Stick to my current IDR or go with the SAVE plan?

[samlecat]

Hi, I graduated from my fellowship last year and has been practicing as a hematologist oncologist for over a year now. I applied for the PSLF waiver when it was available and it looks like I got approved for the six years of my residency plus fellowship. The place I am working at right now also qualifies for PSLF. I am wondering if I should recertify my IDR now under the SAVE plan to save on interests.

The last time I recertified my IDR was november 2020. My IDR I believe is due in July of next year (it says my IDR Anniversary Date is 08/01/2023 in my NSLDS file). Right now my payment would be like $275 when it restarts next month (based on my fellowship salary when I last certified). If I do the SAVE plan now it will jump to $1600 I think (based on my salary from last year-I had worked for 5 months as a specialist). If I recertify next year it will be more.

I am trying to think if there is any benefit for me to do the SAVE plan now (unless there is a deadline to it), since if I do it today, won't I have to renew it in a year anyways? Should I just pay my old IDR rate and wait until July of next year and sign up for the SAVE plan then?

Any advice is greatly appreciated!

My principle is $423K, interest to date is $97K at 7.65% rate.

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[mvenus929]

The benefit of the SAVE plan is if your interest accumulation is above what your payment would be. If you're planning to go for PSLF, this likely doesn't matter.

Back of envelope math suggests you are gaining about $32K in interest per year, so roughly $2500 per month. You'd get a subsidy of about $1000 per month to cover interest and your total interest would not increase under SAVE. Under your previous IDR plan, you're paying less for about a year. If you switch plans, your interest will capitalize, so if you don't do it now, you'll definitely be paying more next summer.

There's no correct answer. I'll be paying about $400 per month when payments restart (based on my fellow salary) but I only have about 14 months of payments left before I get forgiveness, so I don't particularly care whether I get an interest subsidy or not--I'm not going to make any dent in the principal between now and then anyway.

 

[samlecat]

The benefit of the SAVE plan is if your interest accumulation is above what your payment would be. If you're planning to go for PSLF, this likely doesn't matter.

Back of envelope math suggests you are gaining about $32K in interest per year, so roughly $2500 per month. You'd get a subsidy of about $1000 per month to cover interest and your total interest would not increase under SAVE. Under your previous IDR plan, you're paying less for about a year. If you switch plans, your interest will capitalize, so if you don't do it now, you'll definitely be paying more next summer.

There's no correct answer. I'll be paying about $400 per month when payments restart (based on my fellow salary) but I only have about 14 months of payments left before I get forgiveness, so I don't particularly care whether I get an interest subsidy or not--I'm not going to make any dent in the principal between now and then anyway.

Thank you so much for your reply. If I understand correctly, whether or not I go with SAVE now, I will need to recertify in a year correct? And my payment at that point in time will be the same whether I enroll with SAVE now or then? It is just that if I wait for another year, then my interest will compound and therefore I will have to make more payments? It is the issue with the interest that confuses me. Thank you so much for your help!

 

[mvenus929]

Thank you so much for your reply. If I understand correctly, whether or not I go with SAVE now, I will need to recertify in a year correct? And my payment at that point in time will be the same whether I enroll with SAVE now or then? It is just that if I wait for another year, then my interest will compound and therefore I will have to make more payments? It is the issue with the interest that confuses me. Thank you so much for your help!

Your recertification date will be no sooner than March, but is based on when you've recertified in the past. Theoretically, I recertify in October/November each year, so I won't have to do that until next year.

My *understanding* is that interest will compound when you switch plans--meaning that the amount of interest accumulating each month will increase at that time (since your principal is higher). Your *payment* won't be significantly effected, because it's based on your income, not the amount you owe. But if you recertify now, your payment will be based on 2022 taxes (1/2 fellow, 1/2 attending salary) vs 2023 taxes (full attending salary), so your payment will go up if you recertify after you file your taxes next year--in either case, it will go up compared to what you're paying now (which is presumably based on a resident or fellow's salary, depending on the length of your fellowship).

Hope that makes sense.