Student Loans & The CARES Act

The new CARES act pauses student loans for six months without interest. A few important facts:

  • This is a pause (administrative forbearance) until September 30, not a typical forbearance. No capitalization will occur.
  • You don’t need to do anything. It’s automatic for those currently in IDR.
  • These $0 “payments” count for PSLF and long-term IDR loan forgiveness.
  • You can call your servicer to request a refund for any payments made on March 13 or after.

There are a bunch of folks going for PSLF asking if they should pause their auto-payments to avoid making an extra unnecessary payment. Yes, it’s possible you could get charged and then subsequently reimbursed if you have an early April payment as the servicers try to rapidly implement the law. Folks are already reporting that their payment due amounts are now showing $0, and the servicers have until April 10 to implement the new law. It’s also already been stated that all benefits will be applied retroactively, so delays will not impact you in the long term–but you being impatient and foolhardy could.

Personally, if going for PSLF, I would absolutely not make any active changes to save money upfront unless you absolutely need to cashflow-wise. I am deeply suspicious in situations like these that the more you mess with the more likely it is for something bad to happen, requiring more work on the tail end. PSLF requires on-time monthly payments; if you call and get placed on a forbearance due to trying to pause payments, then you will not be in repayment status and these months may not count. Or, trying to manually pause autopay and then make a manual payment at the last second if you don’t see an account update is a massive hassle and places an additional burden on a company that was already strained by its day to day operations before the pandemic. I would just wait and let the servicer do their job.

Outside of the CARES act itself, if you’re PSLF bound and your income has fallen substantially, consider recertifying your income now with pay stubs to lock-in lower payments for when the $0 period expires.

What is the impact?

For most of the non-PSLF-bound, it’s just a pause. You can choose to not make payments for six months (or more, it could always be lengthened later), and there will be no penalty at all. Nice flexibility, but it doesn’t really change the natural history of your loans unless you choose to continue making payments during the pause. If you are fresh off of a capitalization step like consolidation or the end-of-grace period, then you have no unpaid accrued interest and so any optional payments you make will go straight to the principal, which is neat.

For PSLF, how much this will save you in the long run depends on where you are in the repayment process.

For graduating medical students:

Many folks consolidating at the end of school will earn $0 payments for their first year, so your monthly payments will not change. There will be no interest accruing for a while, but this will only be relevant should you eventually take a non-qualifying job. So, basically, it’s quite possible this will have literally no impact on you. For anyone considering PSLF, it’s just another reason to consolidate ASAP, because a full six month grace period could be an even bigger waste.

For those certain they don’t want PSLF, there is now a potential reason to wait to consolidate. A 6-month grace period after graduation will be longer than the CARES act 0% period (at least for now), so waiting until the very end will result in a token amount of increased accrued interest during the last couple of months that will then capitalize. But if you wait you can eek out extra months of $0 payments if you wait to consolidate because you’ll start your IDR cycle later and get a full year of low payments based on last year’s taxes (stacked after the CARES act instead of overlapping it). Ultimately that would result in a full year of the optimal unpaid interest subsidy in REPAYE, likely saving you real money. While waiting does make sense outside of loan forgiveness, I ultimately caution most residents with average or high debt to simply rule out PSLF early in residency.

For residents:

You will save a small amount of money because your monthly payments are generally low to begin with. Certainly not going to hurt, and it’s a good chance to take that extra cash and pay down any high-interest (e.g. credit card) debt you may have previously been unable to make progress on.

For attendings:

Attendings in PSLF will save a lot of money. An average physician debt holder capped at the 10-year-standard could easily save $12-18k thanks to six $0 qualifying payments during their high-paying attending years.

Unintended Consequences

As always, the macro and micro don’t match the way politicians or most people would intend or anticipate. Payment pauses are just the minimum viable cashflow bandaid, a step that will ultimately do little for most borrowers nationwide, who already struggle with student loans at baseline with a 10%+ delinquency/default rate.

Meanwhile, while physicians and other high-earners are certainly not immune to job loss from the COVID pandemic, the actual monetary benefits of this policy disproportionately benefit those with large loans and large incomes.

It’s just not enough.

It’s not enough to prevent an absolute economic crush on young Americans, especially if they are largely left behind in the recovery like they were in 2008.

Student loans–like so many other critical issues from our infrastructure and healthcare system to campaign finance and legislative reform–are crying out for a cohesive, coherent, and complete overhaul, and the developing public health and economic disaster should be a wake-up call.


