Menu

Recent Med School Graduate – Best payment plan (REPAYE vs PAYE)

Home Student Loan Management Recent Med School Graduate – Best payment plan (REPAYE vs PAYE)

  • Avatar RadOncResident 
    Participant
    Status: Resident
    Posts: 3
    Joined: 05/13/2019

    Hi all,

    New to WCI forums. Recent medical school graduate that matched into Radiation Oncology this year with 155k of total undergrad/medical school debt. I have recently started reading up on the WCI and am still trying to figure out the best course of action for me to pay back my loans. I am currently debating REPAYE vs PAYE.

    Some background information:

    • PGY1 stipend is around 57k.
    • Previous year income = $0
    • Engaged, getting married in fall of 2020. Fiancé is a graduate student that will graduate in fall of 2020 with about 150k in student loans. The average starting salary for her field is around 100k.
    • Unsure on private practice vs academics, but will apply for PSLF just in case

    I am trying to determine which payment plan is best for us moving forward. I am currently leaning towards REPAYE but want to make sure I am not making a mistake. My current plan includes:

    1. Consolidating my loans this week
    2. Enter REPAYE ASAP and apply for PSLF
    3. Continue REPAYE payments while not married
    4. Not sure what to do after marriage

    My questions:

    1. Once I am married, should I continue REPAYE or switch to PAYE?
    2. I know REPAYE looks at the total salary of my wife and I, but if she has considerable student debt as well how does this impact payments? Will we both have to pay 10% of our total salary if she does REPAYE as well?
    3. If our total salary during my PGY 3-5 years is ~150k would switching to PAYE at this time be the best option?

    Thank you!

    #214193 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7950
    Joined: 01/09/2016

    Bumping this up – I’m not the student loan expert in our firm and am currently away at a NAPFA conference to boot. Surely somebody here can offer advice.

    If not, @radoncresident, you may need to reach out to someone who specializes specifically in student loan advice. You’re in need of some pretty in-depth advice.

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

    #214368 Reply
    Liked by Tim
    Avatar jhwkr542 
    Participant
    Status: Physician
    Posts: 1283
    Joined: 02/15/2016

    Student Loan Management When Both Spouses Work


    A lot of this, you’ll just have to run the numbers. Paye will probably be better once married but not absolutely sure on this. If both have federal loans, I believe both spouse’s loan balance are taken into account.

    #214407 Reply
    Liked by Tim
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1654
    Joined: 02/11/2019

    Once your spouse starts working your total debt will be less then 2x salary.  I do not know what RadOncs make but I imagine after training your debt will be well under 1x salary debt.  Have you done the math to refinance and pay it down?

    I was in a similar situation and I left it on the 10 year repayment plan and paid extra during residency and finished it off 2 years out.

    “Never let your sense of morals prevent you from doing what is right.”

    #214421 Reply
    Avatar RadOncResident 
    Participant
    Status: Resident
    Posts: 3
    Joined: 05/13/2019

    Thank you for your replies.

     

    @jhwkr542 : I agree that once married PAYE will be better, but is it worth it for me to start on REPAYE?

     

    @lordosis : The average RadOnc makes around 400k, but with reimbursement issues and being a new grad, I would expect my salary to be more towards 300k (not until 2024-2025). Until then, I will make around 60k for the next 5 years while my spouse will start making around 100k beginning in 2021. If I do not enter in PLSF upon residency completion I plan to pay this off ASAP. If I go this route I will refinance and pay off.

    #214622 Reply
    Avatar jhwkr542 
    Participant
    Status: Physician
    Posts: 1283
    Joined: 02/15/2016

    @jhwkr542 : I agree that once married PAYE will be better, but is it worth it for me to start on REPAYE?

    I think so because if you’re going to be starting repayment 7/2019, payments 7/2019-6/2020 will be based on your 2018 income of $0. Then, 7/2020-6/2021 will be based on your 2019 income of ~$28k. So 2 years of payments on RePAYE seems better. Then, for tax year 2020 you’ll file separately and switch to PAYE for payments starting 7/2021.

    Switching from REPAYE to PAYE will probably cause you to wait a month to switch payment plans, but I think the interest subsidy you get for the first 2 years will be more than the difference of 1 month’s payment attending vs resident salary.

    #214660 Reply
    ChadCFP ChadCFP 
    Participant
    Status: Financial Advisor, Website Sponsor, Small Business Owner
    Posts: 76
    Joined: 10/04/2017

    Hey RadOncResident,

    Anytime you have two individuals with student loans & income, the planning/strategy does get a bit more complicated. There are more unique strategies you can exercise which makes the planning more complicated.

    The first concern is the private vs. academia medicine decision. As soon as you start making income driven repayments (IDR), you start to build accrued interest. That accrued interest will capitalize if you change payment plans (i.e. REPAYE to PAYE) or decided to consolidate to a private loan (assuming no PSLF). Both lead to negative amortization or interest on interest. So, if you are not going for PSLF, this can start to be bad with your first IDR. With that said, I know academia vs. private is not an easy call when you are just entering your intern year.

    PAYE is “often” the better option because of the payment cap and tax filing options. However, REPAYE has the much better interest subsidy. The downside to REPAYE is that there is no payment cap and income is always combined.

    There is really no good way to answer your questions without a full review of both your NSLDS files. IDR also makes future planning more complicated because we have to make assumptions for income, family size, and poverty level for 10 years. What does your future spouse plan to do with her loans? Aggressive payoff? This will also affect your strategy.

    Here is an example of the more “complicated” planning that should happen with dual debt households. This was a post for a fellow financial advisor via the CFP board. I had to save it as a picture to include it.

    Moral of the story, here are a few resources for student loan advice from the White Coat Investor. I would contact one of them and get a thorough analysis completed.

    Chad Chubb, CFP ® | WealthKeel LLC
    https://wealthkeel.com/wci | Gen X & Gen Y Physicians

    #214754 Reply

Reply To: Recent Med School Graduate – Best payment plan (REPAYE vs PAYE)

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

Notifications Mark all as read  |  Clear