Loan forgiveness - IBR/PSLF

[txlonghorn]

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I wanted to see if anyone is going the route of doing IBR with PSLF to make their dental school debt vanish after 10 years. Here is some information about the program:

http://studentaid.ed.gov/PORTALSWebApp/students/english/PSF.jsp

After reading the information provided on the website and the detailed pdf document, I wanted to see if this would work:

- Go to dental school and rack up a ton of debt
- Complete a 4 year OMFS residency, which I am interested in. (10 - 4 = 6 years remaining for PSLF)
- Work for or create a 501C and work full time (30 hours a week according to the PSLF guidelines) for 6 years while working on the side at my own practice. (loan forgiven).

The benefit I see here is that if I go for the IBR program, the government will pay for the interest on my subsidized loan for 3 years while I am completing residency. Moreover, since I will only be making around 45k, my loan payments will be a few hundred a month for the 4 years of residency. I am sure that one I begin working as an OMFS, my income will be high and I will be placed on a 10 year standard repayment program. This will increase my monthly payments to a few thousand. However, the overall benefit is that I will only have to pay for around 60% of my loans.

I would love to get peoples thoughts on this program.

 

[gigawatt]

NOTE: This is true for IBR alone, which has a 25 year forgiveness requirement. It's a moot point for PSLF(+IBR) which has a 10 year forgiveness requirement.

If at any point during the 10 years of IBR you cease to qualify for it (i.e. once you starting making OMFS money in private private for the last six years of your schedule) you are put on the standard 10 year plan and you have to pay back all of the government subsidies you received. You'll see no benefit doing IBR over just doing standard repayment all along unless you make sure to keep your income down all 10 years. Actually, you're much better off on the standard repayment plan because you'll at least be making a full OMFS salary and able to spend/save whatever is left after loan payments, as opposed to making next to nothing.

This financial aid officer at USC mentioned this explicitly (and I figure one of the most expensive schools in the country comes across this more often than most).

 

[gigawatt]

NOTE: see above.

http://studentaid.ed.gov/students/attachments/siteresources/IBR_QA_Final2-2011.pdf

Q15 What happens if my income increases so much that I no longer have a "partial financial hardship" as described in Q&A #4 above? Do I then lose eligibility to repay under IBR?

A15 If your IBR payment amount increases to the point where it is more than the monthly amount you would be required to repay under a 10-year Standard Repayment Plan, you would no longer be considered to have a "partial financial hardship." In this situation, you may remain on the IBR Plan (to take advantage of some of the other IBR benefits, as described in Q&A #2), but your monthly payment will no longer be based on your income. Instead, you will be required to pay the amount you would have been required to pay under a 10-year Standard Repayment Plan based on the amount of your eligible loans that were outstanding when you began repaying under IBR. Your repayment period based on this recalculated amount may be more than 10 years. [January 5, 2010]

 

[cmcner]

Yes, but as far as I can tell the loan forgiveness portion of the program isn't changed based on your salary so even if you have the stipulation where you have to start paying back your interest any interest left on your loan at the forgiveness time period would be forgiven, which would work out well with OMFS and 6 years of practice.

Also be careful how much you trust financial aid officers, nothing is better than doing your own research.

 

[redchesus]

Wait, the four years of OMFS residency count towards PLSF?

 

[gigawatt]

Yes, but as far as I can tell the loan forgiveness portion of the program isn't changed based on your salary so even if you have the stipulation where you have to start paying back your interest any interest left on your loan at the forgiveness time period would be forgiven, which would work out well with OMFS and 6 years of practice.

Also be careful how much you trust financial aid officers, nothing is better than doing your own research.

I see what you're saying, and it makes sense. I think I was wrong.

I will say that saving ~40% of your loan balance won't be worth the money you'll lose working for 6 years in limited capacity as an OMFS.

 

[txlonghorn]

I see what you're saying, and it makes sense. I think I was wrong.

I will say that saving ~40% of your loan balance won't be worth the money you'll lose working for 6 years in limited capacity as an OMFS.

