Is REPAYE my best option during residency?

[SwaggyPedro]

I’ll be graduating in a few months with about $210,000 in student loans ($190k principal, $20k accrued interest) and starting OMS residency. All loans are unsubsidized, none are grad plus. I’m not married, expecting to make a standard resident’s stipend (~$55,000), and have no undergrad loans. Because of the low monthly payments and excess interest subsidy (government pays 50%), I think REPAYE is my best option during residency. If my math is right, that should save me several thousands of dollars per year in interest while keeping my monthly payments manageable. After I finish my four years, I plan on refinancing to a lower interest rate and then paying the loans off aggressively within a few years.

Can anyone provide any insight as to why this may not be my best plan? Any suggestions or better ideas? Is it possible to refinance REPAYE after a few years?

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[thefinnishflash]

also interested in this, with a few follow-up questions

when exactly do you apply for REPAYE? They base your monthly payments off of your adjusted gross income from your last tax returns, but if we start in July we won’t have tax info for that previos year period. Do we provide our estimated income? A little confused on this. I want to apply for REPAYE during residency as well but since I was a student all of last year and did not file taxes my AGI would technically be 0 even if that isn’t accurate starting July when I’d be repaying

 

[free99]

@SwaggyPedro -
Yes REPAYE is your best bet.

@thefinnishflash -
Apply for REPAYE and follow the instructions on studentloans.gov. You can't waive your 6-mo grace period but can enter the plan immediately after it concludes.

 

[SigmaFS]

You can consolidated your loans (studentaid.gov then select Manage Loans) immediately after graduation/before starting your residency. Keep in mind, once you're in Med school, if in the 6yr residency, you're not allowed to enter any IDR plan for the Federal Direct Unsubsidized Loan while you are considered a student. Also, by consolidating, you enter REPAYE sooner benefiting from the 50% interest subsidy sooner.

 

[allDAT]

Yes to repaye.
Do not consolidate your loans. Leave them unconsolidated. You’ll be in a position to pay them back.
If you’re applying in July, just use a paystub.

 

[White_Sponge_Nevus]

Forgive me if this is a dumb question. Posters above have mentioned that you can't waive the 6 month grace period, and that you can consolidate and enter right around the start of residency. Is it necessary to consolidate in order to begin REPAYE when you start, and get an extra 6 months of the interest subsidy by starting earlier? What are advantages to consolidating (I'm assuming they will not lump all of your Grad Plus loans into your Unsubsizided Stafford interest rates).

Thanks!

 

[allDAT]

Forgive me if this is a dumb question. Posters above have mentioned that you can't waive the 6 month grace period, and that you can consolidate and enter right around the start of residency. Is it necessary to consolidate in order to begin REPAYE when you start, and get an extra 6 months of the interest subsidy by starting earlier? What are advantages to consolidating (I'm assuming they will not lump all of your Grad Plus loans into your Unsubsizided Stafford interest rates).

Thanks!

Read Student loan strategy

I don’t recommend consolidation to waive grace. It’s not worth the extra few months of IDR in my opinion.

Good luck!

 

[free99]

Forgive me if this is a dumb question. Posters above have mentioned that you can't waive the 6 month grace period, and that you can consolidate and enter right around the start of residency. Is it necessary to consolidate in order to begin REPAYE when you start, and get an extra 6 months of the interest subsidy by starting earlier? What are advantages to consolidating (I'm assuming they will not lump all of your Grad Plus loans into your Unsubsizided Stafford interest rates).

Thanks!

Consolidating will give you a weighted interest rate and eliminate your ability to use the debt avalanche method where you attack highest interest rates first. Not worth 6 mo. of interest subsidy.

 

[White_Sponge_Nevus]

Read Student loan strategy

I don’t recommend consolidation to waive grace. It’s not worth the extra few months of IDR in my opinion.

Good luck!

Thank you!

 

[White_Sponge_Nevus]

Consolidating will give you a weighted interest rate and eliminate your ability to use the debt avalanche method where you attack highest interest rates first. Not worth 6 mo. of interest subsidy.

This makes sense, thank you!

