[This is a guest post by Bo Liu aka Future Proof M.D., who runs http://futureproofmd.com/ He is a colleague in the field of radiology and a comrade in the mission of promoting financial literacy and empowerment among physicians.  We have no financial relationship.]



Given the recent addition of Revised Pay As Your Earn (REPAYE) to the list of Income Driven Repayment (IDR) plans, there has been renewed interest in the topic of what’s the best plan for medical residents who typically have a large student loan debt burden and a meager income, at least for 3-5 years.  Especially if one is to pursue Public Service Loan Forgiveness (PSLF).  Despite the new attractive offerings of REPAYE, I don’t recommend residents automatically jump over to this new plan.  Read on for more details…

Important: PSLF and IDR plans are separate programs.

There has been some confusion surrounding this issue, so I want to clarify – Public Service Loan Forgiveness (PSLF) and Income Drive Repayment (IDR) are 2 separate but complementary programs.  If you choose to go into public service and pursue PSLF, there are multiple repayment plans you can choose from – including ALL 4 IDR plans (IBR, PAYE, REPAYE, and ICR) as well as the 10-year Standard Repayment Plan.  Now you would not want to choose the Standard Repayment Plan because you will end up paying off all your loans in 10 years, leaving nothing left to be forgiven!  The question is – which of the IDR plans should you go with?

Basic Comparison of the 4 IDR plans.

Bo table
Click on the table to see a larger image.




What’s special about REPAYE?

As you can see above, REPAYE sounds like a sweet deal.  It’s just like PAYE but with a sweeter interest subsidy.  Why shouldn’t everyone jump over to REPAYE?  There are 2 main reasons why REPAYE may not be as beneficial as it looks on the surface:

  1. Removal of the payment cap – under all of the other IDR plans, your payment will rise with your income, but never more than the amount you would have paid under the 10-yr standard repayment plan. So for a single resident making $50,000/yr with a student loan balance of $150,000, your payment can never be more than the standard repayment plan amount of $1,726/month.  Under REPAYE, there is no cap on payments.  So assuming everything stays the same except now you are making $350,000/yr as an attending radiologist.  Your calculated payment under REPAYE would be $2,769.54/month – more than $1,000 more a month than if you had stayed on IBR or PAYE!  See example below:
Income* Payment under PAYE Payment under IBR Payment under REPAYE
$50,000.00 $269.54 $404.31 $269.54
$100,000.00 $686.21 $1,029.31 $686.21
$150,000.00 $1,102.88 $1,654.31 $1,102.88
$200,000.00 $1,519.54 $1,726.00 $1,519.54
$250,000.00 $1,726.00 $1,726.00 $1,936.21
$300,000.00 $1,726.00 $1,726.00 $2,352.88
$350,000.00 $1,726.00 $1,726.00 $2,769.54
$400,000.00 $1,726.00 $1,726.00 $3,186.21
*Assumed single filing status and student debt of $150,000.
  1. Spousal income now considered – NO MATTER WHAT! – under all of the other IDR plan, you can enjoy the benefits of filing taxes separately with your spouse, hence limiting the “income” portion of the Income Drive Repayment (IDR). Under REPAYE, your spouse’s income is now factored into calculating your payment – NO MATTER HOW you file your income tax returns!  So unless you marry a deadbeat, the fact that you are married will increase the amount you have to pay under REPAYE.


What’s preventing me from doing REPAYE and jumping back to IBR when I’m about to leave residency?


The short answer is NOTHING.  Currently you can switch between student loan repayment plans that you qualify for at will.  So you can switch over to REPAYE while in residency to take advantage of the lowered payments and better interest subsidy and then switch back to IBR when you’re ready to take that first attending job.  There are only a couple of drawbacks:

  1. Time and hassle – it takes about 10 weeks to switch over from IBR to REPAYE and you have to at least make 1 payment under the Standard Repayment Plan (or a reduced payment if you can’t afford the standard payment) before you can switch to REPAYE.
  2. Interest capitalization – any outstanding interest will be capitalized (added to your principal balance), resulting in a de-facto penalty for anyone trying to leave IBR for REPAYE.


