Loan advice

[BIGphysician]

Not sure if this is common knowledge at this point, but you want to consolidate your loans all into a government FEDLOAN right after your spring dispersement of your 4th year. Once this is all consolidated, you want to apply for income based repayment, specifically the revised pay as you earn. For your entire intern year, your payment will be $0 dollars, and counts towards the 120 needed (non-cumulative) payments for loan forgiveness because 99.9% of training programs are through non-profit hospitals. You want to get the ball rolling on your 120 payments as soon as possible. I just graduated from residency, and I'm 49/120 payments deep, which is a nice start on a potential forgiveness of >$500K.

It's important to keep in mind, that when you do get your loans forgiven, that year on your IRS tax return, you need to count the forgiven amount as income. meaning you'll basically instantly be hit with a massive IRS tax bill for that year. Also, I'd assume the IRS repayment plan isnt only 10% of your income as you've been used to. I know they do offer repayment plans, but I dont know the specifics.

If you wanted to be very aggressive and savy, you could potentially open a large scale small business, maybe involving real estate during that tax year, which would make all those costs a tax deduction/business expense, and help off-set that massive bill.

anyone else have experience with this?

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[SilverStain]

Thanks for the information. I've been researching this option for the past month as I'm heading into residency. Below (link) is the only case I've seen with debt forgiven under PSLF...and more importantly, the official letter from FedLoan states the amount forgiven is NOT considered income and thus NOT taxable.

 

[Raryn]

Not sure if this is common knowledge at this point, but you want to consolidate your loans all into a government FEDLOAN right after your spring dispersement of your 4th year. Once this is all consolidated, you want to apply for income based repayment, specifically the revised pay as you earn. For your entire intern year, your payment will be $0 dollars, and counts towards the 120 needed (non-cumulative) payments for loan forgiveness because 99.9% of training programs are through non-profit hospitals. You want to get the ball rolling on your 120 payments as soon as possible. I just graduated from residency, and I'm 49/120 payments deep, which is a nice start on a potential forgiveness of >$500K.

It's important to keep in mind, that when you do get your loans forgiven, that year on your IRS tax return, you need to count the forgiven amount as income. meaning you'll basically instantly be hit with a massive IRS tax bill for that year. Also, I'd assume the IRS repayment plan isnt only 10% of your income as you've been used to. I know they do offer repayment plans, but I dont know the specifics.

If you wanted to be very aggressive and savy, you could potentially open a large scale small business, maybe involving real estate during that tax year, which would make all those costs a tax deduction/business expense, and help off-set that massive bill.

anyone else have experience with this?

This is not true.

If you get your loans forgiven as part of PSLF (that is, 120 payments), it is not taxable. Note, that to qualify for PSLF (and the 120 payment forgiveness), you must work for either a nonprofit or the government for the entirety of the 10 years. The majority of resident positions do qualify, and the majority of non-academic attending positions do not. That is, when you take your first attending job, you have to be very careful to make sure that whomever is actually paying you is either the government directly or a 503(c)1 nonprofit, rather than a forprofit group that contracts with a nonprofit hospital.

If you get your loans forgiven through the IBR/PAYE/REPAYE, that is after 240-300 payments, whatever is forgiven at that point is taxable.

 

[Trisphorin]

I am currently under REPAYE, I haven't sign up for PSLF yet. To get PSLF via REPAYE, you have to make 240-300 payments? i thought it was 10 years only. Sorry for my stupid questions.

 

[Raryn]

I am currently under REPAYE, I haven't sign up for PSLF yet. To get PSLF via REPAYE, you have to make 240-300 payments? i thought it was 10 years only. Sorry for my stupid questions.

No.

There are two general classes of forgiveness here, and you're somewhat conflating them.

1) IBR/PAYE/REPAYE, this is where you can work for any employer, and pay only 10-15% of your discretionary income towards your loans. If there's anything left after 20-25 years, that is forgiven. Any forgiven loan amount counts as taxable income. There's a variety of differences between the three (10% vs 15%, 20 years vs 30 years, how old your loans can be and still qualify, whether any interest is paid by the government if you have low payments, etc) but they generally work simialrly.

2) PSLF, which requires your employer be either the government or a qualifying nonprofit (for all intents and purposes, only a 501(c)3 counts). Here, you need to be enrolled in one of the above three plans and making your 10-15% payment while employed at a qualifying organization. After ten years of payments (which is only, at best, halfway through IBR/PAYE/REPAYE), PSLF forgives all of your remaining balance, tax free.

That is, everyone "enrolled" in PSLF is also enrolled in IBR/PAYE/REPAYE, but the converse is not true.

 

[Trisphorin]

No.

There are two general classes of forgiveness here, and you're somewhat conflating them.

1) IBR/PAYE/REPAYE, this is where you can work for any employer, and pay only 10-15% of your discretionary income towards your loans. If there's anything left after 20-25 years, that is forgiven. Any forgiven loan amount counts as taxable income. There's a variety of differences between the three (10% vs 15%, 20 years vs 30 years, how old your loans can be and still qualify, whether any interest is paid by the government if you have low payments, etc) but they generally work simialrly.

