Student Loan Management for Medical Residents
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When entering residency, choosing your repayment plan for your student loans is critical. If you’re an individual who will be working for a private practice, loan forgiveness is likely not going to be an option and you’ll need to repay your full loan amount.
Therefore, it’s critical to understand and take advantage of the best interest rate and repayment options for your loans. Schedule a free consulation with a GradFin Loan Expert to ensure you’re exploring all of your options.
Federal Repayment Options
The government will offer you a variety of repayment options. For the average medical resident, your residency salary won’t allow for you to make full principal and interest payments on your loans. Due to an inability to make full payments, many residents enroll in one of the income driven repayment plans. One of the most popular is the Revised Pay As You Earn plan. This plan offers an attractive interest subsidy for borrowers entering the first months of their repayment plan.
However, your payment will vary from year to year, as it will be based on your paystubs or recently filed tax return. This can make it difficult to budget, and if you miss a filing deadline for your payment plan it can cause a significant increase in your payment.
Public Service Loan Forgiveness
Many medical residents are placed in hospitals that qualify for Public Service Loan Forgiveness (PSLF). Depending on how long their residency and/or fellowship is, this means they could be looking at only a few years of repayment before their loans are eligible to be forgiven tax-free.
Not only does this mean residents are typically looking at loan forgiveness in excess of $100,000, but PSLF and Income-Driven Repayment give borrowers the ability to maximize their cash flow with modest monthly payments on their student loans.
It is imperative, though, that residents pursuing PSLF run the numbers, ensure compliance, and confirm eligibilty. GradFin’s student loan consultants specialize in helping student loan borrowers do so: https://gradfin.com/forgiveness/
Residency Refinance
Another popular option for borrowers is a private bank refinance. Some of GradFin’s lending partners offer a residency refinance, which is a program that will approve residents for a refinance based on current market rates, and your required monthly payment on the loan is fixed at $100 per month – though you can overpay on the loan if desired.
After residency, the loan enters into full repayment at an amount that was previously selected. This makes it easy to budget for the future, especially as residents consider career and housing options because they’ll already know the required payment for their loan. Remaining with the government’s income driven plan, especially when residents’ income increases, can make it difficult to budget post-residency for new expenses.
Additionally, with current market rates being the lowest in over two years, the interest savings over the life of the loan outweighs the government’s interest subsidy. In many cases, we’ve seen borrowers reduce their interest rates to less than half of their previous rate, rendering thousands in savings.
When you enter residency and begin repayment on your loans, you have a unique opportunity to take advantage of both a low payment AND a low rate on your loans. But navigating the process alone can be confusing, time consuming and mistakes can be made. Make sure you take full advantage of GradFin’s student loan experts to guide you through the process. There’s never a fee to refinance or to have us help you, and we’ll always find you the lowest rate possible.
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