Bottom Line:

Every situation is different.  But in most situations, the original PAYE plan gives a borrower the best deal.  If you don’t qualify for PAYE, chances are you are already on IBR.  Which means you really should take a long hard look before deciding whether to jump over to REPAYE.  Ask yourself questions like:

  1. What is my expected future income as an attending physician?
  2. Am I planning to get married?
  3. How realistic is it for me to find and stay in a job that qualifies for PSLF?

As usual, making a decision on hundreds of thousands of dollars should not be quick and easy.  Make sure you do your research before you switch to REPAYE.

Additional Reading:

  1. Pay as You Earn (PAYE) vs. Revised Pay as You Earn (REPAYE)
  2. Income-Driven Repayment Plans for Federal Student Loans
  3. Income-Driven Repayment Plans: Frequently Asked Questions
  4. Federal Student Loans: Repaying Your Loans
  5. Public Service Loan Forgiveness Program Fact Sheet
  6. Public Service Loan Forgiveness Program Q&As

Author Profile:

boDr. Bo Liu aka Future Proof M.D. is an aspiring radiologist-in-training and the founder and editor of the White Coat Money Blog (http://futureproofmd.com/).  He has an interest in interventional radiology and helping his medical colleagues get ahead in this mad world of medicine and money.  When he’s not crushing the list at the PACS station or typing up your next favorite blog post, you can usually find him at the local badminton club, movie theater or the most recently opened restaurant.

PSLF – Why REPAYE May NOT be the Best Plan.

37 thoughts on “PSLF – Why REPAYE May NOT be the Best Plan.

  • Pingback:The Student Loan Resource Page - Physician on FIRE

  • August 8, 2017 at 3:24 PM

    I do not normally comment for things like this but one statement you made was pretty offensive. I am a stay at home mom so do not make a salary. Based on the work I do given my husband’s crazy work schedule during fellowship, I would not consider myself a deadbeat. I just wanted to point this out when discussing loan options in light of there being a single salary for a married couple.

    • September 21, 2017 at 7:19 AM

      Hi Michelle, thank you for you input. This was a guest post by another blogger that my late sister had published using her handle, so unfortunately I cannot address the issue any further for you. Thanks again for visiting.

  • May 10, 2016 at 2:03 PM

    I have two large loans with Great Lakes that both have subsidized and unsubsidized loans. Both loans entered repayment after my graduation early this year. Before I entered repayment I was placed on an IBR that was not too much less than what the normal 10 year payment would have been. Both of my loans are paid 4-5 months ahead and I should have them paid off in about 5 years. My next IBR application date will be February 2017 and I will no longer qualify for IBR. At this time I feel it is better to just go to the normal payment amount, but speaking with Great Lakes they said interest would be capitalized, but it didn’t feel like a confidante answer. I have seen the Government will pay up to 3 years of the capitalized interest, but also wondering if there would be anything to capitalize since I am paid ahead. Wondering if I have already paid it. Would it be better to go to normal payment now since I am not that far into repayment or wait until February?

      • May 10, 2016 at 2:17 PM

        I have a combination of them both.

        • May 10, 2016 at 3:00 PM

          In that case, you will have interest from your unsubsidized loans capitalize when switching to the standard repayment plan. Depending on how quickly you want to pay down your debt and how much disposable income you want to have, you might consider REPAYE.

  • April 19, 2016 at 10:55 AM

    Reader question via email,

    My current thought is if someone wants to stay and pursue non-profit jobs with PSLF route, they have to consider the marriage or a partner with income if you will be on REPAYE/PSLF. When you no longer receive subsidy benefit (that’s when my AGI is 155k for 230k loans), it is better to switch to IBR/PAYE at that point. If your income or combined income is over 300k, then it is better to switch to standard or graduated plan to pay the minimum cap to get the full benefit from PSLF forgiveness at the end. These are my current thoughts if one wants to go for PSLF and try to pay the minimum monthly as much as possible considering the marriage factor for those who are on REPAYE. But, then one will be only limited to 503c organizations when job hunting comes. In addition, the salary difference b/t academic and private in radiology is likely at least greater than 50k plus from what I heard in average.

    Since I am open to both academic/private for a job, I will likely start with REPAYE/PSLF (since I am a single) for ~6 yrs of training and hopefully I will know where I will end up during the fellowship year. Then, decide whether I want to pursue PSLF if I will end up in academic. If I get a job at PP, then I know it is time to finance ASAP at that time.

