

[NinerNiner999]

Why not just consolidate your student loans over a 30-year period and pay monthly? Rates are still very low (<5%) and with inflation on the horizon, a fixed payment of $500 per month will feel like $300 per month after 10 years, and you may be earning more than what you start out at. You can consolidate with mose lenders without a pre-payment penalty. Don't sweat the loans too much...

 

[tegs15]

Why not just consolidate your student loans over a 30-year period and pay monthly? Rates are still very low (<5%) and with inflation on the horizon, a fixed payment of $500 per month will feel like $300 per month after 10 years, and you may be earning more than what you start out at. You can consolidate with mose lenders without a pre-payment penalty. Don't sweat the loans too much...

Don't sweat the loans? Maybe I'm over reacting but for those of us that attended private medical schools with > $250K in debt using the 30yr approach we will pay $2000 or so per month, ultimately paying out close to $750K for our education. They don't have the low interest student loans anymore, ours are 6.8 to 8.5%. This future financial obligation coupled with health reform and 21% decrease in medicare payments is a little disconcerting to some of use.

 

[doctorFred]

Don't sweat the loans too much...

yeah, i won't sweat 280k at 7.125 percent. silly me.

 

[NinerNiner999]

Yeah - I forgot how low my rate was when I consolidated. However, even if you have $300,000 in debt to pay off, as long as you live responsibly (don't buy the million dollar house, porsche, vacation home, etc) for the first 2-3 years of your life as an attending - and make smart choices - this will be surprisingly easy to pay off - even with an "average" salary. Trust me - you'll see.

 

[usrael]

Why not just consolidate your student loans over a 30-year period and pay monthly? Rates are still very low (<5%) and with inflation on the horizon, a fixed payment of $500 per month will feel like $300 per month after 10 years, and you may be earning more than what you start out at. You can consolidate with mose lenders without a pre-payment penalty. Don't sweat the loans too much...

I'm no accountant, but this is terrible advice. Not sure when you were in school, but few people have 500/month payments (it's about 4X that).
Don't bother replying though, wouldn't want to ruin that pretty post count...

 

[MSmentor018]

that's what I use to think about repayment. now that I am buying a house, they had to do my numbers. come to find out, we get 6 months deferment before obama his money back. then they did some calculation that estimated $488/mo for fed unsub loans while in residency, then it skyrockets (I think this is the income based repayment plan). dept of ed has taken over all consolidation, there are 7 ways to repay according to the website. like everything else in govt service it's a long and mind boggling paperwork. i am still trying to figure out consolidation issue. but I did figure this out, unless your able to hid your assets and hit poverty level income (this stops next yr), economic hardship is going to be hard to get.

live within your means, don't be a baller and blow your money on things that depreciate, pay down your debt when you can....then enjoy it! I've heard this from plenty of physicians over the years.

 

[tremulousNeedle]

Why not just consolidate your student loans over a 30-year period and pay monthly? Rates are still very low (<5%) and with inflation on the horizon, a fixed payment of $500 per month will feel like $300 per month after 10 years, and you may be earning more than what you start out at. You can consolidate with mose lenders without a pre-payment penalty. Don't sweat the loans too much...

I am not professing to be an expert on financial aid, but I don't think it is possible to get an interest rate as good as what you stated. We just had our financial aid exit interview and our financial aid team is great about giving us all the information we need. For all med students graduating now, the interest rates for the Stafford loans have been fixed at ~6.8% (for at least 4 years). After exploring nearly all of the consolidation options for direct federal loans, the best option takes a weighted average of all a student's current interest rates and then tacks on a ~0.1% service charge. For example, if a student has all of their loans at 6.8%, then the only benefit of consolidation is that all of your loans are at one place (in this case the interest rate actually increases to ~6.9%). Consolidation is not as much of a perk as it once was.

 

[thorg12]

inorder to do IBR you have to consolidate all yours loans under direct loans. Im interested in how hard it is/ how available it is to work for a 501c3 company as an attending. I know lots of places with residencies get their check from 501c3 companies. Are they any private groups that are non-profits?

 

[tremulousNeedle]

inorder to do IBR you have to consolidate all yours loans under direct loans. Im interested in how hard it is/ how available it is to work for a 501c3 company as an attending. I know lots of places with residencies get their check from 501c3 companies. Are they any private groups that are non-profits?

