Paying off Student Loans during Residency

[docmed2012]

Just finished med school, submitted my ROL and have about $250,000 of student loans! I don't even know where to start. Do most residents consolidate before residency and make income based payments or use the residency deferment option and just make interest payments every month? I am under the grace period right now until July.

Thanks

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[Igor4sugry]

What type of loans do you have? Are they all stafford or do you have private loans too?

Only government loans can be signed up for IBR.

 

[docmed2012]

Direct Sub, Direct Unsub and Grad Plus Loans...they are all Federal Loans. I am looking into this option and it sounds like you can apply for this program even with $0 income as long as you provide the supporting documents. Some of my loans will go into repayment in the next few months before residency starts while others have a longer grace period. What is the advantage to getting a deferement rather than using IBR and just paying $0 a month??

 

[Scorcher31]

Do not defer as you may have more capitalizations in the long run. Try to do IRB if possible on all your loan but grad plus which likely have the highest interest rate. Put as much as you possibly can toward your highest interest rate loans. Try to hit borrower benefits on all your loans to decrease interest rates.

 

[Igor4sugry]

Direct Sub, Direct Unsub and Grad Plus Loans...they are all Federal Loans. I am looking into this option and it sounds like you can apply for this program even with $0 income as long as you provide the supporting documents. Some of my loans will go into repayment in the next few months before residency starts while others have a longer grace period. What is the advantage to getting a deferement rather than using IBR and just paying $0 a month??

Advantages of IBR for you:
[1] Your subsidized loan interest is covered for 3 years.
[2] While on IBR all of your payments qualify for the 120 payments under the public service loan forgiveness program (even if your monthly payments are zero)
[3] Your loans remain in good standing.
[4] Deferment is the worst option. I'm pretty sure your interest will be capitalized right away unless you select to pay the monthly interest, which will be ~$1,700.00/month on 250k. Which you won't be able to afford on resident salary.

 

[OMSCardinal]

c

 

[live]

Advantages of IBR for you:
[1] Your subsidized loan interest is covered for 3 years.
[2] While on IBR all of your payments qualify for the 120 payments under the public service loan forgiveness program (even if your monthly payments are zero)
[3] Your loans remain in good standing.
[4] Deferment is the worst option. I'm pretty sure your interest will be capitalized right away unless you select to pay the monthly interest, which will be ~$1,700.00/month on 250k. Which you won't be able to afford on resident salary.

Wait I'm confused.. why is IBR the best option for him? I'm not an expert, nor am I trying to be, but I am in a similar boat (grad from dental school and starting a 72 month MD/certificate integrated residency) and have been reading up on this. Point [1] Whether you defer as a resident or get IBR the sub loans will not accrue interest (either for the whole deferment period or 3 years on IBR) so this appears to be a moot point, right? Point [2] The OP didn't say he is interested in or going into a residency that will allow him to work in the PSLF programs when he gets out... so if he/she isn't or doesn't want to, say they go into private practice, what difference does IBR make? Again a moot point it appears to me. Finally, point [3] the OP's loans will remain in good standing while in deferment... they have while he/she was in medical school. Moot point???

Again I may be so incredibly wrong here that it's causing all who read it to laugh uncontrollably but if I am please inform me because like the OP I am trying to figure out what's the best for me to do as well. Thanks!

 

[Scorcher31]

I dont buy the PLSF stuff either. Maybe its different for dentistry, but med reisdents they cannot defer only forebare for the past few years. This involves additional capitilizations, no borrower benfits and interest on all loans.

 

[JacobMcCandles]

Wait I'm confused.. why is IBR the best option for him? I'm not an expert, nor am I trying to be, but I am in a similar boat (grad from dental school and starting a 72 month MD/certificate integrated residency) and have been reading up on this. Point [1] Whether you defer as a resident or get IBR the sub loans will not accrue interest (either for the whole deferment period or 3 years on IBR) so this appears to be a moot point, right? Point [2] The OP didn't say he is interested in or going into a residency that will allow him to work in the PSLF programs when he gets out... so if he/she isn't or doesn't want to, say they go into private practice, what difference does IBR make? Again a moot point it appears to me. Finally, point [3] the OP's loans will remain in good standing while in deferment... they have while he/she was in medical school. Moot point???

Again I may be so incredibly wrong here that it's causing all who read it to laugh uncontrollably but if I am please inform me because like the OP I am trying to figure out what's the best for me to do as well. Thanks!

IBR is the smart thing for everyone to do because you're getting a guaranteed return of 6.8% on that investment. Where else are you going to get that kind of guaranteed return right now? Don't continue to put off paying your loans down. Start paying them as much as you can.

 

[DrBowtie]

Wait I'm confused.. why is IBR the best option for him? I'm not an expert, nor am I trying to be, but I am in a similar boat (grad from dental school and starting a 72 month MD/certificate integrated residency) and have been reading up on this. Point [1] Whether you defer as a resident or get IBR the sub loans will not accrue interest (either for the whole deferment period or 3 years on IBR) so this appears to be a moot point, right? Point [2] The OP didn't say he is interested in or going into a residency that will allow him to work in the PSLF programs when he gets out... so if he/she isn't or doesn't want to, say they go into private practice, what difference does IBR make? Again a moot point it appears to me. Finally, point [3] the OP's loans will remain in good standing while in deferment... they have while he/she was in medical school. Moot point???

