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Starting residency with lower debt burden

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  • Starting residency with lower debt burden

    Hi folks,

    I'm a graduating M4 and was fortunate enough to have a scholarship that enabled me to avoid taking out any loans during medical school. However I still have a relatively small amount of debt from undergrad in deferment that I am trying to figure out how to best repay. The rough breakdown is:

    Perkins: $1000 (5%)
    2 Direct Subsidized: $4000 (average of 4%)
    Direct Unsubsidized: $6000 (6.8%)

    Originally I was planning on just refinancing my loans in June, but then I read about REPAYE and the unpaid interest subsidy. My new plan is to:
    • Apply to consolidate my Perkins and Direct Unsubsidized loan near the end of the CARE act grace period (my loans are no longer eligible for the 6 month grace period after graduation)
      • This to make my Perkins loan qualify for REPAYE as well as keep my lowest interest loans separate
    • Do $0 payments for 1 year of residency to receive the unpaid interest subsidy
    • Refinance at the end of that period and use the money saved to pay down the higher interest rate loans

    Does this make sense or am I overlooking anything? I understand with a lower debt amount the decisions aren't as consequential as someone with $200k, but if I can save a few hundred dollars in interest or more during residency I'd rather not leave anything on the table.

    Thanks for any insight

  • #2
    I'm not well read on the various loan options available today but I just want you to know that you should in no way fret over this. $11k in debt after medical school? You've made it to financial easy street!


    • #3
      I concur with Cord. The fact you are even thinking about this puts you far ahead. Many people have a larger auto loan than this.


      • #4
        If you pay it off over the first year of residency the small interest difference will not make any impact. Mathematically you could stretch this out a number of different ways that make sense on paper but are just silly to waste your time on for a couple hundred bucks.

        Focus your attention on a good financial plan and maximizing your tax advantaged space in residency. And learning medicine of course :P