IBR/PSLF/Primary Care Loan - What to do?

[Bacchus]

Some background information:

-FM resident starting in July
-Most likely will work for one of the two non-profit hospital systems in my area after residency
-65,000 undergrad debt deferrable through residency (with interest accruing)
-~300,000 in MS debt with present interest added in

I was contacted by my financial aid office after the match in regards to the Primary Care Loan. It's a loan offered to students who agree to primary care in the future. The loan has a 5% interest rate but is able to be deferred through residency. Interest is deferred as well. The school determines your eligibility, offers you the money, and in turn creates a new MPN while reversing other federal funds you used for your loans. For me, I was offered 56,000 dollars. This means I'd have 56,000 at 5% without interest accruing or needing to be paid back during my 3 years as an FM resident. The amount must be paid back within 10 years so the funds can be reused for other students. At 50,000 the financial aid office estimates a monthly repayment of ~1000 per month and an interest savings of ~20,000 compared to federal loans. I don't know if those numbers checked out, I just took them for face value.

I'm currently being "vetted" to see if I can get more funds through the "Super" PCL. I have already committed to the 56,000 above but am toeing the line of possibly getting more funds because of PSLF. I have faith in our government, but I don't think PSLF will be around in 2023 (or 2026 if residency doesn't count).

So my question is: If I'm offered more funds at the PCL rate of 5% with the deferral should I take them or should I hope that PSLF sticks around? I really don't want to rely on PSLF but financially it seems to make more sense when you look at the macro scale.

Thoughts?

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[nogolfinsnow]

Some background information:

-FM resident starting in July
-Most likely will work for one of the two non-profit hospital systems in my area after residency
-65,000 undergrad debt deferrable through residency (with interest accruing)
-~300,000 in MS debt with present interest added in

I was contacted by my financial aid office after the match in regards to the Primary Care Loan. It's a loan offered to students who agree to primary care in the future. The loan has a 5% interest rate but is able to be deferred through residency. Interest is deferred as well. The school determines your eligibility, offers you the money, and in turn creates a new MPN while reversing other federal funds you used for your loans. For me, I was offered 56,000 dollars. This means I'd have 56,000 at 5% without interest accruing or needing to be paid back during my 3 years as an FM resident. The amount must be paid back within 10 years so the funds can be reused for other students. At 50,000 the financial aid office estimates a monthly repayment of ~1000 per month and an interest savings of ~20,000 compared to federal loans. I don't know if those numbers checked out, I just took them for face value.

I'm currently being "vetted" to see if I can get more funds through the "Super" PCL. I have already committed to the 56,000 above but am toeing the line of possibly getting more funds because of PSLF. I have faith in our government, but I don't think PSLF will be around in 2023 (or 2026 if residency doesn't count).

So my question is: If I'm offered more funds at the PCL rate of 5% with the deferral should I take them or should I hope that PSLF sticks around? I really don't want to rely on PSLF but financially it seems to make more sense when you look at the macro scale.

Thoughts?

Congrats on the match! I have done a lot of reading and research as pertains to my own situation (going into primary care peds, 1yr left of residency). I have similar MS debt, although no undergrad debt.

If I understand your post right, $56k of your federal loans goes away (hopefully from the PLUS loans), and is replaced by a lower interest rate loan. Can you consolidate that new $56k loan in with your others? In order to qualify for PSLF, your loans must be consolidated and then payments made through IBR. If you can't consolidate those loans, then you'll be paying both standard repayment on the 56K, then on the balance of your other loans through IBR, which may result in a higher monthly payment.

The other issue to consider: Are you sure that the physicians who work for those non-profit hospital systems are employees of the hospital system, and not a private group that contracts with the hospitals? I was surprised to learn this at my residency program: even though we predominately serve a Medicaid population, the physicians are all part of separate groups that would NOT qualify any of them for PSLF. If you have any experience with Kaiser on the West coast, they function in a similar manner. The insurance plan (which owns the hospitals) is non-profit. The physicians are actually separate from the insurance plan, they just mutually contract with each other, but the physician side is not a non-profit.

