Tips for Managing Medical Student Loans
Income-Based Repayment Plan (IBR)The income-based repayment plan option has made it possible for many young Doctors and Dentists to make their monthly payments without fear of bankrupt or forced into forbearance or hardship deferrals. The IBR bases medical student loan payments on your income rather than total debt owed or interest rate. Payments on unsubsidized loans through the IBR plan are often much less than even the interest on the loans. The IBR plan caps medical student loan payments at 10 percent of the discretionary income (the difference between adjusted gross income and 150 percent of the federal poverty level). When you graduate the residency program and begin making more money in your career the IBR payments will revert to a higher amount, calculated at the original 10 year repayment plan. If you make every payment for 20 years, the remainder of the debt that you owe will be forgiven. However at this point in your career, making at least the minimum payment should have your medical student loans repaid by then.
The Public Service Loan Forgiveness (PSLF) ProgramThe Public Service Loan Forgiveness (PSLF) Program is a type of loan forgiveness that can be beneficial for doctors. It you work for a qualifying 501(c)3 employer, such as the military, Department of Veterans Affairs, a university hospital, or a non-profit hospital, the remainder of the loan forgiveness can be received after 10 years of qualifying payments instead of 20. This program is a great benefit if you are a Doctor specailising with long training programs, such as medical, pediatric, and surgical subspecialists. The PSLF program works by forgiving the amount by which you underpaid your loans in residency, plus the interest that accumulated because of those underpayments.
Loan ConsolidationThe federal government offers loan-consolidation programs. However the government combines student loans, putting them all at the same interest rate. Consolidation a medical student loan may not save you any money in the long run.
Loan RefinancingLoan refinancing with a private bank or other lender is another great option for many doctors. However you have to qualify based on your income-to-debt ratio and credit score. While there are few lenders that offer loan refinancing, those who do start at rates as low as 5 percent fixed and 3 percent variable.
Chris Fuller went to the University of South Florida and has worked in the financial sector for over 20 years. He has extensive experience in all aspects of personal and small business lending, from personal loans, equipment finance to cash flow based solutions for small mom and pop businesses, and large corporations.