Loan Repayment

[Jabbed]

To juxtapose the Porsche 911 thread..

I'll be graduating with ~180k in debt and I'm starting to take a look at repayment options. Planning on doing 6 years for residency+fellowship and anticipating an attending salary of ~300k.

Option 1: IBR+PSLF. Seems to good to be true as I'll only have to repay ~80k. Major cons: 6% interest, requires faith in the federal government, discourages moonlighting and aggressively paying down debt. My major fear is that if it gets discontinued I'm left holding the bag without having paid down my principal at all.

Option 2: Refinance with private lender. What sort of rates do people get with private lenders like SoFi? If <3% is possible I'd rather pull up the bootstraps and aggressively pay down during residency. Projecting a take home of 42k +/- moonlighting for 18K, COL of 15k, 5k to a Roth IRA, I feel that I could feasibly pay down 20K a year and pay off the full 200k by the time I've finished my first year as an attending. Major cons: limited investment, limited discretionary income, paying more than I would with PSLF.

Thoughts? Also would like to hear what private interest rates people are seeing

---

Members don't see this ad.

 

[vm26]

I'll be graduating with ~180k in debt and I'm starting to take a look at repayment options. Planning on doing 6 years for residency+fellowship and anticipating an attending salary of ~300k.

Option 1: IBR+PSLF. Seems to good to be true as I'll only have to repay ~80k. Major cons: 6% interest, requires faith in the federal government, discourages moonlighting and aggressively paying down debt. My major fear is that if it gets discontinued I'm left holding the bag without having paid down my principal at all.

Option 2: Refinance with private lender. What sort of rates do people get with private lenders like SoFi? If <3% is possible I'd rather pull up the bootstraps and aggressively pay down during residency. Protecting a take home of 42k, COL of 15k, 5k to a Roth IRA, I feel that I could feasibly pay down 20K a year and pay off the full 200k by the time I've finished my first year as an attending.

Thoughts? Also would like to hear what private interest rates people are seeing

Can't give you specific advice as what to do but I would err on the side of caution and consider that the 300K salary that you are anticipating may be lower and that IBR PSLF won't be there or will be modified. Reimbursements/US HC system are up in the air and the government does not seem to care what type of debt burden future physicians end up with

 

[Jabbed]

Can't give you specific advice as what to do but I would err on the side of caution and consider that the 300K salary that you are anticipating may be lower and that IBR PSLF won't be there or will be modified. Reimbursements/US HC system are up in the air and the government does not seem to care what type of debt burden future physicians end up with

That's my concern, but I'm just not sure how to alter my repayment schedule based on that possibility. The biggest decision at this point would be whether or not to refinance with a private lender, effectively eliminating the possibility of PSLF.

 

[Tenk]

Would not bank on loan forgiveness.

Right now you can refinance for upper 3%. This will most certainly change by the time you finish residency and fellowship but it is definitely the most stable way to go. People will say: "your loans don't dissapear when you die if you refinance!" For that: You can just take out a higher life insurance policy that covers the loans and then some and this will still be cheaper than keeping federal loans.

 

[ACSurgeon]

Would not bank on loan forgiveness.

Right now you can refinance for upper 3%. This will most certainly change by the time you finish residency and fellowship but it is definitely the most stable way to go. People will say: "your loans don't dissapear when you die if you refinance!" For that: You can just take out a higher life insurance policy that covers the loans and then some and this will still be cheaper than keeping federal loans.

I'm pretty sure your refinanced loans do disappear if you die. That's what my financial advisor tells me. I haven't gone through the process yet.

 

[ACSurgeon]

To juxtapose the Porsche 911 thread..

I'll be graduating with ~180k in debt and I'm starting to take a look at repayment options. Planning on doing 6 years for residency+fellowship and anticipating an attending salary of ~300k.

Option 1: IBR+PSLF. Seems to good to be true as I'll only have to repay ~80k. Major cons: 6% interest, requires faith in the federal government, discourages moonlighting and aggressively paying down debt. My major fear is that if it gets discontinued I'm left holding the bag without having paid down my principal at all.

Option 2: Refinance with private lender. What sort of rates do people get with private lenders like SoFi? If <3% is possible I'd rather pull up the bootstraps and aggressively pay down during residency. Projecting a take home of 42k +/- moonlighting for 18K, COL of 15k, 5k to a Roth IRA, I feel that I could feasibly pay down 20K a year and pay off the full 200k by the time I've finished my first year as an attending. Major cons: limited investment, limited discretionary income, paying more than I would with PSLF.

Thoughts? Also would like to hear what private interest rates people are seeing

SOFI is the cheapest I found. 3.5% fixed interest for 5 year repayment. If you wasted to do 10 years it's closer to 5%. Makes it hard to refinance as a resident and get a really cheap rate.