    I have a follow up question…

    Would you pay extra payment to prevent the interest accrued over these 6 yrs of training or pay the minimum only during these 6 yrs when you are not sure whether you are going to get a job at either academic or private place? I heard about Obama’s proposal on maximum gov can forgive is around 57k two years ago and nobody can guarantee how the gov will execute PSLF program for the next 10 yrs. Should I try to pay the extra amount only to prevent interest accrued over 6 yrs of training under REPAYE and save any leftover cash flow into IRA ROTH? What is your stance on this if you were in my shoes?

    One more point…It seems like refinance with bank right now may not be a right idea due to two things: I still consider academic/private jobs AND difference in amount of saving being on REPAYE for 6 yrs (~25k total saving over 6 yrs under REPAYE) vs. refinance now (~22k total saving for 6 yrs under 4.5% fixed rate). So, in fact, it will be better off to stay on REPAYE just during residency and if I end up in academic, then I will switch to standard or graduated plan to finish 120 payments for PSLF route OR if I get PP job, then refinance asap at that point. What do you think?

    I really appreciate your time reading and commenting on this, DWM!

    • April 19, 2016 at 11:30 AM

      you got it. there are more variables to consider when you are on REPAYE as it is the most complex IDR. but that’s life; life changes and change is the only constant.

      1. yes PSLF can diminish or vanish all together, but hopefully those who are already signed up will be grandfathered in. ie. government may cap or get rid of forgiveness for those who have not signed up for PSLF yet, but if you are already in the program, the fed should not change the terms on you… (that’s the hope, not a promise…)
      2. your 2 questions are thoughtful but can only be best answered in hindsight. I say this because, I would have a totally different approach during training if I Knew I’m for sure getting a job that’s 1/4 the available jobs in the radiology job market, i.e. 503c W2 jobs. I will pay the very minimum, switch back and forth between programs to minimize my monthly & total lifetime payment and maximize forgiveness.

      if I Knew that I’m working PP out of training, I would pay my student loans aggressively even during training so that I minimize how expensive my education could become when all is said and done (all the interests over the life of the loan).

      But since no one truly knows whether they will get a 503c W2 job or PP job out of training, especially during MS4, PGY1 year, it is impossible to say which of the above 2 approaches to take.

      personally I don’t like surprises, which is why I destroyed my 6.8% student loans before contributing to my Roth IRA/Roth 403b, even though I could have potentially increased my net worth faster by channeling cash towards index funds (7-8% long term return) rather than paying down student loans 6.8%. I like the Guaranteed return of paying my debt. So yes, if I were in your shoes, I’d put majority of my cash flow towards paying my student loans aggressively. but if you ask someone else, like WCM, he’d probably say the opposite. (You can ask him to answer your questions too so you consider both ends of the spectrum.)

      Answer to your first question:
      your calculations sound about right, “6 yrs (~25k total saving over 6 yrs under REPAYE) vs. refinance now (~22k total saving for 6 yrs under 4.5% fixed rate).”

      As long as you take into account that with each successive year, you are making more AGI, getting less REPAYE subsidy, and effectively, your interest rate on REPAYE is rising each year. So personally, I like to reevaluate annually and refinance as soon as I see that my refinance rate is lower than the effective REPAYE interest rate. If you did the calculation to get your above total savings figure, you will know exactly during which PGY, your REPAYE interest exceeds refinanced interest (it is entirely possible for some PGY’s, not-married, not much moonlighting, that REPAYE interest is always lower than Refi until becoming attending).

      Answer to your second question:
      Evaluate how you want to balance between cash flow and interest savings.

      Assuming REPAYE saves you more interests based on your calculations, 3k over 6 years.

      REPAYE also ties up more of your cash flow, REPAYE payment climbs with your AGI, refinanced monthly payment stays the same @ $100/month with DRB, $0/month with LinkCapital.

      For simplicity sake, let’s just assume your average annual REPAYE payment throughout 6 pgys is $3000/yr (clearly, for a typical single pgy, pgy1 REPAYE is near $0/mo and pgy6 REPAYE is probably above $300-400/mo).
      compare this to the $1200/yr on DRB refinanced loans. This means you can direct additional $1800/year to index funds investment: you leverage your 4.5% interest refinanced student loan for the potential long term profit @7-8% from investment.

