GL A DVISOR
A tAle of two medicAl school grAduAtes
To illustrate the potential savings available from using federal student debt relief programs such as Income-Based Repayment (IBR) and
Public Service Loan Forgiveness (PSLF), the example below compares two repayment scenarios.
Two medical school graduates finish school with $190,000 in federal student loan debt prior to entering residency. Their loan portfolios are
identical and include federal loans from the Direct Loan Program as well as the Federal Family Education Loan Program (FFELP). The
average interest rate is 7.1% as their portfolios include both Grad PLUS and Stafford Loans. They both participate in four year residency
programs and following residency, take positions in practices owned by a non-profit hospital system, making a $200,000 annual salary.
grAduAte A grAduAte b
during residency: during residency:
- Chooses to enroll in IBR and apply for PSLF - Uses Residency Forbearance to postpone making
- Monthly IBR payment is $37 during the first 2 any payments on his federal student loans during
years of residency and averages $333 residency
during the remainder of residency - His monthly payment during residency is $0
After residency: After residency:
- Her first year monthly payment is $352 and the - His debt increased by $53,584 from interest that
second year is $1,294 accrued on his loans during Residency Forbearance
- Monthly payment never exceeds $2,211 - Enters a standard 10 year repayment term in which
his monthly payment is $2,837
As A prActicing physiciAn:
- Meets the PSLF program requirements and retires As A prActicing physiciAn:
debt after 6 more years, paying a total of $134,766 - Retires his debt on the standard repayment plan,
- Has $189,655 of her student debt forgiven (tax free), with the sum of his total payments over this period
which is equivalent to $316,092 in taxable income totaling a staggering $340,390
the results
While job selection, salary, and family size could all have an
impact on the above scenario, this example highlights the
importance of fully understanding your options and positioning
your loans to benefit from these programs. As illustrated in the
chart to the left, Graduate A retires her debt after the 10 year
repayment term, paying a total of $134,766 while Graduate B
paid a total of $340,390. Thus, taking a proactive approach to
managing student debt saved Graduate A $205,624 in loan
payments relative to Graduate B.*
overview of federAl progrAms
Below is an overview of federal student debt relief programs. To learn more about these programs and their benefits for medical residents
and recent graduates, please view our free webinar: www.glAdvisor.com/medicAlpresentAtion.
• ibr: Limits monthly loan payments to 15% of a borrower’s discretionary income, and for up to three years after
repayment begins, the government will pay any outstanding subsidized interest not covered by the reduced monthly
payment. After 25 years of qualifying monthly payments, any remaining balance on the applicable loans will be eligible
for forgiveness.
• pslf: Provides tax-free loan forgiveness to borrowers after making 120 qualifying payments while working for an
eligible employer such as a non-profit health system, hospital or university. Based on recent employment trends, a
growing number of physicians will be employed by an eligible entity.
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GL Advisor is a division of Graduate Leverage, LLC. GL Advisor does not offer all services to residents of North Dakota at this time. *Repayment Calculations: Actual payment amounts and terms
may vary & are subject to the continuing existence of applicable federal programs. Federal Poverty Line income levels assumed to increase by 2.5% annually. Family size assumed to be 1. Graduate
A: IBR is utilized for 10 years & PSLF occurs after 10 years of eligible payments. Graduate B: Interest capitalizes at the end of the Residency Forbearance. Salary: First year medical resident salary
estimated at $45,000, and pro-rated for the first year. Post residency salary estimated at $200,000. Salaries increase 3% annually. Adjusted Gross Income for calculation of IBR Payment amount
assumes $3,000 of adjustments (reduction) to salary income. Tax Rates: Federal tax rate is 35% for the purpose of calculating tax savings related to deducting student loan interest payments from
taxable federal income. The taxable equivalent amount of the PSLF benefit assumes a federal tax rate of 35% & a state tax rate of 5%. Your tax rate may vary.