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PAYE Recertify Questions for doc in PSLF

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  • Avatar UDoc71 
    Participant
    Status: Physician
    Posts: 2
    Joined: 08/10/2019
    medical school scholarship sponsor

    I have a couple questions that I’ve seen touched on but not clearly answered before:

    For background, I am a first month attending (just finished fellowship in June 2019 and started my attending gig a couple weeks ago) who will be making $350,000/year with $218,000 in student loans ($170,000 principal with remainder being interest that has not capitalized). I recently re-certified PAYE. I have been enrolled in PAYE since graduating medical school in 2013 and have also been enrolled in PSLF since that time. I re-certify my PSLF annually and have made 67 qualifying payments as of June 2019. My new attending job does happen to be at a 501c3 so I was planning to continue in PAYE with goal of completing my remaining 53 payments and having the remainder forgiven tax-free. I am not planning to switch to REPAYE because my wife is also a physician who refinanced her loans with a private loan provider with plans to pay them off in 3-5 years (we file as married filing separately for this reason).

    I have two questions. My first is do I need to notify Fedloan when my income increases to my attending salary or can I continue to just use IRS data for prior year tax returns? I usually just use my prior year AGI which is automatically pulled from the IRS website but now that my income will change substantially I did not know if this was allowed or could cause me issues with getting PSLF in the future. My monthly payments would go up significantly if PAYE is based on my new attending salary when compared to my 2018 salary that I just used to re-certify and I would therefore stand to get less forgiven under PSLF.

    My second question is about qualifying for PAYE in general. I know you need to demonstrate partial financial hardship to qualify for PAYE which I did when I entered the program in 2013. However I doubt that I still qualify for partial financial hardship, but given that I am already in the PAYE program I didn’t know if that mattered.

    Any help with regards to these questions would be greatly appreciated. Thanks!

    #237865 Reply
    Avatar jhwkr542 
    Participant
    Status: Physician
    Posts: 1288
    Joined: 02/15/2016

    I just sent in my tax returns. I haven’t heard of this being an issue.

    And you stay in paye but payments are just capped.

    #237958 Reply
    SerrateAndDominate SerrateAndDominate 
    Participant
    Status: Physician
    Posts: 470
    Joined: 02/01/2018

    I could be wrong, but aren’t you supposed to notify them of any changes (positive or negative ) in salary?

    Earn everything.

    #237979 Reply
    Avatar Outdoors 
    Participant
    Status: Resident
    Posts: 26
    Joined: 08/12/2017

    You only have to re-certify your income once each year for income-driven repayments.  i.e. you DO NOT have to update your income more often than that, even if it goes up substantially.

    https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven

    “You’re not required to report changes in your financial circumstances before the annual date when you must provide updated income information. You can choose to wait until your loan servicer tells you that you need to provide updated income information at the normally scheduled time. If you choose to wait, your current required monthly payment amount will remain the same until you provide the updated income information.”

    #237984 Reply
    Avatar UDoc71 
    Participant
    Status: Physician
    Posts: 2
    Joined: 08/10/2019

    Thanks, this has been very helpful

    #238008 Reply
    Avatar Bdoc 
    Participant
    Status: Physician
    Posts: 11
    Joined: 01/10/2019

    I recently had the same predicament. I contacted fedloan and they said the only reason to check the box is if your salary DECREASED significantly(no explanation why, maybe they want proof of a significant decrease?). Any increase in salary was reflected on my taxes and my PSLF payments have increased appropriately based on last years tax returns. So far no problems, but you never know.

    #238303 Reply
    Avatar MjekuMati 
    Participant
    Status: Physician
    Posts: 4
    Joined: 08/13/2019

    I’m not sure of the best answer to this. I was under the impression that when your employment changes, you needed to recertify employment, and provide proof of income.

    So I did that the moment I signed my attending contract. Unfortunately, I didn’t have any taxe forms, since my job started at that time. I only had taxes from 2018 during my last year of residency. So they took my employment letter from my university, and took the “$300,000” salary as my income. They calculated a NEW payment for me, that was about $2100 / month on my 350,000 in direct student loans. Fast forward to today, when I just got a letter back that says based on my AGI from my taxes, my payment is now only $758/month. I called them to ask if this was accurate and if this new fantastically lower payment still counted toward qualifying payments in PAYE/PSLF and she said it did. Then I asked if I could somehow get my $16,000 that was overpaid back since that would have dramatically changed my life last year. They just said “we can only calculate your repayment based on the income you provided, and you provided $300,000, so it’s not our fault that we used that number. You should have known to submit only TAXABLE income instead of your gross.” She was generally very unhappy with me for trying to

    I’m the typical financially very unsavvy physician, so how was I supposed to know any of this? I have done my best to follow the PSLF and PAYE requirements, submitting paperwork, taxes, everything that was requested, and this is what happens.

