Grace: What Is It?
Some loans automatically grant a “grace” period after graduation or when you are no longer enrolled at least half-time. During a grace period, no monthly payments are due. Although not all loans have grace periods, Direct Subsidized and Direct Unsubsidized Loans have a six-month grace period and Perkins Loans have a nine-month grace period. If you already used the available grace period on your undergraduate loans before starting medical school, then you will need to contact your servicer to manage those loans.
This Loan Repayment Timeline presents a visual comparison of loans and their accompanying grace periods, or in the case of a Direct PLUS Loan, a post-enrollment deferment. Check your promissory note(s) or contact your servicer(s) to determine if your loans offer a grace period.
Deferment: What Is It and Who Qualifies?
Deferment is a temporary suspension of loan payments. During a deferment, interest does not accrue on subsidized loans. There are various types of deferments, and a complete list can be found in the Education Debt Manager.
Eligibility requirements for a deferment can be restrictive – with many residents not qualifying, or at least not qualifying during residency.
Forbearance: Another Option
If you cannot afford to make payments on your student loans, and if you are ineligible for a deferment (or have exhausted the deferment time limitations), your servicer may provide a forbearance, in increments of up to 12-months. This is a time when you can either make payments lower than those previously scheduled – or delay making payments completely.
During a forbearance, interest accrues on both subsidized and unsubsidized loans. After the forbearance is over, any accrued, outstanding interest is added to the principal balance. This is called capitalization. Capitalization results in a new, larger principal balance.
Mandatory Medical Residency Forbearance
As a medical resident, you are entitled to a mandatory residency forbearance. This type of forbearance is given in annual increments and can be used to postpone payments throughout residency. You must clearly identify yourself as a medical resident to your servicer to be approved for this forbearance. It is equally important to complete the mandatory medical residency forbearance paperwork annually and on time if you want the forbearance to continue throughout residency.
The Alternative to Postponing Payments
The alternative to postponing payments during residency is to make payments. Required monthly payments can range from zero to a full monthly payment amount, which depends on the type of repayment plan you choose. If you’re concerned that your salary is too low to afford the Standard 10-year repayment plan amount, then an income-driven repayment plans could be an option to consider.
Payments under the income-driven plans are based on your discretionary income and family size. Some of these plans may even offer interest subsidies and loan forgiveness. To learn more about the repayment plans, review the Repayment Plans Compared chart and the Federal Student Aid website. To examine possible monthly loan payment scenarios, use FIRST’s MedLoans® Organizer and Calculator (MLOC).
Income-Driven Repayment Plans
Income-Based (IBR)
Pay As You Earn (PAYE)
Revised Pay As You Earn (REPAYE)
Income-Contingent (ICR)