Again I may be so incredibly wrong here that it's causing all who read it to laugh uncontrollably but if I am please inform me because like the OP I am trying to figure out what's the best for me to do as well. Thanks!

Your subsidized loans won't be accruing them during your MD portion of the OMFS residency. For the rest of us regular ole med students, the interest starts ticking on the subsidized at graduation.

 

[shantster]

Your subsidized loans won't be accruing them during your MD portion of the OMFS residency. For the rest of us regular ole med students, the interest starts ticking on the subsidized at graduation.

For the subsidized loans, the interest does not start accruing until the grace period ends (which is end of October for me). So if you find that you either 1) want to get in the habit of paying a set amount to the loans each month before the grace period ends or 2) find yourself into some money at graduation time due to generous gifts, make sure you put the money towards the unsubs only to get the benefit of the 6.8% interest capitalization.

I'm going to start paying the IBR number at my first paycheck so that I'm not used to having that money.

 

[docmed2012]

Thanks for your responses! From what I understand, all deferments do cover the subsidized interest...but forbearance does not. So it seems like, the worst option would be forbearance.

As far as IBR vs. deferment, they will both cover the subsidized interest and your loans do remain good standing even if you choose to defer.

I do agree that IBR would be the preferred option because even if you don't end up doing the PSLF program, the loans are still forgiven after 20 years and I like how the payment is based on your monthly income, which is a plus for primary care physicians. I think the disadvantage to IBR would be if you are earning a very high yearly salary after residency, you might end up putting the same amount per month as you would with an extended/standard repayment.

 

[DrBowtie]

This is a good website as you can plug in all of your loans exact amounts and once you match your starting salary and it will run all the numbers for you for the different options. You also plug in your residency length so it calculates how much you will pay off during IBR, and the estimated PSLF amount forgiven.

https://www.aamc.org/services/first/

Click the MedLoans Calculator

 

[Scorcher31]

You cannot defer any longer for just being a medical resident. Deferment is really no longer an option for the most part. This is why everyone keeps saying IRB.

 

[docmed2012]

Also, although the debt is discharged after 20 years of IBR - the amount discharged will become taxable, so you will end up paying in taxes when the loans are forgiven.

 

[MT Headed]

Also, although the debt is discharged after 20 years of IBR - the amount discharged will become taxable, so you will end up paying in taxes when the loans are forgiven.

Unlike student loan debt, IRS debt is dischargeable in bankruptcy. Stick it to the man!

 

[plauto]

Being fresh out of the exit interview, this is what I learned....
For the average med school grad with Stafford loans the best thing to do is IBR (whether the PSLF is around in 10 yrs doesn't matter). Take advantage of the grace period and go right into forbearance. While you are in forbearance, make your monthly payments as if you were not in forbearance. What that allows you to do is:
#1: if you have an emergency, you don't have to worry about making your payments
#2: the payments you make still count towards the 120 payments for PSLF
#3: easier to qualify for a mortgage since your monthly payment is not required

Feel free to correct me if I am wrong.

 

[cincincyreds]

I paid off my student loans by donating a lot of sperm. I guess I have kids I don't know about.

 

[Scorcher31]

Being fresh out of the exit interview, this is what I learned....
For the average med school grad with Stafford loans the best thing to do is IBR (whether the PSLF is around in 10 yrs doesn't matter). Take advantage of the grace period and go right into forbearance. While you are in forbearance, make your monthly payments as if you were not in forbearance. What that allows you to do is:
#1: if you have an emergency, you don't have to worry about making your payments
#2: the payments you make still count towards the 120 payments for PSLF
#3: easier to qualify for a mortgage since your monthly payment is not required

Feel free to correct me if I am wrong.

Your 3 comments are correct and should be considered, however there are 2 very important potential downsides to this.

#1 You wont be able to get the auto debit borrowers benefit this way and likely wont be able to get any borrower benefit interest rate deductions if not in a real plan

#2 Once in a plan as long as you pay there is usually no capitilization of interest. There are usually more opportunities of interest capitalization usually when you enter and leave forebarence and sometimes a fixed interval. This means that at the end of residency all the interest that accrued during residency will get added to your principal so you will be paying interest on interest. If you enter and stay in a plan and pay the interest should never capitalize

 

[gasblaster]

Being fresh out of the exit interview, this is what I learned....
For the average med school grad with Stafford loans the best thing to do is IBR (whether the PSLF is around in 10 yrs doesn't matter). Take advantage of the grace period and go right into forbearance. While you are in forbearance, make your monthly payments as if you were not in forbearance. What that allows you to do is:
#1: if you have an emergency, you don't have to worry about making your payments
#2: the payments you make still count towards the 120 payments for PSLF
#3: easier to qualify for a mortgage since your monthly payment is not required

Feel free to correct me if I am wrong.

Wondering if there were any other opinions thoughts re: this plan?

 

[TMP-SMX]

For the first 3 years of IBR unpaid subsidized loan interest is paid by the feds to a maximum (if I remember correctly) of about $2000-2500 each year.