Q17. I tried to reapply online but I couldn’t b/c I was already rejected with $0 income input on my previous application.

A17. Definitely call DRB tomorrow and have them manually change your income so that your application will reflect your PGY 1 rather than your MS4 income. One of the big benefit DRB advertises is the fact that they go one step further than refinancing PGY’s, that they will refinance MS4 with contract in hand after match day.

Q18. Is there an adviser or person you would recommend me to talk to in DRB?

A18. I was rejected by DRB when I applied for student loan refinancing as an intern. That was before they started offering student loan refinancing for residents and fellows. I worked with Jason, who really knew his stuff, but I felt so frustrated because their rules back then was that you had to have $3,500/mo. after paying all your bills to be even considered, even though I had 800+ credit score. But I’m really glad to see that many of my friends are able to take advantage of student loan refinancing as PGY’s now after DRB started offering PGY refinancing in mid-2015.

Q19. Is it better to stay on fixed or variable interest rate when refinancing?

A19. Since you are at the beginning of your training, I’d recommend staying with fixed rate. However, you can always re-refinance again if you selected variable interest rate right now and the rate went up. You can refinance your loans with DRB with DRB again or with LinkCapital (hopefully they are able raise capital and start refinancing PGY’s again.)

For example, if you refinance with DRB right now and got a much lower variable rate than you would if you select fixed interest rate under the same 10 year long term, and in 2 years, the rate went up by 1%, and you really don’t like the new rate. Then you can apply to LinkCapital for either a fixed or variable rate interest loan. If LinkCapital offers you good deal, then you can bring the deal back to DRB, ask DRB if they want to beat the deal from LC, then they can keep your business.

The only downside to selecting variable rate & re-refinancing if rate increases and starts cutting into your savings are:

1. No one can really predict how rates will go. Yes federal government is increasing the prime interest rate where banks can borrow money gradually, already by 0.25% this year. But if economy sucks, like it sort of does now, the interest rate of refinancing student loans and mortgage, etc. will stay low.
2. There are only 2 banks offering PGY refinancing right now, and one of them LC is out of money to lend/currently in the process of trying to raise more money. So DRB pretty much has total monopoly of the PGY student loan refinancing market right now! Great position for DRB to be in, not the best for the PGY’s who need these refinanced student loans to save money. So if your variable interest rate increases with DRB, and there’s only LC (assuming they get enough money and start lending to PGY’s again), then you may not get a great deal when you re-refinance.

So it is personal decision whether to refinance to variable or fixed but in general, variable rate is fantastic when interest rate drifts down from the time when you sign up rather than drift up. But no one can count on a borrower-favoring downward trend just as banks can’t count on a lender-favoring upward trend. What you need to do is to consider the worst case scenario: If your variable interest rate goes up, and you cannot get out that high interest rate by re-refinancing, what can you do? If you are an attending, you can probably pay off your student loans rapidly, within a year or two by just tightening your belt a bit or re-refinance, but if you are PGY, you may be stuck with the high inter rate until it adjusts down (economy down turn, federal government decreases prime rate, etc.) or when you get to refinance again as an attending.
Q20. If you were me with $206,400 principle from all med school only ($21,386 interest, currently) with avg. 6.08%, which option would you go with personally?

A20. I would refinance because I don’t like debt. I will choose a 7 year or 10 year fixed interest rate loan. I’d imagine that my rate will be around 4.5% or so. Even if it is 5%, I’d still refinance because I will be very aggressive with paying down my student loan throughout training (since our training is so long, 6 years.)

Q21. From your voice, it sounds like you will definitely go with refi and use the cash flow into retirement savings account. If I go with this refi route, is it more beneficial for me to use the cash flow to pay more monthly for student loans or making minimum monthly/putting cash flow into retirement savings/emergency funds?

A21. I will

1. Make a budget and see how much money I can allocate to building my net worth by decreasing debts and increasing assets.
2. As an intern, I was targeting $2000/mo. towards increasing my net worth. I focused on attacking my student loans first because my interest rate was 6.8%. I was very happy to throw $2000/mo. towards my student loans and every extra penny I had towards them because I knew I was making 6.8% return on every dollar I used to pay down my loans.
3. As soon as I killed my student loans, I started to max out my retirement funds, which means to max out both Roth IRA and 403b Roth at BUMC, a total of 23.5k/year.

