Career Resources Student Loan Assistance

The CARES Act halted BOTH accruing interest and payments on all federal student loans as of March 13th, 2020. loan statements should show 0% interest, and servicers have enacted the payment suspensions.

By Executive Order, and again by the Dept. of Education, this payment and interest relief has been extended several times. The most recent extension will extend out to the end of August 2023, or 60 days after President Biden's loan cancellation program is approved... whichever comes first.

If you have made any loan payments through ACH since March 13, 2020, these payments are eligible for a refund by contacting the loan servicer.

Income-Driven Repayment plans that were set to renew during the loan suspension period have been extended, and recertification likely won't be required until 2024. No action is required on your part; your servicer will notify you of when it's time to recertify/renew. That said, any borrower is welcome to recertify proactively if they wish.

Similarly, anyone wishing to make loan payments during the freeze may do so manually. That said, it is not necessary to make payments for Public Service Loan Forgiveness as the payment freeze qualifies if you are meeting the other program requirements.

The CARES Act does NOT apply to private, institutional, most FFEL (2010 or earlier), Perkins and other Non-Direct loans. Loans refinanced to a private lender (Sofi, Laurel Road, CommonBond, Splash, etc.) also are NOT eligible for the stimulus.

Of the five income-driven repayment (IDR) plans available today, there are really three that are most suitable for physicians in training or pursuing PSLF: Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE). Where the term IDR is used below, it is a reference to ALL of these programs.

Income-Based Repayment (IBR) was launched in 2009, and is a federal repayment program that limits monthly loan payments to 15% of your discretionary income.

IBR is also a qualifying repayment plan for the Public Service Loan Forgiveness (PSLF) program. Taxable loan forgiveness is granted through IBR after 25 years of repayment. However, payments in IBR are capped at the 10-year standard payment amount established when the borrower entered IBR. Because of this cap, many attending physicians would pay off their loans through IBR before the 25-year forgiveness period expires.

Note: IBR is least used by today's graduates with the introduction of these next two:

Pay As You Earn (PAYE) was launched in 2012, and similar to IBR newer federal repayment program. Similar to IBR, PAYE limits payments to 10% of a borrower's discretionary income instead of 15%, and taxable loan forgiveness would be granted after 20 years of repayment. The payment cap is also the borrower's 10-year standard repayment amount, and PAYE is a qualifying repayment plan for PSLF as well. Only borrowers who have NO OUTSTANDING BALANCE on a federal student loan issued prior to October 1st, 2007, and who took out a federal student loan ON or AFTER October 1st, 2011, are eligible.

Revised Pay As You Earn (REPAYE) become available in December of 2015, and it may make sense for continuing Housestaff to consider entering it. Here's a brief summary of its features:

• 50% of accruing interest paid by government (Unsubsidized loans become partially Subsidized)!
• 10% of discretionary income required (just like PAYE) and also PSLF eligible. If you switch into REPAYE from IBR, the 10-year forgiveness clock won't reset (unless you consolidate).
• Household income will be used regardless of how you file taxes.
• 25-year taxable forgiveness for graduate students.
• No cap to payments (10-year standard in IBR & PAYE).

Once you enter one of these IDRs, you cannot be removed from them (although you can switch between them as appropriate), even if the hardship that qualified you does not exist after training (hopefully it does not because you are making enough income!). Therefore, a critical part of your repayment strategy is to perform an analysis and determine the best course of action based on your salary and sector of employment AFTER training.

Refinancing, in student loan terms, is when a borrower essentially eliminates their federal student loan debt by securing a private loan, ideally with a lower interest rate.

The issue to consider is suitability, as lenders tend to be transaction-focused and refinancing isn't always the best option for you. Borrowers pursuing PSLF should NEVER refinance. For those in or headed to private or for-profit environments, during the CARES interest and payment pause, many graduates have chosen to keep their loan status federal, but the rising interest rate environment that began earlier this year may soon eliminate the availability of lower rates. As of this draft, several lenders were offering rates as low as 4.5%, which still represents a generous rate reduction for most recent graduates and eliminates the uncertainty around CARES and the regulatory environment.

Once you refinance federal loans to a private lender, you lose all of the federal benefits discussed in this article, so proceed with caution. There are excellent resources available to help:

• DWOQ offers PracticeMatch candidates FREE refinancing suitability analysis. Learn more and register here: www.dwoq.com/refinancing
• BenElevate offers a free "PSLF Salary Analysis" that will estimate PSLF availability and savings based on your specific profile. It can be completed in less than a minute here.

