Lana Oconnell
Paying off student loans as a resident can be a challenging task, especially for those in the medical field, who often face significant debt. Residents have various options to manage their loans, including postponing payments through mandatory residency forbearance or entering loan repayment after graduation. Some choose to make payments during residency, selecting a plan that aligns with their financial goals. Understanding the different repayment plans is crucial, as monthly payments can vary based on income, residency length, household size, and household income. Additionally, residents should be aware of the Saving on a Valuable Education (SAVE) repayment option, which can lower monthly payments and change how interest accrues. Exploring options like public student loan forgiveness, employer loan repayment programs, and assistance from organizations like The National Health Service Corps can also aid residents in managing their student debt.
| Characteristics | Values |
|---|---|
| Mandatory residency forbearance | Medical residents may choose to postpone payment on their federal student loans during residency. |
| Forbearance request form | The Mandatory Forbearance Request form can be obtained on the FSA website or by contacting your loan servicer. |
| Forbearance period | A mandatory residency forbearance is approved in annual increments, so you will need to re-submit the request annually. |
| Voluntary payments | You can choose to make voluntary payments while enrolled in a mandatory residency forbearance, or you could even choose to pay the loan off early, without a penalty. |
| Repayment plans | Review the Repayment Plans section of this guide and the repayment scenarios based upon the loans you borrowed, your residency length, household size, and household income. |
| Lender assistance | Lenders may be able to adjust your payment terms, depending on your circumstances. Consult your lender for options if you are having trouble repaying your loan. |
| Employer repayment | Some hospitals and other employers offer student-loan repayment as a recruitment incentive. |
| Forgiveness programs | The National Health Service Corps and the Public Service Loan Forgiveness Program offer loan repayment assistance in exchange for service in physician-shortage areas. |
| Variable-rate loans | Your loan servicer or lender will notify you each year about changes to the interest rate. Your monthly payment amount will be adjusted accordingly. |
| Direct Subsidized Loans | No interest is charged while you are in school or during your grace period. |
| Direct Unsubsidized Loans | Interest accrues while you are in school and during your grace period. If not paid, it will be capitalized when you enter repayment. |
| SAVE repayment option | The Saving on a Valuable Education (SAVE) plan is a new income-driven repayment plan that offers the potential to lower monthly payments and changes how interest accrues. |
| SAVE eligibility | The SAVE plan may be suitable for borrowers with high loan balances, as it eliminates the remaining interest when scheduled payments are made on time. |
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What You'll Learn
Mandatory residency forbearance
As a medical resident, you may choose to postpone payment on your federal student loans during your residency with a mandatory residency forbearance. The loan servicer is required to grant this forbearance if you request it. You can obtain the Mandatory Forbearance Request form on the FSA website or by contacting your loan servicer.
A mandatory residency forbearance is approved in annual increments, so you will need to re-submit the request annually if you want the forbearance to remain in effect throughout your residency. You have the right to switch into and out of a mandatory residency forbearance at any time. You can choose to make voluntary payments while enrolled in a mandatory residency forbearance, or you could even repay the loan early without penalty. If you choose to make voluntary payments, consider applying the payment to the most expensive loan first.
If you choose to make payments during your residency, you should consider the repayment plan that best aligns with your personal and financial goals. You can switch repayment plans and adjust your repayment strategy at any time. Contact your loan servicer to discuss how any potential changes may impact the total cost of loan repayment. At any time, you may choose to make extra payments, larger payments, or repay the loan early without penalty.
Keep in mind that a lender may be able to grant a forbearance before a loan goes into default and may be able to adjust your payment terms depending on your circumstances. If you are having trouble repaying your loan, consult your lender to explore your options. Additionally, some hospitals and other employers offer student loan repayment as an incentive to recruit physicians. This often includes a requirement for the physician to serve in a certain area or for a specified number of years. Various organizations, such as the National Health Service Corps and the Public Service Loan Forgiveness Program, offer loan repayment assistance in exchange for service in physician-shortage areas.