Overall, I think that if you can consolidate the 5% loans with the rest of your medschool loans, then you hedge a bit against PSLF going away and you having to repay all of your loans. If you can't consolidate them, then you'll have two pools of loans: One you have to pay back on a standard repayment, and one you have to pay back on IBR, which might increase your monthly payment burden.

I don't know if this was helpful at all! Enjoy the last few months of med school.

 

[Bacchus]

Congrats on the match! I have done a lot of reading and research as pertains to my own situation (going into primary care peds, 1yr left of residency). I have similar MS debt, although no undergrad debt.

If I understand your post right, $56k of your federal loans goes away (hopefully from the PLUS loans), and is replaced by a lower interest rate loan. Can you consolidate that new $56k loan in with your others? In order to qualify for PSLF, your loans must be consolidated and then payments made through IBR. If you can't consolidate those loans, then you'll be paying both standard repayment on the 56K, then on the balance of your other loans through IBR, which may result in a higher monthly payment.

The other issue to consider: Are you sure that the physicians who work for those non-profit hospital systems are employees of the hospital system, and not a private group that contracts with the hospitals? I was surprised to learn this at my residency program: even though we predominately serve a Medicaid population, the physicians are all part of separate groups that would NOT qualify any of them for PSLF. If you have any experience with Kaiser on the West coast, they function in a similar manner. The insurance plan (which owns the hospitals) is non-profit. The physicians are actually separate from the insurance plan, they just mutually contract with each other, but the physician side is not a non-profit.

Overall, I think that if you can consolidate the 5% loans with the rest of your medschool loans, then you hedge a bit against PSLF going away and you having to repay all of your loans. If you can't consolidate them, then you'll have two pools of loans: One you have to pay back on a standard repayment, and one you have to pay back on IBR, which might increase your monthly payment burden.

I don't know if this was helpful at all! Enjoy the last few months of med school.

I appreciate your reply. I actually chose not to go ahead with the 5% loan because of PSLF and IBR. The loan was its own entity and wasn't subject to PSLF or IBR. It could not be consolidated either.

As far as the hospital goes, it is a non-profit so 36 payments will count. Afterwards, I would have to find a non-profit because the physicians fall under the umbrella term of "Hospital Name" Physician Group but just by association. I'll worry about that bridge when I get to it, because now there is too much in the air of what I'll be doing after residency.

 

[nogolfinsnow]

I appreciate your reply. I actually chose not to go ahead with the 5% loan because of PSLF and IBR. The loan was its own entity and wasn't subject to PSLF or IBR. It could not be consolidated either.

As far as the hospital goes, it is a non-profit so 36 payments will count. Afterwards, I would have to find a non-profit because the physicians fall under the umbrella term of "Hospital Name" Physician Group but just by association. I'll worry about that bridge when I get to it, because now there is too much in the air of what I'll be doing after residency.

It's tough to predict the future, unfortunately. Probably the best thing you can do is learn how to budget well and keep expenses down during residency. If you can maintain that sort of lifestyle when you first become an attending you'll be able to pay your loans down aggressively.

 

[teacherman84]

Im also considering the primary care loan, my school offered me the super primary care loan as well so all my med school debt would convert to PLC (im on a mil scholarship so I just took additional loans each year to help cover living expenses for my family of 4 so I've got around 90k in med school debt.

I'm having a hard time seeing a downside to covering my Stafford loans. Most of the loans were at 6.8%, so the 5% rate and deferred interest during residency (and a few additional years can be deferred for military service too) is looking really tempting. I can pay toward the principal while in residency and mil service without penalty.

Im set on FM, considering a sports med fellowship (which is still considered primary care).

Am I missing some negatives?

 

[sazerac]

Im also considering the primary care loan, my school offered me the super primary care loan as well so all my med school debt would convert to PLC (im on a mil scholarship so I just took additional loans each year to help cover living expenses for my family of 4 so I've got around 90k in med school debt.

I'm having a hard time seeing a downside to covering my Stafford loans. Most of the loans were at 6.8%, so the 5% rate and deferred interest during residency (and a few additional years can be deferred for military service too) is looking really tempting. I can pay toward the principal while in residency and mil service without penalty.

Im set on FM, considering a sports med fellowship (which is still considered primary care).

