Questions on Repaying Loans, About to Start Residency

[MNCASC]

Hi everyone. I'm about to start residency. I just read whitecoat investor and all blog posts on physician on fire blog about student loans. It seems like the best thing to do in my situation is REPAYE program and register for PSLF. Or is that advice outdated? Do you all have any other resources for student loans debt management?

---

Members don't see this ad.

 

[MyTachyBradyHeart]

Hi everyone. I'm about to start residency. I just read whitecoat investor and all blog posts on physician on fire blog about student loans. It seems like the best thing to do in my situation is REPAYE program and register for PSLF. Or is that advice outdated? Do you all have any other resources for student loans debt management?

Yes, consolidate all of your federal loans and sign up for PSLF and either use a (RE)PAYE or IDR plan which caps your yearly contribution at 10-15% of your salary. This should get you through residency. Then, depending on your goals (academic vs. private, fellowship vs. nonfellowship), you can decide what to do after that.

If you also have private loans (like myself), you're in a tougher situation. You can consolidate both federal and private loans and get a lower rate; however, you can't consolidate your private loans into federal and use the PAYE/IDR plan (you have to use a private company). I was lucky that my private loan had a long enough grace period and I was able to moonlight before needing to make payments.

A word about PSLF: there's no downside to signing up for it. Even if it eventually goes away, most people believe that once you've signed up, you're probably grandfathered in so if you make 120 qualifying payments (which is quite difficult btw... 3-5 years of residency, followed by 2-3 years of fellowship still leaves you about 2 years short... you'll have to be academic and have a super low salary as an instructor), your loans will be forgiven.

 

[MNCASC]

Yes, consolidate all of your federal loans and sign up for PSLF and either use a (RE)PAYE or IDR plan which caps your yearly contribution at 10-15% of your salary. This should get you through residency. Then, depending on your goals (academic vs. private, fellowship vs. nonfellowship), you can decide what to do after that.

If you also have private loans (like myself), you're in a tougher situation. You can consolidate both federal and private loans and get a lower rate; however, you can't consolidate your private loans into federal and use the PAYE/IDR plan (you have to use a private company). I was lucky that my private loan had a long enough grace period and I was able to moonlight before needing to make payments.

A word about PSLF: there's no downside to signing up for it. Even if it eventually goes away, most people believe that once you've signed up, you're probably grandfathered in so if you make 120 qualifying payments (which is quite difficult btw... 3-5 years of residency, followed by 2-3 years of fellowship still leaves you about 2 years short... you'll have to be academic and have a super low salary as an instructor), your loans will be forgiven.

Thanks for all the advice. Have a few more followup questions:
-Once I sign up for PSLF is there any downside to leaving it? Meaning I decide after residency/fellowship that I want a private practice job.
- I will be doing residency in Southern, CA. I am single and in my early 30s. I don't mind living frugally but would also like to enjoy my time out there. Is forbearance a good choice? Or still not worth it? It just seems to me that most single people should do REPAYE and sign up for PSLF no matter what their goals/desires are and forbearance is never a good idea. But I am open to hearing other opinions.

 

[shaggybill]

If you sign up for REPAYE now and make those minimum payments, the government will pay 100% of the interest accrued on your subsidized loans for the first three years, and 50% of the interest on unsubsidized loans. After three years, it covers 50% on both loan types.

Do that.

 

[MyTachyBradyHeart]

Thanks for all the advice. Have a few more followup questions:
-Once I sign up for PSLF is there any downside to leaving it? Meaning I decide after residency/fellowship that I want a private practice job.
- I will be doing residency in Southern, CA. I am single and in my early 30s. I don't mind living frugally but would also like to enjoy my time out there. Is forbearance a good choice? Or still not worth it? It just seems to me that most single people should do REPAYE and sign up for PSLF no matter what their goals/desires are and forbearance is never a good idea. But I am open to hearing other opinions.

There is no downside to "signing up" for PSLF. It's a form you fill out every year. Most people won't qualify for PSLF, since they either go into practice after training and their salaries disqualifies them from PAYE/IDR. The only people who may qualify are idiots like myself, who goes through residency, then fellowship, then super fellowship, then research. Even with this route, I'll still be at 8 years, and may need 2 more years of instructorship to qualify for PSLF.

Forbearance is never a good idea. PAYE will give you the lowest monthly payments. If you spend 10% of your salary on PAYE, 10-20% on taxes (effective tax rate, higher in CA), ~10% on 401k/403b at least to make sure you get the match, that should leave you at least 60-65% of your salary for living expenses. Subtract 33% for rent in CA, you should still have more than enough money to get by at least intern year. After that, take Step 3 and start moonlighting.

