Loan repayment in residency

[Ctcrunch]

I will be speaking with a student loan consultant soon and want to go into the meeting with a basic foundation and good plan to get the most out of the meeting. I will be graduating dental school with 130k debt averaging roughly 6% interest rate (110k federal, 20k university loan - which I think is considered private?). I will be entering a 3 year paid residency (56-60k) in July. From what I have read so far, I think the best option would be to enter REPAYE for my federal loans during my time in residency to minimize payments and take advantage of the 50% interest subsidy to decrease my accumulated interest...also I am not married and file taxes independently. After finishing residency I would look into private refinancing with hopes of getting a low interest rate. I plan on going into private practice and not applying for PSLF.

My questions are:
1. Is this a good plan? and is it allowed to enroll in REPAYE and then refinance privately after finsihing residency?
2. I believe there is a mandatory 6 month grace/defermment period to make loan payments after I graduate, would it be better to consolidate my loans now to eliminate that grace period so I can enroll in repaye earlier and my interest wont accumulate as much?

Any advice or corrections to my thoughts would be greatly appreciated! Thanks!

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[cmsmith85]

That's a great plan. I did exactly what you are planning on doing right after graduating. Skip that grace period and start getting that 50% interest subsidy. You can do that for those 3 years you're in residency and then pay those off quickly after you're done. You're at such a huge advantage to only have 130k in student loans. Congrats!

 

[Ctcrunch]

That's a great plan. I did exactly what you are planning on doing right after graduating. Skip that grace period and start getting that 50% interest subsidy. You can do that for those 3 years you're in residency and then pay those off quickly after you're done. You're at such a huge advantage to only have 130k in student loans. Congrats!

Awesome, thank you! When you skipped the grace period you had to consolidate your federal loans correct?

 

[cmsmith85]

Awesome, thank you! When you skipped the grace period you had to consolidate your federal loans correct?

Yeah, I had to consolidate my graduate plus loans, but for the regular unsubsidized loans I didn't have to. I think each loan servicer might be a little different, so whatever yours says you have to do in order to skip the grace period, go for that. It's funny though, cuz when you call them and do that, they'll probably be really confused why you would want to skip the grace period. That's what happened with me at least.

 

[allDAT]

You have a good plan. Don't consolidate your loans, you may be able to moonlight during the end of your residency and you'll be able to get rid of 1 or 2 small loans. At your debt to income ratio, you'll end up refinancing these. For now, there's a federal freeze and it'll likely be extended (we should know more next week) so consolidating to enter REPAYE earlier is unlikely to be necessary and keeping your loans unconsolidated makes paying them down easier (you don't have to pay off as much unpaid interest to start to get rid of principal balances).

 

[allDAT]

You have a good plan. Don't consolidate your loans, you may be able to moonlight during the end of your residency and you'll be able to get rid of 1 or 2 small loans. At your debt to income ratio, you'll end up refinancing these. For now, there's a federal freeze and it'll likely be extended (we should know more next week) so consolidating to enter REPAYE earlier is unlikely to be necessary and keeping your loans unconsolidated makes paying them down easier (you don't have to pay off as much unpaid interest to start to get rid of principal balances).

Also, during your grace period, just use the money you would have put towards the federal loans towards your private loans because you'll want to get rid of those as quickly as you can. You may be able to refi that 20k as soon as you start your residency too and you'll get a cashback bonus that you can apply to the balance if you choose.

 

[cmsmith85]

Also, during your grace period, just use the money you would have put towards the federal loans towards your private loans because you'll want to get rid of those as quickly as you can. You may be able to refi that 20k as soon as you start your residency too and you'll get a cashback bonus that you can apply to the balance if you choose.

That's a really good call about the 0% interest and the private loan. I forgot about government loans being 0% right now. Don't forgo the grace period for now since 0% interest is much better than the subsidy. Once the interest rates are back on, then go into REPAYE.

 

[vk223]

Can someone explain what's the 50% interest subsidy???