New Financial Aid rules

[EdLongshanks]

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I've been reading the new rules for financial aid.

http://www.finaid.org/loans/publicservice.phtml

This looks like a great deal for medical students. Apparently, all we have to do is pay 10% of our income for 10 years (during residency and fellowship years included) and the rest of our debt is forgiven.

You can't beat that with a stick.

 

[QofQuimica]

I've been reading the new rules for financial aid.

http://www.finaid.org/loans/publicservice.phtml

This looks like a great deal for medical students. Apparently, all we have to do is pay 10% of our income for 10 years (during residency and fellowship years included) and the rest of our debt is forgiven.

You can't beat that with a stick.

I don't think that physicians qualify as low-income public servants, Ed. Not even residents. 😉

 

[DrMidlife]

You don't have to be low income, just a public servant.

Employment: The borrower must be employed full-time in a public service job for each of the 120 monthly payments. Public service jobs include, among other positions, emergency management, government (excluding time served as a member of Congress), military service, public safety and law enforcement (police and fire), public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations), public education, early childhood education (including licensed or regulated childcare, Head Start, and State-funded prekindergarten), social work in a public child or family service agency, public services for individuals with disabilities or the elderly, public interest legal services (including prosecutors, public defenders and legal advocacy on behalf of low-income communities at a nonprofit organization), public librarians, school librarians and other school-based services, and employees of tax exempt 501(c)(3) organizations. Full-time faculty at tribal colleges and universities, as well as faculty teaching in high-need subject areas and shortage areas (including nurse faculty, foreign language faculty, and part-time faculty at community colleges), also qualify.

 

[gunito]

Coolest things I've read all day. Is this just for federal loans accumulated while in medical school, or all loans?

 

[QofQuimica]

You don't have to be low income, just a public servant.

Yes, you do. Read the caveats.

 

[siliso]

What caveats are you referring to? Both my reading of the IBR/PSLF regs, and information from my school's financial aid folks, indicates that your income determines how much you will pay a month, but does not determine when your loans get forgiven.

You do have to have "partial financial hardship," ie standard 10-year payments greater than 10-15% of your income over 150% of poverty, to enter IBR. But once you're in you can stay in for the life of the loan and your payments are capped at the standard 10-year payment amount. Residents are very very likely to have partial financial hardship if they borrowed the average amount of debt and are getting a normal resident's salary.

 

[EdLongshanks]

Yes, you do. Read the caveats.

I'm missing what you are seeing in the caveats.... It says this " Borrowers with low debt or high income will not benefit as much."

But, Residents have both high debt and low income, so... it seems to me that this is begging for medical students to receive a very high benefit from this. In fact, I saw a link to this site from a conservative political blog complaining about it.

 

[jinx520]

I wonder if they will consider it double-dipping if you go into one of those programs where you work in an underserved area in exchange for tuition remission and apply for IBR. I tend to doubt it, though.

 

[Woland]

Maybe I am oversimplifying, but based on information relevant to my state (OR), public service clinics (FQHC/rural) are hiring Primary Care at approx. 110000/yr or 52/hr -- from limited research this seems to be the low end (2 county clinics in Eastern Oregon) and it comes with additional loan repayment "perks".
This makes for 10-15% over 150% FPL (~22k for family of 2) to be $880-$1320/mo for 10 yrs. If a MD/DO comes out with max. federal loan load (no PLUS/private) she/he will have 224k + interest over 3 yrs residency. Even if he/she paid intreset during residency (which might not be possible), normal repayment schedule will be $2580/mo for 10 yrs.
If a DO/MD sticks to the 10 year plan of living in rural Oregon, he/she will save 15k/year participating in IBR. (not counting other perks, such as gradual loan forgiveness offered by 2 clinics mentioned over the period of 4 years).

But then again, I am only a premed, rather far removed from actually concerning myself with repayment of not-yet-incurred debt.

~Cheers.

 

[QofQuimica]

I'm missing what you are seeing in the caveats.... It says this " Borrowers with low debt or high income will not benefit as much."

But, Residents have both high debt and low income, so... it seems to me that this is begging for medical students to receive a very high benefit from this. In fact, I saw a link to this site from a conservative political blog complaining about it.

