Student loan payments are restarting. Still trying to figure out where to start?
Understandably, many physicians are anxious about how changes will roll out, what it means for their finances, and how it will affect their lives. As we know, keeping up with the recent loan changes is an ongoing process, and it can be hard to keep it all organized. How do we know the advice we’re getting applies to our specific loan scenario?
Help is here. Today I will share some of the particular loan scenarios we’ve encountered when we help create student loan plans at Attend for practicing physicians and for physicians in training.
Steps for Graduating Medical Students Starting Residency
If you’re a medical student who recently graduated, I hope the transition has been smooth! Welcome to being a doctor and doing doctor things.
You want to enroll in public service loan forgiveness (PSLF) or at least make payments affordable in training, so here’s our prescription:
1. Verify how much you owe and that you have qualifying federal loans
It can be scary to look at the total amount you owe but rip off the bandaid. You need to know this information to create an effective plan. Then confirm the basics, including who your loan servicer is.
2. Consider consolidating your loans
It’s very common to have a different loan for each semester of school you attended. Consolidating combines all your loans into one giant loan. Consolidating is very different from refinancing (which, in training, is rarely the right option), and it goes through The Department of Education, where your loan originated.
Consolidating allows you to skip the “grace” period, which means a few more months of making payments as a low-income resident and not a high-earning attending, because skipping the grace period through consolidation allows you to enroll in an Income-Driven Repayment (IDR) plan. This is where your income determines your payment. Therefore, while your income is still zero, your payments will also be zero if you had a zero-dollar income as a fourth-year medical student. And these “payments” count toward PSLF.
3. Enroll in an income-driven repayment (IDR) plan
Your income determines the monthly payments for these plans. They are not based on the amount of student loans you have. Because they are based on your income, for many, this makes your payments lower – many first-year residents will have $0 payments.
For the vast majority of single residents who 1) are more than 12 months from the end of training and 2) have no outside income, the SAVE (Saving for a Valuable Education) plan will be the best plan for you. If you are married or within 12 months of finishing training, picking the right student loan plan becomes much more nuanced.
Because of this, many residents choose to put their heads in the sand when it comes to student loans. However, this is not advisable. If you do not enroll, you will automatically enter the Standard Repayment Plan, resulting in a multiple four-figure bill in your mailbox. For many, this will be the size of your entire take-home paycheck as an intern. To avoid this large bill, you need to enroll before that happens (ideally, through consolidation and entering an IDR plan).
Important note: State that your income was zero based on your fourth-year medical student tax filing – do not put your upcoming residency salary.
4. Submit your PSLF form
Completing this form alerts the federal government that you're enrolling into the program, and they can start counting your payments.
Steps for Residents Preparing to Make the First Payment
As a resident, you’ll follow the same four steps listed above with one addition: make your payment on time if you are already enrolled in an IDR plan from before the COVID-19 pause.
In addition to this, residents who just graduated from medical school, as well as current residents who have never made a payment, should be able to log into their loan servicer website and see how much the first payment is. You'll also be able to see what repayment plan you’re currently enrolled in, if any, and when you need to next re-certify your income if you have already enrolled in a plan.
Now is the time to make sure you’re enrolled in an IDR plan. Otherwise, the default standard repayment plan could result in the four-figure loan payment mentioned above. Note the above comments about finding the correct IDR plan for you during training based on your marital status and the amount of time before the end of training.
Steps for New Attending Physicians
Despite being in practice, if you finished training recently, you may need to sort through your student loan plan, too. Here are the steps:
1. Verify your loan status
Confirm the type of loan, amount, interest rate, current repayment plan, and servicer.
2. Decide if you’re going through PSLF or not
As many as 80% of hospitals qualify for PSLF. If employed by a hospital — even if in private practice — there is a good chance you qualify. Look at your pay stub and make sure you know the answer! If you do not work for a PSLF-eligible employer, find the lowest interest rate available to you through private refinancing and compare this to your current interest rate on your student loans if you keep them in the federal system.
3. Take note of when your next payment is due if enrolled in an IDR plan
If not enrolled in IDR, now is the time to enroll.
4. Check to see if and when you need to recertify your income
If you enrolled in an IDR plan (required when seeking PSLF), your loan servicer will provide an income recertification date. If you are not enrolled, you must certify your income when enrolling in an IDR plan.
5. Make sure you’re in the best repayment plan
The best IDR plan as a resident may not be the best plan as an attending. Each plan is nuanced and becomes more complicated as you earn more money and, in particular, if you are married. Your two options are becoming a DIY student loan expert or getting help.
6. If going for PSLF, resubmit your Employment Certification Form annually to get all your eligible payments counted
Long-term financial solutions for physicians at every stage
As you see above, student loans can be pretty complicated. It becomes much simpler if you are a single resident in training with more than 12 months to go before you graduate. SAVE is likely the best plan.
However, for married doctors, attending physicians, or those within 12 months of finishing training, you likely need help determining the best plan. If that’s you, I would encourage you to check out Attend. From there, you can schedule a consult or use the Attend for Doctors app, which can help you upload your student loans, help determine the best plan for you, and follow along as you pay off your debt or move toward Public Service Loan Forgiveness.
Dr. Jimmy Turner is an academic anesthesiologist and the Chief Medical Officer and co-founder of Attend, a comprehensive financial platform built by physicians for physicians. He is also the author of The Physician Philosopher's Guide to Personal Finance and host of the Money Meets Medicine podcast.
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