Loan Repayment Options for Physician Assistants
As if you don’t have enough on your plate with PA school or starting your career as a medical professional, you must also worry about paying those monthly student loan payments! Fortunately, there are options to adjust your payments, from potentially lowering your monthly bill to complete loan forgiveness (yes, it’s a real thing). Today, Financial Planner, David Duquette, Founder of Impact Medical Advisors joins us to share loan repayment options for physician assistants.
Pros and Cons of Government Loans vs. Private Refinance Companies
Government loans, AKA federal student loans, are made by the government with terms and conditions that are set by law and include benefits such as fixed interest rates and income-driven repayment plans that are not typically offered with private loans.
Private loans are offered at private organizations such as banks, credit unions, and state-affiliated organizations with terms and conditions set by the lender. These loans are generally more expensive than federal student loans.
Here’s the good, the bad, and the ugly between the two…
- With government loans, payments aren’t typically due until after you graduate. Many private loans require payments while you are still in school (often a negotiable item depending on your situation).
- The interest rates are fixed with government loans while private loans can either be fixed or variable. Ideally in most situations you should steer clear of a variable loan!
- Both government and private loans are tax-deductible. However, there are income limitations that most medical professionals will exceed.
- Private loans require an established credit record or co-signer. Most government loans do not even run a credit check.
- Government loans allow deferment and forbearance, which allow you to temporarily stop making payments during difficult financial times. Most private loans will not allow this.
Student loans can be a necessary part of achieving your dream. Don’t stress; remember that your PA school loans are not “bad” debt. I know you wish it was less... However, you’ll have the benefit of a good salary and there are many programs in place to help you repay that debt.
Ways to Repay:
National Health Service Corps (NHSC)
This great organization that awards scholarships and loan repayment to qualified healthcare providers who are dedicated to working in the areas of the United States with limited access to healthcare. Under this program, all community members receive healthcare privileges, regardless of their ability to pay. Since the NHSC began in 1972, more than 50,000 health professionals have served.
The NHSC’s Loan Repayment Program (LRP) offers medical professionals the opportunity to have their student loans repaid while earning a competitive salary, in exchange for providing health care in urban, rural, or tribal communities who often have limited access to healthcare. There are two levels of funding which depends on the care level required in the community in which the provider works.
Are you eligible? To participate in the NHSC LRP, you must apply for and accept a position at an NHSC-approved site of your choosing and apply to an NHSC Loan Repayment Program. Click here for more information about service commitment options and loan repayment rewards.
The major pro of this loan option: depending on how long you participate in the program, you could pay off your entire student loan in exchange for work.
However, the only area of medicine that is approved for PA’s is Primary Care. If you want to work in a specialty, then you will not qualify.
This program is great for single individuals that are willing to move for a couple of years in a potentially less desirable location. It is likely more difficult if you are married and your spouse also needs to find a job or if you have kids.
10-Year Public Service Loan Forgiveness (PSLF)
This is a federal program that forgives up to 100% of your loan if you work in the public sector. For example, many medical professionals will work in the Peace Corps for an extended period providing medical attention to those who live in countries with limited access to healthcare.
Complete loan forgiveness may be granted after 120 qualifying payments instead of the standard 20-to-25-year repayment period. Also, there is no dollar cap on the amount of money that can be forgiven. But wait, it gets better... the IRS currently does not consider the forgiven debt as taxable income.
To qualify for PSLF, you must work or volunteer full-time for one of the following:
- A government organization at any level
- A tax-exempt 501(c)(3) not-for-profit organization
- A not-for-profit organization that provides qualifying public services
Find out more about this loan forgiveness program here.
Refinance or Consolidation Options for Government Loans
Federal student loan consolidation for medical professionals combines multiple federal loans into a single federal loan, all through the Department of Education. The result is a single monthly payment rather than multiple payments to separate entities. This option has many variables; read more about student loan consolidation.
Pros of Refinance/ Consolidation Options
- You pay just one monthly bill.
- Lower your monthly payment by opting for a longer period of repayment time (up to 30 years).
