Introduction

Formulate a Financial Plan

Know Your Net Worth

Manage & Minimize Debt

Accumulate Assets

Budget to Live Within Your Means

Understand Investing Basics

Plan for Retirement

Insure People & Property

Deal with Financial Advisors

Review Your Employment Contract

Make Plans for Your Estate

Make Good Decisions

Conclusion

If you’ve completed your education, your focus is on repayment. The specific plans documented below are available on federal loans. They do not apply to private loans.

There are two categories of repayment plans on federal government student loans: Traditional Repayment and Income-Driven. The information below is taken directly from: studentaid.gov. Check formal sources for the latest updates.

Related Links:

U.S. Department of Education Federal Student Aid office

StudentAid.gov Loan Simulator

FedLoan Servicing

Public Service Loan Forgiveness

DoctoredMoney provides very good resources, in particular when it comes to student debt. According to the site's Disclaimer, it strives to provide conflict-free educational resources for physicians. The Disclaimer mentions that one of the founders has a company that provides a limited amount of financial planning services, described as accounting for 2% of his household income.  

 

Figure 6A: Traditional Repayment Plans

 

Repayment Plan

Terms

Standard Repayment

You have up to 10 years to repay; fixed monthly payments must be at least $50; You’ll usually pay less over time than under other plans. 

Graduated Repayment

You have up to 10 years to repay; initial payments are low and increase (usually) every two years; you’ll pay more over time than under the Standard Plan.

Extended Repayment

You have up to 25 years to repay; choose between graduated payments that start low and increase over time or fixed payments; monthly payments will be lower than those under Standard or Graduated Plans, but you’ll pay more over time than the Standard Plan

 

Figure 6B: Income-Driven Repayment Plans

 

Repayment Plan

Terms

Revised Pay As You Earn

(REPAYE)

You have up to 20 or 25 years to repay (depending on whether loans were only for undergraduate or some graduate studies, respectively); if you make the equivalent of 20 (or 25) years of qualifying payments, any outstanding balance on your loan may be forgiven (you may owe income tax on the forgiven amount); payments will be 10% of your discretionary income (defined by the Department of Education relative to the poverty line); you’ll usually pay more over time than under the Standard Plan; may be a good option for public service loan forgiveness (PSLF).

Pay As You Earn

(PAYE) 

You have up to 20 years to repay; if you make the equivalent of 20 years of qualifying payments, any outstanding balance on your loan may be forgiven (you may owe income tax on the forgiven amount); payments will be 10% of your discretionary income, but never more than what you’d have paid under the Standard Plan; you’ll usually pay more over time than under the Standard Plan; may be a good option for PSLF.

 

Income-Based Repayment (IBR)

You have 20 (or 25) years to repay (depending on when you received your first loans); if you make the equivalent of 20 (or 25) years of qualifying payments, any outstanding balance on your loan may be forgiven (you may owe income tax on the forgiven amount); payments will be either 10% or 15% (depending on when you received your first loans) of your discretionary income, but never more than you’d pay under the Standard Plan; you’ll usually pay more over time than under the Standard Plan; may be a good option for PSLF.

Income-Contingent Repayment (ICR)

You have up to 25 years to repay; payments are the lesser of 20% of your discretionary income, OR, the amount you’d pay on a 12-year fixed plan adjusted according to your income; if you make the equivalent of 25 years of qualifying payments, any outstanding balance on your loan may be forgiven (you may owe income tax on the forgiven amount); you’ll usually pay more over time than under the Standard Plan; may be a good option for PSLF.

Income-Sensitive Repayment

Your monthly payment is based on annual income, but your loan will be paid in full within 15 years; you’ll pay more over time than under the 10-year Plan; the monthly payment amount can vary from lender to lender.

Source: https://studentaid.gov/manage-loans/repayment/plans

The latest updates should be available from your on-campus financial aid office, studentaid.ed.gov, or from the Association of American Medical Colleges.

 

Deferment and Forbearance

If you find yourself unable to make federal student loan payments you may be able to avoid default by seeking forbearance or deferment. Either will allow you to temporarily stop making payments or to make reduced payments.

In the case of forbearance you will still be required to pay accrued interest on your federal loans. In the case of deferment, the federal government may pay the interest on your loans during the deferment period. Whether the government covers your interest or not depends on your loan type. See studentaid.ed.gov to determine whether your loan type is eligible for such government assistance.

If you’re responsible for interest payments but elect not to pay them, those required payments may be capitalized—they will be added to your loan principal—and it will take you longer to pay off the loans.

Forbearance and deferment are not long-term offers. The idea is that you will take a few months to get your household finances in order and then resume making your regular payments.

 

Delinquency and Default

If you fail to make a payment by the due date, your loan is considered delinquent. It is seriously delinquent if payment is overdue by more than 90 days. Private lenders generally report delinquencies to credit bureaus once a loan is 30 or more days past due and classify a loan as a default after 90 days. A default classification formally acknowledges that the loan may not be repaid. At this point the claim may be handed off to a collection agency.

 

Consolidation Strategy

Over the course of your schooling you may accumulate several loans, each with its own terms, conditions, and interest rates. It can be both tedious and confusing to manage all these loan payments individually. Having multiple loans may even disqualify you from PSLF (see below) and or some income-based repayment plans.

Instead, you can opt to consolidate loans. Think of that as combining multiple loans into a single loan with a single interest rate and one monthly payment. Logistically this is much easier than managing an entire portfolio of loans. You can easily consolidate federal loans at studentaid.gov. If you plan to pursue PSLF, read eligibility information carefully to ensure your consolidation plan will work as intended.

 

Refinancing Strategy

In past decades many student loans were subsidized, and students could borrow at very favorable rates. Those options no longer exist, and many borrowers find themselves burdened with high annual loan rates in the 6%-8% range. Such high rates obligate you to assign more of your budget to loan repayment, leaving less for all your other financial priorities. The good news is that you may be able to refinance to lower rates, using private lenders. Some lenders cater specifically to professionals, including physicians.

Some providers who offer student loan refinancing include: Earnest, Laurel Road, Splash Financial, and SoFi. Check carefully to ensure your loans are eligible for refinancing. Be on the lookout for scams which are quite common in this space. I recommend doing an online search for information on the latest scams and how to avoid them. Government sources are the most reliable for federal loan related information.

In recent years students at some schools banded together to seek lower-rate graduate student loans. Some founded companies to offer such deals to larger audiences. You may wish to search online to find out whether such programs are available to students or alumni of your school.

 


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