PSLF ama

[whoknows2012]

Hi all-

I thought it might be helpful to provide a thread to ask and answer questions about PSLF. I’m a pgy7 about to embark on academic career and I have educated myself extensively on thIs subject as well as general physician related financial matters (insurance, saving, investing etc) and feel I could be of assistance for those who are either unsure about the program or who have specific questions about their situations. Fire away

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[Cornfed101]

So the first obvious question. Are you taking advantage of PSLF? Also, How confident are you that you will get your loans forgiven?

 

[Dantrolene FC]

I have a few questions regarding your loans and potential savings. Feel free to share as much or as little information as you feel comfortable with.

How much in loans did you graduate med school with? And how much loans did you have or will have when you graduate residency? I'm just curious how much they grew through residency while on the payment plans.

Do you know how much loans will be eligible for forgiveness after the 10 years? Since you’re a pgy7, you’ve basically taken maximum advantage of the payment plan since you’ve have 7 years of residency and/or fellowship, but I’m also assuming you’ll make more than the average attending physician and will probably have high payments for those last 3 years.

 

[whoknows2012]

So the first obvious question. Are you taking advantage of PSLF? Also, How confident are you that you will get your loans forgiven?

yes-I have not had my loans forgiven yet but am quite confident that I’ll qualify (39 payments away, staying in academics at qualifying institution)-of course there’s always some uncertainty that I will have to be comfortable with if I want to take advantage of this massive savings.

 

[whoknows2012]

I have a few questions regarding your loans and potential savings. Feel free to share as much or as little information as you feel comfortable with.

How much in loans did you graduate med school with? And how much loans did you have or will have when you graduate residency? I'm just curious how much they grew through residency while on the payment plans.

Do you know how much loans will be eligible for forgiveness after the 10 years? Since you’re a pgy7, you’ve basically taken maximum advantage of the payment plan since you’ve have 7 years of residency and/or fellowship, but I’m also assuming you’ll make more than the average attending physician and will probably have high payments for those last 3 years.

I have no problem being transparent.

1) I took out a principal amount of $230,000 and consolidated with the government at the beginning of intern year

2) I screwed up a bit on the income driven plan and could’ve saved a bit more interest but with my 6.75% interest rate my total amount with accrued interest is near 300,000. Total amount paid through the 7 years is roughly ~$40,000. By my calculations >$300,000 will be eligible for forgiveness after 10 years

3) yes and no as far as maximum advantage. As above, I kinda screwed up and should’ve been using PAYE instead of IBR. But there are different pros and cons to both that I wasn’t educated on at the time. My future salary at least for the duration of my payments will likely be fairly typical for an academician. Future income beyond that who knows.

as far as payments after training, keep in mind that depending on when you recertify your payment plan, the next years payments are likely to be based on previous year salary. So I expect two years of paying decently high amounts but there are also ways decrease payments like having more kids (dependents) and minimizing AGI by maximizing pre tax contributions to retirement for example. So long as you qualify for “financial hardship” your payments remain relatively low. (Under 2k/mo).

what defines financial hardship is complicated but is essentially when “the annual amount due in your eligible loans under a standard 10 year repayment, exceeds 15% of the difference between your adjusted gross income (AGI) and 150% of the poverty line for a family of your size in the state where you live“

the above is for IBR. For PAYE the first number is 10%. even at a decent junior faculty academic salary so long as you have a high loan balance it is likely there is at least some benefit or “financial hardship” that allows your loan payments to be less than the 10 year standard repayment and if you qualify for PAYE even significantly less than IBR (remember 10% vs 15% of discretionary income).

All the above comes from this website and you can play around with their calculator

What Is Partial Financial Hardship and How Do I Qualify? | Student Loan Planner

 

[whoknows2012]

From another thread in which I posted. A profile of three different trainees initially in the same boat;


Person A
Pays back loans on income driven repayment plan throughout residency and fellowship (7yrs)
Principal amount: 250,000
Amount paid off in 7 years: $42,000
Remaining with interest: $310,000 (rough estimate)

options;
Continue making IDR
Year 8: remains at 500$/mo=$6000
Additional interest accrued after payments ~$15,000
Year 9: based on year 8 salary, $2500/mo payments. Covers interest +~$5000.
Year 10: based on year 9 salary, $2700/mo
Again covers interest and and additional $10,000
Amount left $315,000. Forgiven tax free (pre tax value of ~$500,000)
Total amount paid back; $110,000
$11,000 a year for 10 years

Person b
Same exact situation but decides he/she doesn’t want to do loan forgiveness due to uncertainty.
Refinances remaining $310,000
Interest rate from 7% to 4%, 7 year repayment plan.
~$4250/mo
Total paid after refinancing: $355,000
Total paid altogether $397,000

Difference in loan payments between person a and b=$287,000

That difference is more than the principal of the loan itself and is a substantial amount of money.

