Loans -Deferrment Options

[JPmamd09]

---

Members don't see this ad.

Hi,

Sorry to bother, but as graduation approaches this topic is weighing on my mind (as I'm sure it is for many).

Can someone explain what is going on with the new deferment options? My school's fin aid department said that as of July 1 our only options will be income-based repayment or forebearance. They did not have info regarding the scale for income based repayment or what qualifies as income (for example, does spouse income count when determining what payments will be?).

In an effort to contextualize this question, a little about me: graduating this May, deferring residency due to changing my mind re: specialty fairly late/having a baby in July (great way to get along with your new co-residents, eh?). Spending the year doing research in my specialty of interest - unpaid. Husband is rising 3rd year law student with summer position - will make amazing money for three months, then no more income for the rest of the year (other than his loans). Certainly not the ideal situation, but we'll make due and there are good things to come I believe.

However, I wonder if we'll be considered as having income d/t his summer position and be asked for loan repayment accordingly. Will I qualify for economic hardship if I apply (or do whatever) before July 1? Any insight is much appreciated. Thanks for your time 🙂

 

[DonStracci]

If you apply and are approved before July 1st, you will have the economic deferrment for one year for the loans are already in repayment. If your loans have grace periods after graduation, and those grace periods end after July 1st, you probably won't qualify for economic deferrment and will have to put them in forbearance if you cannot make payments.

http://www.ibrinfo.org/ is a VERY IMPORTANT website- everyone really should understand this stuff.

 

[Miami_med]

I don't know if there is a limit at Sallie Mae ( or if it is a federal student loan rule), but I do know that all loans consolidated with the Feds (and the feds are still consolidating) are required to approve all forebearance requests for residents. Forebearance sucks compared to deferment, but you can put the stuff off. Also, IBR may be the ticket of the future, because the formula for payment is pretty reasonable, and it will continue as an attending. Some people may also be able to count some or all of their residency training towards a 10 year public service forgiveness. This would be helpful if a career in academics or community health is in your future. Hardship deferment is currently (or atleast as of July 1) based on making less than 150% of poverty for your family size. Obviously, your ability to qualify depends on your family size. This number is probably atleast 6 for most residency salaries, so MOST won't qualify after July 1. You also can't take more than 3 years of these. Of note, there is a bill somewhere in congress trying to stop the dismantling of hardship deferments.

 

[goofE1]

One idea that has been floated around is to go into forbearance, but make payments (if possible) as if you were doing income-based repayment. The interest is mostly prevented from capitalizing (which is pretty much all income-based is going to do for you during residency anyway unless you patent something and have royalties rolling in) and if something happens and you happen to come up short on cash for a few months you can just not make the payment since it isn't technically due. Forbearance status is not lost and there is no prepayment penalty, so this seems like a nice option for those who would like to have deferred (i.e. everyone) and not have the interest accrue, but who can afford the payment and just don't necessarily want to be locked into making it every month. This is also handy if one is purchasing a home because the financial aid advisor at XYZ SOM can write a letter in all honesty saying you are going to be in forbearance and owe nothing for the next 3-7 years, thereby making a new resident eligible for a mortgage.

 

[had2piknowEM]

If you have consolidated any federal loans, then you will go into repayment immediately following graduation. With that being said, you can begin the process of applying for an economic hardship deferment now, or at least contact your loan servicer and see how soon you can begin the deferment application. This way, you will qualify under the 20/200 pathway.

For those federal loans that have not been consolidated, your grace period will not end until November (6 months after graduation), and by that time the new economic hardship deferral rules will be in place (July 1, 2009) and you will have to either use the Income based repayment or go into forbearance.

However, if you have been granted an economic hardship deferral for any federal education loan, you are automatically qualified for a that same deferment for all the other federal loans once they enter repayment (ie. people with both consolidated and non-consolidated loans).

Also if you have filed taxes this year and depending on how you filed, your income was most likely little to none. Therefore, you can apply for the economic hardship deferral once your loans go into repayment in November and you will be approved under the new rules. Remember you can use either your 2008 tax return or a current paystub to verify your income. Your paystub wont allow you to qualify, but your tax return will. So for that reason alone, it was worth filing taxes this year (I know...great timing right! 🙄)

Hope this helps. So, it seems that we can get one and maybe two years (consider that you only work about 6 months in 2009 and if you can hide some money in a 403b you may be able to get your income pretty low on your 2009 tax return and thus another year of deferment) before we have to start payments or go into forbearance.

 

[medsRus]

http://www.ibrinfo.org/ is a VERY IMPORTANT website- everyone really should understand this stuff.

Thanks a lot for this info. I had no idea of this program! This is great news!

 

[medsRus]

Concerning the Income-Based Repayment plan, I have a scenario at play:

If I will have a year off between medical school and residency, and I will not work or make less than 150% of the poverty level, should I just voluntariily enter repayment (and not defer and/or waive grace periods) so I start to accrue payments (albeit at $0)?

Thanks!