By Tyler King, OMS-IV, New York Institute of Technology College of Osteopathic Medicine at Arkansas State University
Over the last eight months, I have spent a great deal of time studying student loan repayment, especially during my recent Osteopathic Health Policy Internship with the American Association of Colleges of Osteopathic Medicine. I wanted to share with you some of the key takeaways I have gathered during this journey. Below are some tips I believe all of you, in particular soon-to-be-graduating health professions students, should consider as graduation approaches.
DISCLAIMER: this is not professional student loan advice. Always check with professionals and your school financial aid office before implementing a student loan plan.
That being said, I would urge you to at least consider the following advice:
1. FILE TAXES before April 15 this year, especially if you are graduating in 2020 and even if you made no income.
This year, due to COVID-19, the deadline to file federal and in most cases state taxes has been extended to July 15, but I would still recommend filing by the normal deadline so that you have your income taxes completed before you apply for federal loan consolidation after graduation. Filing your taxes allows you to demonstrate your very low income the year before you graduate (2019), which will allow you to have $0 monthly payments in an income-driven repayment (IDR) plan. These $0 payments during residency count towards Public Service Loan Forgiveness (PSLF) if you enroll in the program, which all of you should do, just in case, because nearly 50% of physicians work in qualifying PSLF jobs.
2. CONSOLIDATE FEDERAL STUDENT LOANS the day after graduation.
Consolidating your federal loans at studentaid.gov allows you to bypass the six-month grace period and get enrolled in an IDR plan immediately. The six-month grace period is BAD for you because any payments made during that time will NOT count towards PSLF. Make SURE that you state you want the consolidation to process immediately, not at the end of the grace period! In addition, be sure to state your intention to enter PSLF. Before applying to consolidate your loans, make sure that your school’s financial aid office has updated your status as “GRADUATED”—otherwise, there could be delays. If you have private student loans and/or very few direct federal student loans, this may not apply to you as you could be less likely to utilize PSLF. Also, please do not confuse federal consolidation with private refinancing. Never privately refinance your federal student loans until you are 100% sure PSLF is not for you. For most people, it is impossible to know this until the end of residency. You would be surprised how many physician roles can count towards PSLF.
3. Choose an IDR plan.
For most graduates, Revised Pay As You Earn (REPAYE) will be the best IDR plan option since it provides interest subsidies, but consider each plan before deciding. For married graduates, consider Pay As You Earn (PAYE) because this plan will only account for your individual income when calculating your monthly student loan payment if you and your spouse file taxes separately, as Married Filing Separate. If this strategy appeals to you, Income-Based Repayment (IBR) is another option if you do not qualify for PAYE. If you had federal loans before October 2007, for example, you do not qualify for PAYE. For more information on IDR plans, this U.S. Department of Education Federal Student Aid web page is a helpful resource.
4. Choose a LOAN SERVICER.
If you expect to enter the PSLF Program, you might as well choose FedLoan Servicing as your loan servicer since you’ll be transferred to them anyway when you submit your first PSLF employment certification form. Fun fact: At nearly 90% of residency programs, your time in residency will count towards PSLF! As long as your employer is a university, non-profit, government agency, or any 501(c)(3), and your checks are signed by one of these organization types, you can enroll in PSLF.
- File your taxes before April 15, especially if you are graduating this year.
- Consolidate your federal student loans the day after you graduate. Indicate your intention to enter the PSLF Program on the application.
- Choose an IDR plan that fits your lifestyle. Most people will find REPAYE appropriate. Married graduates should consider PAYE or IBR and perhaps consider filing taxes as Married Filing Separate in the future.
- If you have a complicated situation, reach out to student loan professionals such as Student Loan Planner or Doctors Without Quarters.
These tips should be helpful to you as you begin the next phase of your career and work toward repaying your loans. Remember also to keep advocating to #SavePSLF so that this loan forgiveness option continues to exist for future health professionals who follow in your footsteps.
The views and opinions expressed are those of the author(s) and do not imply endorsement by AACOM.