Am I missing some negatives?

If you plan on having loans under control and paying them off, then the best plan is to minimize the interest. If the interest rate is still above inflation, then you should also pay the loans off as quickly as possible.

If you plan on having out of control loans and getting them forgiven tax free, then the principal and interest are irrelevant and the best plan is to pay as little as possible for as long as possible.

If you plan on having out of control loans and getting them forgiven taxably, then the math is a little more complicated. It still makes sense to reduce the interest rate, and you should definitely set some money aside to pay off the tax bomb, but the math often works out such that the best plan of action is to pay as little on the loan as possible and get maximum forgiveness.


Since your loans are small ($90K), they will be under control and most likely paid off by you. Minimizing the interest rate makes a lot of sense in your case.

 

[RangerBob]

I agree. While I don't have much faith in PSLF sticking around, 90k is definitely something you can pay off within three years of finishing residency (possibly one or two, depending on your starting salary and frugality), so I'd recommend taking the lower interest rate and deferred interest.

 

[The White Coat Investor]

Some background information:

-FM resident starting in July
-Most likely will work for one of the two non-profit hospital systems in my area after residency
-65,000 undergrad debt deferrable through residency (with interest accruing)
-~300,000 in MS debt with present interest added in

I was contacted by my financial aid office after the match in regards to the Primary Care Loan. It's a loan offered to students who agree to primary care in the future. The loan has a 5% interest rate but is able to be deferred through residency. Interest is deferred as well. The school determines your eligibility, offers you the money, and in turn creates a new MPN while reversing other federal funds you used for your loans. For me, I was offered 56,000 dollars. This means I'd have 56,000 at 5% without interest accruing or needing to be paid back during my 3 years as an FM resident. The amount must be paid back within 10 years so the funds can be reused for other students. At 50,000 the financial aid office estimates a monthly repayment of ~1000 per month and an interest savings of ~20,000 compared to federal loans. I don't know if those numbers checked out, I just took them for face value.

I'm currently being "vetted" to see if I can get more funds through the "Super" PCL. I have already committed to the 56,000 above but am toeing the line of possibly getting more funds because of PSLF. I have faith in our government, but I don't think PSLF will be around in 2023 (or 2026 if residency doesn't count).

So my question is: If I'm offered more funds at the PCL rate of 5% with the deferral should I take them or should I hope that PSLF sticks around? I really don't want to rely on PSLF but financially it seems to make more sense when you look at the macro scale.

Thoughts?

First, why wouldn't residency count toward PSLF? Are you not doing a residency at a 501(c)3?

Second, if you don't think you'll get PSLF (or think it'll be limited to something like the recently proposed $57.5K) then you'll be paying back a whole lot of debt on a primary care salary. $360K now will be something like $440K by the time you get out of training. You'll need to live like a resident for quite a while to get rid of those. That'll be like a second mortgage.

Third, lowering your interest rate from 6.8% to 5% on $56K of debt isn't going to do much for you. 1.8%*$56K= $1008 per year. Every little bit counts, but this isn't a big decision in the grand scheme of things. The big factors are where you're going to live, how big of a house you're going to buy, how much you'll make as an attending, and whether PSLF disappears or not.

 

[Bacchus]

First, why wouldn't residency count toward PSLF? Are you not doing a residency at a 501(c)3?

Second, if you don't think you'll get PSLF (or think it'll be limited to something like the recently proposed $57.5K) then you'll be paying back a whole lot of debt on a primary care salary. $360K now will be something like $440K by the time you get out of training. You'll need to live like a resident for quite a while to get rid of those. That'll be like a second mortgage.

Third, lowering your interest rate from 6.8% to 5% on $56K of debt isn't going to do much for you. 1.8%*$56K= $1008 per year. Every little bit counts, but this isn't a big decision in the grand scheme of things. The big factors are where you're going to live, how big of a house you're going to buy, how much you'll make as an attending, and whether PSLF disappears or not.

I wrote my post a year ago, hehe. I decided not to do the loan I previously mentioned because of PSLF. I think someone bumped the thread to ask their question which was similar. I know, it's hard to believe someone used the search function.