TenderCrisp 04.01.20 Reply

Had been looking out for your post on this. Thank you!

Steve Jonah 04.02.20 Reply

I think you make a very strong argument as to the reason student loan interest will not capitalize based on the CARES act.

I am still concerned.

How confident are you of this and is there any additional authority on this – or is this just your sound logic?

Steve Jonah 04.02.20 Reply

Offical government website on student loans states:

UPDATED: I understand that my loans will be placed in administrative forbearance, temporarily suspending my monthly payments. How long will the administrative forbearance last?

The administrative forbearance will last from March 13, 2020, through Sept. 30, 2020

Ben 04.03.20 Reply

Admin forbearance is not necessarily the same a voluntary forbearance, the former is on the servicers. The language of the law called it a “payment suspension” purposefully. This whole thing is automatic; it’s extremely hard to imagine the government essentially forcing all borrowers into an automatic payment suspension to help them only to secretly plan to screw them half a year later.

The servicers have until April 10 to deal with implementing the law. I imagine final clarification will happen by then.

I think it will ultimately be fine. Additionally, if truly going for PSLF, capitalization is irrelevant.

It says a lot about the state of student loans that so many people are looking the gift horse in the mouth.

Stephen Jonah 04.07.20

Agreed – thanks.

I’m going for REPAYE forgiveness – so I’m expecting a tax bomb in about 18 more years.

Nytimes was reporting that department of education said it will not capitalize – I tweeted at the reporter who provided me the language of DEO stating that interest will not capitalize DURING the six months – which of course doesn’t make sense because no forbearance capitalizes while its in place.

Roll the dice I guess.

Benjamin F Day 04.04.20 Reply

A bit random, but can your wife do a “guest” post on how her practice is doing? What resources she is using? How she would have prepared if she was still in residency? THANK YOU BEN WHITE & COMPANY

Ben 04.05.20 Reply

That’s actually something she and I have planned! We outlined it months ago and then life happened, as it sometimes does. Keep checking back, we’ll definitely get it done.

Matt 04.09.20 Reply

You mention that graduating medical students won’t have much impact due to this act.

However, say we want go into repayment asap, choose REPAYE and hope to have a large amount of money go towards an online savings account to repay the interest later (have our money work for us as you say). Will we want to actually put money towards our new consolidated loan principal until late September, given that we won’t be getting a repaye subsidy on our “$0 payments”, as there won’t be any new interest?

I’m thinking any money we put would go towards the new principal for any new PGY1’s this coming July 2020. It would seem that at around 6% interest, this is even a better idea (for non-PSLF’ers hoping to pay down aggressively after residency) than any unmatched retirement accounts?

NM 04.09.20 Reply

Great question! In a similar boat. Interested to hear the response.

Ben 04.09.20 Reply

You are correct. The will be no unpaid interest subsidy in this context because there is no interest. All new graduates (and anyone else fresh off a capitalization event like consolidation or changing payment plans) have the option to put that money toward the principal as I mentioned above, which is nice. So you can definitely put a lump sum at the end of the interest-free period (September at the earliest if the period is not extended) and have it all directly pay down the principal. It’s a solid move.

As to the age-old question of paying off debt vs investing, for anyone even remotely considering PSLF, it would however make more sense to put extra money into an emergency fund or against high-interest credit card debt or personal loans followed by investment account. Extra payments are a guaranteed waste in a forgiveness scenario, and most people’s plans are not set in stone fresh on graduation, just as residency selection often changes over the course of medical school.

However, if you’re a lucky low-amount borrower for whom PSLF will simply never be worth the hassle, at rates ~6% then either is fine. Given the current market lows, one certainly might end up lucking out and buying low in this situation and then doing quite well with the investment. But who knows? The retirement account in this situation has the additional benefit of being tappable as a second emergency fund in a true emergency.

You can always split the difference and do both.

Bri 04.10.20 Reply

A bit of a unique situation.
Incoming intern, definitely going for PSLF, love academic medicine, your books rock and i hope to pay some of your altruism forward!
So, i am looking to maybe convert a good chunk of money (over 100k) from an old traditional IRA to a Roth. Do it slowly? Or maybe use some of that no-penalty IRA distribution from CARES act (which i wld qualify) for real estate investing or on a brokerage account. Will definitely max out pre-tax contributions in residency so, technically could be paying some of those distributions back.
I know my AGI will go bonkers but…idk, ‘decisions, decisions’! Feel like i ought to take some action now since, hopefully, won’t be in this ‘med student’ tax bracket again lol. Or maybe i shld just chill and let it be.
Would really appreciate your advice.