Q22. OR, maybe I can pursue both which is doable during my 6 yrs training?

A22. Yes, you can definitely do both. Whether you decrease your debts or increase your assets (saving more in retirement accounts), you are increase your net worth.

Q23. Can you briefly explain when and how I can start investing into Roth IRA and company match?

A23. Read these posts.

https://www.drwisemoney.com/?s=bitter+sweet

https://www.drwisemoney.com/2016/01/27/where-to-put-limited-pgy-dollars/

https://www.drwisemoney.com/?s=company+match

https://www.drwisemoney.com/2015/12/12/christmas-a-gift-that-keeps-on-giving/

For company match, contact your hospital HR/benefits department to find out if they offer residents/fellows a match. If they do, definitely open a 401k or 403b account to take advantage of the match. UA did not use to offer company match for retirement savings, but thankfully Banner bought UA and starts offering 4% company match on 7/1/2016 for PGYs. So yay, that’s another 2-4k/year of money one can get by putting away 2-4k themselves into their 401k.

Q24. Do you recommend to start opening account starting at PGY1?

A24. Yes, definitely start Roth IRA ASAP. You can read this post and learned from my biggest mistake J I would have started Roth IRA in medical school if I knew how wonderful Roth IRA savings are.

Hitting a Net Worth of $0 As An Intern

Q25. With your big help so far, I narrowed down to two choices as below with my goal for the loan repayment option (have the option that provides me the most minimum monthly repayment so I can have more flexibility or room to pay more if I choose to with less interest rate; pay off completely within 2-3 yrs of post-residency training):

1) Refi with DRB now (if approved) for 6 yrs and then re-Refi when becoming attending
Is it worth a lot if I refi now from 6.08% to 4.5% using DRB?

A25. So rough math is 228k x (6.08% – 4.5%) x 6 years of training = $20,520 guaranteed post tax savings even if you choose to pay nothing like in the case of $0 monthly requirement by LC.

That’s about half a year of post-tax income as a PGY1. I think it’s a big deal, but others may think differently.

Q25a. Is 4.5% under 10 yrs plan guaranteed most of time when I apply, recently?

No, not guaranteed. Could be higher or lower. Apply for free and find out.
A25a. Under this plan, you mentioned I can keep re-refinance. Is there a penalty from DRB (assumed I refi with them), when I refi again after 6 yrs (when I get a job) to different bank?

DRB currently has NO pre-pay penalty; you can refinance with anyone that wants your business.
Q25b. From your comments above, you mentioned that someone was approved for 4.5%, but fed interest rate of 7% is still alive?

A25b. My colleague signed the paper agreeing to have DRB buy his loans from the federal government, who’s charging him 7% currently. However, DRB has been really slow at moving forward. They are probably getting too much business. That’s why I recommend that anyone who is even considering refinancing to apply ASAP, because the borrower can get the DRB deal in hand first and still have time to think about the best course of action, After learning what rates/terms DRB will offer the specific borrower.

Q25c. This didn’t make sense to me. If refi worked, fed interest rate should go away and that person will be locked in with 4.5% right after he was approved as a fixed rate, no?

A25c. You are totally right. As soon as DRB go ahead and buy the student loans from the federal government, my friend is set on his fixed 4.5% interest rate until the end of his selected term (I believe he selected 7 year term because he is a pgy3.)

Q26. 2) PAYE(or RePAYE) with PSLF for 6 yrs and then re-Refi when becoming attending
A26. I totally agree with you that PSLF is not going to help us (higher paying specialties) much. But, based on your wisdom, I might as well apply to PSLF (if I have to choose one of IDRs) since it won’t do me any harm even if I will get my 1st job at the profit organization which most rads people get.

Yes staying with IDR/PSLF combination only hurts you if your interest rate on IDR is higher than that of refinancing with private banks.
Q27. Out of other IDRs options, if you were to choose one of IDR with my mentality and will to make extra monthly payment, would you still go with RePAYE over PAYE due to interest subsidy?

A27. If I plan to pay minimum, I’d stick with RePAYE so I can get maximum interest subsidy.

