Updates and tips
by Michael Jerkins, MD, M.Ed, President and Co-Founder, Panacea Financial
Featured in the Fall 2023 Colorado Medicine Colorado Medicine.
Since 2020, many physicians, like millions of other Americans, have benefited from the temporary suspension of federal student loan payments due to the COVID-19 pandemic. Federal student loan payments resumed in October, meaning those millions of student loan borrowers are now required to make payments.
Do you have federal student loans? Are you ready to make payments? Here’s what you need to know about updates to federal student loan policies and programs and strategies for managing your loans.
Federal student loan changes: New income-driven repayment plan and on-ramp to payments
About 1 in 5 student loan borrowers surveyed had risk factors that indicated that they would struggle when payments resumed, according to a report from ConsumerFinance.gov.
As the payment pause ended, the Department of Education (DOE) announced an optional on-ramp approach to repayment and a new income-driven repayment plan to help borrowers that may be at risk.
Student loan on-ramp
The sudden resumption of payments could be financially overwhelming for many individuals, so the on-ramp was designed by the DOE to gradually reintegrate borrowers into the rhythm of student loan payments.
By utilizing this provision, borrowers have a one-year grace period for missed payments from Oct. 1, 2023 to Sept. 30, 2024. Those who have missed or made late payments won’t be reported to credit reporting agencies, be considered in default, or be sent to collection agencies, but interest will still accrue during this time.
If you are considering whether you should take advantage of this on-ramp, know that the White House recommends that if borrowers can pay on their loans, they should. The on-ramp is meant to help borrowers who are unable to make their payments and need time to adjust to the new expense.
New IDR plan
Replacing the Revised Pay-As-You-Earn plan, the new income-driven repayment plan, Saving on A Valuable Education (SAVE), is the most affordable plan to date and could help doctors by:
- Increasing the amount of income that is considered non-discretionary. (This could be particularly useful for residents and trainees).
- Eliminating all of the remaining monthly interest for loans when a monthly payment is made. Meaning your balance will not grow as long as you make your monthly payments – even when that monthly payment is $0 because your income is low.
- Excluding spousal income for married borrowers who file taxes separately.
Transitioning to student loan repayment
The payment pause is over, so borrowers are now transitioning into repayment. This can be difficult, but taking proactive steps to choose the best repayment strategy for your needs can make it a little easier:
- Review your loans: Be sure you understand the specifics of your loan, such as interest rates, repayment options, and potential benefits or programs available.
- Assess your finances: Evaluate your current financial standing to determine the feasibility of the repayment terms.
- Consider repayment plans: Explore the different repayment plans offered by the DOE, which will adjust your payments based on your income level.
- Seek expert advice: Navigating student loans can be challenging, especially for doctors who often have six-figure student debt balances. A student loan advisor can provide a customized repayment plan based on your unique financial needs and goals.
Managing your student loans
Don’t let the transition from forbearance to repayment overwhelm you. Panacea Financial is here to help every step of the way with Student Loan Refinancing and Student Loan Consultations built for doctors. Learn more and take advantage of CMS exclusive discounts at panaceafinancial.com.