      While I decided against leveraging my 6.8% student debt for a potential 7-8% investment return, I could have probably gone with leveraging 4.5% student debt for a potential 7-8% investment return. The greater the differential between the interest I pay and the potential interest I collect, the more likely I will go with the refinancing to a lower monthly payment route.

      So I suggest that you do an apple to apple comparison.
      Run 2 separate scenario.

      PGY3 income (include your projected moonlighting)
      on REPAYE vs. on Refi
      Find out the following,

      calculate your effective interest rate on REPAYE, compare to refi interest rate.

      if REPAYE interest rate exceeds refi, then I’d go with Refi as PGY3 and not even bother the rest of the calculation/comparison. because this means Refi gets me the best of both worlds: more long term interest savings (due to lower interest rate) AND greater today cash flow (due to lower monthly payments.)

      but if Refi interest rate exceeds REPAYE, then check the rest of the comparisons below.

      1. total minimum payments in 1 year on REPAYE vs. Refi.
      2. total debt balance at year’s end on REPAYE vs. Refi.
      3. assuming you put the difference between REPAYE & Refi minimum payments into index fund, earning you 7-8% long term annualized return. calculate how much total investment (principle & gain) you have at year’s end.
      4. compare your net worth (debts subtract from assets) at year’s end on REPAYE vs. Refi.

      This way you can see the numbers and know which approach gets the bigger bang of the buck:
      paying more towards student loans at a lower interest on REPAYE vs. paying less towards student loans (but investing the difference) at a slightly higher interest rate on Refi loans.

      Also, I ask you to run the numbers based on PGY3 income because likely our PGY1 REPAYE beats Refi on both financial considerations: interest savings with lower rates, & greater cash flow with lower monthly required payments.

      Any time either plan beats the other (REPAYE vs. Refi) in BOTH interest savings & cash flow, the decision is clear, go with the double winner.

      It’s when REPAYE or Refi each wins in 1 consideration, that’s when you need to do the projected calculations to see the numbers for yourself.

      Hope this helps.

  • April 17, 2016 at 8:14 PM

    Little bit thought on REPAYE/PSLF route…

    Under the repayment calculator tool, IBR/PAYE option will not be available if your AGI is greater than 300k. With this in mind, if I want to go with PSLF option, you have to make 120 payments at non-profit places. Most radiologists even at academic or 503(c)1 places may likely make more than AGI of 300k, if I assume correctly. Also, if I start with REPAYE/PSLF route during 6 yrs of residency and get married with a partner during this period who also has an income, the required payment under REPAYE will be beyond the cap of 10 yrs standard amount. So, staying on PSLF for full 120 months won’t give me much amount to be forgiven. So, even if I will work at academic, PSLF option doesn’t seem to give me much benefit for people going into specialties that provide fair and above average physician salary. Also, by considering the marriage while you are on REPAYE, that can bring more monthly payment. So, my current thought is that PSLF will not favor for radiologists and people who are married with someone who has income to be able to get the full benefit from PSLF.

    Thus, I will just have to stay on REPAYE and PSLF (just apply for this to get my payments counting, why not) during 6 yrs of residency and definitely refinance during or after fellowship to pay off on my own.

    I am curious what you guys’ thoughts are on this matter as well.

    • April 17, 2016 at 8:51 PM

      I agree with your plan. Your assumptions are fair. it is true that our academic attending at 503c organization start at 300k. So there won’t be much to be forgiven at the end of 10 years (most of it will just be the interest accrued from the high federal student loan interest rate @6-7%).

      Also, I recently read a JACR article that states 2014-2015 academic year, there were still 75% private jobs posted on ACR, so that means PSLF-eligible non-profit 503c jobs are still in minority, 25% to be exact. So I highly recommend Not counting on PSLF. Try to reduce interest accrued as much as possible so that you will be paying off a smaller total debt in the end.

      With REPAYE, if you likely will save less on interest if you marry someone who also makes decent/resident equivalent income but without much debt. So it does get unpredictable. You just have to re-evaluate every year to see if it makes sense to stay on REPAYE or refinance before you finish training.
      For example, if you marry an ER attending as PGY3, that means your REPAYE payment will be through the roof (as REPAYE counts spousal income regardless of filing separately or not), and you won’t get Any interest subsidy, so the interest will be effectively 6-7%, (I remember you quoted me 6.1% for your case). Then, it may make sense to refinance Immediately rather than staying on any fed payment plan because the refinanced rate will likely beat a high 6.1%

      But refinancing upon getting a private attending job is definitely the way to go!

