Student loans have become an important but dreaded reality that many of us must face following medical school. Whether or not you realize it or not they aren’t going to disappear and the best thing you can do is to get familiar with your loans and come up with a game plan to tackle them. And hopefully, remove the shackles as fast as possible! This article will address some important steps to take to get the ball rolling and to feel confident of your individualized plan to eliminate this dreaded debt. Remember that not having this burden weighing over you, will most likely take an added stress off your plate and lead to improved state of mind and even wellness in medicine. There is something to be said about working because you want to instead of working because you have to.
Where to start? Get Familiar with Your Loans and Employer!
You may be asking yourself, where do I even start?! Well, it’s okay, that is where all of us start and I am here to show you step by step what to do. First, you want to familiarize yourself with all of your student loans. Start doing this by visiting the Federal Student Aid website, logging in, and getting a summary of all of your loans. This is where your federal student loan information will be housed. Now, remember the public service loan forgiveness (PSLF) program only works for federal loans and not private loans. If you have private loans, you will have to go to that particular company’s website.
There will be a list of quick links on the right side of the screen that are all very helpful as well as most recent news related to student loan relief and legislation. Now the next step is to get familiar with your employer because the PSLF program only works if your employer qualifies as a 501c3 organization. These organizations are typically described as not for profit organizations or charitable organizations. Note: There are many “private” practice settings that still qualify for 501c3, so do not assume since you aren’t in an academic practice that your employer will not qualify. The next step is to make sure to choose a qualified payment plan which will be one of the income driven repayment (IDR) plans. Something also to remember is that you want to be careful which payment plan you choose, because every time you switch payment plans your loans will recapitalize (i.e. your accrued interest lumps in with your original principle to make a new larger principle) which is never a good thing! So at the end of this section, you should have a list of your loans, what type they are, if your employer qualifies as a 501c3, and what you have selected for your income driven repayment plan.
Now that you have gathered all of your student loan information, it is time to start with your action steps! The first step is to apply for PSLF. During this process you will be notified if you have any loans that are not currently qualifying for the program. If that is the case you will have to consolidate your loans. If all of your loans qualify individually, you will not have to consolidate, however if you are a medical student entering residency you will want to consolidate your loans regardless because this is one way to bypass the 6 month grace period that you will get when you first get out of school. Now you may think, wait why would I want to start paying my loans back immediately after medical school ends? Wouldn’t I want to have a break before the loan payments start rolling in? Actually no! You don’t want this because remember you want to make as many payments as possible when you are making a resident salary on the PSLF program. Remember, a payment as a resident is one less payment you will need to make with your attending salary when you will not qualify for financial hardship and you will be faced with a standard payment.
If you are in training and start paying every month during surgical residency you can end up with 5 to 10 years of payments (depending on your training paradigm) under an income-based repayment plan. In the figures to the right, you can see the difference between a standard payment vs. having a graduated payment that increases with your salary. The difference between your income-based repayment and your standard payment will be what is forgiven under PSLF. Once you finish your PSLF form, your loans will all transfer to Mohela which is the new servicer for PSLF. Additionally, if you make sure to apply under the PSLF waiver AND consolidate your loans before October 31, 2022, you can get credit for past periods of repayment that would otherwise not qualify for PSLF. Also, for those of you who have been with FedLoans on the PSLF trajectory, your loans will soon be or already have been transitioned to Mohela and you will get credit for all the COVID-19 forbearance months even though your payment has been $0 with a set 0% interest rate from March of 2020 until December 31, 2022 (assuming this does not get extended again).
Follow-Up and Maintenance
Once you apply for PSLF, you should make sure to follow up and make sure that your loans have been consolidated and are all with Mohela. If you are having trouble with getting them where they need to be, the Department of Education Ombudsman number, (717) 720-7605, is critical to actually helping you track your loans and/or payments down. When you have confirmed all of your loans are at Mohela and your PSLF payment tracker is live, then the next step is to make sure to turn in your PSLF certification once a year and set an alarm for your annual renewal for your income-driven repayment plan. Remember, if you miss your renewal for your income-driven repayment plan, you will be kicked back into standard payments and your interest will recapitalize, so you don’t want to miss this deadline! You also want to renew even when you are an attending when the response will be that you no longer qualify for financial hardship. This will guarantee that you stay in your “qualified repayment plan” even during these last few years of the PSLF program.
Change in Job
If you are like many of us, you will not be at the same employer for all 10 years of PSLF and so it will be critical for you to fill out a certification form to have signed by your administrator on the last day of employment. This will ensure that the PSLF counts will all register before moving to a new job and quickly forgetting who, where or how to get your old job to certify your PSLF form. Also, make sure to verify that your new employer is indeed a 501c3 organization and if so then just continue to re-certify annually. If you are someone that has ultimately decided that you will be going to a new job that does not qualify and you are ok with that, then the next step for you will be to refinance your loans with a private company to get a competitive, low rate that will ultimately be much better than the federal interest rates once the COVID-19 forbearance is over. Now if COVID-19 forbearance is still going, you will want to pay lump sums to your loans ASAP to try to get ahead of your loans while they sit at 0% interest. You can then make the transition to a competitive refinance once the COVID-19 forbearance has officially ended. Just remember, once you transition your federal loans to a private company, you can never go back to having them federal so make sure you consider this wisely.
Stay Up To Date
Just like in medicine, you should stay up to date with what is happening with student loans until yours are paid off. I also would encourage you to go a step further and get educated on overall financial literacy and come up with your individualized financial plan because at the end of the day no one is going to care more about your money, or your financial future than YOU! If you are wondering where to start, I would recommend starting with the book The White Coat Investor by Dr. James Dahle or his website which has plenty of great resources on everything from student loan advice to critical insurances to the basics of investing. Hopefully, you found this article useful whether you are just starting your PSLF journey or if you just needed a refresher. As always, I am always willing to help in any way I can, so feel free to reach out to me via email at [email protected] with any questions you may have. Good Luck!!
-Danielle C. Sutzko, MD, MS