Loan Repayment Strategy (PSLF)

[deleted1021716]

Hello!

Just trying to get as much input as possible from different sources. I'm planning on starting med school this fall (OOS) and I've been sort of banking on the PSLF program because of the type of field I plan on going into. I know it may seem risky as it's not guaranteed to exist 10 years down the road, etc. but the real question I wanted to ask was about the current situation I'm in:

I'm sitting on a chunk of debt from undergrad and a post-bacc and my thought on how to deal with this for the time being is to pay just the interest for now. Because grad PLUS loans have such a high interest rate, covering the monthly is hard as is and consolidating my loans to a lower rate would make me ineligible for PSLF. Hypothetically, could I just stop paying my interest and let it go until after med school where I would then enroll for PSLF? It feels like if I'd pay now I would just be throwing my money away if it would be forgiven anyway.. I dunno, this is all pretty overwhelming.

I plan on contacting the PSLF servicers anyway, but I figured it couldn't hurt to gain an extra 2 cents from here.

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[Cornfed101]

Why not just defer your federal loans while in medical school? If your question is if you can not pay anything, then the answer is yes. Obviously all of that interest would accrue, but if you are planning on doing PSLF then it doesn't matter. You want to minimize the amount you pay in that case.

 

[deleted1021716]

Why not just defer your federal loans while in medical school? If your question is if you can not pay anything, then the answer is yes. Obviously all of that interest would accrue, but if you are planning on doing PSLF then it doesn't matter. You want to minimize the amount you pay in that case.

Sorry, I wasn't clear enough. I plan on deferring once in school, but I'm talking about whether I should be paying interest right now while I'm in my gap-year.

 

[Cornfed101]

Sorry, I wasn't clear enough. I plan on deferring once in school, but I'm talking about whether I should be paying interest right now while I'm in my gap-year.

Gotcha. If you are able, sure. You can also do an income-based repayment that can lower your payments all the way to $0/month. I make $40k and we qualify for that.

 

[CatDad26]

Sorry, I wasn't clear enough. I plan on deferring once in school, but I'm talking about whether I should be paying interest right now while I'm in my gap-year.

If its doable without starving yourself then I would pay off some the interest during your gap-year. Like previously said, if you plan on doing PSLF then I wouldn't stress too much about making payments now though. Hopefully by the time we finish school there will be more options for helping students like us who are drowning in debt.

Worst case scenario though if PSLF doesn't exist in 10 years I still think you will be fine. We are all very good at living broke right now so the best thing you can do is live very cheap your first few years as an attending and pay off the debt in huge chunks fast. As many physicians have told me, be conscious of the debt you're accruing but do not over stress about it. Live happy, healthy, and focus on school this next year to do as well as you can, then with a physician salary down the road things will work out.

 

[BigRedBeta]

Go to the White Coat Investor website immediately and start reading

I have zero experience with PLSF, but given that you have loans eligible for PSLF, you might explore getting a job through an eligible employer while in medical school and continue making payments during those 4 years on an IBR plan and have those 4 years count while in school, then you are that closer to forgiveness.

Caveats to this plan that other people smarter than me will have to weigh in on

• Is the 10 years of payments after the loan origination date? Like if you are still accumulating eligible loans during med school, when you reach the 10 years on your Grad PLUS, will you still have 4 years of med school debt still hanging in the balance?
• Are there limitations about being a student while making PLSF payments?
• How does the gap year and IBR plans play into each other - would it be wiser to wait until M2 year when you'd have less income to look back at before choosing that path?

In your spot, looking back as an attending, I would absolutely be debt conscious and go into medical school with a plan. The cost of medical education is usually reserved for the cost of house, which for anyone else is typically the single largest purchase they will ever make in their lives. You wouldn't buy a house without some sort of plan for paying it off (the banks generally won't let you these days at least), so it's a problem if you don't do the same for your educational debt. That's especially true if you're entering med school with some burden already. Believe me, I went in without any plan, did nothing smart during my education and training, and only now after entering a particularly lucky situation within my field have a plan and a horizon to pay everything off within just over 5 years after training. You don't need to let it paralyze you, but it shouldn't be ignored either.