      Hope this helps!

      • April 17, 2016 at 9:27 PM

        Forgot to add one more point. Thank you, Dr. Liu for prompt response 🙂

        If you still want to pursue PSLF, then you may switch from REPAYE/PSLF to Standard 10 yr plan to fulfill the minimum monthly amount to get the best benefit from PSLF after 120 payments. Repayment calculator also tells me that you can pay the least monthly amount under Graduated plan with AGI above 300k. If you can switch from REPAYE/PSLF to either standard or graduated plan, then you may get the decent benefit of amount forgiven with PSLF. Can you switch to graduated plan rather than standard from REPAYE? If yes, then PSLF option can give you a decent amount forgiven. But, the trade-off here is you are only limited to 503(c)1 places for job hunting…

        In the end, if you are thinking of both academic/private jobs, I think it is better off to stay on REPAYE/PSLF during residency and switch to either standard or graduated plan to get the most benefit from PSLF (if you end up at academic). If you know you are not going into academic during PGY6-fellowship year, then refinance asap at that year is necessary to pay off on your own. If you get married in the middle of residency while on REPAYE pursuing PSLF, then, you can still switch to IBR/PAYE, but you won’t get the subsidy benefit.

        I contemplated on this point because I am still considering academic jobs in the future and potentially marry a partner in the later residency training or beginning of attending. If thinking of academic jobs (503c), would you consider being on PSLF with options I thought of as above rather than financing to pay off on your own?

        • April 18, 2016 at 12:44 AM

          great points to consider.

          never hurts to keep options open 🙂 just stay on top of the policy on whether you can switch back to IBR/PAYE without penalties (currently you can freely switch among all IDR plans). usually when we leave one IDR to join another, your interest will capitalize… (so that’s something to consider as well.)

          on the other hand, it does not hurt you if you are aggressive and on your way to pay off your student loans even before the 10 year mark for PSLF. for instance, even though I am considering working academic jobs, i won’t regret paying off my loans on my own either. I’m really happy that I don’t have to pay student loans for 4.5 more years after PGY in order to get PSLF.

          you know pretty much all the facts now. life can surprise you and you can always adjust your plans accordingly 🙂 you will do fine as long as you are disciplined with how you manage your money (whether you choose to pay your debt aggressively or to save in retirement aggressively.)


  • April 3, 2016 at 3:09 AM

    Thanks for checking! Definitely then, I should go ahead and apply for the Direct consolidation on just two Perkins to be eligible for PSLF. Why not, right? I mean if I am going to stick to REPAYE with my Perkins loans, then it seems inevitable to submit application for consolidation on these two Perkins.

    May I ask what repayment option you are on, Bo? Are you on RePAYE/PSLF?

      • April 20, 2016 at 1:59 AM

        WCM, quick question on application process.

        When did you apply to IBR/Consolidation/PSLF at the same time before your 6 months grace period end? From Fedloan person I talked to, I can start applying to REPAYE/Consolidation at the same time, 45 days prior to 6 months grace period ends. Then, I can apply to PSLF and then Direct Debit after application is approved.
        Also, my dad’s tax return for 2015 have me as a dependent and I did not file on my own since I didn’t have any income as a student. When I will apply for REPAYE and if I want to have $0 minimum monthly payment for PGY1 year, I am aware that I need to provide my own filed tax return for 2015. However, I missed the deadline as of yesterday and I am curious whether I should still file for 2015 with $0 AGI on there before applying to REPAYE. If I don’t file it and just provide the paystub to Fedloan, I heard they will assume my AGI by soley on that monthly paystub and decide AGI. Of course, I want to avoid this situation.

        What do you recommend me to do in terms of timeline if I want to apply to REPAYE/Consolidation and PSLF?
        Appreciate it!

        • April 20, 2016 at 6:59 AM

          $0 AGI will allow you to pay $0/month until April of 2017 and all the $0 payments will count towards the 120 payments for PSLF if you work for a qualifying employer. I would recommend taking that route.

          • April 20, 2016 at 2:56 PM

            Yes, I want to take that route and to get this benefit of $0 payment, I should definitely go ahead and file my tax return for 2015 with AGI of $0 even if the deadline for file is passed, right?

