The topography of the student loan repayment landscape is hardly a prairie. The ups and downs facing physician borrowers—and how to deftly navigate them—was a recent topic of conversation in an episode of “Financing Ambition,” a podcast by Laurel Road.
The podcast featured insight from Chris Walters, who heads up GradFin, a brand of KeyBank along with Laurel Road, which has been selected by the AMA to help you navigate your financial future. Here’s a look at some key takeaways from the episode.
The under-the-radar move
Announced nearly a year ago, the Biden administration’s plan to cancel up to $20,000 in student-loan debt for borrowers who earn $125,000 a year or less, or $250,000 or less for couples who file taxes jointly, was effectively killed after a 6–3 Supreme Court ruling in the case of Biden v. Nebraska.
While the loan forgiveness executive order generated all the headlines, proposed tweaks and changes to income-driven repayment (IDR) plans could be of major benefit to millions of borrowers, including physicians.
“In January, actually, there was a proposal by the administration that would expand IDR plans, making it easier for people to get relief, reducing how much—especially undergraduate borrowers—they would have to pay on their student loans. A one-time adjustment to income-driven repayment plans could save thousands for 9.2 million borrowers.”
The administration has also recently proposed a new SAVE payment plan that could offer lower monthly payments to IDR borrowers.
Consider a consolidation
Borrowers with Federal Family Education Loans (FFEL), a program that no longer exists, also have an opportunity to gain student loan forgiveness relief. FFEL loans were discontinued during the Obama administration. They are technically private loans that are backed by the federal government. With some maneuvering, borrowers can make these loans count toward income-driven repayment plans, Walters said. To qualify for the income-driven repayment option, borrowers with FFEL loans must pursue direct consolidation.
“It’s not a private refinance; it’s a federal consolidation that changes the underlying nature of the loan,” Walters said. “It would change it from an FFEL loan or a Perkins Loan, and it would turn it into a federal Direct Loan. And anything that’s a federal Direct Loan is held by the Department of Education. And really, the impact of that is huge.
“The urgency here is folks should really look at your loans, figure out if you have the right or wrong loans,” he said. “If you have the wrong ones—meaning FFEL or Perkins—you have this opportunity right now to consolidate and make them eligible for relief and for forgiveness.”
A limited window
The one-time adjustment that allows FFEL, Perkins, or Health Education Assistance Program (HEAL) loans to qualify for income-driven repayment is limited, so quick action is prudent, Walters said. Eligible borrowers currently have until the end of the year to apply for this one-time adjustment.
“There is a sense of urgency here,” he said. “So, first thing to do really is, is to look deeply at your loan types to see if you have these loans that are eligible. Also, if you [were] in forbearance periods for a long period of time or economic hardship deferment or [in] military deferment.”
One key step is to go to the studentaid.gov website and download your loan file. For those looking to gain a better understanding of their situation, you may want to contact your federal loan servicer. Laurel Road is also offering free consults to borrowers to get a complete picture of their forgiveness and repayment options.
“Everyone has unique situations,” Walters said. “I like to say when we look at your Student Aid file, it’s like your fingerprint. Everyone has a different Student Aid file. It contains all the history of your loans when they were disbursed, any forbearances, any deferments. So that’s what I would do.”
