Overview
Loan repayment may seem too far away to even think about. However, the more you know now, the better prepared you will be when repayment begins. Once you graduate and enter your residency program you will receive a salary and your financial profile will change significantly.
You will finally be earning an income! However, your responsibilities to your lenders, who have a claim to some of this new income, will also increase.
Types of Repayment Plans
A repayment plan is a schedule that outlines the total principal and interest due, a monthly payment amount and the number of payments required to repay the loan in full. It also restates the interest rate for the loan(s), any schedule for interest rate changes if the rate is variable, the due date of the first payment and the frequency of payments. Resources providing details regarding repayment options include:
Repayment Plans for Federal Student Loans (AAMC)
Repayment estimates
Budgeting for loan payments requires a detailed review of your payment schedule to determine the amount of your monthly payments. Since some of your loans will have variable interest rates, select an average rate for your calculations. You can estimate your monthly loan payment(s) by using a student loan calculator.
Financial Hardship
Under NO circumstance should you ignore your financial problems. Open mail and return calls from your loan servicer to avoid defaulting on your student loans. Default will result in legal actions that will have severe consequences for many years, both professionally and personally.
The key is to maintain contact with the holders, or servicers, of your loans. By keeping your lenders informed of your status, and particularly of any financial problems you may have, you can take advantage of one or more of the following options to help you survive your residency years:
Grace period
Postponement of a loan repayment. It begins on the day a student borrower ceases to be enrolled at least half-time (or full-time as required by the individual school), and extends through the time the loan repayment is postponed, per the original agreement. Grace periods are automatic (you do not have to apply for them) and can last from three to nine months, depending on the original terms of the loan. Repayment begins on the day the grace period ends.
Deferment
A specified and limited period of time during which payments on principal and interest are postponed while the loan is in good standing. Deferments, in some cases, can be granted for residency and further study. Deferments are not automatic. You must apply for them, and the lender must formally approve them.
Forbearance
If you are willing but financially unable to make the required payments on a federal Stafford loan, you may request the lender to grant forbearance. Forbearance allows you to stop making payments temporarily. You may also request forbearance as an extension of time for making payments, or to make smaller payments than were previously scheduled. The lender may grant forbearance of principal, interest or both.
Upon written request, lenders are required to grant forbearance to medical residents, renewable at 12-month intervals for the duration of residency. Interest accrues during forbearance, and you are responsible for paying all accrued interest.
Your lifestyle as a student and the amount of money you borrow will have a tremendous impact on your professional and personal life for many years.
Entrance & Exit Counseling
Entrance counseling
All borrowers need to fully understand the commitment they are making before accepting a loan.
If you will receive federal Stafford loan funds, you must participate in entrance counseling before any loan proceeds are applied to your tuition account. You are required to complete online counseling that covers these topics:
- Loan Terms.
- Borrower Rights and Responsibilities.
- Deferment Options.
- Consequences of Failure to Repay Loans.
Exit counseling
All federal student loan borrowers who are graduating or leaving school are required to complete exit counseling. Exit counseling is required by law and provides important information that you will need as you prepare to repay your federal student loan(s). The school must alert lenders that you have left school and provide certain information (e.g., address) for future communication between you and the lender. You are required to complete online counseling.