            My annual date will be on mid-Dec each year when I re-certify REPAYE. So, from Dec 2016-Dec 2017, if I successfully prove that I had $0 income as a student in 2015 tax return, then, isn’t my payment of $0/mon till the Dec, 2017, not April, 2017? Because even though I will file new tax return for 2016 on April 2017, I will have to and only can re-certify on Dec, 2017, it seems like since any IDR plans are annually certified. So, I will actually have $0 payment for a year, then, right?

            Thanks, WCM!

            • April 20, 2016 at 4:54 PM

              Yes. Always files your taxes, preferably on time. ?

              I believe you recertify your income in April no matter when you signed onto the program. At least that was the case with me. You can contact Fedloans to check to be sure.

          • April 20, 2016 at 5:09 PM


            Yes, I checked with Fedloan and told me that I do NOT have to provide tax return to prove that I have zero income. Just check box that “I do not have any taxable income” when applying to REPAYE and just need to print the first 4 pages of REPAYE application with my sign as a proof. That should work for me to get $0 payments for the first full 12 months. So, since REPAYE has to be recerified annually, the monthly payment is based on your previous tax return and it will be set for a year!

            One more question…fedloan rep told me that if I want to consolidate two Perkins (5% each) into Direct loans for the sake of being PSLF eligible, they told me I MUST include one of the Direct loan with these two Perkins loans to make these two Perkins loans into Direct…I have 5.41% Direct loan that I may have to consolidate with two Perkins (5% each). So, the new interest rate when consolidating these three loans (44,900 at 5.41%, 8,000 at 5%, 8,000 at 5%) is 5.375% according to consolidation estimator. Is this right?

  • April 2, 2016 at 8:46 PM

    Is it beneficial to do consolidation on my two Federal Perkins loans, though just to get on PSLF? Each is 5% interest rate with loan amount of $8,000. I don’t know what the new Direct loan will be on these two loans. Will it be called Direct unsub at 5% or a bit higher? I will not do consolidation on other Direct loans (unsub and grad plus).

    FYI, Fedloan servicing won’t waive grace period. So, I only start make payment in mid-December. If I have to apply for Direct Consolidation on those two Perkins loans, then I have to apply at the same time when I apply to RePAYE (2-3 months prior to grace period ends).

    • April 3, 2016 at 12:44 AM

      When you consolidate, they simply weight average all your loan balances. So your new consolidated loan should come out to be 5% also. Also you can do the entire application online to see what the rates are going to be as well. If you’re not sure you want to do it, just don’t submit the application.

      • April 3, 2016 at 12:58 AM

        exactly, since your weighted average is 5% already, there’s no rounding up by 1/8 % as opposed to a weighted average that’s between 1/8 points (e.g. 5.12% will be rounded up to 5.125%), so no increase in the interest rate on the direct consolidation loans if you consolidate the 2 perkins loan you have now. read excerpt from studentaid.ed.gov below

        What is the interest rate on a consolidation loan?
        A Direct Consolidation Loan has a fixed interest rate for the life of the loan. The fixed rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%. There is no cap on the interest rate of a Direct Consolidation Loan.

        from studentaid.ed.gov article

  • April 1, 2016 at 4:45 PM

    There is a “Targeting payments” tool when I will make payments online via Fedloan Serivicing. Also, I can send a letter to the loan servicer in advance how I want my extra funds go toward each month. I don’t think we can control how extra funds go like 80% principle or 20% interest. I can only specify which loans (either highest interest rate one or highest principle amount) I want my extra funds go toward. If I do not tell them how my extra funds go, then they will spread extra fund across different loans. So, I believe it is smart thing to do to let them know in advance how my extra funds should be utilized. If you pay more than the total amount due and don’t target your payment, they will apply the extra amount toward a future bill.

    My plan will be signing up for ‘Direct Debit’ which will reduce the interest rate by 0.25% through Fedloan Servicing. I will let them withdraw only required monthly payment under RePAYE. Then, I will pay any extra funds online on my own after they withdraw my monthly amount using ‘Targeting payments’ to specifically select the loans I want them to go (highest interest rate loans, first). FYI, I have various rates of Direct loans (Unsubsidized, Grad Plus and Perkins) with average rate of 6.1% and I am not going to do Direct Consolidation into a single loans since it may raise up my interest rate overall. Also, it is not mandatory to undergo Direct Consolidation to be eligible or to apply to RePAYE or any other IDR.