Now if person A was smart, they’d take there monthly savings during those 7 yrs and invest smartly in a mutual fund cd etc and let’s assume conservative growth at 5%.
After 20 years that difference has gone from substantial to massive.

At the end of 7 years the value on that money is ~$350,000 and after 20 years (assuming you stopped making contributions for arguments sake) is worth $675,000. This is at a modest retun of 5%. At 7% it’s $862,000 difference after 20 years. At 2.5% from let’s say a CD account it’s more like 450,000.

now let’s take the case of hypothetical person c who attempts loan forgiveness but is either denied or program is rescinded:

same as person A up until year 10, then:
$315,000 refinanced at 4% paid back over 7 years:
$4400/mo
Total amount paid during 7 years: $370,000
Total amount paid altogether: $480,000

difference between person b and person c=
$83,000

not insignificant but also 3.33x less than the possible upside. It’s an excellent bet based on this exact situation. Some people make higher payments during training. Some people want to do private practice. Some people will train for a shorter time. Some have smaller or larger loan amounts. The advice to take advantage of PSLF should be given on a case by case basis

 

[Dantrolene FC]

I have no problem being transparent.

1) I took out a principal amount of $230,000 and consolidated with the government at the beginning of intern year

2) I screwed up a bit on the income driven plan and could’ve saved a bit more interest but with my 6.75% interest rate my total amount with accrued interest is near 300,000. Total amount paid through the 7 years is roughly ~$40,000. By my calculations >$300,000 will be eligible for forgiveness after 10 years

3) yes and no as far as maximum advantage. As above, I kinda screwed up and should’ve been using PAYE instead of IBR. But there are different pros and cons to both that I wasn’t educated on at the time. My future salary at least for the duration of my payments will likely be fairly typical for an academician. Future income beyond that who knows.

as far as payments after training, keep in mind that depending on when you recertify your payment plan, the next years payments are likely to be based on previous year salary. So I expect two years of paying decently high amounts but there are also ways decrease payments like having more kids (dependents) and minimizing AGI by maximizing pre tax contributions to retirement for example. So long as you qualify for “financial hardship” your payments remain relatively low. (Under 2k/mo).

what defines financial hardship is complicated but is essentially when “the annual amount due in your eligible loans under a standard 10 year repayment, exceeds 15% of the difference between your adjusted gross income (AGI) and 150% of the poverty line for a family of your size in the state where you live“

the above is for IBR. For PAYE the first number is 10%. even at a decent junior faculty academic salary so long as you have a high loan balance it is likely there is at least some benefit or “financial hardship” that allows your loan payments to be less than the 10 year standard repayment and if you qualify for PAYE even significantly less than IBR (remember 10% vs 15% of discretionary income).

All the above comes from this website and you can play around with their calculator

What Is Partial Financial Hardship and How Do I Qualify? | Student Loan Planner

It sounds like you are on top of your stuff and are getting a good deal.

I’m only a med student, so I’m not extremely familiar with all the different repayment programs. I didn’t realize you’re 1st year as an attending would still be based off your resident salary, but that makes sense and sounds like you’re getting a great deal.

 

[whoknows2012]

It sounds like you are on top of your stuff and are getting a good deal.

I’m only a med student, so I’m not extremely familiar with all the different repayment programs. I didn’t realize you’re 1st year as an attending would still be based off your resident salary, but that makes sense and sounds like you’re getting a great deal.

Technically speaking there is a question when you fill out either your initial forms or recertification forms if there has been a significant change in your salary in which you could select “yes” but the reality is if I’m still
making resident or fellow salary at the time of filling the form out then I’m most certainly selecting no given that I’ll be using my prior years tax return as proof of income.

the same issue came up during internship. Technically speaking I paid 0$ and got credit for 9 payments intern year because of this odd loophole (0 income in the calendar year prior to starting residency). The reason I knew any of the basic information is I went to a private medical school that cost 50k/yr and fin aid advisor was very involved with student body and was well aware of PSLF early on (we’re talking about early 2010’s).

 

[whoknows2012]

Also this thread is probably most applicable to 3rd 4th year med students and residents/fellows (so could easily also be posted in residents forum) but found a particular lack of well informed PSLF info on SDN for whatever reason

 

[BoneWizard]

What is the debt level or length of residency where you would recommend someone pay off their loans completely over using PSLF?

