Sorting Out Loan Repayment Options

[analogsavior]

Hi all,

I’m am a new psychiatry resident, and I’ve been trying to sort out my loan repayment plan, and I was hoping to get a few opinions.  My loans are pretty simple:

$300,000 in direct unsubsidized loans averaging about 7.4%.

My initial plan was to participate in PSLF and using PAYE to keep my payments low, especially during residency.  I’ve been doing some research and asking around, and I’ve gotten a few other suggestions, most emphasizing the uncertainty of the future of PSLF.

Refinancing and paying off ASAP has been brought up several times.  I have some concerns about this because of psychiatry being on the lower end of physician salaries.  Most of my calculations have this being one of the less ideal options.

I recently had someone suggest doing the military financial assistance program (FAP) combined with refinancing.  I come from a family with a history of military service and I’ve always had this program in the back of my mind. I also have an interest in military psychiatry.  I would be particularly interested in anyone providing their experience with this program.

These are the main ones I am considering.  I would appreciate any opinions as well as other suggestions that I have not considered.

Thanks.

[FutureDoc]

As another incoming Intern I would personally suggest against refinancing, unless your credit score is close to or over 800.  With the recent rise in interest rates for private lenders, the effective rate that you can get via REPAYE is better than a lot of the private options you will get right now with no recent history of income and a huge debt burden.

I personally have not done any of the military programs, but I spoke with an attending that had, and it's a multi-year committment for what amounts to not any extra money in the long run.  Let's run some of the numbers for you.  I found this link which talks about the benefits.

http://www.medstudent.ucla.edu/offices/fao/current/documents/AirForceFinancialAssistanceProgram.pdf

Basically you get a 45k check each summer, and a stipend of a little over 2k each month.  This comes out to 75k a year, which is a lot of money on top of your resident salary, but after taxes it won't be near enough to knock out 300,000 in loans (which are accruing interest at over 22,000 a year)

On top of that, you are trading 5 years (assuming you do the military program all 4 years of psych residency) of attending money for a military paycheck which will be a fraction of the former.  Unless working as a military physician is important to you you would be better off just moonlighting in residency and using REPAYE.  I'll stop there, and maybe other people can chime in.

[mamead]

I agree with everything FutureDoc posted. WCI has written several blog posts about the military programs and general consensus is to do them if serving in military is important to you. Do not do them for financial reasons, as you will almost always make more money in the long term by getting a nonmilitary attending position.

Look into REPAYE during residency instead of refinancing. You can test the waters by getting some quotes from private lenders but your effective rate after REPAYE interest subsidy will be better (unless you have a spouse who makes a lot).