To answer your question, 1 of 6 EM companies in my local area is a 501c3, but it is probably rarer than that. It is the physician group associated with my med school, but a separate entity than the hospital.

As an aside, according to my loan servicers you did not have to consolidate all of your loans to be eligible for IBR (as long as your individual loans are all direct loans). If you have a source stating that this is false please let me know. Thanks.

 

[It'sElectric]

Why not just consolidate your student loans over a 30-year period and pay monthly? Rates are still very low (<5%) and with inflation on the horizon, a fixed payment of $500 per month will feel like $300 per month after 10 years, and you may be earning more than what you start out at. You can consolidate with mose lenders without a pre-payment penalty. Don't sweat the loans too much...

I realize you're, relatively speaking, long removed from medical school, but it's often frustrating to hear this advice/phrase from current attendings. I'm sure once I'm out, I won't keep entirely up to date on student loan issues, but FYI Med students right now, more than ever before, are truly getting f#&*#d. Not only are we taking on a higher debt burden with exponentially rising tuition costs, but we've also been jammed with ridiculous interest rates of 6.8 (Stafford) and 8.5% (Grad Plus) that are FIXED. Consolidation is really quite useless now. A lot of students that graduated from med school 5-10 years ago have it quite nice with those low low interest rates that I'm sure they locked in.

If I owed $200,000 at 2.5%, I definitely would not sweat it and take as long as possible to pay it off. Unfortunately, I owe $200,000+ at 6.8 and 8.5%. Kind of changes everything.

 

[december07]

To answer your question, 1 of 6 EM companies in my local area is a 501c3, but it is probably rarer than that. It is the physician group associated with my med school, but a separate entity than the hospital.

As an aside, according to my loan servicers you did not have to consolidate all of your loans to be eligible for IBR (as long as your individual loans are all direct loans). If you have a source stating that this is false please let me know. Thanks.

IF you were to consolidate to earn the IBR repayment plan, why would you not want to consolidate all of your loans with Direct Loan? The whole goal here is to be forgiven the remaining balance after 10 years (public service) or after 25 years (IBR). So, if I was to do this, I would load up everything and hope that's a large chunk will be forgiven.

BTW, anyone else done research on consolidating your loans with another company beside Direct Loan? any quote on the rates?

 

[tremulousNeedle]

IF you were to consolidate to earn the IBR repayment plan, why would you not want to consolidate all of your loans with Direct Loan? The whole goal here is to be forgiven the remaining balance after 10 years (public service) or after 25 years (IBR). So, if I was to do this, I would load up everything and hope that's a large chunk will be forgiven.

BTW, anyone else done research on consolidating your loans with another company beside Direct Loan? any quote on the rates?

For me consolidation has not benefit. For example, all of my student loans are Stafford loans with a fixed rate of 6.8%. Currently I have 12 separate loans through the federal government, a subsidized and 2 unsubsidized Stafford loans for each year of medical school. Each one of these loans is eligible for IBR, regardless of whether or not I consolidate them (I would simply need to set it up with each servicer). If I were to consolidate through Direct Loans, then my weighted-average interested rate would still be 6.8% plus an adjustment increase of ~0.1%, giving me an interest rate of ~6.9%. So the only thing I would accomplish by consolidating is securing a higher interest rate.

 

[usrael]

For me consolidation has not benefit. For example, all of my student loans are Stafford loans with a fixed rate of 6.8%. Currently I have 12 separate loans through the federal government, a subsidized and 2 unsubsidized Stafford loans for each year of medical school. Each one of these loans is eligible for IBR, regardless of whether or not I consolidate them (I would simply need to set it up with each servicer). If I were to consolidate through Direct Loans, then my weighted-average interested rate would still be 6.8% plus an adjustment increase of ~0.1%, giving me an interest rate of ~6.9%. So the only thing I would accomplish by consolidating is securing a higher interest rate.

There would be a few benefits to consolidating with DL
1) fewer checks/payments to take care of.
2) the remote chance of public service loan forgiveness.
3) a 0.25% decrease in interest when signing up for electronic payment. This more than off-sets the rounding up of the interest.

