• Loan repayment

    • Section is summarized and abridged as there are many resources available for loan repayment but included, since personal finances would not be inclusive without discussion of loan repayment.

    • Traditional repayment plans

      • Standard repayment plan

        • This is not an income driven repayment plan

        • The government calculates how much you would need to pay off your loan over 10 years

        • Usually this is a higher amount than any resident can afford

    • Income driven repayment plan

      • PAYE (Pay As You Earn)

        • Income driven repayment plan

        • 10% of your discretionary income per month x 20 years, after which the remainder is forgiven but taxed

        • You are CAPPED. Meaning, despite how much you make as a successful attending, your maximum monthly payment is capped at what the government calculated to be your 10 year standard monthly payment if you were doing the traditional standard repayment plan. (Think about how beneficial this is if you are a high earning specialty physician.)

        • If you are married filing separately, this loan repayment does not take into account your spouse’s income and debt.

        • Your interest is not subsidized. (Government does not pay your interest. You pay it.)

      • REPAYE (Revised Pay As You  Earn)

        • Income driven repayment plan

        • 10% of your discretionary income per month x 25 years, after which the remainder is forgiven but taxed

        • You are NOT CAPPED. This may be an issue for high income potential specialties.

        • The benefit is that the government pays 50% of your accrued interest every month.

        • The disadvantage is that it takes your spouse’s income and debt into account (even if you’re married filing separately on taxes). So this may be a disadvantage if your spouse is a high earning income individual, or beneficial if he/she makes a lot less than you.

    • Public Service Loan Forgiveness (PSLF)

      • This is not a payment plan

      • It is a route you can take towards forgiveness.

      • You have to show 120 qualifying payments (10 years of employment) and the rest of your balance is forgiven. The payments do not have to be consecutive and payments during residency counts toward the payments if done at an eligible institution, and the forgiveness is tax-free. You have to be paid by a non-profit institution, which most academic centers qualify as. Make sure your non-profit institution is not sub-contracting out your paychecks to for-profit companies, because in the end your paycheck will look like it came from the for-profit institution and not from the non-profit institution.

      • Make sure to file your taxes during your 4th year of medical school. Unless you had any other employment besides ‘Student’, your income should be $0. When you pick your loan repayment plan, they will calculate your loan repayment on last year’s income. So when you are a first year resident, your repayment plan will be calculated on last year’s income which is $0, so your first 12 payments should be $0, and do qualify towards the 120 payments if at a qualifying institution.

      • Will it work?

        • The first eligible forgiveness was in 2017. Whether it has or has not worked is still up for debate. There are many fears that it is not sustainable and will disappear, while others believe there will be many reforms, i.e. it will be removed by those in PSLF will be grandfathered in, or it will become taxable. We just don’t know yet.

        • But to date, as of April 2018, we do know that only 55 people gave been granted loan forgiveness to date. ( see below). 

    • Interest is capitalized every time you switch payment plans

2018. by Christie Ton with wix.com

Dr. Piggy Bank

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