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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

Student loans are a hot political item. As such, expect rules to change over time. Please confirm all terms and thresholds through your federal loan representative or private lender before finalizing your borrowing and repayment decisions.

As of early 2020, student loans outstanding reached $1.6 trillion. Student loan debt is now second only to home mortgage debt in the United States. It is larger than car loan debt and all other retail debt types.

According to the AAMC, the median 4-year Costs of Attendance for graduates of public and private medical schools, respectively, are estimated at $250,222 and $330,180 for the class of 2018. Premedical (undergraduate) and non-education debts are a very small portion of outstanding indebtedness by medical school graduates (around $25,000 and $17,000, respectively).

 

If you’ve already completed your education, your focus is on repayment. There are two categories of repayment plans on federal government student loans: Traditional Repayment and Income-Driven. The information below is taken directly from: www.studentaid.ed.gov. Check formal sources for the latest updates.  

 

Related Links:

U.S. Department of Education Federal Student Aid office

StudentLoans.Gov loan repayment estimator

The National Student Loan Data System (NSLDS) is the U.S. Department of Education’s central database for student aid  

 

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.ed.gov/sa/

 

The latest updates should be available from your on-campus sources, studentloans.gov, the student aid section of 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 from your lender. 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.

Determine your eligibility for deferment and forbearance at studentaid.ed.gov.

 

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.

 


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