Know your options for paying back student loans during residency.
Q: What are my options for paying back my student loans during my residency and fellowship?
A: The two most realistic methods for handling your loans during residency are income-based repayment (IBR) or forbearance. IBR is calculated off a household's total income and family size relative to the government established poverty line. Although the calculation is adjusted, a monthly payment is about $63 for every $5,000 of gross income over the poverty line (which depends on family size). IBR payments typically are manageable for individuals or one-income earning families that can consistently afford to pay $500 per month in the training years. An advantage to IBR is that in most cases the government will pay the interest accruing on the subsidized portion of the loans.
The other common option is to have your loans in forbearance. Although the interest continues to compound on the sum of the loans, this can be a great way to attain financial flexibility when money is tight. Electing to have your loans in forbearance keeps them current and relieves any obligation to make regular payments on what is due. Nothing about having loans in forbearance prohibits you from making payments on the loans, so many residents will actively pay their student loans while in forbearance but use its flexibility as a form of emergency reserves in the event that they have unexpected expenses and cannot pay toward student loans.
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. Answer provided by Jon C. Ylinen, a financial professional with North Star Resource Group, Madison, Wisconsin.