Ben 04.10.20 Reply

This would have been best achieved during med school itself when you presumably didn’t have much income and weren’t on IDR. At that point, you could have contributed up to the no-tax-owed federal limit every year and done most of the conversion tax-free (though that may have not been applicable to you personally depending on your specific circumstances).

The issue now is that any conversion is treated as income, which means that in addition to paying tax on that money it will also *raise* your IDR payments the following year by 10% as you mentioned because of the increased AGI. As a result, not as great a time anymore. The point of the Roth conversion is to pay less money in tax now than you would in retirement. Paying extra in IDR in the event of eventual PSLF wipes away a lot of that benefit.

The way you could get around this issue conceivably is to do the conversion (at least up to the amount that the extra income would reach the marginal tax rate you’re comfortable with and can afford the taxes on) and then use pay stubs the following year when you recertify your income for IDR. The pay stub method doesn’t take into account deductions like pretax retirement contributions, but since many people are unable to make those contributions the first half-year of their new job, you may not be able to that for the 2020 tax year anyway so the impact on IDR would be mitigated.

Any penalty-free withdrawal will also be income, so the issue for real estate is do you want to invest in real estate. Not something I’d recommend to an intern, personally, give limited income, time, flexibility, and unknown destination/circumstances after graduation.

Bri 04.10.20

I know, dropped the ball in med school. But y’know how it is-this stuff is the last thing on a med student’s mind. You live & learn (and pay for it :)).
The pay stub method is very interesting. There is nothing fishy abt it either because i never get to see the converted funds (so it’s not really income). Tax is paid, all is well. Thank you sir-you provide an invaluable service. And not just in radiology!

Ben 04.11.20

Of course! I certainly didn’t and still don’t do everything right. But these comments and answers are still ultimately helpful for other readers. Going back to school can be a great opportunity for Roth conversions for those previously employed or with an inherited pretax account.

NM 04.11.20 Reply

For a non-PSLF, >250K federal loan debt graduating medical student – do you still recommend consolidating now and entering REPAYE ASAP? Despite the 0% interest until Sept. 30?

Ben 04.12.20 Reply

Grace period is longer than the 0% period, so waiting until the very end will result in a token amount of increased accrued interest that will then capitalize. But if you wait you can eek out extra months of $0 payments if you wait to consolidate because you’ll start your year of low payments based on last year’s taxes in the fall. Ultimately that would result in a full year of the optimal unpaid interest subsidy. It would be hard to time things so that you consolidated right as interest would otherwise accrue but theoretically plausible. Haven’t done the math to see how much a difference the month or two makes. Waiting does make sense outside of loan forgiveness, but I ultimately caution most people with debt that high to just rule out PSLF at this point.

RG 05.11.20

Hi Dr. White, if we do wait to consolidate in order to eek out a few extra months of $0 payments, would we still be running the risk of the servicer asking us for pay stubs (assuming we wait until September when we will be in residency) to prove our current income rather than basing it off our last years tax filings?

Ben 05.11.20

Now that the IDR application for language was changed to ask about an income “decrease” instead of an income “change,” this should no longer be a problem.

George 04.14.20 Reply

Hi Dr. White,

When in residency and planning to do PSLF, how should I choose between contributing to a Roth IRA or traditional IRA? Traditional lowers AGI. Roth given the resident salary. If it is okay, do you mind providing some examples of which would be better?



George 04.14.20 Reply

Sorry; forgot to include not employer match.

Also, should I do HSA over IRA?

Ben 04.14.20 Reply

If you have HDHP with the option for an HSA, the HSA is actually the most flexible of all retirement accounts and is well-worth prioritizing. Pretax contributions reduce AGI but can also be a tax-free withdrawal for health expenses. Just save all healthcare-related receipts for documentation in the future.

Roth vs pretax can’t really be calculated without making assumptions on your current tax bracket and retirement tax bracket. Roth is only actually better if you end up retiring in a higher bracket than you currently are in. A reasonable guess but not a guarantee. PSLF functions as an automatic 10% match on pretax due to AGI decrease and lower IDR payments, so that may easily offset the tax difference. I would personally do the pretax for now and keep an eye out for any future low-income years ripe for a Roth conversion. If you’re torn, you could always split the difference and do both your 403b and a Roth IRA.

Travis J 04.15.20

Yeah, that’s what I figured. My question is why do so many other blogs recommend IRAs over HSAs? Is it simply the age when we can use these funds without penalty?