On the flip side, every time i talk with a DL rep, i want to break my phone.
MY non DL loans are serviced by folks that are knowledgable and pleasant though not forgiving

 

[december07]

For me consolidation has not benefit. For example, all of my student loans are Stafford loans with a fixed rate of 6.8%. Currently I have 12 separate loans through the federal government, a subsidized and 2 unsubsidized Stafford loans for each year of medical school. Each one of these loans is eligible for IBR, regardless of whether or not I consolidate them (I would simply need to set it up with each servicer). If I were to consolidate through Direct Loans, then my weighted-average interested rate would still be 6.8% plus an adjustment increase of ~0.1%, giving me an interest rate of ~6.9%. So the only thing I would accomplish by consolidating is securing a higher interest rate.

I see in your case, not consolidating might be the right choice. Good job on not having any GradPlus (8.5%) through out your med school career

 

[tremulousNeedle]

1) fewer checks/payments to take care of.
2) the remote chance of public service loan forgiveness.
3) a 0.25% decrease in interest when signing up for electronic payment. This more than off-sets the rounding up of the interest.

1) I can spend an extra 4 minutes setting up automatic payments.
2) Are you sure you have to consolidate them for the public service loan forgiveness program? I thought as long as you were making some sort of monthly payment (IBR amount or greater) that counted regardless of whether or not the loans were consolidated?
3) Not sure if a corrected interest rate of ~(6.8-0.15%) is really worth all the hassle.

Thanks anyways.

 

[NinerNiner999]

I'm no accountant, but this is terrible advice. Not sure when you were in school, but few people have 500/month payments (it's about 4X that).
Don't bother replying though, wouldn't want to ruin that pretty post count...

Lemme guess- you read my first post and immediately reacted with this witty retort, all the while completely missing my next post, that acknowledges my example was from a different time, with a different rate. Your arrogance will get you nowhere, and I don't think THAT is terrible advice.

 

[usrael]

Lemme guess- you read my first post and immediately reacted with this witty retort, all the while completely missing my next post, that acknowledges my example was from a different time, with a different rate. Your arrogance will get you nowhere, and I don't think THAT is terrible advice.

You're just a tad sensitive. Despite meaning well, you just gave bad advice. Look, we're in a tough situation here, with heavy loan burdens, high interest rates and few resources to field our numerous questions. We do have ourselves to rely on for help. People actually listen to the advice given on this forum regarding loan repayment etc. That's why you have to be careful when posting on this topic. Your advice was outdated and not relevant to today's situation. I apologize if you were insulted, and I did miss your later post. I know you had our best interests in mind (no pun intended). It's just that things have changed (especially since July '09).

 

[usrael]

1) I can spend an extra 4 minutes setting up automatic payments.
2) Are you sure you have to consolidate them for the public service loan forgiveness program? I thought as long as you were making some sort of monthly payment (IBR amount or greater) that counted regardless of whether or not the loans were consolidated?
3) Not sure if a corrected interest rate of ~(6.8-0.15%) is really worth all the hassle.

Thanks anyways.

Regarding #2, I'm not sure. I assume that if all your loans are with DL, then it doesn't matter if they are consolidated or not. I was under the impression that your multiple loans were FFEL or non-DL staffords. I think you're fine. Though the 3 points above are important to consider for non-DL loans.

How about this scenario...
College loan entering repayment in two weeks. Non-DL loan.
Medical school loans entering grace period at the same time (mostly non-DL, few DL). If I consolidated the college loans into DL and started IBR payments...would those payments even count towards PSLF (public service loan forgiveness) ? Consider that the bulk of my loans (medical school) are in a grace period and not with DL at that time.

 

[Moonglow]

I give this advice to every graduating resident: pay off your loans as soon as possible, no matter the type of loan.

Example: if you owe 200K at the end of residency, pay off the total (with interest included) over 60 months. That's a ~4K per month payment for the next five years (~236K total.) If you average ~150K a year in earnings over the next five years, that 4K a month payment will leave you around ~$4800 take home pay (after taxes).

[FONT=ARIAL, HELVETICA]Loan Balance: .[FONT=ARIAL, HELVETICA]$200,000.00.
[FONT=ARIAL, HELVETICA]Loan Interest Rate: .[FONT=ARIAL, HELVETICA]6.80%.
[FONT=ARIAL, HELVETICA]Loan Fees: .[FONT=ARIAL, HELVETICA]0.00%.
[FONT=ARIAL, HELVETICA]Loan Term: .[FONT=ARIAL, HELVETICA]5 years.

