Can you repay loans in residency?


Ha…this is pretty accurate, because it’s a fan of 1s 🙂

I’ve done my fair share of searching about this topic.  And generally, there isn’t a consensus.  I think, like most things in finance, part of it depends on your personality.  Many people say “you’re going to be a doctor…you’ll be able to pay it back someday”.  Others feel like the loan amount is so insurmountable and the training is so challenging that trying to pay off any amount (or even trying to spend less than your salary) is too much.  And depending on where you went to school, you might graduate with north of 250,000 in loans (public school average is $156,000, private school average is $183,000, but up to 27% of private med school grads have over 250k)*.  Understandable thats SO overwhelming.  I however, DO think it’s possible to repay loans.

A little background:

There are a number of ways to repay loans

1. Income Based Repayment: IBR is a method of repayment for federal loans that allows you to pay a prorated payment during training based on your income from the previous year.  This means, for your first year of payment which begins in December of your internship after the grace period ends, your calculated income would be what you earned during fourth year of medical school.  For most people, that means your calculated income would be $0!  Goose egg!  Additionally, in the first three years of training, if your calculated payment is less than the interest that would be accruing monthly, the federal government will NOT assess interest on your subsidized loans (aka, during your first year of repayment, you pay 0 towards your loans and your subsidized loans, which would start accruing that December, won’t accrue as long as you “make” your $0 payments.  During your second year, your payment may still be less than your interest on unsub and sub loans and the government will continue to forgive the interest on your unsubsidized loans). The drawback of this approach is as your income increases (gradually by 1-3k/year during residency and then a MASSIVE jump for most specialties when you become an attending doc), your payments go up.  Eventually, it’s cheaper to enter the traditional repayment plan.

2. Traditional repayment plan: In this plan, you’re on a 10 year pay off schedule and you pay a monthly payment that will lead you to total debt repayment in 10 year.  Interest accrues (for Stafford loans this is 6.8% but will be lower on new loans based on new legislation).

3. Extended repayment plan: In this plan, you pay back over an even longer term (up to 25 years) but continue to accrue interest.

And more:

For those in medicine (and education), there are even better options to combine with those above

These options are even more diverse because for docs there is the option of the Public Service Loan Forgiveness Program.  In this program, if you work for a nonprofit for 10 years and make 10 years of on time payment, whatever remains at the end of your 10 years is forgiven.  The nice part for docs is that most residency training programs count as not for profits, and the payment approach you take CAN be income based repayment.  For people who are general surgery residents who often have to do 2 years of research on top of 5 years of general surgery training plus a fellowship of at least 1 year, that means almost all of your training years count and you’ll be paying at IBR, which will likely be less than your traditional repayment approach.  Once you become an attending physician and your income goes up,  you will switch into traditional repayment for a few years and then the remainder of your loans are forgiven.

So, with all of that considered, doesn’t it make sense to do IBR during residency, switch to traditional once you’re an attending, pay only what you’re required to and get loan forgiveness?

Well…yes.  For most people.  But I’m not most people.  For one, I’m not sure where I’ll be practicing.  I had previously REALLY wanted to go practice in the community I grew up in, in which case I would be practicing in a for profit center.  There goes the PSLF program.  Second, you never know when the funding for this program will dry up.  Chances are, people currently in the program may be grandfathered in, but if they aren’t, they’ve been wasting money allowing interest to compound.  But third- and I will take some heat for this because it sounds like criticism of those who do use the PSLF- I feel that I should pay back all of the loans I took out.  I knew when I started training I would be taking out this debt, and so I feel morally obligated to pay back the money I borrowed.  I do know that I’m kind of cheating the system by using the plan below since I won’t be paying some of my interest, so I’m not totally a purist. I DON’T think everyone needs to feel this way and I DON’T judge anyone for using PSLF- in fact, I think it’s a really smart idea and would love for all of my buddies going into primary care to have all of their loans forgiven.

BUT MOST IMPORTANTLY….I feel like debt is a ball and chain- I HATE IT.  It makes me so uncomfortable that when I think about it too long, it freaks me out.  So, for my own sanity and peace of mind, I’m repaying as fast as I can.    Which means I’m going into IBR and paying every penny that we (have to get used to that “we”) can on to my loans.  IBR will keep my Federal Subsidized loans at 0% and so we’re paying down the unsubsidized loans as fast as we can, since they’re accruing interest like gangbusters.  My lovely school has a wonderful 0% interest loan during medical school that gets forgiven for those in primary care, but for those of us in specialties becomes an 8% loan following internship.  It’s also not eligible for IBR.  That repayment will be my focus after internship once the interest rate jacks up.

So what’s all the fuss?  I wanted those out there who are budding premed students, or who are finishing medical school and don’t know what to do about repayment, or those who wonder why I work my butt off to save money to know what the options are for repaying loans in residency.  Also, I’ll be posting on it periodically, so a grounds for the discussion was important.

*The AAMC compiles these facts:


About BuzzwithLove

Buzzwithlove was something I had talked about with a good friend- how there are just some people in the world who just exude energy, happiness, and love. That's how I hope to live my life- and share little bits of it online!
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