 

[KnightDoc]

Hello!

Just trying to get as much input as possible from different sources. I'm planning on starting med school this fall (OOS) and I've been sort of banking on the PSLF program because of the type of field I plan on going into. I know it may seem risky as it's not guaranteed to exist 10 years down the road, etc. but the real question I wanted to ask was about the current situation I'm in:

I'm sitting on a chunk of debt from undergrad and a post-bacc and my thought on how to deal with this for the time being is to pay just the interest for now. Because grad PLUS loans have such a high interest rate, covering the monthly is hard as is and consolidating my loans to a lower rate would make me ineligible for PSLF. Hypothetically, could I just stop paying my interest and let it go until after med school where I would then enroll for PSLF? It feels like if I'd pay now I would just be throwing my money away if it would be forgiven anyway.. I dunno, this is all pretty overwhelming.

I plan on contacting the PSLF servicers anyway, but I figured it couldn't hurt to gain an extra 2 cents from here.

Actually, it could hurt a lot. 🙂 There are a lot of really smart people here who could give you all kinds of advice that sounds really good, but only the servicers can give you an authoritative answer. Going in default now with the expectation that it will be forgiven more than a decade from now sounds very dangerous to me, particularly with a debt that wouldn't be discharged in a bankruptcy. That default (to avoid "throwing away money that would be forgiven anyway") could have all kinds of unforeseen adverse consequences for you in the future.

 

[Cornfed101]

Actually, it could hurt a lot. 🙂 There are a lot of really smart people here who could give you all kinds of advice that sounds really good, but only the servicers can give you an authoritative answer. Going in default now with the expectation that it will be forgiven more than a decade from now sounds very dangerous to me, particularly with a debt that wouldn't be discharged in a bankruptcy. That default (to avoid "throwing away money that would be forgiven anyway") could have all kinds of unforeseen adverse consequences for you in the future.

OP I apologize if I was unclear. Under no circumstances should you default on your loans or miss payments that you are supposed to make. You need to set up something (whether that be IBR, deferment, forbearance) that allows you to pay less within the rules. Don't just not pay and hope things will be ok. They will not. Luckily, you can call your loan servicer and they will walk you through your options

 

[tessellations]

OP I apologize if I was unclear. Under no circumstances should you default on your loans or miss payments that you are supposed to make. You need to set up something (whether that be IBR, deferment, forbearance) that allows you to pay less within the rules. Don't just not pay and hope things will be ok. They will not. Luckily, you can call your loan servicer and they will walk you through your options

@Cornfed101 is giving good advice here. Highly recommend IBR if it's an option. My loan payments went from $300+ to $23 when I made the switch.

 

[KnightDoc]

@Cornfed101 is giving good advice here. Highly recommend IBR if it's an option. My loan payments went from $300+ to $23 when I made the switch.

Also need to very carefully study how IBR intersects with PSLF, because, under certain circumstances, I think it might either extend the 10 years or even make you ineligible for forgiveness (due to the fact that it is making the required payments so low, thereby inflating the balance otherwise eligible for forgiveness). I haven't studied the ins and outs of this because it doesn't yet impact me, but definitely ask your servicer before doing anything if this is a concern. (Most people in OP's position are not yet planning their next 15 years around some kind of loan forgiveness at the end. It's enviable to be so forward thinking, but it's way too contingent to make sense for most of us (i.e., lower IBR payments now vs. possible loan forgiveness at some point in the distant future).)!

Whatever you do, DO NOT take on massive amounts of debt with the expectation you won't have to pay it back!!!!! Consider it a wonderful gift if it happens, but there are tons of people with tons of stories about getting tripped up in technicalities and not receiving the forgiveness they expected, and this is before massive $1,000,000,000,000+ federal deficits and whatever changes are coming to healthcare. NOBODY knows what loan forgiveness will actually be available to any of us in 2035, or whenever you think you might be eligible under current rules!!!!!