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Student loan forgiveness
Residents can choose to postpone payments on their federal student loans during their residency with a mandatory residency forbearance. This option is available to medical residents, who can obtain the Mandatory Forbearance Request form on the FSA website or by contacting their loan servicer. The forbearance is approved in annual increments, so residents must re-submit the request every year. Residents can also choose to make voluntary payments while enrolled in a mandatory residency forbearance or pay off the loan early without penalty. When making voluntary payments, it is best to apply the payment to the most expensive loan first.
Another option for residents with variable-rate student loans is to be aware of changes to the interest rate. The loan servicer or lender will notify the borrower annually about changes to the interest rate, which will impact the monthly payment amount. If the loan is a Direct Subsidized Loan, no interest will be charged while the borrower is in school or during the grace period. However, if the loan is a Direct Unsubsidized Loan, interest accrues during these periods and will be added to the loan amount when the borrower enters repayment.
Some hospitals and other employers offer student loan repayment as a benefit to recruit physicians. These programs may require the physician to commit to working in a certain area or for a specified number of years. Additionally, organizations like The National Health Service Corps and the Public Service Loan Forgiveness Program offer loan repayment assistance in exchange for service in physician-shortage areas.
There are also several student loan forgiveness programs offered by the government, such as the Public Service Loan Forgiveness (PSLF) program, which requires borrowers to repay their federal student loans under an IDR (income-driven repayment) plan or a standard 10-year plan. IDR plans base monthly payments on income and family size, and the remaining balance may be forgiven after a certain number of payments over 20 or 25 years. Those working full-time for a government or not-for-profit organization may also qualify for forgiveness of their Direct Loans.
Other loan forgiveness programs include the Teacher Education Assistance for College and Higher Education (TEACH) Grant, which provides forgiveness of up to $17,500 for teachers who work full-time for five consecutive years in certain low-income schools or educational service agencies. Additionally, individuals with a disability that severely limits their ability to work may qualify for a TPD discharge, which forgives their federal student loans.
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Variable-rate student loans
Variable-rate loans may be beneficial in certain situations, particularly if market rates are low and you plan to pay off your loan quickly. They often start with lower interest rates than fixed-rate loans, which can be attractive to borrowers. However, the unpredictable nature of variable-rate loans means that forecasting the exact cost long-term is impossible, and there is a risk of higher rates in the future.
If you have a variable-rate student loan, your lender will notify you annually about any changes to the interest rate, which will take effect on July 1. Your monthly payment amount will be adjusted to account for these changes.
When considering a variable-rate loan, it is important to weigh the risks and benefits. Variable-rate loans can be beneficial if you are looking for lower rates when markets improve and can pay off the loan relatively quickly. However, fixed-rate loans offer more stability and predictability, as the interest rate remains constant, and you know exactly how much you will pay each month and overall.
If you are a resident with student loans, you have several options for managing your loan repayment. You may choose to postpone payments through a mandatory residency forbearance, which is approved in annual increments and can be requested through the FSA website or your loan servicer. Alternatively, you can enter loan repayment after graduation or make voluntary payments during residency, applying them to the most expensive loan first. Some hospitals and employers may offer student loan repayment as a recruitment incentive, and there are also loan repayment assistance programs available through organizations such as the National Health Service Corps and the Public Service Loan Forgiveness Program.
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Income-driven repayment plans
Repayment plans can be divided into two types: traditional repayment plans and income-driven repayment plans. Income-driven repayment plans base a borrower’s monthly payment on their income and family size. Traditional repayment plans, on the other hand, generally offer more affordable monthly payments, but this can lead to higher overall costs and longer repayment timeframes.
With income-driven repayment plans, the borrower repays the loan over a specific period, with the monthly payment amount adjusted according to their income and family size. This means that the monthly payment amount is typically lower than it would be with a traditional repayment plan, making it a more flexible option for those with lower incomes or larger families.
There are a few things to keep in mind with income-driven repayment plans. Firstly, they may result in higher overall costs due to the longer repayment periods. Additionally, if a borrower reaches the end of the income-driven repayment term and still has a loan balance, the remaining loan balance is forgiven, but this amount is considered taxable income when filing a federal income tax return.
