In parts one and two we discussed your loans, deferment versus forbearance as well as how to find all your student loans and what is consolidation. In part three below we discuss the most common current loan repayment programs available to you and some information on each program.
Current Loan Repayment Programs
The Federal Government offers a number of repayment programs. Below are the most common ones and some highlights on each.
Standard – the Standard repayment program spreads your loan repayment over 10 years (120 payments). Each monthly amount is the same which means that during the first few years of repayment (for example during residency) where your income may be lower compared to later years, you may not be able to afford the standard repayment monthly amount. It’s benefit is that you’ll pay less over time compared to other plans.
Graduated – the Graduated repayment program is exactly that: graduated. About every 1-2 years the loan amounts increase and depending on the type of loan you’ll have between 10-30 years.
Extended – the Extended repayment program can be fixed or graduated. It then also extends these payments up to 25 years. It does have requirements – please check out the Federal Government website for those requirements.
PAYE and REPAYE – these two repayment programs (Pay As You Earn and Revised Pay As You Earn) are great and likely what would be best for those who want to start repaying during residency. Firstly, your monthly payment will be 10% of your discretionary income (based on their calculations) and is recalculated each year. Secondly, you’ll have the potential of having loan cancellation at 20 to 25 years for REPAYE and 20 years for PAYE. Lastly, they are both eligible for the Federal Public Service Loan Forgiveness program (PSLF) that may cancel out loans after 10 years of payments based on certain requirements of where you work. The major difference between REPAYE (which is newer) and PAYE is that PAYE has initial loan disbursement date requirements and does not use your spouse’s income in it’s calculation while REPAYE does not have the date requirements but does use your spouse’s income in it’s calculation (no matter if you file jointly or separately).
IBR – the Income Based Repayment program is similar to the PAYE program in the sense that it is based on either 10 or 15% of discretionary income and is recalculated yearly. It is also eligible for PSLF. You do need a high debt to income ratio (most doctors during residency).
ICR – the Income Contingent Repayment program is similar to PAYE as well but utilizes 20% of discretionary income. It is also eligible for PSLF and does not have the same high debt to income ratio that IBR has.
Once you’re ready to consolidate and have chosen a repayment program that meets your needs, head over to the Federal Student Aid website and apply for a consolidation loan. This loan in essence pays off all the other small loans and makes one large loan that you have to pay off.
Check out our article on Public Service Loan Forgiveness for more information on that program and if it’s right for you!