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Incoming Resident Loan Repayment Strategy and Tips Inquiry

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  • Incoming Resident Loan Repayment Strategy and Tips Inquiry

    Hey! Looking for loan repayment advice.

    Incoming Uro PGY1, loan balance $123,000 with rates between 6-6.6%, Single, 5 year residency, not very interested in PSLF (skeptical of if it will exist by the time I reach the finish line). PGY1 salary of $60k.

    My original repayment plan: Enter PAYE/REPAYE during residency. After graduation, refinance and enter other form of repayment method to pay off loans quicker.

    With the CARES act suspending interest rates, what steps should I be taking now in order to set myself up for success in my repayment strategies? (ie, should I consolidate now, start paying on loans vs taking advantage of the $0 payments in the grace period)

    Estimated salary after residency is around $300k.

    If anyone is in similar shoes, what's your repayment strategy?

    Any advice is much appreciated!


  • #2
    REPAYE will be your best option as a single resident. The interest subsidy will allow your to minimize interest growth during residency.

    Under normal circumstances, you'd consolidate right after graduation to end the grace period and enter REPAYE / receive interest subsidy ASAP.

    Benwhite.com had an interesting post suggesting you could delay this process under the current CARES act. Essentially as long as the 0% interest rates are in effect, you do nothing. When they end or before the start of 2021 you consolidate and apply to REPAYE with your 2019 tax returns. Bassically buying yourself some extra months of $0 payments and larger interest subsidies.

    I could be missing something on the nuts and bolts portions of this, but the post would have more information.

    Othwise, refi once you graduate and pay down aggressively. You have a low income to debt ratio.

    Side note, experts in the field are near certain PSLF will be available for current borrowers. The terms were in your master promisary note you signed.

    Great job on the low student loan balance!

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    • #3
      If you're not considering PSLF then just find the lowest interest rate and start throwing money at it. There is no need to overcomplicate things once you exclude PSLF.

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      • #4
        Originally posted by goldenchimpy View Post
        If you're not considering PSLF then just find the lowest interest rate and start throwing money at it. There is no need to overcomplicate things once you exclude PSLF.
        Even with a resident who is almost certain they will not participate in PSLF, I wouldn't refinance in residency.

        With the REPAYE subsidy you're effective interest rate is 3% your first year with it slowly increasing with income. By refinancing early you lose federal loan protections such as forbarance and lose the possibility of PSLF if your mind does change in the future.

        More than likely OP would be okay if he/she refinanced, but in a small number of cases (job loss, electing to pursue PSLF) it could have big negative impact or opportunity cost for a slight reduction in interest.

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