In a recent interview on July 16, 2021 with Jan Miller, nationally recognized student loan repayment expert, Jan described a strategy using the REPAYE income-driven repayment plan that would save veterinary residents thousands of dollars. With over 23 years of experience from within the financial services and student loan sector, Jan is a nationally recognized expert in finding pathways through student loan debt.
Not only does he have the expertise to manage your student loan repayment, he is also a personable and relatable advisor. Jan will get to know you through relationship building and work from an understanding of your personal dreams and financial goals. Just as you chose to specialize as a veterinarian, when it comes to your student loan repayment, you need a specialist. Jan is a highly informed student loan specialist, who keeps on top of the latest trends and knowledge in the quickly-changing student loan field.
In this article, we will give an outline-view of REPAYE, one of the four income-driven repayment plans. But, your student loan situation is unique, so the best path forward is contacting Loyall Group so we can connect you with Jan Miller, a student loan expert.
When Veterinarians Share About Student Loans
Sally graduated from veterinary school ready with $175,000 in student loan debt. Like most starting veterinarians, she was only going to be making around $75,000 her first year of veterinary residency.
Sally was feeling overwhelmed with her student loan payoff, and started talking with several other residents in her program. At first she thought she would just put her loans into deferment. With deferment, she wouldn’t have to start paying the loans back, although they would still accrue interest. But then she chatted with her friend, Mary, who shared her student loan strategists’ inside information.
Mary said her strategist had her apply for an income-driven repayment plan for her student loans, the Revised Pay As You Earn (REPAYE) plan. Her residency was unpaid, so her payments were $0 a month. And, during the first three years of the plan, during the time she was in residency, the Federal Government subsidized 100% of the accruing interest on her loans.
Sally was excited to see if this plan might work for her too. At the encouragement of Mary, she called the strategist and set up a consultation to personalize her own student loan repayment path.
What is REPAYE?
The Revised Pay As You Earn Plan (REPAYE) is the newest income-driven repayment plan for student loans. While there are three other plans [link to Loyall Blog “Understanding the 4 Income…”], each with their benefits and qualifications, REPAYE has the largest interest subsidy of them all, and is eligible to the most borrowers.
Introduced in December of 2015, REPAYE is a revision of the Pay As You Earn (PAYE) Plan. the revision was necessary because PAYE has a “new borrower” limit on it’s program. Two of PAYE’s qualifications were that:
- You didn’t have any loans taken out before October 1, 2007 AND
- You did have a Direct Loan or Federal Family Education Loan taken out on or after October 1, 2011. The Direct Loan could be a Direct Unsubsidized, Direct Subsidized, Direct PLUS, or a Direct Consolidation (with an application received after Oct 1, 2011).
These two qualifications weeded out many borrowers. REPAYE opened the doors to any borrower with any Federal Loan.
Other benefits of REPAYE are similar to the other loan repayment plans. REPAYE uses your adjusted gross income and 150% of the poverty line to calculate your discretionary income. Then it takes 10% of your discretionary income and divides that number by 12 to find out your new monthly payment.
After 20 years for undergraduate loans and 25 years for graduate loans, any remaining balance is forgiven. Because Congress passed in 2021 a bill that exempted taxes on forgiveness amounts through 2025, it is hopeful that similar tax bills in the future will help borrowers on the taxes due for forgiveness.
Who is Eligible for the REPAYE Plan
You must have a Federal Loan to qualify for the REPAYE program. Private and defaulted loans won’t qualify. The only loans that won’t qualify are Parent PLUS Loans; these loans qualify for the income contingent program.
To begin, you’ll need to apply for REPAYE. Each year, you’ll have to recertify with income verification. While payments are capped at 10% of your discretionary income, this payment does rise each year if your recertification shows increases in your income. If you are married, you’ll have to include your spouse’s income into the calculation as well.
How Can I Use REPAYE to Save Money During Residency?
New veterinary residents can save money through REPAYE’s lowering the monthly payment amount and their interest subsidy feature. During residency, you may be facing a surprising number of new costs, including insurance requirements and possibly tuition. REPAYE could significantly reduce your monthly payment.
Saving money through REPAYE goes beyond cutting your monthly premium into an affordable payment. One of the biggest factors in saving you money during residency is getting a handle on your accruing student loan interest. The American Veterinary Medical Association states that the average veterinary debt is $167,534.89, meaning a monthly repayment of $1,163 with a 6.8% interest rate. Over a loan period of 25 years, the average veterinarian will pay more in interest than principal, averaging $181,308.99.
REPAYE has the opportunity to give you a huge boost in paying your loans while saving money on interest. During the first three years of the program, the Department of Education subsidizes 100% of the unpaid interest on your loans. After the first three years, they subsidize 50% of the unpaid interest on your loans. This saves you from interest capitalization, unpaid interest that is put back as principal to your loans. So, while you make the 20-25 years of required payments before forgiveness, you will save yourself thousands of dollars.
An Example of Thousands of Dollars Saved
Let’s say that Sally’s $175,000 student loan debt has the average 6.8% interest rate. Sally’s total monthly payment for her loans over 25 years would be $1,162 per month. Her residency has a salary of $40,000/year. Sally is single, and she will be in residency for three years.
First, we can use the REPAYE formula to calculate her new monthly payment. You can find the poverty line at the Federal Register.
$40,000 – $19,320 = $20,680
$20,680 * 10% = $2,068
$2,068 divided into 12 months = $172.33/month
She will already be saving $990 per month in the REPAYE plan – $11,880/year. Let’s take a look at her interest subsidy to see how much more she will save.
Since $172/month will not pay back all his interest, the Department of Education will pay the unpaid interest for the first three years, then half her interest for the remainder of the time Sally is in the REPAYE program. Based on these charts by DoctoredMoney, Sally could end up saving between $3,755-$4,505 in interest. Her interest rate will be cut to between 4.00-4.75% instead of 6.8% for the time she is enrolled in REPAYE. These are significant savings each year!
Should You Apply for REPAYE? Get a Strategist for Personalized Counsel
Everyone’s student loan situation is unique. Your life is personal to you – your dreams, family size, income levels, career goals. It might be tempting to try to use an online income-driven repayment calculator to find out how much you can save on REPAYE. But, we wouldn’t recommend it. An online calculator won’t assess your goals or individual needs and desires.
We suggest connection instead. Connection with an experienced counselor, who will walk with you through your journey and create a strategy that aligns with your goals. To understand if REPAYE is right for you, and if you qualify, contact Loyall Group today. We will connect you with Jan Miller, a nationally recognized expert waiting to listen to your story and guide you on the path that is right for you.