Student Loans Books: Free Forever

When I began the project that eventually resulted in my two books on student loans, my long-term plan was to sell them temporarily, recoup some of the incredible time (and opportunity cost) burden of putting them together, and then eventually release them for free.

I’m happy to say that day is finally here.

From now on, you can always download the Kindle, epub, and pdf versions of Medical Student Loans and Dealing with Student Loans for free right here.

To receive your copy, you’ll need to sign up for my email list, and if you’re not interested in actually hearing from me again (which is totally fine), then just hit the unsubscribe link in the very first line of the email. (Okay, I admit I still haven’t actually started my newsletter yet, so I don’t have any gauge of how good it will be; the plan is quarterly [maybe?] starting 2019).

In order to subsidize the cost of giving these downloads away, I’ve brought on a sponsor. I want you to know that even though there will now be a single ad on a single page of this site (up from the current number of zero), there is no absolutely no tracking or cookies or anything of any kind. Ever. Because that makes the internet worse.

When I thought about who to bring on for the first sponsor, I may have left some cash on the table, but I specifically did not want to bring in a student loan refinancing company. While I have a relationship with most of them, these books are not about refinancing. That’s one chapter, which is a topic frankly not that interesting nor confusing, and I have no interest in endorsing one company over the nearly identical others within the context of this meticulously researched text, even by semi-passive association. So I instead reached out to Larry Keller.

If you ever read any of the sites in the proliferating physician finance blogosphere, you’ll certainly have seen Larry’s face, as he has done a ton to support doctors writing (about money) online. He specializes in disability and term life insurance—the former every doctor absolutely needs and the latter basically every doctor with a family needs—and he’s one of the good guys: an independent agent who knows what he’s doing and isn’t going to try to sell you whole life insurance. I also picked Larry for the first major sponsor of this site because he’s actually my insurance agent, so I can honestly recommend him without reservation.

But most importantly, I’m happy these books are free for the long term. I wrote them first and foremost to help as many people as possible, and making them free forever is the biggest part of that. While they say “student loans” in the title, these are also a good introduction to a decent chunk of personal finance for young doctors and other professionals.

So, learning about student loans and basic personal finance will cost you a few hours and not a dime. And, if you’re on the fence about the time, let me leave you with a quote from a recent review by Dr. James Dahle, author of The White Coat Investor:

[Dr. White] does a fantastic job though; I wish I had written the book. But more than that, I wish every medical school required it to be read before you could receive your first student loan.

Download your copy today.

PSLF & Double Part-Time Employment

Qualifying employment is a critical component to the PSLF formula:

Eligible Loans
+ Qualifying Payments
+ Qualifying Work
x 120 months (10 years)
= Public Service Loan Forgiveness

But most folks haven’t considered a nuance in the PSLF law that currently applies to very few people but could easily apply to more. Part-time work counts, so long as you have enough of it to make a “full-time” equivalent.

From the official PSLF FAQ:

I’m working for more than one employer during the same period of time, but I’m not employed by either on a full-time basis. Will my combined employment be considered full-time for PSLF?

Yes, as long as the combined number of hours you work for each employer equals at least 30 hours per week. Each employer must be a qualifying employer for the employment to be included in determining whether you are employed on a full-time basis. For example, if you worked for one qualifying employer for 10 hours per week and you concurrently worked for a second qualifying employer for 20 hours per week, this would meet the 30 hours per week requirement.

 

That combined 30-hour threshold is a key facet. Because normally (emphasis mine):

For PSLF, you are generally considered to work full-time if you meet your employer’s definition of full-time or work at least 30 hours per week, whichever is greater.

If you are employed in more than one qualifying part-time job at the same time, you may meet the full-time employment requirement if you work a combined average of at least 30 hours per week with your employers.

 

There are plenty of folks working 30 hours or more per week but who are still considered “part-time” by their employer. An 8 or 9-hour workday with a 5-day work week is 40 or 45 hours respectively. A part-time employee working 80% at four days a week might work a 32 or 36 hour week: already enough hours to theoretically qualify for PSLF.

This suggests that a lot of people working part-time for a nonprofit employer may still qualify for PSLF if they can find a small amount of additional part-time work to get themselves over the 30 hours per week hump.

Put another way, not everyone who needs to or wants to work part-time needs to abandon PSLF.

And, not everyone needs to work “full-time” in order to achieve loan forgiveness.