It also says that the program is targeted toward those with low income in the sentence immediately before the one you quoted. I'm not sure how reasonable it is to say that residents, who start out now at nearly $50,000 even as interns, count as low income-earners. But even if they do, you aren't a public servant while you are training as a resident, whereas, unlike physicians, every other career mentioned on that list can be begun immediately upon graduation. Once you finish residency, you will for sure not be a low income earner, even if you go straight into being a public health official. Plus, unless you do a preventive medicine residency and/or start out with an MPH or something analogous, I don't know why you'd be hired as a public health official straight out of residency anyway, because you wouldn't have had any training in public health!

What I'm trying to say here is, you may want to look into whether physicians even qualify for this program before you go counting on your huge debt forgiveness in PGY-11. 😉

 

[EdLongshanks]

What I'm trying to say here is, you may want to look into whether physicians even qualify for this program before you go counting on your huge debt forgiveness in PGY-11. 😉

Oh shoot, basic research, and here I was hoping a simple query here would get someone else to do my work for me!!!

 

[EdLongshanks]

Oh shoot, basic research, and here I was hoping a simple query here would get someone else to do my work for me!!!

I've got the number 1800-4-fed-aid to call and ask. I will do so Monday and let you all know the result

 

[EdLongshanks]

I've got the number 1800-4-fed-aid to call and ask. I will do so Monday and let you all know the result

Q, you should be interested in this website http://www.graduateleverage.com/medical-residency-IBR-salary.aspx

"
Public Service Loan Forgiveness

In addition to IBR, there is another government program that provides loan forgiveness and is available to medical residents. It is called Public Service Loan Forgiveness (PSLF). The majority of medical residents are uniquely positioned to benefit from the Public Service Loan Forgiveness Program. This program provides tax-free forgiveness for a borrower's outstanding balance after the borrower has made 120 qualifying payments on his/her federal loans. Medical residents often meet the employment qualification criteria because many are employed by nonprofit hospitals or universities. This provides medical residents an opportunity to essentially earn credit towards forgiveness during their medical residency. Following medical residency, employment opportunities at nonprofit entities such as hospitals, hospital-owned practices, and universities provide ample opportunities for physicians to complete the program requirements without sacrificing career or lifestyle aspirations."


If this is accurate, then, if you have high debt, you will benefit significantly by your residency being in a non-profit hospital (which is likely). You then only have to consolidate your non-PLUS and non-Perkins loans into a federal direct loan and you are qualified for IBR (income based repayment). For 3 years, this makes the loans tax-free. After your residency, you just make sure that you work full-time for a non-profit (shouldn't be hard for a doctor) and continue the IBR - which will go up to 15% of your salary after you file taxes in your first attending year. After 7 more years, all the rest of the loans are forgiven.


Let me know if I missed anything, but I don't think that I have.

 

[QofQuimica]

If that's accurate, it's pretty darn awesome. But it sounds awfully good to be true. 😛

All kidding aside, I've never heard of anyone doing this, and the financial aid people at my school never mentioned it either that I'm aware of. But then again, I have to confess that I don't exactly read through all the loan information stuff since none of it applies to me. 😳

Now you've got me curious too, Ed. Next week I'll ask the financial aid office at my school and see what they say about it.

 

[MCAT guy]

Q, you should be interested in this website http://www.graduateleverage.com/medical-residency-IBR-salary.aspx

"
Public Service Loan Forgiveness

In addition to IBR, there is another government program that provides loan forgiveness and is available to medical residents. It is called Public Service Loan Forgiveness (PSLF). The majority of medical residents are uniquely positioned to benefit from the Public Service Loan Forgiveness Program. This program provides tax-free forgiveness for a borrower's outstanding balance after the borrower has made 120 qualifying payments on his/her federal loans. Medical residents often meet the employment qualification criteria because many are employed by nonprofit hospitals or universities. This provides medical residents an opportunity to essentially earn credit towards forgiveness during their medical residency. Following medical residency, employment opportunities at nonprofit entities such as hospitals, hospital-owned practices, and universities provide ample opportunities for physicians to complete the program requirements without sacrificing career or lifestyle aspirations."