Q28. If I can make extra monthly, I think being on either of these PAYE vs. RePAYE won’t be matter, right?

A28. If I plan to pay anywhere close to the monthly accrued interest, causing nearly $0/mo. interest subsidy on RePAYE, then I’d go with PAYE. I am saying this because RePAYE beats other plan like DRB/PAYE by interest subsidy. On the other than IBR/PAYE beats RePAYE by 2 things that may become relevant to you in the future:

1. IBR/PAYE will not count spousal income as long as you file taxes separately. (RePAYE counts spousal income always no matter how you file taxes.)
2. IBR/PAYE lifetime maximum payment requirement is capped by the monthly payment you get under standard 10 year repayment plan at the time you enroll with IBR/PAYE. (RePAYE has no payment cap, so you can potentially make enough money as an attending that your monthly RePAYE requirement gets higher than monthly IBR/PAYE requirement.

However, these 2 issues make no difference to someone who’s paying down their student loans aggressively rather than paying the monthly IDR plan requirement waiting for PSLF. But since you don’t know for sure that you won’t get PSLF, IBR/PAYE are better than RePAYE.

I mean it will be ideal if I pay the most minimum under RePAYE to get the most benefit, but now I feel like being on RePAYE won’t hurt me neither if I choose to pay more monthly (close to interest accrued) ~$1100/month.

RePAYE won’t hurt you as long as

1. You can switch back to IBR/PAYE, when you the above mentioned 2 points are relevant to you and that you’d rather pay less on IBR/PAYE so that you get More forgiven under PSLF.
2. If you don’t get a PSLF-eligible job and you are going to pay off your debt yourself ASAP anyways, you can just refinance from RePAYE to a private bank and destroy your debt within 2-4 years after training.

Q29. When I switch from PAYE (or RePAYE) to refi after 6 yrs, unpaid interests during these 6 yrs will be capitalized and these total amount will be refinanced, correct?

A29. Yes. When you finish training, you will no longer qualify for PAYE because you no longer demonstrate partial financial hardship. When you leave PAYE either voluntarily or due to non-qualification, your interest will capitalize too. Interest will capitalize whether you get automatically switched from PAYE to standard 10 year repayment or you refinance.
Q30. If I go with either of PAYE vs RePAYE, will Direct consolidation provide me lower rate than current average rate of 6.08%?

A30. No, Direct consolidation loan is usually 1/8% higher than your current weighted interest rate, so your rate will likely be 6.125% instead of 6.08%. You can confirm this with your servicer. The only reason people consolidate is to make sure that All of their federal government loans become PSLF-eligible. But if all your current individual loans are Direct; they are all PSLF-eligible already. Federal loans like Grad Plus loans are not PSLF-eligible, so a borrower with Grad Plus loans should probably consolidate.

You can read Meet PETE here.

You can read PETE  Q&A PT 1 here. 

FYI, with my current 228k fed loan, my daily interest dollars are $33, which makes it $1,000 interest accruing monthly, roughly.
[when you graduate, the interest you accrued during medical school will capitalize. which means your new principle is 228k (assuming your current total debt = interest accrued thus far + principle you borrowed each semester is the 228k you quoted me.) So going forward, your 6% federal interest rate will be accruing simple daily interest on the entirety of ~228k of principle debt.

So daily interest is 228k (debt principle) x 6.08%/365 = $ 38/day = $1140/mo.]

Q11. Now, I have a better idea for my options with your help, but still have questions about which option will work the best for me:
Option 1. Refi for lower interest (Which refi market is the best? I know you are for DRB, but any others I should consider?)

A11. There are only 2 companies that will refinance residents & fellows: LinkCapital and DRB. The other companies only qualify people with attending level income.

Because there are only 2 banks, they got so much business from PGY’s that LC ran out of money to lend (LC is in a capital raise and will contact me as soon as they have money to lend. because they also will give DMW readers a cash back bonus.) So this leaves DRB the only company that refinance residents and fellows with high debt-to-income ratio. Even with DRB, I have noticed that they are taking longer to get the whole process done. I have a co-resident who got 4.5% rate offered a few months ago, but DRB has yet bought his federal loans (in other words, his fed loans are still feds, collecting 7% interest.)