 

[whoknows2012]

What is the debt level or length of residency where you would recommend someone pay off their loans completely over using PSLF?

To me it ends up being a somewhat straightforward analysis but ultimately a very complicated decision that is highly personalized. First calculate your projected payments under an IBR (or PAYE) plan and see what the cost is and what the total potential forgiveness is. Then run those same numbers with standard repayment with refinancing. Assume when it comes to refinancing the better your credit score and the lower your loan amount and higher your payments paid the lower the refinanced interest rate (for arguments sake assume 3-5%) Calculate the amount of money it will cost to pay in full the loan back at varying time points (ie 5,10,15 years) to get a sense of interest and total amounts paid.

this analysis requires that you have a general sense of your salary which for these purposes I’d recommend reading up a bit on compensation reports from the more reputable sources or you can just estimate.

A couple points
1) don’t pick a job/specialty based on forgiveness alone
2) while one could argue specifics, I’d say that the higher the loan balance starting 1st year attending and the lower the salary, the more beneficial PSLF is. What the break even point is for each person is will be different. I also realize for many the decision to take advantage of PSLF happens many years earlier.
3) as far as opting in to PSLF I’d recommend strongly considering it and starting with PAYE or REPAYE so long as there’s the potential for an academic career (where you’d continue to work at a “not for profit”) and have qualifying payments
4) As many on SDN have noted, the future of the program is in doubt. I have a lot more confidence in those who will eligible for forgiveness between now and 2025 then I do for those who are eligible thereafter
5) keep in mind that for many of you it’s low risk venture to start with Income driven repayment during residency because the higher “standard” repayment options are more difficult the bigger your family, the bigger the city you live in (and thus higher cost of living) and the higher loan balance you have. There are clearly many residents with lower loan balances that don’t need to consider PSLF because of how quick they’d be able to pay off their loans either during residency/fellowship or early on into being an attending

Long story short, I don’t see much of a downside to starting residency in a PSLF eligible plan but be very clear on potential changes to the program and prepare financially for both options

 

[MLNS]

From another thread in which I posted. A profile of three different trainees initially in the same boat;


Person A
Pays back loans on income driven repayment plan throughout residency and fellowship (7yrs)
Principal amount: 250,000
Amount paid off in 7 years: $42,000
Remaining with interest: $310,000 (rough estimate)

options;
Continue making IDR
Year 8: remains at 500$/mo=$6000
Additional interest accrued after payments ~$15,000
Year 9: based on year 8 salary, $2500/mo payments. Covers interest +~$5000.
Year 10: based on year 9 salary, $2700/mo
Again covers interest and and additional $10,000
Amount left $315,000. Forgiven tax free (pre tax value of ~$500,000)
Total amount paid back; $110,000
$11,000 a year for 10 years

Person b
Same exact situation but decides he/she doesn’t want to do loan forgiveness due to uncertainty.
Refinances remaining $310,000
Interest rate from 7% to 4%, 7 year repayment plan.
~$4250/mo
Total paid after refinancing: $355,000
Total paid altogether $397,000

Difference in loan payments between person a and b=$287,000

That difference is more than the principal of the loan itself and is a substantial amount of money.

Now if person A was smart, they’d take there monthly savings during those 7 yrs and invest smartly in a mutual fund cd etc and let’s assume conservative growth at 5%.
After 20 years that difference has gone from substantial to massive.

At the end of 7 years the value on that money is ~$350,000 and after 20 years (assuming you stopped making contributions for arguments sake) is worth $675,000. This is at a modest retun of 5%. At 7% it’s $862,000 difference after 20 years. At 2.5% from let’s say a CD account it’s more like 450,000.

now let’s take the case of hypothetical person c who attempts loan forgiveness but is either denied or program is rescinded:

same as person A up until year 10, then:
$315,000 refinanced at 4% paid back over 7 years:
$4400/mo
Total amount paid during 7 years: $370,000
Total amount paid altogether: $480,000

difference between person b and person c=
$83,000

not insignificant but also 3.33x less than the possible upside. It’s an excellent bet based on this exact situation. Some people make higher payments during training. Some people want to do private practice. Some people will train for a shorter time. Some have smaller or larger loan amounts. The advice to take advantage of PSLF should be given on a case by case basis

For person A would you mind going through the math? For 250k at 7% interest I come out with a much larger owed amount after 7 years (including the amount paid during those 7 years).

I’m graduating this year with 425k in debt and am going into a low paying field so I would be overjoyed if my calculations are high. For example, I’m planning on 6 years of training and calculated to owe around 600k once I’m done. Is this wrong?