    Long story shorter, I’m still not sure of the best thing to do. It seems that perhaps you should submit your paystubs once you have one so they see your actual taxable income? It seems that technically you don’t have to submit it again until the required recertification period, but since that happens in August/October, new attendings are in that situation. Perhaps you STILL only use last year’s tax return, so you don’t get a massive bump in loan payment like I did by using my employment letter. I don’t know what the difference is between gross and taxable, apparently. But neither does Fedloan it seems, because they took a 300,000 salary on an employment agreement letter as verification of my income. It clearly stated it would start in August. They used that number as my total AGI for the entirety of the last 12 months, apparently, when it seems like they should know that that’s clearly a gross amount.

    These student loans and plans and repayments are turning me grey. Not having someone to guide me through it during med school and residency has cost me a significant amount of money, and now I’ve lost another $16,000 just like that for doing what I thought I was supposed to be doing…It’s very frustrating. There just isn’t a good self-guide for this, and I don’t know where to find the best non-self guide either apparently! I keep messing it up. Oh well, only 6.5 years left to go…fingers crossed.

    #238541 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
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    Joined: 01/09/2016

    I’m not sure of the best answer to this. I was under the impression that when your employment changes, you needed to recertify employment, and provide proof of income.

    So I did that the moment I signed my attending contract. Unfortunately, I didn’t have any taxe forms, since my job started at that time. I only had taxes from 2018 during my last year of residency. So they took my employment letter from my university, and took the “$300,000” salary as my income. They calculated a NEW payment for me, that was about $2100 / month on my 350,000 in direct student loans. Fast forward to today, when I just got a letter back that says based on my AGI from my taxes, my payment is now only $758/month. I called them to ask if this was accurate and if this new fantastically lower payment still counted toward qualifying payments in PAYE/PSLF and she said it did. Then I asked if I could somehow get my $16,000 that was overpaid back since that would have dramatically changed my life last year. They just said “we can only calculate your repayment based on the income you provided, and you provided $300,000, so it’s not our fault that we used that number. You should have known to submit only TAXABLE income instead of your gross.” She was generally very unhappy with me for trying to

    I’m the typical financially very unsavvy physician, so how was I supposed to know any of this? I have done my best to follow the PSLF and PAYE requirements, submitting paperwork, taxes, everything that was requested, and this is what happens.

    Long story shorter, I’m still not sure of the best thing to do. It seems that perhaps you should submit your paystubs once you have one so they see your actual taxable income? It seems that technically you don’t have to submit it again until the required recertification period, but since that happens in August/October, new attendings are in that situation. Perhaps you STILL only use last year’s tax return, so you don’t get a massive bump in loan payment like I did by using my employment letter. I don’t know what the difference is between gross and taxable, apparently. But neither does Fedloan it seems, because they took a 300,000 salary on an employment agreement letter as verification of my income. It clearly stated it would start in August. They used that number as my total AGI for the entirety of the last 12 months, apparently, when it seems like they should know that that’s clearly a gross amount.

    These student loans and plans and repayments are turning me grey. Not having someone to guide me through it during med school and residency has cost me a significant amount of money, and now I’ve lost another $16,000 just like that for doing what I thought I was supposed to be doing…It’s very frustrating. There just isn’t a good self-guide for this, and I don’t know where to find the best non-self guide either apparently! I keep messing it up. Oh well, only 6.5 years left to go…fingers crossed.

    Click to expand…

    Welcome to the forum and I’m sorry for your experience – this is really sad to me. Did you know there are some really good student loan advisors who can correctly guide you for far less than what you’re costing yourself? See this list. Even if it’s too late for you (and I don’t know that’s the case – I still think you should get a review from one), I’m posting this for others in your position.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #238563 Reply
    Avatar FutureDoc 
    Participant
    Status: Resident, Physician
    Posts: 124
    Joined: 04/24/2016

    I’m not sure of the best answer to this. I was under the impression that when your employment changes, you needed to recertify employment, and provide proof of income.