Token efforts

To double down, if a person’s main “part-time” work is already 30 hours per week, then literally any paid employed qualifying position should automatically make the person qualified because they already have the raw hours they need.

Of critical importance, there are no specific compensation stipulations regarding what constitutes qualifying part-time employment. It is the number of hours worked in a paid position that matters, not how well (or poorly) paid you are.

At this point, the gears may be turning in your head, and it’s worth noting: this is not actually a loophole. But it is a potential gamechanger for how people look at both their main job and evaluate potential additional opportunities.

On a related note, there is also no rule in the PSLF law that states that you can’t also have a for-profit job. What you need is to have enough qualifying nonprofit work. These are not mutually exclusive.

There’s also no rule that both positions have to be related in any way. You could be a doctor and also work at a food bank.

You need either a full-time qualifying job or any combination of 2 or more jobs that hit 30 hours/week worked.

Too much money?

Ultimately, the more money you make, the more money you pay toward your loans within an income-driven repayment plan and thus the less money you will have forgiven after your 120 payments. If you’re constantly in a negative amortization scenario, then it probably won’t matter, but if IDR repayments were already making good progress in paying down your loans, then sometimes extra work can change the calculus.

Double employment is a great way to pursue an unsatisfied passion while essentially having the government pay your salary indirectly through loan forgiveness. But if you are fortunate enough to work at a well-funded non-profit and earn too much money with your second endeavor, it may make loan forgiveness more expensive than just paying off the loans yourself.

Start your own non-profit

You could (theoretically) even create your own qualifying nonprofit organization and work for it part-time to get over the hump (you could also theoretically do that full-time too obviously). Surprisingly, the barriers to creating your own 501(c)(3) organization are actually not that cumbersome, and the PSLF rules even say that it is OK to certify your own employment eligibility if you’re the only person who can do so.

Again, from the FAQ:

I’m the only official who can certify my employment. Can I certify my own qualifying employment?

Yes, you may certify your own employment if you are the only employee of the organization who can do so. However, we will request additional documentation concerning your employment, such as earnings statements, IRS W-2 forms, your application for tax-exempt status, or any other documentation required to be filed with the IRS on a periodic basis regarding the activities of the organization.

Note that if one were to try this potentially super shady solution, it would be highly prudent to also keep extensive records including a detailed time log to document your work hours and output. People absolutely should not be trying to convert their for-profit personal businesses into fake non-profits, but it does mean that you can be rewarded for making the world a better place.

Nonetheless, while there are clearly honest and legitimate ways to do this and achieve PSLF; it’s undoubtedly ripe for abuse. I think it’s safe to say that anyone who plans on certifying their own qualifying employment–even in conjunction with a more traditional job–is setting themselves up for a lot of questions and some serious bureaucratic hassle. Annual certification forms would be an absolute must. Running a real non-profit is a must. And frankly, given the number of people who are likely to be caught with fake paper-only nonprofits created for personal gain, it’s probably not a great idea.

A hypothetical example

I work as a neuroradiologist full-time for a non-qualifying employer, but for purposes of discussion, let’s say I worked 80% at a qualifying academic institution. In this scenario, I would easily surpass the 30 hours/week needed for PSLF, but since I’m part time, my main job won’t qualify on it own.

Conveniently, since 2009, I’ve been quietly editing and publishing the longest-running exclusively Twitter-based publication for fiction in the world. It’s called Nanoism, and it’s a literary magazine that even pays “professional“ rates to authors. This effort costs money and time and doesn’t earn me a penny. It’s already functionally non-profit in the sense that the only time money changes hands is when I pay writers or run contests to benefit charities (which I admit I haven’t done in a while).

Literary organizations like this are perfectly suited for 501(c)(3) nonprofit status and there are tons and tons out there, and though it would take some nontrivial hassle to file for this, I could do so. With official nonprofit status, suddenly the spare time I’ve been spending running a strange little Twitter-based literary venue would actually go toward loan forgiveness, which could help me redouble my efforts, expand the organization, plan more educational outreach, run more charity fundraising events, finally publish the anthology I’ve been promising for the past decade, etc. It would go from an unusual hobby to an unusual hobby that indirectly secures my financial future.

Since (in this example) I work enough part-time hours already anyway, a massive additional time commitment is unnecessary. Just enough that my organization is a real, functioning non-profit (which–let’s face it–would probably still end up a massive additional time commitment, but you see what I’m getting at here). Making a legit would also probably entail bringing in more people and growing the organization. A one-member non-profit might look mighty suspicious to the government with hundreds of thousands of bucks on the line.