Thanks for this thread btw. I’m also planning on academics so I hope pslf doesn’t get axed

 

[BoneWizard]

For person A would you mind going through the math? For 250k at 7% interest I come out with a much larger owed amount after 7 years (including the amount paid during those 7 years).

I’m graduating this year with 425k in debt and am going into a low paying field so I would be overjoyed if my calculations are high. For example, I’m planning on 6 years of training and calculated to owe around 600k once I’m done. Is this wrong?

Thanks for this thread btw. I’m also planning on academics so I hope pslf doesn’t get axed

It wouldn't be 7% though would it? Unless all the loans were grad plus.

 

[MLNS]

It wouldn't be 7% though would it? Unless all the loans were grad plus.

My combined interest rate is roughly 7%. I figured OP used his 6.75% rate in his examples. I assumed this and used 7% to make the math easier/ faster.

 

[whoknows2012]

For person A would you mind going through the math? For 250k at 7% interest I come out with a much larger owed amount after 7 years (including the amount paid during those 7 years).

I’m graduating this year with 425k in debt and am going into a low paying field so I would be overjoyed if my calculations are high. For example, I’m planning on 6 years of training and calculated to owe around 600k once I’m done. Is this wrong?

Thanks for this thread btw. I’m also planning on academics so I hope pslf doesn’t get axed

You are correct it should be slightly more than 600,000 left. I used my example with rough estimates so the numbers are slightly off. The actual correct calculation based off 230,000 principal would be:

230,000 6.75% interest rate
Intern year: 12 payments, 0$ paid. Interest accrued $15000-balance 245000
R2: 12 payments, ~500/mo, $6000 paid, interest accrued ~16000, balance 255000
R3: 12 payments ~500/mo, $6000 paid, interest accrued ~17000, balance 265,000
R4: 12 payments, ~700/mo, $8400 paid, interest accrued ~17500, balance 274,000
R5: 12 payments ~700/mo, $8400 paid, interest accrued ~18,000, balance 283,000
R6: 12 payments ~700/mo, $8400 paid, interest accrued ~18500, balance 293,000
R7: 12 payments ~700/mo, $8400 paid, interest accrued 19000 balance 304000
Year 8: Based on previous year, salary, $8400 paid, interest accrued 19500, balance 315500
Year 9: 12 payments, ~$1600/mo, $19,200 paid, interest accrued 20,000, balance 316300
Year 10: 12 payments, ~$1750/mo, $21,000 paid, interest accrued 19,500, balance 315,000

Total paid through training: $45,600
Total paid through forgiveness: 94,200
Total forgiveness $315,000

Lets take your specific situation. I'm going to make some assumptions so feel free to correct;

425,000 6.75% interest rate
Intern year: 12 payments, 0$ paid. Interest accrued $28,000-balance 453000
R2: 12 payments, ~500/mo, $6000 paid, interest accrued ~30,000, balance 477000
R3: 12 payments ~500/mo, $6000 paid, interest accrued ~32,000, balance 500000
R4: 12 payments, ~700/mo, $8400 paid, interest accrued ~33,000, balance 525,000
R5: 12 payments ~700/mo, $8400 paid, interest accrued ~34,000, balance 551000
R6: 12 payments ~700/mo, $8400 paid, interest accrued ~36,000, balance 578,000

Total amount paid during training: $37,200
Income increases from average of 70,000/yr previous 6 years to 200,000/year

Year 7: 12 payments, based on previous years income, $8400 paid, interest accrued 38,000, balance 608000
Year 8: 12 payments, ~$1500/mo, $18,000 paid, interest accrued 39,000, balance 630,000
Year 9: 12 payments, ~$1600/mo, $19,200 paid, interest accrued 41,000, balance 652,000
Year 10: 12 payments, ~$1750/mo, $21,000 paid, interest accrued 43,000, balance 674,000

Total paid as an attending: $66,600. Total paid $103,800. Total to be forgiven, $674,000


These are general numbers makes lots of assumptions about salary, monthly payments type of IDR plan etc but is a general guide to how it would look. If our numbers are drastically different could you explain how you came to your conclusion? Hope this helps! Your high balance with academic interest makes PSLF highly worthwhile to consider.

 

[whoknows2012]

It wouldn't be 7% though would it? Unless all the loans were grad plus.

My average loan interest rate is 7.0% upon consolidation (only about 25000 were grad plus) with an extra 0.25% reduction for direct deposit. What is the going rate on loans these days? Mine were from 2009-2013

 

[BoneWizard]

My average loan interest rate is 7.0% upon consolidation (only about 25000 were grad plus) with an extra 0.25% reduction for direct deposit. What is the going rate on loans these days? Mine were from 2009-2013

6.08 for direct unsub and 7.08 for grad plus. I guess my 6% assumption was based off my own loans. I'll only need to take out ~$100k so most of my loans are direct unsub @~6.08%.