 

[tessellations]

Also need to very carefully study how IBR intersects with PSLF, because, under certain circumstances, I think it might either extend the 10 years or even make you ineligible for forgiveness (due to the fact that it is making the required payments so low, thereby inflating the balance otherwise eligible for forgiveness). I haven't studied the ins and outs of this because it doesn't yet impact me, but definitely ask your servicer before doing anything if this is a concern. (Most people in OP's position are not yet planning their next 15 years around some kind of loan forgiveness at the end. It's enviable to be so forward thinking, but it's way too contingent to make sense for most of us (i.e., lower IBR payments now vs. possible loan forgiveness at some point in the distant future).)!

Knightdoc, some of us are poor. This wasn’t some strategic scheme. This is so I can not be in debt starting medical school.

 

[Cornfed101]

Also need to very carefully study how IBR intersects with PSLF, because, under certain circumstances, I think it might either extend the 10 years or even make you ineligible for forgiveness (due to the fact that it is making the required payments so low, thereby inflating the balance otherwise eligible for forgiveness). I haven't studied the ins and outs of this because it doesn't yet impact me, but definitely ask your servicer before doing anything if this is a concern.

IBR payments count the same as normal payments towards PSLF

 

[Cornfed101]

Also this thread just started today, so you can ask questions to this guy who knows much more than me

PSLF ama

Hi all- I thought it might be helpful to provide a thread to ask and answer questions about PSLF. I’m a pgy7 about to embark on academic career and I have educated myself extensively on thIs subject as well as general physician related financial matters (insurance, saving, investing etc) and...

forums.studentdoctor.net

 

[RangerBob]

I would not go into med school with the expectation of PSLF. Hopefully it'll be around, but the politics are strongly in favor of some changes if not elimination of the program once more people start getting their loans forgiven. It's also bad planning to borrow money without having a plan to pay it all off.

If you default, you won't be eligible for forgiveness. At least that's my understanding.

Typically federal loans all go into forbearance when you're back in school. Mine did when I went to med school. So you don't need to pay anything. Also, to be clear, no payments made while in med school will count as eligible payments for PSLF since you're not employed.

Apply for REPAYE if you haven't already. The government will cover half your unpaid interest. If you have minimal/no income, that's essentially halving your interest rate.

You can contact your servicer for help, but only FedLoan knows anything about PSLF. And in my experience, more than half the time their customer service rep gives you wrong/incorrect info.

Here's what I recommend:
1) Go onto income-based payment (ideally REPAYE) now. It'll be very manageable.
2) Go into in-school deferment once you start medical school (this often happens automatically, but you may need to be on top of your loan servicer)
3) Borrow the minimum amount you need for medical school, assuming you need to pay everything back
4) If you finish med school and start pursuing PSLF (most, but not all, residency programs are PSLF-eligible) then educate yourself via whitecoatinvestor and save up a side fund in case PSLF falls through.

 

[Cornfed101]

Typically federal loans all go into forbearance when you're back in school.

2) Go into in-school deferment once you start medical school (this often happens automatically, but you may need to be on top of your loan servicer)

One small note: forbearance and deferment are not the same. Forbearance is due to financial hardship while not in school and there is typically a limit to the amount you can use. Deferment is while you are in school and typically doesn't have a limit (except for private loans). In either case you are not required to make any payments.

 

[KnightDoc]

Knightdoc, some of us are poor. This wasn’t some strategic scheme. This is so I can not be in debt starting medical school.

Totally get that, and totally was not trying to imply otherwise. In fact, I pointed out that it would be foolish to forgo the benefit of the lower IBR payment now in return for the possibility of obtaining loan forgiveness at some distant point in the future! I only meant to point out to OP to be careful and to check with his servicer on whether IBR might impact PSLF in the future since he seems so intent on pursuing that.