If you have a skill or a craft and are on the cusp of a qualifying gig for PSLF, I’m not necessarily suggesting that starting your own non-profit is the way to go, because it’s not. For most people, really, it’s almost certainly not. But I am suggesting that you look for ways to use your skills for deserving organizations if it might make all the difference. You don’t need a big salary; you just need to be a paid employee.

Take home

A non-profit side-hustle could be more profitable than you’d think.

For people working full-time just for PSLF, keep in mind that you may not be quite as tied down as you might think.

Yes, PSLF is really happening

People often ask if I personally know anyone who has gotten their loans forgiven via PSLF since the first crop of folks became eligible in October 2017. It’s a reasonable question, but it’s also the wrong one.

Because, despite the legitimacy of the PSLF program, there are very few people who could have actually benefitted in the initial crop. This stems from the fascinating(ly terrible) way the program was rolled out to discourage the older generation of folks who were already in repayment to utilize it.

Nonetheless, the proof that PSLF is real has arrived. The Federal Student Aid office recently released their new student loan report (conveniently summarized here):

The Public Service Loan Forgiveness (PSLF) Program, which was established under the College Cost Reduction and Access Act of 2007, permits Direct Loan (DL) borrowers who make 120 qualifying monthly payments under a qualifying repayment plan, while working full-time for a qualifying employer, to have the remainder of their balance forgiven. October 2017 was the first month that borrowers could potentially qualify for loan forgiveness under this program, provided they met all program requirements since the inception of the program.

As of June 30, 2018, approximately 28,000 borrowers had submitted almost 33,000 applications for loan forgiveness under this program. Of the approximately 29,000 applications that have been processed, more than 70 percent of them have been denied due to not meeting the program requirements (such as having eligible loans, 120 qualifying payments, or qualifying employment). In late May 2018, FSA initiated outreach efforts to those borrowers who may potentially qualify for the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) opportunity, which provides limited, additional conditions under which borrowers may be eligible for loan forgiveness if some or all of the Direct Loan payments were made under a non-qualifying repayment plan for PSLF.

Another 28 percent of PSLF applications were denied due to missing or incomplete information on the form. These borrowers have been advised to submit a complete application so a determination of their eligibility can be made. Almost 300 applications have been approved by the PSLF loan servicer as meeting all program requirements, resulting in $5.52 million in processed discharges for 96 unique borrowers.

99% rejection sounds terrible, but it’s actually exactly what you would expect if the feds were honoring the specifics of the program as advertised. Recent graduates—who essentially all hold qualifying loans—tend to focus on the qualifying employment aspect of the rules. But for the folks who would theoretically have been eligible in 2017, the lynchpin was really qualifying loans and, to a somewhat lesser extent (see below), qualifying repayment plans.

Allow me to explain.

The PSLF formula:

Eligible Loans
+ Qualifying Payments
+ Qualifying Work
x 120 months (10 years)

= Public Service Loan Forgiveness

 

The Loans

“Eligible loans” means Direct Loans. Direct loans are given “directly” by the government, which is what all recent students use who don’t take out additional private loans. Back in 2007, that wasn’t the case. Students received loans from private banks that were “guaranteed” by the government under the FFEL program. During the financial crisis in 2008, the government stepped in and used the Direct Loan program to provide most educational funding. The FFEL program was completely shuttered in 2010.

Anyone in repayment during the late 2000s or finishing school near 2007-8 would not have had eligible loans without taking additional steps to consolidate them into a Direct consolidation loan. No one who didn’t hear about the program back then and read the fine print would have done the right thing. Huge swaths of people who thought they were eligible and applied for PSLF were denied for exactly this reason. They were never eligible.

If any of these folks had filed a single PSLF employment certification form, they would have found out the news and been able to change course accordingly.

Take home point: loan forgiveness is too important to not plan.

 

The Payment Plans

This is the second reason for denial, but at least some of these folks will win out eventually.

“Qualifying payments” are full, on-time, payments while utilizing a qualifying repayment plan: IBR, ICR, PAYE, REPAYE, or Standard. The Extended and Graduated plans do not count. IBR, the first of the new generation of income-driven repayment plans, started in 2009. So again, by definition, the folks making payments toward PSLF back in 2007 and 2008 couldn’t have even been using it yet (the lucky ones were using ICR). Unfortunately, many applicants were on the graduated or extended payment plans, which—again—do not count. 