Also, is there a way to support the blog/you and your family financially (besides referring others to your site)?

Ben 04.15.20

No, I think mostly because access is less common. Everyone can fund an IRA and almost everyone has access to an employer 403b/401k at some point, but certainly most residents don’t have access to an HSA because they don’t have the ability to choose a high deductible health plan. Most people only have access to an FSA, which while pretax is a use-it-or-lose-it account generally best used for known/anticipated health expenditures.

I’ve never had any donate buttons (probably a mistake) on the site. The easiest ways to support me financially are to buy my books and leave reviews on Amazon, share with friends, and especially to purchase items or services (that you actually need or want) from the referral links scattered on the site, like before doing normal shopping at Amazon, checking out rates for a physician loan, buying a qbank, or when doing a student loan refi, because those do not impose any additional cost on the reader.

Henrietta 04.17.20

In regards to Roth vs traditional, wouldn’t the Absolute dollar difference be greater, even though PSLF offers 10% – attending tax bracket is on a higher salary? Which cases would offset this? And we’re assuming resident is doing Roth and attending should do a combination of Roth and backdoor Roth?

Ben 04.17.20

The difference between pretax and Roth isn’t about the attending bracket being higher than a resident’s. No doubt an attending will have a higher marginal rate than a resident. The question is where you do spend more in tax: now or in retirement? If you are in the same bracket now when you put the money as in retirement when you take the money out, then the Roth and pretax options are mathematically equivalent.

The typical savvy attending is generally doing pretax on their 401k/403b and then a backdoor Roth. That’s because they assume in retirement with a house paid off, no debt, and school to pay for that they will retire on less money than they earn in these peak years. There are certainly some folks that use the Roth option on everything because they think taxes are going to go up across the board during the coming decades.

The real answer is yes. Saving money is good.

B 04.19.20

I think you should do an entire post on this discussion. I haven’t seen this talked about anywhere and think it would be value and even more readers to this blog. Just my $0.02. Thanks for all you do Ben!

Ben 04.19.20

It’s mostly in the chapter on Contributing toward Retirement in the book:

But you’re right. I do have a partially written draft of “Residency retirement contributions and PSLF: Pretax or Roth?“ in my long queue of things to finish writing.

Billy 05.03.20

hey thanks for responding to my previous comment and referring me other to this discussion. any idea of when the post on PSLF tradition vs Roth will be coming out? Thanks

Ben 05.03.20

Good question. I’ve bumped it up on the list of half-written posts to finish. I will try for this week.

Jim 05.11.20

I’ve been following this post for a bit now. Realize you’re busy with all the changes going on, but wondering if the traditional vs roth ira for pslf borrowers would be coming out soon. Obviously will wait for a better written article than a rushed one

John 04.14.20 Reply

Just discovered your site and excited to get my hands on your other resources soon. I’m new at learning all this financial information so please bear with me, but I am an MS4 and I have 200K in loans (+20K in interest). I want to go into pediatric emergency medicine (6 years). I hope to get married in 3 years (after residency before fellowship). I have no other debt and am living at home for training (so no rent $)/low personal spending in general. I wanted to pay off my loans aggressively and am avoiding PSLF because I don’t trust it in the future. I signed up with REPAYE but do you recommend I consolidate before Sept 30th and continue with REPAYE or should I consolidate and refinance with a private lender instead? Under a private lender can I put in as much money towards my loans each month? I didn’t mind putting 95% of my residency income to loans for 3 years to help reduce rising interest costs. Are there some cons I should be aware of if I did Repaye for residency, PAYE for fellowship (married), and then using all my attending salary to pay off the rest of my loans in 1-2 years post fellowship? Thank you so much!

Ben 04.14.20 Reply

You should really read the full book for sure. Frankly, if I were doing peds subspecialty I would probably seriously consider PSLF but that’s your call. A few points:
– No one should refinance right now given the 0% federal rate until September
– You are highly unlikely to get a better private rate as an intern than you can with REPAYE and the unpaid interest subsidy, which with $0 will effectively half your interest rate.
– You should be leverage money elsewhere while in REPAYE at any time you have uncapitalized interest instead of paying extra interest only payments. See
– There is basically zero reason to switch to PAYE if you’re aren’t going for forgiveness. Lower payments just mean taking longer to pay off your loans and spend more money on interest, and capitalization on plan switching results in a larger principal. If you’re trying to be aggressive, there is really no reason to switch out of REPAYE until you are getting a better deal from a private refi. There are never prepayment penalties with either federal or private loans.