 

[tantacles]

There is no downside to "signing up" for PSLF. It's a form you fill out every year. Most people won't qualify for PSLF, since they either go into practice after training and their salaries disqualifies them from PAYE/IDR. The only people who may qualify are idiots like myself, who goes through residency, then fellowship, then super fellowship, then research. Even with this route, I'll still be at 8 years, and may need 2 more years of instructorship to qualify for PSLF.

Forbearance is never a good idea. PAYE will give you the lowest monthly payments. If you spend 10% of your salary on PAYE, 10-20% on taxes (effective tax rate, higher in CA), ~10% on 401k/403b at least to make sure you get the match, that should leave you at least 60-65% of your salary for living expenses. Subtract 33% for rent in CA, you should still have more than enough money to get by at least intern year. After that, take Step 3 and start moonlighting.

Just a small correction: it's 10% of disposable income. So, for example, my payments this year, after having made around $75000/year at my last recertification (and I think they take out all of your nontaxable contributions like 403B), are a little over $300/month, or about 5% of my yearly income. For someone who doesn't moonlight, that number will likely be lower.

 

[aafisahar]

There is no downside to "signing up" for PSLF. It's a form you fill out every year. Most people won't qualify for PSLF, since they either go into practice after training and their salaries disqualifies them from PAYE/IDR. The only people who may qualify are idiots like myself, who goes through residency, then fellowship, then super fellowship, then research. Even with this route, I'll still be at 8 years, and may need 2 more years of instructorship to qualify for PSLF.

Forbearance is never a good idea. PAYE will give you the lowest monthly payments. If you spend 10% of your salary on PAYE, 10-20% on taxes (effective tax rate, higher in CA), ~10% on 401k/403b at least to make sure you get the match, that should leave you at least 60-65% of your salary for living expenses. Subtract 33% for rent in CA, you should still have more than enough money to get by at least intern year. After that, take Step 3 and start moonlighting.

You can't salary yourself out of PSLF. at worst, you'll pay a few years of full payments, but even a standard 10 year plan with prior qualifying payments will qualify for PSLF as long as your employer is 403b and qualifies under PSLF. Not every non profit counts for PSLF.

 

[MyTachyBradyHeart]

You can't salary yourself out of PSLF. at worst, you'll pay a few years of full payments, but even a standard 10 year plan with prior qualifying payments will qualify for PSLF as long as your employer is 403b and qualifies under PSLF. Not every non profit counts for PSLF.

That is incorrect. My understanding is that you have to make 120 "qualifying payments" under IDR. If you make repayments under a standard plan, those would not count. The caveat is that you can't qualify for IDR if your monthly payment under standard plan exceeds that of your IDR. Basically, if your loan amount is high compared to salary (for most trainees and perhaps academic attending, this is the case), then you will qualify for IDR. If you make an attending salary (i.e. >200k let's say for sake of argument), then unless your loans remain well above $200,000 (give or take, depending on the math), you won't qualify for IDR and your monthly payments do not count towards the "qualifying payments."

 

[tantacles]

That is incorrect. My understanding is that you have to make 120 "qualifying payments" under IDR. If you make repayments under a standard plan, those would not count. The caveat is that you can't qualify for IDR if your monthly payment under standard plan exceeds that of your IDR. Basically, if your loan amount is high compared to salary (for most trainees and perhaps academic attending, this is the case), then you will qualify for IDR. If you make an attending salary (i.e. >200k let's say for sake of argument), then unless your loans remain well above $200,000 (give or take, depending on the math), you won't qualify for IDR and your monthly payments do not count towards the "qualifying payments."

So not exactly. If you are employed by the appropriate employer, you qualify, regardless of your salary. Your salary determines the maximum amount you can pay, which caps out at the amount you would pay under a standard repayment plan. However, these payments still qualify.

Now, if you were on a standard repayment plan and then wanted to qualify for PSLF, that would not work out. But PSLF does apply to those making full payments because of their income as long as they are working for a qualifying employer.

 

[Lucy Arnez]

How does one qualify for zero being the payment for the first 6-12 months? Plan on RePAYE and PSLF and currently filling out the fed loan consolidation form and it asks Employed or Unemployed. Residency starts next month, so do I put unemployed?

 

[tantacles]

How does one qualify for zero being the payment for the first 6-12 months? Plan on RePAYE and PSLF and currently filling out the fed loan consolidation form and it asks Employed or Unemployed. Residency starts next month, so do I put unemployed?

If you filed taxes during your last year of medical school (taxes for fiscal year 2019 for the current graduating class), your income was zero. Therefore, your payments until recertification will be zero. If you are currently unemployed, put unemployed.