Luckily, Congress decided this technicality was too cruel and passed a temporary $300 million PSLF expansion to help people denied for this on a first-come-first-served basis.

In order to benefit from the new law, you need to apply to PSLF and also file a TEPSLF request.

Since the government doesn’t actually hold the FFEL loans, there is essentially no chance of them extending anything extra to the folks denied for having the wrong kind of loans.

 

The Future

The initial disappointment and underwhelming numbers from the initial stages of PSLF were an inevitability.

Over the next few years, the numbers of successful applicants will skyrocket. Not accounting for undergraduate borrowing, medical students graduating in 2012, for example, would almost universally have qualifying loans and been using qualifying repayment plans. Lawyers from 2011, some masters degree holders in 2009 and 2010, etc. Folks whose schooling began ten years ago will be part of a cohort that didn’t require the same big steps to have been made correctly early on that these initial failures succumbed to.

We’ll see a small uptick this year and then big rises thereafter. This is only the beginning.

Resident Refinance: Laurel Road vs LinkCapital vs SoFi vs Splash vs REPAYE

Let’s assume that you are a graduating medical student or resident and plan to actually pay off your loans (i.e. not attempt to qualify for PSLF.)

But before we assume that, let’s remember that PSLF makes the most sense for people destined for academic or government (city/county/state/federal) or with long residencies and big loans.

So, assuming you need to pay off this debt yourself, your goal is to get the lowest interest rate possible to reduce the growth on your loans while having a monthly payment that is feasible as a resident.

Low-debt residents can refinance with any company. If you owe less than you’ll make as a resident, you won’t need a special program. If you’re an resident who owes somewhere near $200k while making $55k/year, then your options are likely limited to the federal government options and the four private companies who offer medical resident programs with reduced monthly payments during training: Laurel Road, Splash FinancialSoFi, and LinkCapital

Unfortunately, all special resident programs offer less good rates (at least during the training period) than refinancing as an attending, but for some borrowers, you can still save some real money. On the plus side, via the referral links on this page, most offer welcome bonuses.

 

Laurel Road

Laurel Road gets it. Back in 2015 when the company was just called DRB, they were the first to create a student loan refinancing program for medical residents. The deal hasn’t changed much since then.

Post-match MS4s and all residents are eligible for Laurel Road refinancing. The monthly payment is set at $100/month regardless of your income during residency/fellowship, and then switches when you finish training.

There is no maximum number of training years, and you can continue the reduced payment up to 6 months after finishing training to help get you through the fresh start.

The welcome bonus is $300.

 

Splash

Splash Financial is unique among the four programs as being a true forbearance alternative. The required monthly payment is exactly $1 for up to 84 months (7 years) of training. While most residents should not be forbearing and should hopefully be able to find $100 of flexibility in their monthly budget, many feel pinched and forbear anyway. While a lifestyle that requires forbearance is far from ideal, Splash is the only company that makes forbearance completely unnecessary in your quest to get a better rate.

Note, however, one sneaky wrinkle: while Splash offers the same 0.25% autopay discount as everyone else, the discount doesn’t apply to the $1 trainee payment period. So you’ll need to add that back on to compare apples to apples during residency.

Splash offers a $300 bonus for loans above $30k.

 

SoFi

SoFi is the biggest player in the student loan refinancing market, and they’ve grown and grown into a big corporate entity that offers all varieties of personal loans, mortgages, etc. Without that personal touch and scrappiness of the new companies, it took SoFi a long time to make a resident product, and they didn’t do anything creative.

SoFi offers residents $100/month payments for up to 4 years of training. You are eligible as a post-match MS4, but only if your training is 4 years or less in duration. The total reduced payment period is actually up to 54 months (with the final 6 months for the transition to becoming an attending).

If you apply to SoFi in your final year with a signed contract, you’ll automatically get the attending rate instead of the resident rate. Oddly, you will be placed in a mandatory forbearance during that year so that you won’t be able to get an autopay discount during that time.

The welcome bonus is $100.

 

LinkCapital

LinkCapital was the second company to join Laurel Road in offering a resident-friendly program. Link’s program is only available to PGY2’s and above, so graduating students and interns are not eligible. The required monthly payment is a bit lower at $75/month.