[FONT=ARIAL, HELVETICA]Monthly Loan Payment: .[FONT=ARIAL, HELVETICA]$3,941.39.
[FONT=ARIAL, HELVETICA]Number of Payments: .[FONT=ARIAL, HELVETICA]60.

[FONT=ARIAL, HELVETICA]Cumulative Payments: .[FONT=ARIAL, HELVETICA]$236,483.75 .
[FONT=ARIAL, HELVETICA]Total Interest Paid: .[FONT=ARIAL, HELVETICA]$36,483.75 .

 

[LabMonster]

I give this advice to every graduating resident: pay off your loans as soon as possible, no matter the type of loan.

Example: if you owe 200K at the end of residency, pay off the total (with interest included) over 60 months. That's a ~4K per month payment for the next five years (~236K total.) If you average ~150K a year in earnings over the next five years, that 4K a month payment will leave you around ~$4800 take home pay (after taxes).

[FONT=ARIAL, HELVETICA]Loan Balance: .[FONT=ARIAL, HELVETICA]$200,000.00.
[FONT=ARIAL, HELVETICA]Loan Interest Rate: .[FONT=ARIAL, HELVETICA]6.80%.
[FONT=ARIAL, HELVETICA]Loan Fees: .[FONT=ARIAL, HELVETICA]0.00%.
[FONT=ARIAL, HELVETICA]Loan Term: .[FONT=ARIAL, HELVETICA]5 years.

[FONT=ARIAL, HELVETICA]Monthly Loan Payment: .[FONT=ARIAL, HELVETICA]$3,941.39.
[FONT=ARIAL, HELVETICA]Number of Payments: .[FONT=ARIAL, HELVETICA]60.

[FONT=ARIAL, HELVETICA]Cumulative Payments: .[FONT=ARIAL, HELVETICA]$236,483.75 .
[FONT=ARIAL, HELVETICA]Total Interest Paid: .[FONT=ARIAL, HELVETICA]$36,483.75 .

I've got 250k+ (kids...) and have about 2 options the way I see it: #1. Defer through residency and then begin paying them off in huge chunks. #2. IBR now with potential for forgiveness after 10 years.

The thing is, I'm not 100% sure of how my finance will be once I'm moved, settled and the asset/liability sheet balances out. I'm thinking that even a 100-200$ is going to make a BIG difference with a family of 5, so I'm beginning to think forbearance is the best option then paying them off fast, fast, fast after residency...

Any thoughts?

 

[deleted109597]

You can work plenty of places and earn closer to 400K than 150K. Not saying you shouldn't still be fiscally savvy, but as long as you don't buy your mansion, you will be able to put easy mac on the table.

 

[Emergency!]

I've got 250k+ (kids...) and have about 2 options the way I see it: #1. Defer through residency and then begin paying them off in huge chunks. #2. IBR now with potential for forgiveness after 10 years.

The thing is, I'm not 100% sure of how my finance will be once I'm moved, settled and the asset/liability sheet balances out. I'm thinking that even a 100-200$ is going to make a BIG difference with a family of 5, so I'm beginning to think forbearance is the best option then paying them off fast, fast, fast after residency...

Any thoughts?

I"m with you - not quite that much in debt, family of 4. I'm leaning towards forbearance as well, and then paying them off ASAP after residency.

 

[MSmentor018]

with a family you may qualify for economic hardship.....also I heard today if you consolidate now, you lose the 6 months of deferment??? I couldn't find it on the dept ed site

 

[Hamhock]

plenty of places and earn closer to 400K

Really?
I have not started to look for "real" work yet, but is this really true?
Of course, there are jobs where one can work their tail off with little protection or other benefits, but is "closer to 400K" really that common in the private world just out of residency?
Note: I am honestly claiming "ignorant" here.

HH

 

[tkim]

You can work plenty of places and earn closer to 400K than 150K. Not saying you shouldn't still be fiscally savvy, but as long as you don't buy your mansion, you will be able to put easy mac on the table.

Hmmm, those places are blood money and/or places I would not want to live. But that's me.

 

[deleted109597]

Even academic positions are paying $210K right now. It isn't a stretch to think that other places are paying more. Yes, there are some dirty places where you can earn 500K a year, but you won't want to work there. $170-200 an hour isn't hard to get, unless you only want to live in California or the northeast (the worst paying places).

 

[thorg12]

so i guess the nj/pa area qualifies as northeast? in the philly/bucks county/easton area are there academic jobs for 501c3 that are greater than 200k?