 

[Tenk]

I'm pretty sure your refinanced loans do disappear if you die. That's what my financial advisor tells me. I haven't gone through the process yet.

A lot of them do not. It is a good question to ask though!

 

[Azete]

The IBR plans have bipartisan support, so it would be a relatively safe bet to assume these will exist. In addition, all proposed revisions (that I've seen) have included clauses to allow those that have already signed up to complete the duration of their agreement.

Any refinanced loan from a reputable lender does disappear when you die -- I've written out many of these. The obvious exceptions being if the refinance includes collateral from a tangible asset, or if the document included a co-sign.

Also, PSLF and refinancing privately are not mutually exclusive. You can (and should) do both if they are available to you, it's just a matter of doing a little math to determine the appropriate refinance amount. This would likely be the most optimal route, but IBR can be quite advantageous if you're married with multiple dependents (since the equation deducts the poverty line from your income).

 

[Jabbed]

Would not bank on loan forgiveness.

Right now you can refinance for upper 3%. This will most certainly change by the time you finish residency and fellowship but it is definitely the most stable way to go. People will say: "your loans don't dissapear when you die if you refinance!" For that: You can just take out a higher life insurance policy that covers the loans and then some and this will still be cheaper than keeping federal loans.

You can refinance at that rate as a resident?

 

[mvenus929]

You can refinance at that rate as a resident?

Doubtful. Most of the rates I was being offered were not much better than my current rate on my federal loans. Yes, once you are making an attending salary, you can refinance for relatively cheap if the interest rates hold out that long, but likely not as a resident.

 

[Jabbed]

Doubtful. Most of the rates I was being offered were not much better than my current rate on my federal loans. Yes, once you are making an attending salary, you can refinance for relatively cheap if the interest rates hold out that long, but likely not as a resident.

What did you end up doing then during residency? Minimum payments on REPAYE? Pay off your interest only?

 

[Tenk]

You can refinance at that rate as a resident?

Refinancing all depends on your salary. If your only income is residency then no.

 

[mvenus929]

What did you end up doing then during residency? Minimum payments on REPAYE? Pay off your interest only?

REPAYE wasn't around when I started residency, so I'm in regular PAYE. I put any extra money I had towards my private school loan, which I had to pay interest on throughout residency, but have cut the principal balance by about $4000.

 

[DOFOSHO]

i just got a letter from my loan servicer stating i am on the PAYE plan and my monthly payment is $750/month. I am just an intern and my wife is a nurse, we don't have children, total combined income after taxes is about 52000. Does this payment amount sound correct? How do i not pay half my salary monthly?

 

[mvenus929]

i just got a letter from my loan servicer stating i am on the PAYE plan and my monthly payment is $750/month. I am just an intern and my wife is a nurse, we don't have children, total combined income after taxes is about 52000. Does this payment amount sound correct? How do i not pay half my salary monthly?

Assuming a gross combined income of $69,000, which seems low for an intern + an RN, your loan repayment would be about $350 on PAYE. It goes up to about $550 on IBR and over $800 on ICR. I would look into what your gross annual income is and contact your servicer.

 

[JPSmyth]

PSLF is written into the MPN for every year's loans that you took out during medical school. If you finish M4 and PSLF still exists then, it was part of your contract when you took out those loans and you will be grandfathered in. This is what I'm told. I guess the gov could potentially scrap the whole program but when you signed for the loans PSLF was an option and they cannot make that option unavailable to you once you already signed the documents. I saved my MPNs just in case

 

[68PGunner]

You can refinance at that rate as a resident?

If you go into the REPAYE plan as a resident, 50% of your interest will be paid off by Uncle Sam, giving you an effective interest rate of 3%. Then, if you are planning to aggressively pay off that debt, you can refinance at the current 3.5% through SOFI after residency.

 

[tranviettc]

Hihi

 

[NickNaylor]

PSLF is written into the MPN for every year's loans that you took out during medical school. If you finish M4 and PSLF still exists then, it was part of your contract when you took out those loans and you will be grandfathered in. This is what I'm told. I guess the gov could potentially scrap the whole program but when you signed for the loans PSLF was an option and they cannot make that option unavailable to you once you already signed the documents. I saved my MPNs just in case

I would not hold out hope that the program will be in place irrespective of what is included on the MPN. I think the wisest and most conversative option would be to plan as if the program is not in place; if it is by the time you become eligible, then great, you get a little bonus.

 

[mvenus929]

PSLF is written into the MPN for every year's loans that you took out during medical school. If you finish M4 and PSLF still exists then, it was part of your contract when you took out those loans and you will be grandfathered in. This is what I'm told. I guess the gov could potentially scrap the whole program but when you signed for the loans PSLF was an option and they cannot make that option unavailable to you once you already signed the documents. I saved my MPNs just in case

While this is true, the wording is vague. Something like 'after 10 years of qualifying payments, you may be eligible to participate in PSLF'. Congress can do any number of things to make you ineligible, including changing what the definition of a qualifying payment, capping the amount that can be forgiven, or limiting the organizations that are considered 'qualifying'.