2) PSLF, which requires your employer be either the government or a qualifying nonprofit (for all intents and purposes, only a 501(c)3 counts). Here, you need to be enrolled in one of the above three plans and making your 10-15% payment while employed at a qualifying organization. After ten years of payments (which is only, at best, halfway through IBR/PAYE/REPAYE), PSLF forgives all of your remaining balance, tax free.

That is, everyone "enrolled" in PSLF is also enrolled in IBR/PAYE/REPAYE, but the converse is not true.

I appreciate your clarification. I have 2 follow up questions if you don't mind helping me.

1. If I enroll in PSLF now, does my prior payments count toward the 10 years requirement or does it start when you sign up?
2. Let's say I am in PSLF with REPAYE and at the end of my training I decided to forgo PSLF and enter the private sector, is there any consequence? What I am trying to say is that, what is the harm of signing up for PSLF now and decide if I want to go through with it at the ned of my training when selecting jobs?

To put into context, I am in IM and interested in cardiology (6-7 years of training) with about 200k loan.

 

[Raryn]

I appreciate your clarification. I have 2 follow up questions if you don't mind helping me.

1. If I enroll in PSLF now, does my prior payments count toward the 10 years requirement or does it start when you sign up?
2. Let's say I am in PSLF with REPAYE and at the end of my training I decided to forgo PSLF and enter the private sector, is there any consequence? What I am trying to say is that, what is the harm of signing up for PSLF now and decide if I want to go through with it at the ned of my training when selecting jobs?

To put into context, I am in IM and interested in cardiology (6-7 years of training) with about 200k loan.

1) Typically, yes. Better to fill out the forms yearly, but assuming you were working for a qualifying employer, your prior payments should count.
2) No harm, other than REPAYE might not be the best option for you if you're not planning on doing PSLF - if you're planning on going the whole 20 years, you might be better off refinancing your loans and getting a lower interest rate. But then you wouldn't qualify for PSLF.

 

[mvenus929]

I appreciate your clarification. I have 2 follow up questions if you don't mind helping me.

1. If I enroll in PSLF now, does my prior payments count toward the 10 years requirement or does it start when you sign up?
2. Let's say I am in PSLF with REPAYE and at the end of my training I decided to forgo PSLF and enter the private sector, is there any consequence? What I am trying to say is that, what is the harm of signing up for PSLF now and decide if I want to go through with it at the ned of my training when selecting jobs?

To put into context, I am in IM and interested in cardiology (6-7 years of training) with about 200k loan.

You don't really sign-up for PSLF. You submit documentation that you've worked for a qualifying non-profit organization, but you can do that as you go, or at the end of your 120 payments. It's easier to do it as you go, but make sure you keep good records, cause government...

So in that sense, it doesn't really matter if you decide to take a job in the for profit sector, cause you just wouldn't complete the 120 qualifying payments. Note that you can also work for a non-qualifying employer for 2-3 years, then go back and work for a qualifying employer, and the clock resumes where you left off (you don't lose the 30 qualifying payments just because you worked at a non-qualifying job in the interim). Assuming you're still on a qualifying repayment plan and don't consolidate and refinance your loans.

 

[Trisphorin]

Thanks all for the answers. So for someone who is doing CT surgery which can ran up to 9 years in training if not longer with the traditional gen surg+CT fellowship, why aren't everyone doing the PSLF? They can all of their loan forgiven under this if they just work for a nonprofit for 1 more year

 

[mvenus929]

Thanks all for the answers. So for someone who is doing CT surgery which can ran up to 9 years in training if not longer with the traditional gen surg+CT fellowship, why aren't everyone doing the PSLF? They can all of their loan forgiven under this if they just work for a nonprofit for 1 more year

The program was initiated in 2007, which means the first people to actually qualify for forgiveness were able to do so just this past fall. It's entirely possible CT surgeons are working towards it--they just haven't completed the 10 years yet.

 

[ThoracicGuy]

The program was initiated in 2007, which means the first people to actually qualify for forgiveness were able to do so just this past fall. It's entirely possible CT surgeons are working towards it--they just haven't completed the 10 years yet.

The program wasn't available for me or I would have likely qualified...

 

[BorntobeDO?]

1) Typically, yes. Better to fill out the forms yearly, but assuming you were working for a qualifying employer, your prior payments should count.
2) No harm, other than REPAYE might not be the best option for you if you're not planning on doing PSLF - if you're planning on going the whole 20 years, you might be better off refinancing your loans and getting a lower interest rate. But then you wouldn't qualify for PSLF.

If he doesn't refinance, he can count all qualifying payments. The fun part with PSLF is that the annual certification doesn't mean anything. DoE doesn't even consider whether your 120 payments count till you have completed them and you apply for forgiveness. I am not sure I would even bother with the annual certifications. If you work for Government or 503c your good.

 

[TMP-SMX]

There's a lot of talk in government about caps on PSLF forgiveness by both the GOP and Democrats. There are probably more people banking on this continuing than we know but there's no guarantees unless congress keeps the program. If congress orders the the DOE to stop payouts to those that would hopefully be grandfathered in, then we will likely have lawsuits. We shall see.

