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John Burr

7+ Year Member
Apr 28, 2014
30
5
Hey guys,

A D4 here going into residency soon. My school financial aid counselor said that it's always better to choose REPAYE or PAYE than to refinance student loans. He also said that federal student loans (direct and direct plus) accrue simple interest, not compound interest which was not what I was told before. Can anyone tell me which is better to pay off student loans? Also, is it true that student loans accrue simple interest?
 

rolltidedumptruck

2+ Year Member
Apr 2, 2018
6
1
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  1. Dental Student
It depends on your personal situation, (ie. how much debt you have, debt to income ratio etc.) so unfortunately there isn't one easy answer about this. I recommend checking out the student loan planner podcast, he goes into these issues and could give you some perspective.
 

Awarara

2+ Year Member
May 9, 2016
96
83
Your school counselor is correct on both things. I would recommend googling about student loans some more to get a better understanding. Student loans is actually really straight forward once you read about it.
 
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ESPN907

2+ Year Member
Aug 27, 2018
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  1. Pre-Dental
Plus those income based repayment programs have interest subsidies you should qualify for your first year or two out of school
 

Xtract

7+ Year Member
Jul 9, 2013
405
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  1. Dental Student
So whether you go into work directly out of dental school, go to a residency that pays, or one that you pay for, is it still worth entering REPAYE? (400k+ dental school tuition)
 

Alpha Centauri

7+ Year Member
Mar 6, 2013
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Always stay on REPAYE. They pay for 50% of your interest. Even if your income is like 140k and you are making bare minimum REPAYE payments, you can make individual lump sum payments.

AKA, REPAYE payment is 1,000 a month but you can afford to pay 4000 a month. Stay on REPAYE, pay the 1000 then a week or two later pay another 3,000
 

allDAT

SDN Bronze Donor
10+ Year Member
Mar 11, 2011
402
433
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  1. Dentist
It is true that student loans accrue simple interest. Interest is only capitalized if certain conditions are met - like exiting your grace period.

Unless you owe 150k or less, don't refinance right away. Enter IDR, get some experience under your belt, secure stable employment or use the flexibility of IDR to acquire a practice. Then look at your income and decide if refinancing is right for you. Refinancing can't be undone.
 

allDAT

SDN Bronze Donor
10+ Year Member
Mar 11, 2011
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REPAYE only pays 50% of the interest that accrues on the loans, not 100%. The goal is to at least earn enough so that 10% of your discretionary income covers the interest, at that point, there's no benefit to REPAYE and switching to PAYE to shorten repayment towards forgiveness by 5 years isn't a bad idea. Those last 5 years (20 in PAYE vs 25 in REPAYE are really expensive for a dentist).
 

allDAT

SDN Bronze Donor
10+ Year Member
Mar 11, 2011
402
433
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  1. Dentist
So whether you go into work directly out of dental school, go to a residency that pays, or one that you pay for, is it still worth entering REPAYE? (400k+ dental school tuition)
Yes. With 400k in student loans, you should enter REPAYE, then consider switching to PAYE if you lose the interest subsidy because your payment covers the interest. When you switch from REPAYE to PAYE, any outstanding interest will be capitalized.
 

Xtract

7+ Year Member
Jul 9, 2013
405
258
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  1. Dental Student
Student loan forgiveness is now tax free; does this mean there is no tax bomb after 20-25 years of repayment?
 
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