The Public Service Loan Forgiveness, or PSLF, program was created in 2007 to encourage student loan borrowers to work in Public Service roles. It offers UNLIMITED, TAX-FREE loan forgiveness to borrowers who meet the three (3) core program requirements for ten (10) cumulative years:

• Must have Direct federal loans; Stafford, Grad PLUS or consolidation loan(s).
• Must use a qualifying repayment plan: Any Income-Driven Repayment plan, or a 10-year standard repayment plan.
• Must work full-time for a qualifying organization: Direct employment by any federal, state or local government or agency, or any 501(c)3 organization.

Physicians uniquely can benefit from this program because most residency and fellowship programs are 501(c)3 organizations. Due to high levels of debt and modest incomes during training, debt levels increase during this time and 10 years after graduation, many doctors will still have substantial debt available to be forgiven.

In October of 2021, the Department of Education announced an overhaul of PSLF and a one-time IDR adjustment, which is expected to improve the forgiveness status of millions of borrowers... including many of you. The PSLF loan type and repayment plan requirements have been loosened to include payments made on ANY federal student loan while working full-time in a qualified environment since the program's inception in 2007.

Recent graduates likely don't need to take any action as a result; the changes are intended to support borrowers who had FFEL loans or used a repayment plan that wasn't "Income-Driven" in the years after PSLF was created. Here are the key takeaways:

• ANY past payment on FFEL and Perkins loans will qualify for PSLF as long as they are consolidated to Direct Loans by 12/31/2023.
• Payments made before 9/30/21 that were not counted towards PSLF due to being late, or in the wrong payment plan, will now be considered qualifying payments.
• Time spent in any forbearance longer than 12 consecutive months, or three cumulative years, will be counted towards PSLF and Income-Driven Repayment plan forgiveness.

For updated information on the evolving legislation and the PSLF and IDR waivers, visit our blog here.

Regarding future changes to PSLF, physicians pursuing it should be reassured that these changes will likely apply only to new borrowers. The Master Promissory Notes you signed to borrow each loan for medical school included language about PSLF and your right to utilize the program. Thus, a legal contract between you and the federal government says you borrowed under the assumption you'd be able to utilize the PSLF program under the terms at the time you took out the loan.

In July 2010, Direct Loans became the lender for all federal student loans. Stafford and Grad PLUS loans borrowed prior to this time may have been originated by a private lender (Sallie Mae, Wells Fargo, etc.) under the FFEL program. These loans need to first be consolidated to Direct Loans before making IDR payments on them will qualify for PSLF. Furthermore, Perkins and select need-based loans are not eligible for and IDR on a stand-alone basis, but they can be consolidated to Direct Loans for eligibility. Variable rate loans originated before July of 2006 can also be fixed at extremely low rates through consolidation.

If you've yet to enter an IDR, the first step in your action plan is to review all of your loans and determine if a consolidation is necessary to maximize your savings opportunity.

All IDRs use your previous year's tax return to establish your payment for the next twelve months. If you're married, it may make sense to file your taxes married and separately during your training to maximize your savings opportunity. For our clients, we perform an analysis of the impact filing separately can have on your loan savings opportunity, which can be shared with your tax advisor to make a final decision.

Interns may wish to file a tax return for the prior year, particularly if you had little or no income in your last year of medical school. This strategy can often yield a $0 payment in your first year of training. If no prior tax return is available when you apply for an IDR, you'll be asked for a payroll stub. Your loan servicer will then annualize this figure, which could result in a payment closer to $250 - $400/month.

This is the most critical loan decision you'll make if you've been using available IDR's strategically during training, particularly if you're deciding between offers from a PSLF-qualified employer and a private sector employer after training. In one of our case studies, a graduating resident after 4 years of training with $250,000 in federal student loan debt was comparing a $150,000 salary directly by a non-profit hospital, and a $205,000 salary from a for-profit program. After contemplating the after-tax impact of Public Service Loan Forgiveness and the corresponding reduction in payments required for the next six years, the $150,000 salary was actually worth over $240,000 on average for that six-year period. Only by utilizing an IDR during training can you position yourself for this opportunity.

DWOQ offers PracticeMatch candidates PSLF reviews, refinancing suitability and discounted one-on-one consultations with a dedicated Advisor. Learn more on DWOQ's website, and use the coupon code "PM15" for a 15% discount.

BenElevate has created a tech-enabled tool for employers, recruiters and individuals which includes a detailed PSLF Opportunity Assessment, digital signatures for the PSLF Forms, and annual monitoring and compliance for under $50/year. Learn more and register here.