    So I did that the moment I signed my attending contract. Unfortunately, I didn’t have any taxe forms, since my job started at that time. I only had taxes from 2018 during my last year of residency. So they took my employment letter from my university, and took the “$300,000” salary as my income. They calculated a NEW payment for me, that was about $2100 / month on my 350,000 in direct student loans. Fast forward to today, when I just got a letter back that says based on my AGI from my taxes, my payment is now only $758/month. I called them to ask if this was accurate and if this new fantastically lower payment still counted toward qualifying payments in PAYE/PSLF and she said it did. Then I asked if I could somehow get my $16,000 that was overpaid back since that would have dramatically changed my life last year. They just said “we can only calculate your repayment based on the income you provided, and you provided $300,000, so it’s not our fault that we used that number. You should have known to submit only TAXABLE income instead of your gross.” She was generally very unhappy with me for trying to

    I’m the typical financially very unsavvy physician, so how was I supposed to know any of this? I have done my best to follow the PSLF and PAYE requirements, submitting paperwork, taxes, everything that was requested, and this is what happens.

    Long story shorter, I’m still not sure of the best thing to do. It seems that perhaps you should submit your paystubs once you have one so they see your actual taxable income? It seems that technically you don’t have to submit it again until the required recertification period, but since that happens in August/October, new attendings are in that situation. Perhaps you STILL only use last year’s tax return, so you don’t get a massive bump in loan payment like I did by using my employment letter. I don’t know what the difference is between gross and taxable, apparently. But neither does Fedloan it seems, because they took a 300,000 salary on an employment agreement letter as verification of my income. It clearly stated it would start in August. They used that number as my total AGI for the entirety of the last 12 months, apparently, when it seems like they should know that that’s clearly a gross amount.

    These student loans and plans and repayments are turning me grey. Not having someone to guide me through it during med school and residency has cost me a significant amount of money, and now I’ve lost another $16,000 just like that for doing what I thought I was supposed to be doing…It’s very frustrating. There just isn’t a good self-guide for this, and I don’t know where to find the best non-self guide either apparently! I keep messing it up. Oh well, only 6.5 years left to go…fingers crossed.

    Click to expand…

    Wow, this is so sad.  I am sorry that it happened to you, and arcane rules like those that govern PSLF are the reason WCI and all of the other student debt/personal finance blogs are able to provide significant value.

    I would second Johanna here, paying a few hundred dollars to avoid any more mistakes as an attending is absolutely a good use of your new attending salary.  Think of it as “paperwork” insurance, so that there are no more paperwork issues like there were last time.

     

    As a random aside, I wonder when in the year most physicians are re-certifying income for IDR eligibility.  My wife and I consolidated so ours is the end of April, but I realize a lot of people didn’t do that and so theirs is later.

    #238570 Reply
    Avatar Bdoc 
    Participant
    Status: Physician
    Posts: 11
    Joined: 01/10/2019

    This happens a lot to people who get scared of the system. It happened to me during residency and it cost me $3000 in un-needed payments. PSLF payments are based on the previous years tax return. Some people get scared with their drastic increase in salary as an attending and give the government an update that unfortunately increases their monthly payments. The only time you need to update Fedloan is if there is a dramatic decrease in your income(as per my phone call with them a few months ago). Otherwise, Your payments will be changed yearly based on your previous year tax return.

     

    So for example: If you are doing Emergency medicine residency and your salary is 60,000 in your PGY3 year. You then become an attending making 300,000. For your first year as an attending your payments should be based on your PGY3 year of 60,000. Your 2nd year as an attending should be based on a salary of 30,000+150,000. And only until your 3rd year as an attending will your payments be based on your full 300,000 salary.

     

    Hope that helped

    #238577 Reply
    Avatar MjekuMati 
    Participant
    Status: Physician
    Posts: 4
    Joined: 08/13/2019

    I think you have the right answer. Unfortunately, I’ve learned all these lessons the hard way already.

    I was put in forbearance by my school’s “financial aid specialist” after graduation because he said I wouldn’t qualify for PSLF / IDR, and I took him at his word. So I lost 3 years of residency payments there.