SO plan like it's not going to happen, and celebrate if it does.

 

[JPSmyth]

I would not hold out hope that the program will be in place irrespective of what is included on the MPN. I think the wisest and most conversative option would be to plan as if the program is not in place; if it is by the time you become eligible, then great, you get a little bonus.

While this is true, the wording is vague. Something like 'after 10 years of qualifying payments, you may be eligible to participate in PSLF'. Congress can do any number of things to make you ineligible, including changing what the definition of a qualifying payment, capping the amount that can be forgiven, or limiting the organizations that are considered 'qualifying'.

SO plan like it's not going to happen, and celebrate if it does.

I’m going to have almost 300k in school debt when I finish M4. By the the time my residency is over who knows how high.

If PSLF is not an option I am only looking at specialties that pay over 400k, which I may not be happy going into but it would be out of necessity. If PSLF doesn’t stay in place I will be completely screwed lol

 

[Triple Cheeseburger]

If you go into the REPAYE plan as a resident, 50% of your interest will be paid off by Uncle Sam, giving you an effective interest rate of 3%. Then, if you are planning to aggressively pay off that debt, you can refinance at the current 3.5% through SOFI after residency.

It isn't entirely accurate to state half the interest is paid by the government. I believe half the remaining interest after the monthly payment is subsidized by the government. Please correct me if I'm wrong.

 

[68PGunner]

It isn't entirely accurate to state half the interest is paid by the government. I believe half the remaining interest after the monthly payment is subsidized by the government. Please correct me if I'm wrong.

If you have a family as in a married couple w/ 1 or two kids with your resident wage, your effective monthly payment will be zero. Therefore, all interest payments will be subsidized by 50%.

 

[Triple Cheeseburger]

If you have a family as in a married couple w/ 1 or two kids with your resident wage, your effective monthly payment will be zero. Therefore, all interest payments will be subsidized by 50%.

I've ran your scenario above with a family size of four (planning for the future) and the payment estimator shows $300 per month for $50,000 salary and $250,000 debt.

 

[mvenus929]

I've ran your scenario above with a family size of four (planning for the future) and the payment estimator shows $300 per month for $50,000 salary and $250,000 debt.

As a single person making somewhere in the ballpark of 53K, I pay less than $300 on PAYE. The PAYE calculator on studentloans.gov overestimates my cost somewhat (at $291 instead of $279), but I still pay less than $300 and they usually favor married people with children in these instances.

 

[68PGunner]

I've ran your scenario above with a family size of four (planning for the future) and the payment estimator shows $300 per month for $50,000 salary and $250,000 debt.

It's 10% of your discretionary income.

https://studentloanhero.com/featured/discretionary-income-student-loans/

Therefore, your entire interest payment will be subsidized by 50%.

 

[Triple Cheeseburger]

It's 10% of your discretionary income.

https://studentloanhero.com/featured/discretionary-income-student-loans/

Therefore, your entire interest payment will be subsidized by 50%.

Looked it up.

If your monthly payment is so low that it doesn’t cover the monthly interest charges, any excess interest on subsidized loans will be paid by the Department of Education for up to three years. After that time period, the DOE will cover 50 percent of unpaid interest.


The government also covers 50 percent of accrued interest charges on unsubsidized loans throughout the REPAYE repayment period.

The entire interest payment is not subsidized by 50% unless you have a $0 payment.

 

[68PGunner]

Looked it up.

If your monthly payment is so low that it doesn’t cover the monthly interest charges, any excess interest on subsidized loans will be paid by the Department of Education for up to three years. After that time period, the DOE will cover 50 percent of unpaid interest.


The government also covers 50 percent of accrued interest charges on unsubsidized loans throughout the REPAYE repayment period.

The entire interest payment is not subsidized by 50% unless you have a $0 payment.

It will be zero payment once you understand what goes into the calculation for discretionary income.

 

[Triple Cheeseburger]

It will be zero payment once you understand what goes into the calculation for discretionary income.

Even with a family of five, the discretionary income isn't zero which means there will be a payment. discretionary income is based on 150% federal poverty guideline

https://studentloanhero.com/featured/discretionary-income-student-loans/

 

[68PGunner]

Even with a family of five, the discretionary income isn't zero which means there will be a payment. discretionary income is based on 150% federal poverty guideline

https://studentloanhero.com/featured/discretionary-income-student-loans/

Your tax deductible IRAs for you and your spouse also go into your discretionary income. So let's say that you make about 55K for your resident pay. That would lower it to 44K. Social security, Medicare, fed tax, and state tax would def put that number very close to 36K.

