And now for a dreadful subject that is often overlooked for doctors: Student Debt. It is an unfortunate reality that many young physicians and dentists face coming out of medical and dental school that needs a very detailed plan to navigate through. For this episode Dr. Kristy McAteer interviews Josh Lantz, CRPC® / Chief Investment Officer, one of MD Financial’s senior advisors who specializes in debt management.

Two key things as you approach your student debt:

Know your career goals, as they can help guide your way into conquering your debt
Know your potential future employers and how they might impact your student debt

One of the first steps that Josh Lantz guides his clients to is researching the forgiveness and repayment programs that exist:

Public Student Loan Forgiveness Programs (PSLF)
- PSLF forgives federal direct student loans (Not all federal loans apply – you must review your student loan profile) if a doctor works in a not-for-profit setting for 10 years. There are much more granular details, which we recommend meeting with a financial advisor to go over.
- This program works best for physicians

Within PSLF, the three most popular income driven plans are:

Pay As You Earn (PAYE)
- To keep it simple, essentially you pay 10% of discretionary income, which means you pay much less in residency compared to when you become attending. You can generally file separately if you’re married to single out your income and you generally have a payment cap where your payment never goes higher than your 10-year standard repayment, based on your loan balance when you entered into the program.
Revised Pay As You Earn (REPAYE)
- This program is very similar to PAYE in that they are both 10% of discretionary income formulas. The difference is REPAYE has a better subsidy on unpaid interest, REPAYE doesn’t have a payment cap, and you can’t split your incomes by filing separately with REPAYE. It will consider your entire household’s income. Therefore, REPAYE works well for lower income doctors or doctors where their spouse doesn’t earn much income.
Income Based Repayment (IBR)
- This program might not be as desirable as PAYE and REPAYE, however it depends. Some borrowers aren’t given the option to do PAYE. Everyone could choose REPAYE however REPAYE doesn’t have a payment cap. IBR still allows you to file separately and it has a payment cap where REPAYE doesn’t allow either. But it is good to know a few of the requirements:

When you sign up for the PLSF program, is it always a standard 10-year term?

You need to make 120 payments toward the PSLF program but do not need to be continuous
Once the 120 payments (or 10 years of payments) are made you need to apply for the forgiveness and if approved the government pays out the remaining debt
The forgiveness is tax-free for the PSLF, which is a huge benefit
Each year you need to complete a certification process to remain enrolled in the program and get credit for qualified payments
Program began in 2007 and some borrowers began receiving forgiveness in 2017
One of the biggest benefits of PSLF is that you don’t need to start a large payment while in training. Your payment will increase as you become an attending. In PAYE/IBR the payment will not go any higher than your standard 10 year repayment.
- Often can save over $100,000-$200,000 less than paying loans the “old-fashioned way.”

So, how do you choose what program is right for you?

Your type of repayment program depends on what you are eligible for and anticipating your future income and employers will help you decide which repayment option is best for you:
- PAYE tends to be the best as keeps payments the smallest and can file tax returns separately from partner, IF you are eligible
Everyone is eligible for REPAYE but the cons include: You can’t file tax returns separately from spouse and you don’t have a payment cap, it continues to go up and up. The pros for REPAYE include: It’s good if you plan on making less than the income cap, such as a job in an academic environment
IBR – payment cap is the highest of the 3 (PAYE, REPAYE, and IBR) at 15%
In certain circumstances you can switch between repayment options but that trips capitalization -a process in which accrued interest applies to the principal balance
** Private student loans are not eligible and need to be dealt with separately from PSLF

In general, if in you’re in your training and not sure where you are going to end up really no downside to enroll in one of the PSLF programs you get credit for those payments and changes can be made later depending on your life circumstances.

Situations where the PSLF may not apply to you:

1. Lower student loan balances ($150,000 or less) may make more sense to refinance

2. If you know that you are going to be with a “for profit” employer

Lessons from today’s podcast:

Speak to a professional before making any steps to forgiveness or payment programs, they will know the nuances and can anticipate what happens in the future
Plan early – when in school be aware of what types of loans you are taking out and what you are eligible for. Try to obtain as many direct federal loans as possible to provide the most flexibility later on, however, be aware that there are loan limits
Shop around for loans if you refinance– any time you need to refinance be sure to look around for the best rates at multiple companies
If you refinance, then you can no longer get public service loan forgiveness

Recommendation to protect your future:

In case the PSLF program goes away, or changes, we recommend setting up an investment side account that holds what your typical Standard repayment amount would have been, less your current PSLF payment. This protects you in the event the program is modified or goes away. In addition, it puts you ahead if the program does go through, given you’ll have extra investments as a result.

For example, if you currently pay $700/month on your PSLF payment and your standard 10-year repayment program payment would be $3000/month we recommend that you take the additional $2300/month and invest in a side account. If you don’t need it, WONDERFUL! If you do, then you won’t be vulnerable
Be sure to track your own payments, when looking at your PSLF 120 payments. If your payment numbers are different from what the government is giving your credit for, follow up with an appeal. The appeals process is rather arduous, but it is important to protect yourself.

1-888-256-6855

Info@MDFinancialAdvisors.com

Josh Lantz, CRPC®, CFO and Financial Advisor at MD Financial works diligently with all our teams to coordinate the services we provide for our clients. He wants to make sure all our clients have sound, fiscally responsible, financial plans and feel more comfortable about their future. He can be reached at Josh@mdfinancialadvisors.com.

You can also check out the posting here, featured on Brown Emergency Medicine, or on iTunes.