I matched! Now, what happens with my student loans and what are the important things I need to consider or think about?
TLDR:
- Only Federal/Department of Education-issued loans are Eligible for Loan Forgiveness Programs.
- Consolidation is NOT THE SAME as Refinancing student loans!
- Consider filing taxes the fourth year of medical school.
- Borrowers are automatically enrolled in the 10-Year Standard Repayment Program. (federal loans only)
- Highly consider enrolling in an income-driven repayment plan during Exit Counseling. (federal loans only)
Action Steps:
- Meet with Medical School Financial Aid Advisor to Understand Your Loan Situation
- Consider if Enrolling in an Income-Driven Repayment Program is Best for You
- Consider Forgoing the Federal Loan Grace Period (6-Month) for Repayment
- Complete Exit Counseling on StudentAid.gov
- File Your Taxes in the Spring of Match
- Consider Hiring a Student Loan Advising Company if Your Situation is Complex
Intro:
With the rising cost of medical education, many students are graduating with a mix of private and federal student loans. Understanding the similarities, differences, and repayment options available is essential to managing your debt and keeping more of your money in your pocket.
Private Student Loans:
Banks and other financial institutions offer private student loans. These loans can have higher interest rates than federal loans before medical school graduation and do not offer the same repayment options. Private loans do not qualify for federal forgiveness programs, and income-driven repayment programs are only seen on an individual basis. During the refinancing process, you can attempt to negotiate with your lender for a lower rate or a more flexible repayment plan.
Federal Student Loans:
Federal loans, such as Unsubsidized Loans and GradPlus Loans, are offered by the federal government and come with fixed interest rates and flexible repayment options. These are the most commonly used to finance undergraduate medical education.
PEARL: The Department of Education automatically defaults federal student loan borrowers onto the 10-Year Standard repayment plan. This can lead to crippling monthly payments for anyone on a resident salary.
4th Year & Taxes:
- Many fourth-year medical students do not work during the academic year. If enrolled in an income-driven repayment plan, the government uses the annual salary of the PRIOR tax year.
- As an intern (given no break between medical school & resident) your monthly payments will be ZERO ($0). Filing taxes does not appear to be mandatory, but it helps argue your case if there is a glitch.
Intern Year & Repayment:
- During the first year of repayment, you should start the habit of recertifying your income and family size annually. This is done by printing out an Employee Certification Form (associated with the public service loan forgiveness program – a more in-depth explanation post is coming down the pipeline) and bringing it to your residency Program Coordinator or Human Resources department.
- This is important to ensure that you are on the correct repayment plan, that borrowers know their payment situation, and that your monthly payment is accurate. Paperwork sucks, and there’s no way around that, but ten years is a long time to trust the government to keep track of your payment history. It’s common to hear stories where the government has a starkly different payment count than borrowers thought.
Closing:
Understanding the differences between private and federal student loans and income-driven repayment options is essential to managing your debt and finances as a medical student. Take the time to research your options and contact your lenders to discuss your repayment plan. You can repay your loans and achieve your career goals with careful planning and management.
The last point, consolidation vs. refinancing is NOT THE SAME THING! Federal repayment plans and forgiveness programs are ONLY available for debt held by the Department of Education/government. Refinancing your loans for a lower interest rate to a PRIVATE company will DISQUALIFY you for any forgiveness program FOREVER!
Consolidation vs. Refinancing:
- Consolidation –
- Taking multiple loans and merging them into 1 loan. Interest is averaged & rounded up to the nearest 1/8% of 1.
- This term can be used when talking about both federal AND private loans.
- Refinancing –
- Typically used when borrowers TRANSFER their Loans FROM Government TO Private Companies.
- If the above, borrowers NOT Eligible for government forgiveness programs!