 

[Not_A_Doc]

Consolidating will give you a weighted interest rate and eliminate your ability to use the debt avalanche method where you attack highest interest rates first. Not worth 6 mo. of interest subsidy.

It may be if the borrower plans to refinance immediately after residency. What's your opinion @SigmaFS?

 

[free99]

It may be if the borrower plans to refinance immediately after residency. What's your opinion @SigmaFS?

I forgot to mention, when you consolidate I believe the federal loan capitalizes the interest, meaning you're then paying interest on interest. But yeah, if you're only talking about a time frame of a year or a few in residency, any change you make (REPAYE, consolidation, refi) doesn't make an enormous difference in the total amount paid.

 

[SigmaFS]

It may be if the borrower plans to refinance immediately after residency. What's your opinion @SigmaFS?

The goal is to minimize interest costs. The combined strategy of consolidating to enter REPAYE immediately after MS/before residency, then refinancing after OMS will likely minimize costs. The big unknown...where will interest rates be in 4-6 years? I think many have developed an expectation that rates will continue at historic lows. I'm not so confident.

Also, one unique variable with OP is he only has Federal Direct Unsubsidized Loan. You can't select REPAYE while in the grace period nor while in school.

 

[Trout_Bum]

Is it possible to take advantage of the interest subsidy of REPAYE while in a residency and then stop the program after graduation? Pros? Cons? I want to minimize my interest accrual while in residency and am not so much interest in loan forgiveness in 25 years.

 

[free99]

Is it possible to take advantage of the interest subsidy of REPAYE while in a residency and then stop the program after graduation? Pros? Cons? I want to minimize my interest accrual while in residency and am not so much interest in loan forgiveness in 25 years.

What is your plan with the loans after residency?

Repaye during residency, locked in at the lowest monthly payment possible to maximize the interest subsidy, is a great idea. After residency graduation, I believe one should get the highest paying job they can find without compromising ethics/morals, give that job 6-12 months to make sure it's stable, then refinance student loans privately. In the first 6-12 months in the job put every extra penny you have into the student loans -- there is no penalty for overpayment. Some financial advisors (Dave Ramsey) would suggest you defer contributing to tax-sheltered retirement accounts... I don't agree with that, especially if your company offers a 401k match. Even if they don't, I think it's worth putting $6k into a backdoor roth IRA in addition to paying as much as you can toward student loans.

This advice is all predicated on the assumption that your total student loan indebtedness isn't astronomical. I read something by student loan planner that made me rethink whether the folks with $600k+ student debt should follow the above advice. I feel really bad for those folks.

 

[Trout_Bum]

What is your plan with the loans after residency?

Repaye during residency, locked in at the lowest monthly payment possible to maximize the interest subsidy, is a great idea. After residency graduation, I believe one should get the highest paying job they can find without compromising ethics/morals, give that job 6-12 months to make sure it's stable, then refinance student loans privately. In the first 6-12 months in the job put every extra penny you have into the student loans -- there is no penalty for overpayment. Some financial advisors (Dave Ramsey) would suggest you defer contributing to tax-sheltered retirement accounts... I don't agree with that, especially if your company offers a 401k match. Even if they don't, I think it's worth putting $6k into a backdoor roth IRA in addition to paying as much as you can toward student loans.

This advice is all predicated on the assumption that your total student loan indebtedness isn't astronomical. I read something by student loan planner that made me rethink whether the folks with $600k+ student debt should follow the above advice. I feel really bad for those folks.

My debt will not be that high. My plan after residency is to aggressively pay down loans and also invest in retirement accounts. I guess my question is whether I could quit REPAYE after residency no strings attached or would they make me pay back the 50% interest subsidy that I benefited from while in the program.

 

[free99]

My debt will not be that high. My plan after residency is to aggressively pay down loans and also invest in retirement accounts. I guess my question is whether I could quit REPAYE after residency no strings attached or would they make me pay back the 50% interest subsidy that I benefited from while in the program.

No, as far as I can tell that interest subsidy is added each month and won't be taken away. That's a good question though, call your servicer and let us know what they say. At any rate, it's the best program and you're no worse off than any other program if it is actually taken away, which i think is highly unlikely.