Once you pay down your debt more and/or make more income, your debt-to-income ratio will come down and more banks will refinance your student loans, and you will have more options such as common bond, first republic (the lowest most amazing interest rate I’ve seen, but again, only will qualify people with attending level income, given a typical debt burden of 200k or so), earnest, etc.

Q11a. I am not confident to make monthly payment more than $1,000 during my first 6 months right after graduation in May, 2016 since I have to relocate to internship site in Reno, Nevada. What does DRB make me do in this case?
A11a. For DRB, you monthly minimum payment is $100/month; LinkCapital, you monthly minimum payment is $0/month during training. So you can choose to be aggressive, and throw all your $5000 tax refund at your student loan one month and the next month only pay the $100 requirement. The $100/month minimum with DRB ends 6 months after you become an attending/finish fellowship, so your payment will jump then, but you should be able to afford that payment. Plus your goal and all pgy’s goal should ideally be to pay off all student loan w/n 2-5 years of finishing training (which I think with your mentality, you are well on track to do so.)

Q11b. Even though if I get 4.5% fixed rate, for 228k loans, monthly payment is easily over $2100 for 10 yrs. plan when I used the DRB loan calculator with their rough estimator. Is there some flexibility for residents in terms of how much I can pay per month depending on emergency situations that may happen out of nowhere, for example? I believe that I will be able to pay ~ $1,000/mon for student loans or little bit more if have a room, but not more than $2,000/mon until I go into more upper level of PGY 4-5 with more moonlight chances in Houston.
A11b. See above.

Q12. Option 2. Repaye with PSLF: I am not sure if I want to go into academic or private practice for radiology (50/50 for now). But, if I want to make my both options open, like you mentioned, should I still apply to PSLF?
A12. Yes definitely.

Q12a. For this option 2, this only benefits me if I pay the very minimum of their required monthly payment for next 6 yrs. so I can save from the interest subsidy and then get a job at non-profit for 4 more years to get leftover amount forgiven (with current allowable maximum amount forgiven is $57000, right?).

A12a. Yes, the maximum interest subsidy occurs when you pay minimum Repaye. In other words, you are encouraged/incentivized to let your student loan grow larger. The bigger the difference it is between your monthly payment and your monthly debt growth, the greater the absolute amount of Repaye subsidy there will be.
No, currently there is no cap on amount of forgiveness, but there has been lots of talk of it, with Obama attempting to cap all forgiveness at $57,000. So if you want to sign up for PSLF, do so ASAP before anything changes.
Remember, most people are able to sign up for IDR and PSLF after grace period, which usually ends December the year of medical school graduation. This means that you will get 5.5 years out of training, then you will need 4.5 years as attending radiologist in a non-profit as W2 employee.

Q12b. In this plan, I will have some cash flowing on me since I am not a big spender and won’t be one during residency, what will I do with these cash flow?
A12b. Any freed up cash, I’m a big proponent for Roth IRA, getting company match, etc. i.e. start saving for retirement. Put your dollar to work early in your career, so that it can work as hard as you. But if you refinance your student loans as PGY, you get even MORE cash flow. Because usually the $100/mo. requirement is lower than the IDR repayment monthly requirement. Read the top post in this search, it gives you an idea where to best put your money

https://www.drwisemoney.com/?s=where+to+put+my+dollar

Q12c. Save them for maybe emergency fund? I rather prefer to spend this extra to pay loans during residency to pay off quicker.
A12c. I agree with you. I like the idea of putting my money where I get the most return. In the case of student loans with 4.5% interest rate, I know every dollar I put towards this loan will get me guaranteed, post-tax, return of 4.5%.

Here’s my idea of rainy day funds. Not everyone agrees but it has served me well in helping me pay off my student loans and now saving 23.5k/year in retirement.