It's important to review the repayment plans available and consider your personal and financial goals when deciding on a repayment strategy. You can switch repayment plans and adjust your strategy at any time, and you also have the option to make extra payments, larger payments, or pay off the loan early without penalty.
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Loan repayment assistance programs
Federal Programs
The federal government offers various loan repayment assistance programs for students and residents in specific fields. These include:
- Public Service Loan Forgiveness (PSLF): This program offers loan forgiveness for borrowers who meet the required eligibility requirements and make 120 qualifying monthly payments under a qualifying repayment plan, such as an IDR plan or a standard 10-year plan.
- Indian Health Service's Loan Repayment Program: This program provides repayment assistance for health professionals who commit to practicing for two years in health facilities serving American Indian and Alaska Native communities.
- National Health Service Corps (NHSC): The NHSC offers a Students to Service (S2S) Loan Repayment Program for medical students in their final year.
- Veterans Affairs Loan Repayment Programs: The VA provides repayment assistance through its Specialty Education Loan Repayment Program (SELRP) and Health Professions Scholarship Program (HPSP).
- Health Education Assistance Loan Program: This program includes Federal Direct PLUS loans and Federal Direct Stafford loans.
- Teacher Loan Forgiveness Program: Teachers who have worked full-time for five consecutive years in qualifying schools can receive up to $17,500 in federal loan cancellation.
- Perkins Loan Cancellation for Teachers: Full-time teachers in low-income schools or those teaching qualifying subjects can get up to 100% of their Perkins loans canceled.
- Military Service Members Benefits: The U.S. Department of Defense offers loan repayment assistance programs for active members of the Armed Forces, with benefits varying depending on the specific branch.
State and Company Programs
In addition to federal programs, there are also state-specific and company-specific loan repayment assistance programs:
- National Institute of Health Loan Repayment Program: The NIH offers up to $50,000 annually for health professionals in biomedical and biobehavioral research careers, both within and outside the agency.
- Veterinary Medicine Loan Repayment Program: This program offers up to $25,000 per year in loan repayment for veterinarians working in critical shortage areas.
- Attorney Student Loan Repayment Program: Attorneys and employees working in the Department of Justice can receive grants of up to $6,000.
- State Loan Repayment Assistance Programs for Lawyers: Twenty-four states offer loan repayment programs for lawyers working in public interest law to help pay off law school debt.
- College Loan Repayment Program for Active Military: Active members of the Army can take advantage of tuition and loan repayment programs, with up to $65,000 in debt repayment over three years of service.
- Company-Specific Programs: Various companies like Abbott, Ally, Chegg, and Gradifi offer student loan repayment assistance or contributions toward retirement savings. These benefits can vary widely, so it's important to inquire about specific details.
It is important to note that eligibility requirements and application processes may vary for each program. Additionally, some programs may have specific service commitments or requirements attached to the loan repayment assistance. It is always a good idea to research and explore the different options available to find the ones that best suit your needs and career path.
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Frequently asked questions
Residents can choose to postpone payments through a mandatory residency forbearance or enter loan repayment after graduation. If you choose to make payments during residency, you should review the various repayment plans and choose the one that best aligns with your personal and financial goals.
The Saving on a Valuable Education (SAVE) repayment option, launched by the Biden administration, bases monthly payments on a smaller portion of a borrower’s adjusted gross income, ranging from 5% to 10%. The Public Service Loan Forgiveness Program (PSLF) is another option that aims to offer debt relief for physicians and others working for a nonprofit or government entity who make 120 qualifying student loan payments.
Some hospitals and other employers will offer student-loan repayment as a benefit to recruit physicians. Many loan-repayment programs include a requirement that the physician stays and treats patients within a certain area or for a specified number of years. A variety of other organizations offer loan repayment assistance in exchange for service in physician-shortage areas, including The National Health Service Corps.
Consult your lender for options that may be available to help. A lender may be able to grant a forbearance before a loan goes into default and may be able to adjust your payment terms depending on your circumstances.
