If you were at ASDA’s National Leadership Conference last month, you saw my colleague, Steve Swan, speak about debt management. As a refresher, we will go through some of your options for student loan repayment here. The following are the four most common methods for managing student loan debt upon graduating from dental school:
- Standard repayment: This is how you will repay your loans if you do not choose another option. The standard repayment period for most loans now is 10 years.
- Income Based Repayment: Your monthly payments are based on your income and family size. Payments are capped at a percentage (10% or 15%) of your “discretionary income” each year. The length of the loan is limited to 20-25 years and any remaining balance at the end of the repayment period is “forgiven.” Be careful–most successful dentists will make too much income for the term to be carried out to 20-25 years and therefore will only add years of extra interest to their payments without realizing any debt forgiveness.
- Public Service Loan Forgiveness Program (PSLFP): Under this program, your debt is forgiven after 10 years of service with a qualifying organization/employer and after making 120 “qualifying” payments. The forgiven debt is not included in taxable income. Note that if you qualify to use Income Based Repayment, these payments do qualify toward the 120 repayments required by the PSLFP.
- Refinancing: Many companies, such as Sofi and Earnest are now doing a great job of refinancing student debt. If you have a good job with steady income, companies like these are offering lower interest rates and no fees, along with death and disability forgiveness. However, once you choose to refinance (usually at a much lower rate), you lose the ability to use income-based repayment forever on the loans you refinance.
If you’re looking for more information on loan repayment, check out ASDA’s webpage on loan repayment plans at ASDAnet.org. Have questions? Ask your student loan questions in the comment box below!
~Megan Mathers, J.D., Mathers Law