Rainy Day Fund

Q12d. since I cannot pay more than or close to the interest accruing each month under this option of RePAYE with PSLF, I am not sure if this option is the BEST plan for me because I am willing to pay at least $1,000 a month consistently starting internship. RePAYE without PSLF option won’t work for me neither if I want to pay more monthly…
A12d. you hit the nail right on the spot, I cannot pay more than or close to the interest accruing each month under this option of RePAYE with PSLF.
Exactly, the whole idea of PSLF or Income Driven Repayment is that you are Encouraged to let your debt grow rather than to take it seriously and pay it down. That’s why I’m pretty much fundamentally against PSLF for doctors. In fact, PSLF was initially designed for school teachers with 100k debt and will make 50k for the rest of their lives, not for doctors. But companies which give “financial advice” start telling PGY’s how much “they can save” by taking advantage of this doctor’s loop hole. And this get people into the mentality of the more I borrow, and the less I pay for the next 10 years (given that I get a 503c W2 job right out of training), the more I save!
This mentality is quite opposite to yours and mine. My blood gets boiling when I see my debt get larger rather than smaller.
So yes, if you are committed to paying your student debt DOWN during training, PSLF is NOT for you, none of the IDR plan is for you.

Q13. Option 3. IBR without PSLF (I do not think I am considered new borrower since I borrow my first Direct Stafford loan in 2012)
A13. yes you are new borrower.
Q13a. Under this plan, I am expected to pay at least $500 a month starting in PGY2.
Good, but I hope that you will pay $1000/mo. so you can get your debt to not grow or even become smaller.

For every IDR options, I do not need to start making payment for a whole year during my internship, correct?

A13a. All IDR monthly payment are calculated based on your prior year tax return. Assuming you made little in tax year 2015, you are probably required to pay $0 to $50 dollars/mo. with any IDR plan (including IBR, REPAYE, PAYE, and ICR.) Your 2016 tax year will be composed of half a year of nearly no income as a MS4 and half a year of PGY1 income, so the payment may not be as high as $500/mo. either.
But again, if your goal is to make more payment anyways, it does not make sense to stick with federal loans and pay the higher interest rate.
The only reason to pay the higher interest rate while paying down your debt aggressively is to keep your option for potential PSLF open.

Q13b. I believe this option is better than option 2 in my situation where I can/am willing to pay more monthly, but compared to option 1, option 1 will save me more money from less interest during the waiting time before I can start pay under IBR option, correct?
A13b. To start repayment, you will need to waive out of the grace period. Contact your loan servicer to find out how (if they allow you to do so.) The other benefit to waive grace period and to consolidate your loans into one direct consolidation loan now is that you can start counting your 120 PSLF payments as soon as July hits and you are working as a residents. For most others, they just wait till the grace period ends and the loan company to contact them for first payment, so their PSLF repayment clock does not start until 6 months into residency, which pushes back their potential forgiveness by another 6 months.

IBR is not necessarily better than PAYE or REPAYE when you make payment equal to or greater than you’re monthly accrued interest; because all IDR share the same interest rate when you are paying down your loans. They just have different payment requirement which you can see by using the loan repayment estimator.

https://studentloans.gov/myDirectLoan/index.action

the differences between IBR (PAYE) vs. REPAYE are

REPAYE will count your spousal income for payment requirement regardless how you file (where as IBR/PAYE don’t count your spousal income if you MFS, married filing separately.)

REPAYE does not have a payment cap (where as IBR/PAYE cap your monthly required payment at 10 year standard payment on the loan amount you entered IDR with.) This means for those going for PSLF, you potentially will pay back more on REPAYE compared to PAYE/IBR after training/lower income years.

If you are currently in IBR/PAYE, to switch to REPAYE, you will be entered into 10 year standard repayment plan first, then make at least one payment, before you can elect REPAYE. Plus, your interest accumulated under IBR/PAYE will capitalize when you leave IBR or PAYE.

Q14. Option 4. PAYE without PSLF: I am going without PSLF if I decide to go with either IBR or PAYE since I am willing to make more monthly payment as I stated above. I believe that to get the best benefit with PSLF and any of the IDR options is to make the minimum monthly amount for 6 yrs. and work at the non-profit for 4 more years. But with a good salary from radiologist compared to other specialties, I think PSLF is not a viable option for most radiology residents?
A14. I agree with you. This is why I was so aggressive with paying off my student loans.