If this is accurate, then, if you have high debt, you will benefit significantly by your residency being in a non-profit hospital (which is likely). You then only have to consolidate your non-PLUS and non-Perkins loans into a federal direct loan and you are qualified for IBR (income based repayment). For 3 years, this makes the loans tax-free. After your residency, you just make sure that you work full-time for a non-profit (shouldn't be hard for a doctor) and continue the IBR - which will go up to 15% of your salary after you file taxes in your first attending year. After 7 more years, all the rest of the loans are forgiven.


Let me know if I missed anything, but I don't think that I have.

P.L. 110-84 also authorizes a new "public service" loan forgiveness program, effective July 1, 2009. Physicians will be eligible for the program after 10 years of loan repayment while practicing in a "public service" job. The definition of "public service" includes 501(c)(3) non-profit organizations, faculty in "high-needs areas (as determined by the Secretary of Education), and service at private organizations providing "public health" or "emergency management" services. P.L. 110-315 clarifies the definition of public health to include "full-time professionals engaged in health care practitioner occupations and health care support occupations, as such terms are defined by the Bureau of Labor Statistics." Only Direct Loans are eligible for forgiveness, but borrowers may consolidate other federal loans under a single Direct Consolidation Loan. Physicians that participate in the income-based repayment program could save over $75,000 on their total loan repayment.

http://www.aamc.org/advocacy/library/educ/ed0004.htm

http://www.aamc.org/advocacy/library/educ/ed0003.htm

 

[MCAT guy]

Sample incomes...

Total Payout Before Forgiveness:

100k at 15% for 7 years: 105k

150k at 15% for 7 years: 157k

200k at 15% for 7 years: 210k

250k at 15% for 7 years: 262k

________________

Depending what specialty you were planning in going to, I'm sure the "high needs" areas and public jobs pay significantly less (i.e. 10-20% less than others). Which would put these #'s closer to:

Total Payouts Before Forgiveness (with opportunity cost)

100k (15%) in 7 years + opportunity cost: 175-245k

150k (15%) in 7 years + opportunity cost: 262-367k

200k (15%) in 7 years + opportunity cost: 350-490k

250k (15%) in 7 years + opportunity cost: 437-612k

Depending on how much you were planning on earning, this starts to get expensive. I don't think it is a stretch to say they can earn 10% less in these areas.

Also scary:

Public service loan forgiveness is all or nothing; you will not get any forgiveness if you work less than 10 years in a public service job.

If they decide to cut the income by 50% in your final 2 years of the 10 year plan, tough. You have to take that lost income too. Unlikely? Maybe, but they could cut your income by some percentage.

 

[MCAT guy]

Also a decent discussion of this on:

http://forums.studentdoctor.net/showthread.php?t=616577

caveat...

And I'm extremely reluctant to do financial planning based on the hope that a program in place now will still be in place in 10 years time. To me this is the real issue. I do not want to deal with the extra accumulated interest from going IBR for several years if I end up not qualifying or if they take the program away.

Maybe this is pretty good though,

AAMC

http://www.aamc.org/programs/first/training/mdeconomics.htm

http://www.aamc.org/members/gsa/meetings/dreconomics.pdf

http://www.aamc.org/programs/first/pha/repayment_examples.pdf

 

[EdLongshanks]

Sample incomes...

Total Payout Before Forgiveness:

100k at 15% for 7 years: 105k

150k at 15% for 7 years: 157k

200k at 15% for 7 years: 210k

250k at 15% for 7 years: 262k

________________

Depending what specialty you were planning in going to, I'm sure the "high needs" areas and public jobs pay significantly less (i.e. 10-20% less than others). Which would put these #'s closer to:

If I understand this right, "public service" jobs extend beyond "high needs areas". The quote from your link is:

'The definition of "public service" includes 501(c)(3) non-profit organizations,[comma] faculty in "high-needs areas (as determined by the Secretary of Education), and service at private organizations providing "public health" or "emergency management" services. P.L. 110-315 clarifies the definition of public health to include "full-time professionals engaged in health care practitioner occupations and health care support occupations, as such terms are defined by the Bureau of Labor Statistics." '

So, apparently, every doctor's job would qualify as public service - not just jobs in high needs areas.