 

[MLNS]

Lets take your specific situation. I'm going to make some assumptions so feel free to correct;

425,000 6.75% interest rate
Intern year: 12 payments, 0$ paid. Interest accrued $28,000-balance 453000
R2: 12 payments, ~500/mo, $6000 paid, interest accrued ~30,000, balance 477000
R3: 12 payments ~500/mo, $6000 paid, interest accrued ~32,000, balance 500000
R4: 12 payments, ~700/mo, $8400 paid, interest accrued ~33,000, balance 525,000
R5: 12 payments ~700/mo, $8400 paid, interest accrued ~34,000, balance 551000
R6: 12 payments ~700/mo, $8400 paid, interest accrued ~36,000, balance 578,000

Total amount paid during training: $37,200
Income increases from average of 70,000/yr previous 6 years to 200,000/year

Year 7: 12 payments, based on previous years income, $8400 paid, interest accrued 38,000, balance 608000
Year 8: 12 payments, ~$1500/mo, $18,000 paid, interest accrued 39,000, balance 630,000
Year 9: 12 payments, ~$1600/mo, $19,200 paid, interest accrued 41,000, balance 652,000
Year 10: 12 payments, ~$1750/mo, $21,000 paid, interest accrued 43,000, balance 674,000

Total paid as an attending: $66,600. Total paid $103,800. Total to be forgiven, $674,000


These are general numbers makes lots of assumptions about salary, monthly payments type of IDR plan etc but is a general guide to how it would look. If our numbers are drastically different could you explain how you came to your conclusion? Hope this helps! Your high balance with academic interest makes PSLF highly worthwhile to consider.

No, sadly, they are similar. I just used 7% compared to your 6.75%. Seeing how much I’ll owe the day I graduate training gives me heart palpitations.

Thank you for your time and input though. It is beyond appreciated

 

[whoknows2012]

No, sadly, they are similar. I just used 7% compared to your 6.75%. Seeing how much I’ll owe the day I graduate training gives me heart palpitations.

Thank you for your time and input though. It is beyond appreciated

Don't worry about something you cannot control. Get a good sense of your finances by speaking with someone knowledgeable on the subject and decide if for you it makes sense to start with PSLF in mind. If so, you'll be making minimal payments for quite some time. If the program goes poof or limitations are put in place, you can refinance move to a say 15 year plan and potentially halve your interest rate if you have good credit. This will not be minimal money spent in full if the program goes away but so long as a you make a smart long term financial plan, you will be more than capable of weathering the situation. Have a good savings plan in place and try your best to keep spending under control.

 

[PatsyStone]

A couple points:

To echo above, I want to plug RePAYE. If your monthly payment is less than the monthly interest, only half of the excess is added to your account. For example: monthly interest is $700 and your monthly payment is $300, of the $400 you don’t pay, only $200 will be added to your outstanding total. You may not choose to stay in an income driven plan after residency, but during it, this can be a major help.

Interest does not capitalize as long as you stay in the program. If your principal is 200k, you will pay interest on this only. However, if you accumulate another 50k in uncapitalized interest during residency, your are not paying interest on this. When it comes time when you can pay more, any excess in payments are applied to uncapitalized interest before principal

 

[whoknows2012]

A couple points:

To echo above, I want to plug RePAYE. If your monthly payment is less than the monthly interest, only half of the excess is added to your account. For example: monthly interest is $700 and your monthly payment is $300, of the $400 you don’t pay, only $200 will be added to your outstanding total. You may not choose to stay in an income driven plan after residency, but during it, this can be a major help.

Interest does not capitalize as long as you stay in the program. If your principal is 200k, you will pay interest on this only. However, if you accumulate another 50k in uncapitalized interest during residency, your are not paying interest on this. When it comes time when you can pay more, any excess in payments are applied to uncapitalized interest before principal

Yes and thank you for explaining so eloquently! My calculations due to ease were based on IBR. PAYE and REPAYE are rosier especially as it pertains to lower payments and less capitalized interest as you described nicely.

 

[whoknows2012]

I also found this website which is also quite helpful

www.doctoredmoney.org

 

[openstage]

Reading this with keen interest as I begin M1 this summer. What do people think about working with a Med School financial consultant to review the options and plans? And if so, when would you speak to this person? Before taking out loans? M3 or M4 years?