Unlike Laurel Road (but like SoFi), Link offers trainees in their final year to qualify for the attending rate with a signed employment contract. Unlike the other companies, Link also tells you your training and attending rates, and when you finish training, your rate automatically goes down. With other companies, you’d likely be on the lookout to refinance again.

As of August 2017, LinkCapital is no longer offering welcome bonuses.

 

IDR: REPAYE & PAYE

I’ve discussed REPAYE and even compared REPAYE/PAYE more at length previously.

With PAYE, your rate is your rate unless you have subsidized loans from college, and so comparing what you currently have to what the refinancing industry can offer is easy.

With REPAYE, there is the 50% unpaid interest subsidy to complicate (but improve!) matters. In short, the government forgives half of the interest that accrues each month that remains unpaid after applying your scheduled calculated payment. This effectively reduces your interest rate, in many cases substantially (especially if you’re single or married with a non-working spouse).

An example:

Loan: $200,000 at 6.8%
REPAYE payment as a single resident making $50,000: $270/month
Annual interest accrued: $13,600
Annual interest paid: $3,240
Annual interest unpaid: $10,360
Amount forgiven: $5,180
Effective interest rate: 4.2%

The more you borrowed and the less you make, the bigger your subsidy will be and the more it will lower your rate

If you’re married and your spouse earns income, the less your subsidy will be and the less it will lower your rate.

Also, note that REPAYE can be a particularly good deal for your intern year if you play your cards right. Even if refinancing is a generally good choice for your situation, unless you had substantial income as a family during your final year of school, private companies are going to have a really hard time beating the feds if you consolidate and apply for REPAYE right after graduating.

 

Summary & Verdict

All of these companies offer no-cost refinancing with zero fees. Picking a shorter term will result in lower rates (note: the term doesn’t kick in until you become an attending and start true repayment). A couple things to keep in mind: if you pay the minimum every month, you will definitely be in a negative amortization situation, likely even more than you would be using a federal plan (with their higher monthly payments). Second, unpaid interest will also capitalize at the end of the training period, so it would behoove you to try and reduce some of this accrued interest prior to graduation.

Most companies also offer referral bonuses where you can get some cash back with your refinance. This means that while you can never go back to a federal repayment plan after refinancing, there is literally nothing stopping you from refinancing multiple times, rate hunting, and even collecting multiple referral bonuses.

Assuming you have the financial flexibility to afford all four plans, the only reason to completely exclude a company is if their plan doesn’t conform to your current PGY status and training duration. Getting preliminary rates is a quick 2-minute process that is a soft credit check that won’t affect your credit. It’s only once you move forward with getting a final rate and the formal (but still short) application process that involves a real (“hard) credit check; even then, multiple checks for the same thing within a short period of time are considered rate shopping and should function as a single temporary hit. Applying to all of the options that are feasible is the best way to guarantee a good rate. Even the complete applications don’t take more than half an hour or so.

Most importantly, however, is to make sure that your effective REPAYE rate isn’t as good if not better than what the private industry can offer you. Be aware that advertised rates almost universally contain a 0.25% autopay discount, so make sure to account for that when comparing your federal rate. In many cases, REPAYE offers the straight up best rate for someone in training (particularly if single and not moonlighting substantially). Most residents should be in REPAYE in training and then refinance after training or only once they’ve signed a contract for a job that is not PSLF-eligible.

A few docs talk about early career financial mistakes

A bunch of physician finance bloggers (and me) were asked to weigh in on early career financial mistakes for MDLinx’s relatively new PhysicianSense blog.

Everyone else said don’t buy a house and don’t try to beat the market. I largely agree with both of those sentiments.

I’m not exactly a finance blogger, even though I write about money with some frequency. My answer was instead largely about being purposeful with your time.

Many of us spend our lives reacting. We spend our days constantly reacting to crises, patients, and bureaucracy at work. We react to short bursts of free time or moments of boredom with our phones and social media. We consume media and television like we’re hardwired.

And when faced with financial troubles like student loans or other financial goals, we often react by either shutting down and ignoring our problems or by becoming obsessed with dollars and cents. There’s nothing wrong with moonlighting or trying to carve out some side income–I still do both routinely. But it’s also important to step back and see if and how your efforts are affecting your mood, health, and family.

The need to be cognizant of how you spend your money should be self-evident. The need to be cognizant of how you earn it is less obvious.