 

[HuskyPride149]

Does the loan servicer have to be "FedLoan" specifically or can you just consolidate your loans with any loan servicer. Currently all my loans are through Navient.

 

[TMP-SMX]

Does the loan servicer have to be "FedLoan" specifically or can you just consolidate your loans with any loan servicer. Currently all my loans are through Navient.

When you file your first employment certification form you are automatically moved to Fedloan. All of your loans must be direct to qualify (which I thought all of them were since around 2010)? You don't have to consolidate as long as all are direct to begin with.

 

[HuskyPride149]

When you file your first employment certification form you are automatically moved to Fedloan. All of your loans must be direct to qualify (which I thought all of them were since around 2010)? You don't have to consolidate as long as all are direct to begin with.

Oh that is good to hear. Another question is, I have subsidized direct loans from undergraduate and then just unsubsidized direct loans from med school, are those also included in the 10 year PSLF forgiveness plan?

I assume consolidation would be the best option since itll be 1 monthly bill instead of 8 bills (for my 8 loans)

 

[TMP-SMX]

It's not necessary to consolidate if they are all direct to begin with. You do have more than one payment with all the different loans, but your interest rate is rounded up when you consolidate. All direct loans when under an eligible repayment plan and working for an eligible employer count towards PSLF.

 

[mvenus929]

Oh that is good to hear. Another question is, I have subsidized direct loans from undergraduate and then just unsubsidized direct loans from med school, are those also included in the 10 year PSLF forgiveness plan?

I assume consolidation would be the best option since itll be 1 monthly bill instead of 8 bills (for my 8 loans)

I’ve had my loans with Navient for the past 4+ years. I only have one payment per,month that gets divided amongst my 6 loans. If I were to pay more than my monthly payment, I’d have to specify where I wanted the extra to go.

 

[Leonardsean]

After graduating from residency, in an Income-based-repayment plan, or PAYE plan, do you have to resubmit your income and have your student loan payment recalculated as soon as you start working, or is the end of the year/annual recertification soon enough?

I've already recertified my new employer as qualifying under PSLF. Would the payments I make until the end of the year qualify in the 120, if I don't recertify my income level?

Thanks,

--Sean

 

[TMP-SMX]

After graduating from residency, in an Income-based-repayment plan, or PAYE plan, do you have to resubmit your income and have your student loan payment recalculated as soon as you start working, or is the end of the year/annual recertification soon enough?

I've already recertified my new employer as qualifying under PSLF. Would the payments I make until the end of the year qualify in the 120, if I don't recertify my income level?

Thanks,

--Sean

Just do it once per year

 

[dpmd]

For any loans made before 2010 you have to make sure that you have a direct loan and not ffel otherwise you will have a very sad surprise after 10 yrs of payments under a qualifying plan. That is one of the reasons the current rate of actually getting pslf for those that applied for it is so low. This article gets into it a little.

 

[cupcake81]

Hi guys I know this thread is very old, but I do have an important question. I was recently accepted into med school for the Class of 2024. I will be paying with federal loans..however I did take out private loans for expensive private undergrad tuition. I am familiar with the REPAYE option for federal loans after med school graduation. However, I was wondering if anyone knows how that works for private loans? Would my income amount that I am required to pay for my federal loans also take into account that I have private loans that must be paid as well? I am worried about not being able to pay the monthly requirement for both my federal and private loans

 

[TMP-SMX]

No, your federal repayment amount doesn't take into account private loans. What are the loan terms and what's the amount of loans we are talking here? Private repayment plans vary widely depending on what the company is.

 

[cupcake81]

No, your federal repayment amount doesn't take into account private loans. What are the loan terms and what's the amount of loans we are talking here? Private repayment plans vary widely depending on what the company is.

Private loan amount is around 200K at 10% interest (Sallie Mae) .. I understand its a horrible situation so no need for you to mention it again. And I am planning on taking out med school cost using Federal loans (grad plus etc) .. I am worried that once it is time to pay back, I won't be able to afford to pay the monthly payment for both private and federal at the same time.

 

[dpmd]

Private loan amount is around 200K at 10% interest (Sallie Mae) .. I understand its a horrible situation so no need for you to mention it again. And I am planning on taking out med school cost using Federal loans (grad plus etc) .. I am worried that once it is time to pay back, I won't be able to afford to pay the monthly payment for both private and federal at the same time.

Any chance you can keep costs under what you are eligible for and use the extra loan fund to decrease your private loans?

 

[TMP-SMX]

Tough situation. Will your lender offer reduced payments during residency? What's your projected federal loan balance after medical school?

 

[cupcake81]

Tough situation. Will your lender offer reduced payments during residency? What's your projected federal loan balance after medical school?

Once I start paying loans, they said I'd be required to pay full monthly payment...not income based or anything. I could defer until after residency but that would just cause me to accrue interest. I am considering refinancing sallie mae to sofi. After med school federal loans will prob be about 400K because I also completed a masters degree prior to entering.

 

[TMP-SMX]

I see. If you can get a cosigner to lower those rates it would be a great idea.