Top tips for developing a med school loan repayment strategy

AMA Wire
Email this page

With how high med school debt can be, developing a strategy for paying back your loans can help make handling that debt more manageable. Here’s what physicians in training need to know to develop a sensible repayment strategy.

Paul Garrard, founder and president of student loan consulting group PGPresents, has more than 30 years of experience in student financial aid and higher education. AMA Wire® spoke to Garrard, who recently presented at the 2015 AMA Annual Meeting, about the best ways to develop a repayment plan and which repayment plans  to consider if you’d like to qualify for public loan forgiveness.

AMA Wire: You work with thousands of medical residents and fellows who have questions about student loan repayment. What is one of the main questions or concerns you hear from them?

Garrard: The most frequent question or concern we get is whether or not they should try to take control of their own debt during residency or rely on the federal government for help through one of the forgiveness programs, most notably Public Service Loan Forgiveness (PSLF).

AMA Wire: What do physicians in training need to know about PSLF?

Garrard: The eligibility requirements for PSLF match up well for many medical school graduates, at least during residency, regardless of their ultimate career plans. PSLF is available to borrowers who have Direct Loans (federal loans directly from the government) and make 120 payments with an Income-Driven Repayment Plan like Income Based Repayment (IBR) or the newer version called Pay As You Earn (PAYE) while they work at least 30 hours per week (certainly not a problem for residents) for an eligible non-profit employer. 

[Here’s] how this plays out for many medical residents: First, they already have Direct Loans since the government now makes all federal loans and has for years. Second, many residents cannot afford repayment under any plan other than IBR or PAYE. And third, many teaching hospitals are non-profits. 

So this pretty much guarantees several years towards PSLF eligibility while they are residents, whether they are ultimately interested in public sector work or not, as long as they start making payments [toward the 120 payment requirement]. This is why we tell all medical school borrowers we work with that the decision about pursing PSLF likely comes toward the end of residency or fellowship when hopefully they have multiple job offers. 

They simply “start the clock” towards [PSLF] eligibility [by making payments] during residency.

AMA Wire: What are the drawbacks of starting these repayment plans during residency?

Garrard: The challenge comes in that for many residents, their required minimum payment under these income plans is often so low that it doesn’t come close to covering the interest due on the loans because of how much they borrowed. [This] results in the balances growing even more during residency and fellowship. 

AMA Wire: How can residents approach loan repayment?

Garrard: Many residents we work with can afford to be at least a little aggressive and pay more each month, but they don’t want to as long as PSLF is part of their repayment strategy because they would be paying down their potential forgiveness amount. So they make their minimum payments and watch their balances grow, all the while hoping PSLF will be there for them later. 

Others take the approach of still using IBR or PAYE for a manageable payment, but they overpay on their worst loan any time they can and thus try to take control of their debt. 

We think the latter is a very common repayment strategy, and [it is] certainly a sound one.

AMA Wire: Any tips for how medical school graduates should go about figuring all this out?

Garrard: At a minimum we suggest at least three things for figuring out an effective repayment strategy:

First: Borrowers need to know what they borrowed, who services their loans (companies like FedLoan Servicing, Great Lakes, Navient and Nelnet) and when their loans come due. 

The National Student Loan Data System lists all a borrower’s federal loans and also provides information on loan servicers. Most loans come due about six months after medical school. Step No. 1 is really quite simple, and many recent graduates are finding that all their loans are already with one loan servicer, which negates one of the reasons to consolidate. Borrowers who have other loans not listed on NSLDS (such as private loans) can check their credit report for similar information.

Second: We suggest they take a good look at their own repayment objectives. Do they want to aggressively pay down their debt whenever they can, or do they want to make minimal payments, at least in residency and fellowship, perhaps with an end game of maximizing their potential forgiveness under PSLF?

We always encourage medical residents to review their repayment objectives on a regular basis. We have worked with many borrowers who started out making minimum payments in residency, perhaps with an eye towards PSLF, only to land a job in the for-profit sector after residency that they really wanted, which effectively took PSLF “off the table.” [This] resulted in a new repayment objective geared towards aggressive repayment.

Third: The final step is to pick a repayment plan that will help them meet their repayment objectives with a required monthly payment they can comfortably afford, again remembering they can aggressively pay later if needed with no penalty.

IBR and PAYE are popular with medical residents and fellows because they allow affordable payments when the debt level greatly exceeds income. However, we always encourage borrowers to look at other options as well and to “back into” IBR and PAYE. In other words, they should not assume they cannot afford another more aggressive plan from the start, especially if their debt is relatively low and they have access to other resources, perhaps courtesy of a spouse or partner. There are calculators that can help with this third step, and loan servicers should be able to help as well.

 Explore more loan repayment tips  

Email this page

Comments

Are you a business man or woman? Do you need funds to start up your own business? Do you need loan to settle your debt or pay off your bills or start a nice business? Do you need funds to finance your project? We Offers guaranteed loan services of any amount and to any part of the world for (Individuals, Companies, Realtor and Corporate Bodies) at our superb interest rate of 3%. For application and more information send replies to the following E-mail address: [email protected]<br/> <br/> Thanks,<br/> Mr. Barry More.
Good day Loan Seekers Solution for your financial problems......<br/> We are a fully registered and certified loan firm, that offers secured and unsecured loans to individuals and companies at a very low interest rate of 2%. We offer long and short term loans.Our company has recorded a lot of breakthroughs in the provision of first class financial services to our clients, especially in the area of Loan syndication and capital provision for individuals and companies. We have brought ailing industries back to life and we back good business ideas by providing funds for their up start. We have a network of Investors that are willing to provide funds of whatever amount to individuals and organizations to start business and operations.We are a group of energetic and experienced loan professionals with thorough knowledge of financial markets.In general we offer mortgages, home loans business loans and bad credit loans commercial loans, start-up- working capital loans construction loans car loans, hotel loans Xmas loans Our interest rate is 2% per annual repaid, our loan takes a maximum of 3 working days to get to all approved customers across the globe.You can contact us via <br/> <br/> [email protected] <br/> <br/> elvinloancompanys.bravesites.com<br/> <br/> +1(307) 213-2540
Hello everyone<br/> <br/> I am Mr. Khan, i will grant you all kinds of loans you need because our services are reliable.<br/> <br/> I give out loans at 3% interest rate and from a duration of 6 months to 25 years.<br/> <br/> My work is trusted and guarantee, reliable and quick, fast and understanding. So i urge you now to apply because application is open to those above 18+.<br/> <br/> Contact us through our email today at [email protected] I await your swift application so that we can help you out with what you want.<br/> <br/> Pelle Khan
Show Comments (3)
Mar 23, 2017
“Mini med school” projects inspire disadvantaged youth to consider health careers and help medical students get to know underserved communities.