- Consolidation may allow you to become eligible for federal loan repayment programs.
- You’ll be able to switch from a variable interest rate to a fixed one.
Cons of Refinancing PA School Loans
- Because federal consolidation will not lower your interest rate and only extends the loan repayment period, you will likely end up spending more money because of additional payments and interest.
- When you consolidate your student loans, outstanding interest on those loans will become part of the principal on the new loan – meaning interest may accrue on a higher principal balance.
- You may lose certain borrower benefits such as interest rate discounts, principal rebates, or loan cancellation benefits.
Banks and lenders such as Earnest, SoFi, ELFi, and Citizens Bank (just to name a few) allow borrowers to refinance student loans as well as consolidate them during the process. With this option, the borrower may save money by replacing the existing college debt with a new, potentially lower-cost loan through a private lender. Both federal and private loans are eligible for refinancing.
To qualify, you’ll need:
- A credit score in the high 600s (ideally, even higher)
- A steady income
- A creditworthy co-signer (if you fall short on the other criteria, though this is not always the best option). Having a co-signer is risky as that person is responsible if you can’t pay the loan during a disability or death.
Income-Based Government Loan Options
Income-driven repayment (IDR) plans are repayment plans based on your income and a great solution to your high monthly loan payments – two of the most popular being Income-Based Repayment (IBR) and Pay As You Earn (PAYE).
IBR plans adjust your student loan payments based on your income. If you borrowed loans after July 1, 2014, your monthly payments will be set at 10 percent of your discretionary income and 15 percent if borrowed before that date. To qualify for IBR, you must show a high debt-to-income ratio (thanks, PA school) and that your current payments exceed 10 to 15 percent of your discretionary income.
IBR will extend your repayment period and switch from a 10-year repayment period to a 20-or-25-year term. As a new borrower on or after July 1, 2014, you can choose between the two on an income-based plan. Learn more about your IBR repayment options here.
If there is a remaining balance after your repayment period ends, the government will forgive it! However, you will more than likely pay income taxes on the forgiven balance. Federal loans are more likely to get approved for an IBR whereas private loans or loans made by parents are not.
Like IBR, with Pay As You Earn (PAYE), your monthly student loan payments are based on your income. Payments are capped at 10 percent of your discretionary income, and you will never have to pay more than you would on the Standard Repayment Plan. PAYE extends your repayment period to 20 years and forgives any remaining balance after that.
PAYE plans are more difficult to qualify for than IBR, as you must also have taken out a Direct Loan on or after October 1, 2011. Loans with a balance on a Direct Loan or FFEL Program loan that originated before October 2007 will not qualify for PAYE.
A Fulfilling Future
Loans are a part of your financial future, but I will reiterate that these are not “bad” loans. Student loan debt can be used to help launch you into a valuable and fulfilling career. Being proactive about your finances will help you repay your debt faster. Potentially, your PA school loan repayments could be forgiven. Check back soon for the next blog where we will go over different strategies on how to pay your loans back.
About the Author:
David Duquette is one of the top financial advisors in the country for medical professionals. He is the Founder of Impact Medical Advisors and partners with Westshore Financial Group in Tampa, FL to provide Physicians and Physician Assistants with Income Protection, Systematic Savings Plans, Debt Repayment Strategies, and Wealth Management. It’s not just professional for Dave; his wife has been an orthopedic PA for 10 years, so he has a unique perspective on the debt and PA career.
To schedule a Free Consultation with Dave about your unique wealth-building potential, email him at firstname.lastname@example.org, call 813-956-3633, or visit his website www.impactmedicaladvisors.com.
Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Guardian and its subsidiaries do not issue or advise with regard to student loans. Links to external sites are provided for your convenience in locating related information and services. Guardian, its subsidiaries, agents, and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services, and make no representation as to the completeness, suitability, or quality thereof.
Dave is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Impact Medical Advisors is not an affiliate or subsidiary of PAS or Guardian. Impact Medical Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. 2019-83635 Exp 08/21