I understand if you limit yourself, then it would not be worth it. However, if you work for 3 days, 30 hours, and the other 4 days you work at your own practice, it would be worth it. Also, I am sure you can setup a non-profit and work as the CEO of a charity to count towards the 30 hours. I am not talking about some BS non-profit you setup for this purpose, but you could setup a legit non-profit that you can benefit from as well.

 

[Hysteria24]

However, if you work for 3 days, 30 hours, and the other 4 days you work at your own practice, it would be worth it.

7 day work weeks? Sign me up!

 

[txlonghorn]

7 day work weeks? Sign me up!

Lol. I am sure you can fit the 30 hours a week into M-F if you wanted. The idea was to see if you can use IBR with PSLF. From what I have been reading on the medical forums about PSLF, it seems that the program is not funded and the rules can be changed in the future. The short of it is that you should not count on it.

 

[Hysteria24]

From what I have been reading on the medical forums about PSLF, it seems that the program is not funded and the rules can be changed in the future. The short of it is that you should not count on it.

I like this thread... I actually was playing this idea out in my head as soon as I heard about IBR. New ortho grads on SDN (a specialty I'm interested in) often say that work is very slow for a while and that they can only work a few days a week. If in the down time, one can put it towards a 501c, not only would that be extra income in the short term, but after 10 years elimination of a large percentage of debt. In a case like mine where I'm graduating with $400,000+ of debt for my DDS degree alone, and another possible $200,000 for post grad, were talking hundreds of thousands saved.

However, if they can change the rules at any time, why would anyone go this route? Seems like a good way for the government to get people into public service in the next decade, and then 9 years later change the rules not costing them anything. Hmmm...

 

[cmcner]

In the past when government programs were changed those currently enrolled in them would be grandfathered in, the problem is that PSLF doesn't have a form to say that you're enrolled yet, supposedly they're working on it though, so I'd say if they have some documentation saying that you're enrolled there is a good chance you'll be grandfathered in should they change it. However, they can do as they please so there are no guarantees.

And yes in theory a residency should be able to count if you're getting a pension and your residency is at a non-profit/state school. You'd have to be making payments during your residency on IBR.

 

[GTFOOMICT]

Do the math and you will see how unlikely it is to truly benefit you. Take your time, read the documents on it, and apply your situation. It will likely not be of benefit to you. The 25 year plan especially is extremely financially dangerous. The benefits can be good, but the downfalls can be disastrous! Those who will benefit the most are at the greatest financial risk. Those who barely qualify due to higher income will be the ones with the least risk.

The 10 year one can POTENTIALLY be fantastic for the right person and situation. And it's pretty risk free. Even with some hiccups in your life, this one is unlikely to punish you. The 25 year one....bad bad bad. Do not get distracted by it. Think of it as a safety net to keep you out of poverty should something go very bad along your career, not a plan to financial success.

And the idea of creating a non-profit just to get into this program is BS. The amount of time and energy it takes to keep one of them running financially and physically isn't worth it unless you are in it for the right reasons.

 

[OG1]

Interesting idea, but any way you slice it, you are sacrificing 6-10 years of building a practice and reputation while working full time at a public job. It is unlikely that you will have the energy to invest in a full-time job, plus a practice on the side and building that practice, especially after completing 8-10 years of dental school + residency. By that point you are going to want to get the hell out and have some free time and money.

In the long run, biting the bullet and starting your own practice will mean 6-10 extra years during your peak earning years.

This was the logic that kept me out of the military HSPS program; I was doing it primarily for financial reasons, but then I realized I would be losing 4+ years of peak earning potential. Plus, if you want to be in private practice, be the boss, and dictate your own schedule, a public job may not allow that.

 

[cnoordma]

after residency any money you make in addition to what you will make working at your non-profit will be considered when estimating your monthly payment. unless you can hide the money you make at your private practice from the government it will most likely greatly boost your monthly payment and may even disqualify you from the program.

 

[cmcner]

after residency any money you make in addition to what you will make working at your non-profit will be considered when estimating your monthly payment. unless you can hide the money you make at your private practice from the government it will most likely greatly boost your monthly payment and may even disqualify you from the program.

Not if you graduate with $500k in debt like you will from the high cost private schools. Those 4 years of interest tack on $100k to the $400k.