 

[Triple Cheeseburger]

Your tax deductible IRAs for you and your spouse also go into your discretionary income. So let's say that you make about 55K for your resident pay. That would lower it to 44K. Social security, Medicare, fed tax, and state tax would def put that number very close to 36K.

Tax deductible IRA, playing the game, I like the way you think.

 

[Perrotfish]

I’m going to have almost 300k in school debt when I finish M4. By the the time my residency is over who knows how high.

If PSLF is not an option I am only looking at specialties that pay over 400k, which I may not be happy going into but it would be out of necessity. If PSLF doesn’t stay in place I will be completely screwed lol

No you will not be completely screwed. Physicians are very well paid. Even a general Pediatrician can expect to earn north of 7 million over a 35 year career. Even if you do the absolute worst thing possible by starting with 450K in principle after reaidency, and paying it off on a 30 year plan, you will still have 5.5 million in lifetime earnings to save and spend. That's almost three times what a normal college graduate makes in a lifetime.

 

[68PGunner]

Tax deductible IRA, playing the game, I like the way you think.

There are a bunch of other crap that go into adjustable income which is then subtracted by 150% poverty rate to get into discretionary income. But I guarantee you that your effective payment will be close to zero as a resident if you max contribute 401K and then both IRAs.

 

[Triple Cheeseburger]

There are a bunch of other crap that go into adjustable income which is then subtracted by 150% poverty rate to get into discretionary income. But I guarantee you that your effective payment will be close to zero as a resident if you max contribute 401K and then both IRAs.

which would be the smart thing to do

 

[DOFOSHO]

can someone calculate what my monthly payment should be? I am an intern making ~50K/year and my wife makes ~50K/year. (i forgot to include this information in an earlier post). We are on PAYE and my monthly payment is $750/month. I was surprised when I was notified of this payment amount. After taxes that is about 1/4th of MY income. I was under the impression it shouldn't be that high....

 

[MrChance2]

use REPAYE during residency. Your interest will only be like 3-3.5 % during residency. Look up "federal interest subsidy" and REPAYE to see why. Refinance once you become an attending as your interest will be like 6-7% with REPAYE then and you can refinance to 3-4% at that point to a shorter term loan and you will likely get a good rate due to good income and credit.

 

[Postictal Raiden]

can someone calculate what my monthly payment should be? I am an intern making ~50K/year and my wife makes ~50K/year. (i forgot to include this information in an earlier post). We are on PAYE and my monthly payment is $750/month. I was surprised when I was notified of this payment amount. After taxes that is about 1/4th of MY income. I was under the impression it shouldn't be that high....

seems you are overpaying by 100 every month.

100k income - 25k (150% poverty line for family of 2) = 75k of discretionary income

10% of that income = 7.5k = 625 a month

 

[Postictal Raiden]

i just got a letter from my loan servicer stating i am on the PAYE plan and my monthly payment is $750/month. I am just an intern and my wife is a nurse, we don't have children, total combined income after taxes is about 52000. Does this payment amount sound correct? How do i not pay half my salary monthly?

Here's something I don't understand. Since you just graduated, why are you paying at all? Aren't you supposed be in grace period for the first 6 months after graduation?

Also, since PAYE is calculated based on your previous year's earnings, your payment will be calculated based on your wife's income alone because you were a student and had no income. Even the second fiscal year of your residency, your taxes will show only half year's worth of income (you start earning money in July of your graduation year) so your calculated PAYE should also be lower than what your loan services estimated.

 

[mvenus929]

Here's something I don't understand. Since you just graduated, why are you paying at all? Aren't you supposed be in grace period for the first 6 months after graduation?

Also, since PAYE is calculated based on your previous year's earnings, your payment will be calculated based on your wife's income alone because you were a student and had no income. Even the second fiscal year of your residency, your taxes will show only half year's worth of income (you start earning money in July of your graduation year) so your calculated PAYE should also be lower than what your loan services estimated.

It's November. People start getting notified of their next month dues around now.

 

[Postictal Raiden]

It's November. People start getting notified of their next month dues around now.

I see. That explains the grace period part, but what about the $750? I feel that's way too high given the information provided by the OP.

His monthly payment, under PAYE, should be calculated based off last year's earnings. I assume he didn't earn a dime because he was a student and that only his wife's income (~50k) is what begin considered. Doing some back-of-the-envelope calculation, his monthly payments shouldn't exceed 250.

 

[mvenus929]

I see. That explains the grace period part, but what about the $750? I feel that's way too high given the information provided by the OP.

His monthly payment, under PAYE, should be calculated based off last year's earnings. I assume he didn't earn a dime because he was a student and that only his wife's income (~50k) is what begin considered. Doing some back-of-the-envelope calculation, his monthly payments shouldn't exceed 250.

Yeah, I got nothing on that.