    If I am assuming anything wrong, please correct me.

    This is what I got so far.

    • April 1, 2016 at 8:35 PM

      I think you got most of it Pete. Are you planning on taking advantage of the PSLF? If so, you may need to consolidate some of your loans to qualify.

      • April 1, 2016 at 11:38 PM

        I may as well apply to PSLF if I choose to go with RePAYE. I am going into radiology and will start internship this July. My plan is either stay on RePAYE for 6 years of training and then refinance thereafter OR refinance now and then re-refinance 6 years later. I am currently waiting for the application process with DRB at the moment. What do you think on my situation whether I should go with RePAYE vs. Refinance. If it is true about utilizing the extra funds into outstanding interests while I get the subsidy benefit, it seems more beneficial to stay with RePAYE during residency than being on refinance.

        Do you mean I have to consolidate all of my loans into a single one to be eligible for PSLF? I checked with fedloan rep that I do not need to consolidate to be on RePAYE. But, I am not sure about mandatory consolidation before PSLF. What am I missing here?


        • April 2, 2016 at 1:31 PM

          sounds like you got a great plan (or 2) going, Pete. it really hinges on if DRB can come up with a killer deal for you or not.
          1. my understanding is that you only need to consolidate if you have loans that are not “Direct” loans, loans that are not already PSLF-eligible. if all of your loans are Direct of sorts, (no Parent Direct loans), no perkins and other non-direct loans, your non-consolidated individual direct loans are PSLF eligible. (but check what Bo has to say since he is on PSLF and knows the policies like the back of his hands.) Also, call PSLF to hear directly from the horse’s mouth.
          2. since no one know exactly When and what kind of deal DRB can offer you, I suggest you get all your ducks lined up to sign up for REPAYE & PSLF. (remember like Bo mention, they are 2 separate programs you need to sign up for.)
          3. it may be that you are already on REPAYE, & your forgiveness clock for PSLF already start clicking (great thing to have since PGY years are lowest payment years, the sooner your payment starts counting towards PSLF, the better,) and DRB offers you some refinancing options. At which point, you can run your numbers to see what is the Effective interest rate of REPAYE and compare that to DRB refinancing.
          4. If LinkCapital, the only other company that refinances PGY’s starts refinancing again (after their capital raise to get money to lend), you should definitely apply to them so that you can get the better deal of the 2 refinancing options if you want to switch from REPAYE.

          So my bottom line recommendations:

          1. REPAYE-PSLF ASAP (I believe you need to wait out the grace period, which sucks, it’s 6 months right? I remember with Nelnet my loan servicer, I had the option to WAIVE my grace period.)
          2. Start making whatever payment you like to REPAYE at any amount above the REPAYE program required payment, since PGY1 REPAYE payment with little MS4 AGI is going to be approx ~0, you can even direct your cash flow towards higher return item such as index funds in Roth IRA or checking with your HR to maximize getting your company retirement contribution match (if there’s one) because with match, the idea is that you get instant 100% return of your invested dollars (definitely beats the return of paying student loans down further at 6.1% or the subsidized 3-5% rate on REPAYE.)
          3. once you hear from DRB, check their offer against the effective interest rate of REPAYE. if REPAYE interest rate is lower, stick with REPAYE.
          4. annually check with DRB and LinkCapital, there may likely be a tipping point at which your income is too high (due to the large moonlighting income you mentioned) that REPAYE will no longer provide you with a nice interest subsidy and that your effective interest rate of REPAYE is close to 6.1% again. And if at that point, the feds have not raised the interest rate too much, DRB and Lincapital can most likely beat the federal rates on REPAYE/PAYE/IBR (all the same interest rate without the REPAYE subsidy).
          5. so you may have refinance sometime during PGY, but most definitely right around the time you turn attending (because you will know definitely if you are eligible for PSLF as an attending or not).

          Now I have a big favor to ask you Pete.
          You are one of the most diligent readers I have ever met. You really have thought through your student loan attack plan CAREFULLY and comprehensively; checking facts and gathering advice from those before you along the way.

          Please write a guest post for DWM: perhaps titled “My Student Loan Attack Plan” where you lay out step by step what you plan to do to Minimize your debt/interest and/or Maximize your net worth by putting your limited (relatively to attending) income in the 6 years ahead of you.