    Then I updated my income, because the fedloan / studentloans site says to do that if you “have a substantial change in your income,” and they took that and ran with it. So in the end, I’ve lost a lot of money, but it seems to be hammered out now. My payments are counting, and I have a lot of years left, but it’ll still be cheaper than to pay them off even if I had the cash to do it.

    Costly mistakes. There just isn’t good counseling for this stuff unless you know you need it, which the medical schools make you believe you don’t because they have financial aid specialists that “help” you. Unfortunately, if you’re like me, you don’t know you need it until you have already made the mistakes.

    #238580 Reply
    Avatar FutureDoc 
    Participant
    Status: Resident, Physician
    Posts: 124
    Joined: 04/24/2016

    This is exactly why I hold a post match personal finance session at my academic center’s medical school.  30 minutes then would have saved you years of payments, but you are right.  Now that you are on the other side there isn’t much to be done. That being said, I would go read the below post carefully and see if it applies to you.  Earning 350k right out of fellowship with only 218 in loans (and only 170k of which is producing interest), you might not actually benefit that much from PSLF, depending on how many years of payments you already have (you lost three years of residency, how long was fellowship? 1 year? 5 years?).

     

    Read this article and come back and post here and folks can probably help you confirm where you are.

    https://www.whitecoatinvestor.com/pslf-attending-physician/

    #238582 Reply
    Liked by Peds
    Avatar MjekuMati 
    Participant
    Status: Physician
    Posts: 4
    Joined: 08/13/2019

    Thanks FutureDoc!

    I wish I had been smart enough to get involved earlier. I didn’t do a fellowship, I’m a dermatologist at a public university in Utah. A guy from my church worked at PayChex and when he heard I wasn’t doing PSLF / IDR he was flabbergasted and told me to get on it right away. So I got into it with about 1.5 years left of my residency. Then I felt horrible that I had been squandering essentially 3 years of minuscule payments and now I have three years of (probably, depending on how my AGI changes my NEXT year’s payments…) $25,000 in payments each that otherwise would have been gone. But there was no going back, and now I have to call that cool ~100,000 a stone cold loss. Just bad advice from a guy who didn’t care about us or his job apparently, and punishment for trying to follow the requirements of a program that doesn’t do you any favors.

    My gross is 300,000. My loans are $314,000, but with un-capitalized interest that brings it just over 350,000. So even if I paid it off now, my out of pocket would be >350,000. If I was making my 2100 / month payments monthly for the next 7 years, that’s only like $180,000 so that’s what I’m going off of. It’s not a great boost to my salary, but I figure that’s still very real money if I go through and get PSLF.

    Is this erroneous thinking?

    #238585 Reply
    Avatar FutureDoc 
    Participant
    Status: Resident, Physician
    Posts: 124
    Joined: 04/24/2016

    I think you are right on track!  Those numbers look right and that would put you squarely in the orange range with plenty to be forgiven.  If you like you job in a year and everything is stable I think you are right on track, especially considering you caught your mistake before graduating and got 1.5 years of low payments.

     

    It’s hard not to kick ourselves (trust me I know), but you have learned a ton in the process and have a really good plan laid out!  Also on a 300k salary making your PSLF payment and then adding enough into a PSLF side fund (10 year pay off for those loans is 4k a month so another 1900 a month) will still leave you plenty of room for a decent lifestyle and retirement savings.  Then when you have your loans forgiven you will have a huge chunk of change to do whatever you want with.

    #238659 Reply
    Avatar MjekuMati 
    Participant
    Status: Physician
    Posts: 4
    Joined: 08/13/2019

    It IS hard not to kick myself for all this, it’s a lot of money that could have been saved and used much more effectively. What are the odds of showing them my 2017 tax return and getting any of that extra money back after proving to them that my payments were way too high?

    Zero? Is it possible to go less than zero?

     

    Edit:

    I think it IS less than zero. After a long and circular call with a random fedloan operator, I got nowhere. Except to find out that YES, you ARE supposed to update them when your income dramatically increases. He was of the opinion (fact?) that if you DON’T tell them when your income increases, the IRS can audit you, and disqualify you from the ENTIRETY of the PSLF program. So there’s that. I’m glad I updated my income, at least, but apparently when you’re a new attending you should update your income, and THEN come back and give them paystubs once you have it so that they can calculate your payment based on your income on there that’s not gross…

    Could this be any more opaque?

    #238705 Reply

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