Student Loans and Challenges
Facing Medical Students
Prepared by:
Joshua Stanton, MSIV
New York Medical College
Objectives
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Loan Types
Consolidation
Forbearance and Deferment
20/220 and IBR
Problems with IBR
Solutions
Student Loans
• Financial aid packages that are required to
be repayed and often acquire interest
while open
• 3 Primary Types:
– Stafford Loans
– PLUS Loans
– Private Education Loans
Stafford Loans
• Stafford loans are federal loans made directly to
the student.
• These loans are then further subdivided into
Subsidized and Unsubsidized
– Subsidized loans accrue interest that is paid by the
Federal government.
– Unsubsidized loans accrue interest for which the
student is responsible.
• There are lifetime limits on both Subsidized
($65,000) and Unsubsidized ($224,000) loan
PLUS and Private Loans
• PLUS - Federally sponsored student loans
– Supplemental to Stafford
• Private loans can be also bridge gaps
– Subprime crisis
– Decline in the economy
– Decreased lenders providing these loans
With Graduation Comes so
Many More Problems
Loan consolidation and other
avenues of repayment
Loan Consolidation
• May have multiple educational loans to pay
• Consolidation allows a student to combine
several loans into one big loan
• Consolidation is available for most federal loans
– Some restrictions do exist:
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Students cannot consolidate while attending school
Married couples cannot consolidate together
Loans can be consolidated only once
Additional loans must be added to be reconsolidated
Deferment and Forbearance
• Deferment – postponement of payments with
interested paid by the government:
– Graduate program
– Unemployment
– Economic hardship
• Income-Based Repayment became law in 2008
that made deferment near impossible
• Forbearance – postponement of payments with
interest accruing to the student
20/220 Pathway and the
Income-based Repayment
• 20/200 Pathway was the old system
– Resident qualified for deferment if they were:
• Employed full time
• If their debt burden is greater than 20% of their income
• If their income (minus their debt burden) is not greater
than 220% of the federal poverty level.
• As of July 1, 2009 the 20/200 pathway was
replaced by the Income Based Repayment (IRB)
system.
Income Based Repayment (IBR)
• Requires payments based on a percentage of
income
• Rationale – Encourage payment on loans and
prevent large debt burden
– Medical school unique with low-paying residency
– Not considered in blanket approach passed to cover
all graduate programs
IBR 10 Year Plan
• Once in Residency:
– Work for non-profit entity for 10 years
– Pay IBR calculated payment for 10 years
– After which, the remainder of loans are forgiven
• The good news: Residency, Fellowship, and
most hospitals count as non-profits.
• The Bad news: Once an attending, have to pay
on the 10 year plan, thus limited utility
Loans Eligible for IBR
• Federal Direct Unsubsidized Stafford
Loans
• Federal Direct Subsidized Stafford Loans
• Federal Direct PLUS Loans for parents
and grad/professional students
• Federal Direct Consolidation Loans
Concerns and Solutions
• The average American medical student
graduates from school with 126,000
dollars
• Average Resident salary is 46,000
• Even minimal payments difficult for some
residents in urban settings
Possible Solutions and Objectives
• Permanent reinstatement of the 20/200 Pathway
• Expansion of the Hardship Deferment Criteria
• Return of in-school consolidation
• Increases in federal grant aid
• Reduction of IBR mandated repayment
percentage
Conclusions
• Graduate Education is Very Expensive
• Loan Repayment options are no longer
as favorable
• IBR System can be very challenging
for residents
• New systems with better adaptability to
individual conditions will be needed
Online Resources
• Calculator available to estimate amount of IBR
payment and borrower eligibility:
www.studentaid.ed.gov
• NSLDS available to borrower to obtain complete
Federal student loan information www.NSLDS.ed.gov
Resources for you Decision Making
1. National Student Loan Data Systems for Students
http://www.nslds.ed.gov
2. Federal Direct Loan Home Page
http://www.ed.gov/offices/OSFAP/DirectLoan
3. Free Application for Federal Student Aid (FAFSA)
http://www.fafsa.ed.gov
4. Association of American Medical Colleges
http://ww.aamc.org
5. American Medical Association http://www.ama-assn.org
6. The Smart Student Guide to Financial Aid
http://www.finaid.org
7. Sallie Mae http://www.salliemae.com
8. Nellie Mae http://www.nelliemae.com