“Best benefit with PSLF and any of the IDR options is to make the minimum monthly amount for 6 yrs. and work at the non-profit for 4 more years.”
I did not like the idea of PSLF for the following reasons

1. It’s not a guarantee that I can find a PSLF-eligible job.
2. I like my job options to be open and not limited by the fact that I NEED a PSLF-eligible job for my out of control debt.
3. the whole ideal of PSLF creates an internal conflict for me in that on one hand, I hate seeing my debt grow but on the other “potentially” all my growing debt will be forgiven via working for a PSLF-eligible job right out of training.
4. I could not stand watching my debt grow at 6.8% for 6 years wondering whether I’ll be the one paying these interest or not.
5. There are still more private jobs than PSLF-eligible jobs in radiology. Even if you work for the hospital, most of the time you belong to a private radiology group that contracts with the hospital. So most radiologists are NOT going to be W2 employees to 503c hospitals, which is what PSLF requires.
6. I like the idea of being paid as a contractor 1099 rather than W2 employee because there’s much more flexibility in taxes and retirement savings. Again only W2 employees of 503c organizations are eligible for PSLF.

Compared to IBR vs PAYE, the key difference will be paying 15% and 10% of discretionary income, respectively and for just during my next 6 yrs., isn’t IBR option giving me slightly faster way to cut down the interest since I am forced to pay more under IBR compared to under PAYE? If I have to choose between IBR and PAYE, what would you recommend, realistically?
If I’m choosing between IBR and PAYE, and PAYE requires less payment, I’d go for PAYE, knowing full well that I will be paying way more than both out of my motivation to become debt free. I think you are in the same boat. All the IDR repayment amounts are just the minimum you HAVE to pay, you can always pay above and beyond. It’s completely up to you. For instance, I like the fact that my mortgage is $925 on a 7/1 arm 30 year rather than $1500/mo. on 15 year fixed, this is because it gives me the flexibility to pay however much I’d like above $925 but does not require me to pay $1500/mo. minimum.
You sound very conscientious about finances/debt, you probably have the discipline to pay the amount you are committed to, rather than just the bare minimum required under a plan. So ask yourself, if you choose a lower payment required plan (lowest is Refi at $0 or $100/mo.), will you still be make the largest payment you can afford to annihilate your debt? If so, it actually doesn’t matter which plan you pick at all.

Overall, I am leaning toward either refi option vs. IBR(or PAYE) without PSLF for 6 yrs. and then refinancing when I earn attending salary since I am willing to make at least $1,000 monthly consistently during my residency to at least equal out my interest accruing monthly.
This is my suggestion if you are committed to pay the $$1140/mo. during intern year.

1. refinance now, you can pay as little as $100/mo. or as much as you’d like (but you enjoy a lower interest rate and faster pay down no matter how much you choose to pay)
2. throughout residency, re-evaluate debt-to-income ratio
3. Reapply to different companies to re-refinance your student loans. (when companies compete, you win the best deal)
4. When you become attending, there will be many more banks other than the current 2 (LC and DRB) that will refinance you. Because you are a much lower risk with an attending income than you are with PGY income. People who are attending now are enjoying rates as low as 1.95% with first republic.

The principle is lower your interest rate whenever you can. There is no fee in refinancing your student loans and you can re-re-refinance as many time as you want. It’s completely up to you, if you pit banks offer to refinance you against one another, you’ll get the best rate.

Q15. Which market should I apply and compare from each other?
A15. Right now as PGY, only LC and DRB.
But let’s say somehow your debt become 100k and you are making 100k as pgy3 with moonlighting income. Then potentially other banks MAY consider you because you’d demonstrate a much lower debt-to-income ratio than you do now.

Q16. I will reapply to DRB and call Fedloan servicing (my lender) to get their opinions, too.
A16. Definitely call Fedloan servicing to grill them with questions. They are collecting 6.08% interest on your 228k. Ask them all the questions you have and get a clearer idea of how things work specifically with them.

DWM readers:

You get $300 bonus when your student loan refinancing closes with DRB, Earnest, or CommonBond when you apply from this site.

Click above to start your application, and you will get this bonus and support this website at the simultaneously.

Note – you must click the “APPLY NOW” button after clicking on the link above.  If you navigate away from the DWM link, your participation will not be tracked.  If you would like to explore the site before applying, I recommend you do so in a separate tab.

To get First Republic Bank $200 bonus, you need to email [email protected] for personal referral so the banker can track and credit your application when your loan closes.

Read more about how refinancing student loan saves you money here.