Look into loan forgiveness
Standard loan-repayment plans amortize over 10 years. So if a student accrues $300,000 in loan debt and repays on a standard plan, it’s almost certain that, with interest, the monthly payments on any loan would be approaching or upward of $3,000.
That sum is an unrealistic figure for most residents, but there are ways to reduce it and even have a chunk of your loan debt forgiven.
The Public Service Loan Forgiveness (PSLF) program is a viable option for many residents. It is available to physicians with federal loans who work at nonprofit institutions. To qualify, borrowers must make 120 on-time payments over 10 years. If those payments are made, the remaining principal and interest are forgiven, and the forgiven sum is untaxed.
To further reduce payments, there are several income-based payment plans that allow for realistic payback options—it is not entirely uncommon to have a debt load that exceeds income at the outset of residency—that can be used in tandem with the PSLF program. These plans only require a fixed percentage of income to be paid monthly toward a student-loan balance.
The clock on a PSLF plan begins when the first payment is made. So following four years of residency, a physician would be required to spend an additional six years in a nonprofit care setting. In theory, the most beneficial way to go through the PSLF program is to pay the minimum payment each month for the duration of your repayment. That may not be the case, however, for physicians who are unsure if they want to spend the first 10 years of their career in nonprofit settings.
“I think I’ll be paying down a little more [debt] and trying to stay qualified for PSLF at the same time. That way I’m hedging in two directions,” Dr. Ouyang said. “I won’t pay the least amount of money, but I’m trying to optimize my options either way, because who knows what four years from now is going to bring.”
Other programs offer stipends or loan forgiveness for physicians who work in understaffed fields or areas with a shortage of physicians.
Karen Dionesotes is a third-year medical student who is taking a gap year to work in public health after earning a master’s degree in that field in 2016. Because she has been away from medical school for two years—she plans to finish up her fourth year in 2018—her loans will require payment. She enrolled in an income-based repayment plan and cut her monthly payments by more than $3,000.
“There’s a program I’m going to apply to in my fourth year where, if you work in a primary care field, they give you stipends to help you pay off your debt during residency,” she said. “I’m probably going to end up in psychiatry. It’s a needed specialty. I like the idea of working in a VA, and if you work for the government you can get student-loan forgiveness.
“Besides [the stipend and repayment plans] there’s not much else you can do,” Dionesetes said. “You look at these [debt numbers], they could end up being like half a million dollars. It’s definitely overwhelming.”
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