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Loan Repayment Options

February 26, 2021

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With medical school behind you, you’re certainly due for congratulations. But that’s not all that’s due – loan payback time is just around the corner – either beginning now or when residency is over. Fortunately, when it’s time to repay, you have flexibility in structuring your repayment schedule by choosing the plan that works best for you.

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Refer to the Repayment Plans Compared chart for a side by side comparison of highlights of each plan and to determine which repayment plan is best for you. For comprehensive details about each plan, visit the Federal Student Aid website.

Traditional Repayment Plans

Standard Repayment

  • Fixed monthly payment with possibly the lowest interest-cost plan
  • 10-year repayment term (longer if consolidated)
  • Default plan if no other plan is chosen

Extended Repayment

  • Reduced payments stretched over a longer term (without consolidating)
  • 25-year repayment term; to be eligible, must owe more than $30,000
  • May be more costly because of lengthened term and total interest paid

Graduated Repayment

  • Initially smaller payments that increase after two-years
  • 10-year repayment term (longer if consolidated)
  • May result in higher costs compared to the Standard plan

Income-Driven Repayment Plans

Income-Contingent Repayment (ICR)

  • May offer lower monthly payments with payments based on income and family size
  • Interest accrues annually but capitalization of unpaid interest is limited to 10% of the loan balance when entering ICR
  • Payments based on the lesser of either 20% of monthly discretionary income or a monthly payment on a 12-year plan times a percentage factor based on your income
  • Up to 25-year term and then remaining balance forgiven (but taxable)
  • Need to provide income and family size verification annually

Income-Based Repayment (IBR)

For new borrowers on or after July 1, 2014

  • Monthly payment based on family size and Adjusted Gross Income (AGI) - verified annually
  • Payment "caps" at 10% of your discretionary income
  • Up to 20-year term and then remaining balance forgiven (but taxable)
  • Partial Financial Hardship (PFH) needed to qualify

For those who are not new borrowers on or after July 1, 2014

  • Monthly payment based on family size and AGI - verified annually
  • Payment "caps" at 15% of your discretionary income
  • Up to 25-year term and then remaining balance forgiven (but taxable)
  • Partial Financial Hardship (PFH) needed to qualify

Pay As You Earn Repayment (PAYE)

  • Lower monthly payment that "caps" at 10% of your discretionary income (based on family size and AGI) - verified annually
  • While in this plan, capitalization cannot exceed 10% of the loan balance when entering PAYE
  • Partial Financial Hardship (PFH) needed to qualify
  • Up to 20-year repayment term and then remaining balance forgiven (but taxable)
  • Must be a new borrower on or after 10/1/2007, and have a Direct Loan disbursement on or after 10/1/2011

Revised Pay As You Earn Repayment (REPAYE)

  • Monthly payment based on 10% of discretionary income, AGI and family size - verified annually (no cap on monthly payment)
  • When monthly payment doesn’t cover interest, you are responsible for only 50% of the interest
  • Up to 25-year term (for graduate/professional borrowers) and then remaining balance forgiven (but taxable)
  • No PFH requirement 

What is a PFH

If your monthly payment under an income-driven plan is less than what it would be under a Standard plan, then you have a PFH.

Reviewing Your Repayment Options

Select a plan that provides a manageable payment, but keep in mind that the longer it takes you to repay your loan, the more interest you could pay over the life of the loan. Aim for a repayment schedule that allows you to meet all of your financial needs and goals. If your financial situation changes, you can change your repayment plan by contacting your servicer(s). Use the charts within the Education Debt Manager and run repayment estimates with the MedLoans® Organizer and Calculator.

When Do You Start Repaying?

About 30 to 60 days before your first payment is due, you’ll receive a notice from your loan servicer(s) notifying you of your loan’s due date, the payment amount, current information about interest rates, and your total outstanding balance. Be sure your loan servicer(s) have your accurate contact information because whether you receive a billing statement or not, the servicer of your loans requires that your payments be received on time each month. Set up an online account with your servicer(s) so that you can better manage your loans. See the Next Steps brochure to make sure you take timely action regarding repayment of your student loans.

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