Also, the 10 years do not have to be consecutive. The requirement is that you make 120 payments on the loans while employed in a public service job. So, if you spent 2 months unemployed during the 10 years, then you would make 122 payments instead of 120 before the forgiveness would kick in.

Your figures also assume an attending physician's salary. But Residents don't make this much. And the repayment is calculated on the previous year's tax return. soooo.. Let's assume worst case - Peds doctor 3 year residency

Resident starts his residency in May and begins paying in Jan -

1st year's income = 30K, 1st 12 monthly payments = $375 Total $4,500
2nd & 3 year income = 50k, payments = $625 Total $15,000
4 year (start career) income =$80k pmnt = $1000 2yr total 12,000
Years 5 through 10 income = $120K pmt=$1,500 6yr total 108,000

Sum of max total paid back before forgiveness is $140,000.

The AAMC link that you reference says that Physicians could make as much as $75k off of this deal. This seems correct - since the max federal direct loans are just over $200 K.

The forgiveness is also tax free.

Q is right, this seems too good to be true. National review is certainly hollering about it. If it didn't look like I would the beneficiary, I would too. But, I know how to be selfish occasionally.

On the other hand. A specialist making $300K + , is going to pay off the loan before the 10 years ---- Cry me a bucket.

 

[MCAT guy]

If I understand this right, "public service" jobs extend beyond "high needs areas". The quote from your link is:

'The definition of "public service" includes 501(c)(3) non-profit organizations,[comma] faculty in "high-needs areas (as determined by the Secretary of Education), and service at private organizations providing "public health" or "emergency management" services. P.L. 110-315 clarifies the definition of public health to include "full-time professionals engaged in health care practitioner occupations and health care support occupations, as such terms are defined by the Bureau of Labor Statistics." '

So, apparently, every doctor's job would qualify as public service - not just jobs in high needs areas.

Also, the 10 years do not have to be consecutive. The requirement is that you make 120 payments on the loans while employed in a public service job. So, if you spent 2 months unemployed during the 10 years, then you would make 122 payments instead of 120 before the forgiveness would kick in.

Your figures also assume an attending physician's salary. But Residents don't make this much. And the repayment is calculated on the previous year's tax return. soooo.. Let's assume worst case - Peds doctor 3 year residency

Resident starts his residency in May and begins paying in Jan -

1st year's income = 30K, 1st 12 monthly payments = $375 Total $4,500
2nd & 3 year income = 50k, payments = $625 Total $15,000
4 year (start career) income =$80k pmnt = $1000 2yr total 12,000
Years 5 through 10 income = $120K pmt=$1,500 6yr total 108,000

Sum of max total paid back before forgiveness is $140,000.

The AAMC link that you reference says that Physicians could make as much as $75k off of this deal. This seems correct - since the max federal direct loans are just over $200 K.

The forgiveness is also tax free.

Q is right, this seems too good to be true. National review is certainly hollering about it. If it didn't look like I would the beneficiary, I would too. But, I know how to be selfish occasionally.

On the other hand. A specialist making $300K + , is going to pay off the loan before the 10 years ---- Cry me a bucket.

With a 5-7 year residency I would seriously consider this. With only a 3 year residency, it really depends on the employment options.

I guess it really is a no brainer with a 7 year. Depends on in state or out of state tuition. If you are under 100k for loans it wouldn't work, but 150-200k+ is very appealing.

 

[orion333]

Ed is absolutely correct about this. I don't know exactly how much you have to have in loans, but do know that as long as you work for a non-profit for ten years, you never pay more than a small fraction of your salary for the loans, and after ten years, you are officially debt-free! Nice. I learned about this from a current med student and a finaid officer at a med school.

 

[EdLongshanks]

Ed is absolutely correct about this. I don't know exactly how much you have to have in loans, but do know that as long as you work for a non-profit for ten years, you never pay more than a small fraction of your salary for the loans, and after ten years, you are officially debt-free! Nice. I learned about this from a current med student and a finaid officer at a med school.

I hope that no one is taking my little bit of research and making plans on it. "Consult your financial physician. Side effects can vary"