          I think your journey/thought process/facts&tips you learned along the way can help many others like yourself 🙂
          Thanks to Bo @ whitecoatmoney.com and Pete for one of the most in-depth student loan discussions I have seen (including those on WCI)!

        • April 2, 2016 at 2:45 PM

          Since you are considering PSLF, staying on REPAYE would be your best choice. Because once you leave the federal system, you won’t be able to switch back to PSLF. Staying on REPAYE will give you the most options down the road.

          Yes, only certain loans are eligible for PSLF. For example, Perkins loans are not and will need to be consolidated as part of a Direct Loan Consolidation before it becomes eligible for PSLF. Take a look here: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service#eligible-loans

          • April 2, 2016 at 4:09 PM

            I have two $8,000 Perkins loans at 5% interest rate. It has not been accrued as of yet. It will after my graduation date, mid-May this year. Just to be eligible for PSLF, I can only consolidate Perkins into Direct, right? I have other loans of Grad Plus and Unsub at different interest rates. I do not have to consolidate Grad Plus and Unsub, I presume?

            • April 2, 2016 at 6:22 PM

              That’s a really good question.

              I will defer this one to Bo, Whitr coat money, since I personally have never consolidated my student loans.

              The question is can you consolidate loans into a direct consolidation long to 4PSLF eligibility? Or do you have to consolidate all your student loans if you were to consolidate a few of them?

              The question is can you consolidate A few selected loans into a direct consolidation loan 4PSLF eligibility? Or do you have to consolidate all your student loans if you were to consolidate any?

              If you can consolidate just the loans that are currently not PSLF eligible, that’s what I would prefer to do. As I’ve mentioned before, consolidation of your student loans takes the weighted average & add 1/8% to your new interest rate on the direct consolidation loan.

            • April 2, 2016 at 6:37 PM

              Another critical point is that if you were to consolidate at all, be sure to consolidate as soon as possible. The act of consolidation actually resets the clock that counts The 120 forgiveness payment.

              So ideally you want your first payment that counts towards forgiveness to be right after your consolidation. Consolidation after you already started income-driven repayment to qualify for a public service loan forgiveness is, will reset the clock counting the 120 payments.

            • April 2, 2016 at 8:05 PM

              Which types of federal student loans qualify for PSLF?
              A qualifying loan for PSLF is any loan you received under the William D. Ford Federal Direct Loan (Direct Loan) Program.

              You may have received loans under other federal student loan programs, such as the Federal Family Education Loan (FFEL) Program or the Federal Perkins Loan (Perkins Loan) Program. Loans from these programs do not qualify for PSLF, but they may become eligible if you consolidate them into a Direct Consolidation Loan. However, only qualifying payments that you make on the new Direct Consolidation Loan can be counted toward the 120 payments required for PSLF. Any payments you made on the FFEL Program loans or Perkins Loans before you consolidated them don’t count.

              If you have both Direct Loans and other types of federal student loans that you want to consolidate to take advantage of PSLF, it’s important to understand that if you consolidate your existing Direct Loans with the other loans, you will lose credit for any qualifying PSLF payments you made on your Direct Loans before they were consolidated. In this situation, you may want to leave your existing Direct Loans out of the consolidation and consolidate only your other federal student loans.

              If you don’t know which types of federal student loans you have, log in to My Federal Student Aid to get that information. Generally, if you see a loan type with “Direct” in the name on My Federal Student Aid, then it is a Direct Loan; otherwise, it is a loan made under another federal student loan program.


  • March 31, 2016 at 3:49 PM

    Awesome post!

    If one wants to make extra payment monthly on top of minimum required monthly payment under RePAYE, where does that extra payment go? Will that go toward paying down the unpaid outstanding interest amount?

    • March 31, 2016 at 11:34 PM

      Extra payments will apply to outstanding fees and interest first by default but you can contact your loan servicer to direct where the extra payment is applied towards. For example – 80% principal 20% interest. Your mileage may vary depending on your loan servicer as to how much control you have over this.

      • April 1, 2016 at 4:17 AM

        this sounds promising, that means taking the initiative can potentially allow you direct all your extra payment beyond towards principle. find out with your loan servicer and update DWM readers here!
        thank you, Pete and Bo.

Comments are closed.