 

[Trout_Bum]

No, as far as I can tell that interest subsidy is added each month and won't be taken away. That's a good question though, call your servicer and let us know what they say. At any rate, it's the best program and you're no worse off than any other program if it is actually taken away, which i think is highly unlikely.

Ed financial services told me you do not have to pay back the gov subsidy if you stop REPAYe.

 

[DocMon16]

What is your plan with the loans after residency?

Repaye during residency, locked in at the lowest monthly payment possible to maximize the interest subsidy, is a great idea. After residency graduation, I believe one should get the highest paying job they can find without compromising ethics/morals, give that job 6-12 months to make sure it's stable, then refinance student loans privately. In the first 6-12 months in the job put every extra penny you have into the student loans -- there is no penalty for overpayment. Some financial advisors (Dave Ramsey) would suggest you defer contributing to tax-sheltered retirement accounts... I don't agree with that, especially if your company offers a 401k match. Even if they don't, I think it's worth putting $6k into a backdoor roth IRA in addition to paying as much as you can toward student loans.

This advice is all predicated on the assumption that your total student loan indebtedness isn't astronomical. I read something by student loan planner that made me rethink whether the folks with $600k+ student debt should follow the above advice. I feel really bad for those folks.

What is your plan with the loans after residency?

Repaye during residency, locked in at the lowest monthly payment possible to maximize the interest subsidy, is a great idea. After residency graduation, I believe one should get the highest paying job they can find without compromising ethics/morals, give that job 6-12 months to make sure it's stable, then refinance student loans privately. In the first 6-12 months in the job put every extra penny you have into the student loans -- there is no penalty for overpayment. Some financial advisors (Dave Ramsey) would suggest you defer contributing to tax-sheltered retirement accounts... I don't agree with that, especially if your company offers a 401k match. Even if they don't, I think it's worth putting $6k into a backdoor roth IRA in addition to paying as much as you can toward student loans.

This advice is all predicated on the assumption that your total student loan indebtedness isn't astronomical. I read something by student loan planner that made me rethink whether the folks with $600k+ student debt should follow the above advice. I feel really bad for those folks.

I agree with this, I have read White Coat Investor and after reading it, it really helped understand some of these concepts.

 

[Trout_Bum]

I agree with this, I have read White Coat Investor and after reading it, it really helped understand some of these concepts.

So is it better to do REPAYE with interest subsidy but also compound interest during residency or to do forbearance but with simple interest?

 

[aaa127]

So your break even AGI (when you should switch from REPAYE to PAYE) is (yearly interest/.10) + 150% of federal poverty line. So in your case since your single it would be 150% of $12,760 which is $19,140. Your yearly interest would be about 7% of $210,00 which is $14,700. So if your break even AGI is ($14,700/.10) + $19,140 = $166,140. So if your making at least $166,140 as your AGI then you can go to PAYE. If your making under then stick to REPAYE.

 

[DocMon16]

I’ll be graduating in a few months with about $210,000 in student loans ($190k principal, $20k accrued interest) and starting OMS residency. All loans are unsubsidized, none are grad plus. I’m not married, expecting to make a standard resident’s stipend (~$55,000), and have no undergrad loans. Because of the low monthly payments and excess interest subsidy (government pays 50%), I think REPAYE is my best option during residency. If my math is right, that should save me several thousands of dollars per year in interest while keeping my monthly payments manageable. After I finish my four years, I plan on refinancing to a lower interest rate and then paying the loans off aggressively within a few years.

Can anyone provide any insight as to why this may not be my best plan? Any suggestions or better ideas? Is it possible to refinance REPAYE after a few years?

Me and you are pretty much in the same exact place and going into OMFS residency, I plan on doing exactly what you mentioned above.

 

[resiliens]

For OMFS residents doing REPAYE, are you making yearly Roth IRA/401k contributions during residency, or just putting that money toward paying off your loans? rn, I'm going with REPAYE primarily for its interest subsidy and not the (expected) loan forgiveness at the end. I want to be debt-free asap rather than start investing, but I'm curious what others have to say.

 

[SDFBlaque]

Has anyone heard of residents qualifying for or taking advantage of State SLRP while in residency as many training sites are a FQHC with high HPSA scores??