A few comments before you refinance:
Before you refinance and get your bonus…I recommend that you put the bonus towards your loans, but “I ain’t yo’ daddy.” As long as it is spent intentionally to build wealth and wellness, I have no qualms. You could even apply The 10% Rule. As part of this I also get a kick-back (though on some of them I gave up the commission to give you a better deal) for you refinancing your loans through these partner programs.
Don’t forget, you can refinance your loans as many times as you want! So, you may consider using one program while you are in your internship, another while in residency, yet another once you are refinancing during your last year who honors contracts in hand, and then another after you finish for a lower rate if necessary. Or you can only do it once or twice. Do what works for you.
*One last note: Forbearance and Deferment are a last resort option. You should either make a plan to proceed with governmental programs and the PSLF (below) or private refinancing. Don’t choose the third option (forbearance or deferment) as they are by far and away the worst option.
Public Service Loan Forgiveness (PSLF)
Before you refinance your loans privately, you should make sure that you know you are not going to do the Public Service Loan Forgiveness (PSLF) program. In other words, make sure you don’t have a long training period (> 5 years), high debt (>200,000), and you aren’t planning to work at a 501(c)3 organization.
If you are planning on doing PSLF, you should likely refinance using the governmental REPAYE program during residency as this will give you the lowest possible governmental rate during residency and decrease the amount of interest you are paying. [This doesn’t always apply. If you are married to a high earner, REPAYE may not be a great option]. Then refinance AFTER residency to PAYE (capped payment, unlike REPAYE which gets expensive as an attending). 120 payments later and your debt is forgiven as long as you certify each year.
You must certify each year! If you change your mind or determine you will not participate in PSLF, then proceed with the following excellent refinancing options.
How much you pay in the REPAYE program =10% of your discretionary income = 10% (AGI – 150% of poverty level). Therefore, if you are single or married to a non-working spouse, in your first year of residency, the REPAYE payment it often ZERO dollars, because you didn’t get paid during medical school.
In REPAYE, you even receive a subsidy that pays for all of whatever remaining interest you cannot cover on your subsidized loans for the first three years (then 50% after that) and 50% of the remaining interest you don’t cover on unsubsidized loans. (PAYE and IBR also have subsidies but they are only on subsidized loans).
However, REPAYE has no cap (10% of an attending’s discretionary income is a big bill), which is why REPAYE is not a good option as an attending physician. PAYE is usually the better option there.
Proceed to the private refinancing options below If you have determined that you
1) Don’t plan to work for a 501(c)3 organization
2) Don’t have a high amount of debt (>200,000) – or – a debt to income ratio < 2
3) Don’t have a long training program
4) Aren’t partaking in PSLF for any other reason
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