Julia 04.19.20 Reply

Are there any downsides to having two funds within one account? I’m new to finances and want to stop contributing to one and start contributing to another? Do you think VIIIX is okay? No VTSAX or Life strategy

Ben 04.19.20 Reply

No problem with multiple funds. How many and how complicated depends on your interest, what’s available in your account, your age and needs.

When you are still utilizing only a retirement account and don’t have anything in a taxable account, you don’t need to worry about where to put stocks vs bonds. In a retirement account, there is no reason you can’t just sell one fund and switch to another in order to optimize fees or rebalance your portfolio. On the simple side you can do a target date fund. Many folks will have a thee fund portfolio composed of US stocks, international stocks, and bonds. Also common is a four or five fund where US stocks a broken down by size (large cap, small cap, and other mid cap). Permutations are endless.

VIIIX is a good large-cap weighted total market fund, it tracks the S&P500 and is a good fund for US stocks with a low expense ratio.

Asdfgghk 04.19.20 Reply

Ben White, important question (for those not going for PSLF)!:

Since the interest is 0% right now, can we “skip” capitalization by entering REPAYE before Sept 30th?

Also, dumb question, when is the earliest one can enter REPAYE? Ignoring the consolidation loop hole, can we sign up before grace period ends? Or are we only able to sign up closer to when repayment starts?

In other words..wouldn’t it be better not to consolidate this year and to just enroll in the REPAYE to avoid loan capitalization? Then thereafter, focus the majority of payment on paying off the high interest loans first.

I hope that made sense. Your book was Great!!!

Ben 04.19.20 Reply

No, you can never avoid capitalization after finishing school. It either happens when you consolidate or at the end of the grace period. The interest that accrued during school will always be part of the new principal.

You will receive a communication from your servicer when it’s time to sign up from IDR. It’s often a couple months before your grace period ends, but it will not take place until the 6 month grace period is over. The only way to get into IDR faster than 6 months is to consolidate.

You can certainly wait until the end of grace period to enter repayment. Because of the 0% period now, there is no downside to waiting for those not entertaining the option of loan forgiveness, because no *additional* interest will accumulate prior to capitalization.

Jill 04.20.20 Reply

Hi Dr. White,
My friend told me about your site. Can I ask you for your opinion about my employer sponsored retirement funds – ARDSX, ARENX,ARCSX – these are American Century One Choice. Should I simply get my match, and open my own IRA elsewhere?

Ben 04.20.20 Reply

Expense ratios are on the high side; at the levels you’re contributing certainly not a dealbreaker on actual dollar and cents, but yes the optimal strategy would be to get the match with your employer and fund an IRA with the excess you can manage, only going to back to the employer account once the IRA is maxed.

Joann 04.30.20 Reply

Hey Ben, I’m thinking about moving my funds from an employer Roth 403b to a vanguard Roth IRA. How do I best approach this, and is this recommended? My employer’s fund is limited with high ER, but I already put some money in there. Can I harvest tax loss when I transfer these funds?

Ben 04.30.20 Reply

Your Roth accounts are both tax-advantaged retirement accounts. You can’t tax loss harvest because you’re not paying taxes on investment growth for funds in these accounts. That’s a concept for taxable accounts.

Moving is totally fine to get access to lower-cost funds, just make sure there aren’t rules about keeping money in the account to get a company match, for example. As for how to do it, it’s sorta tedious but not complicated. You fill out online forms on Vanguard and they tell you what to request from your employer account, who likely also have forms for you to fill out. In many cases, you will be unable to rollover out of an employer-sponsored account while still employed.

Julia 05.04.20 Reply

Silly question here: is it easier to have a larger “profit” with a stock with a smaller price per share than one with a larger price per share?

Ben 05.04.20 Reply

Not necessarily, all that matters is how much it grows. It’s true that you can buy lots of shares of something with the same amount of money if the price is low, and smaller stocks on the whole have slightly outperformed larger stocks. This is why some people like to have a “small cap tilt” in their portfolio. Taken to an extreme, this is the idea behind “penny stocks.”

kimberly 05.11.20

I see.
Just to clarify: if I have $1,000 and put all of it into a fund with shares costing $20 or $10, and both funds go up by 6%, I earn the same profit regardless of which one I chose?

Ben 05.11.20


Johnson 05.11.20 Reply

Really really enjoyed your book!
I heard that traditional IRA deductions to lower AGI can only be itemized if other retirement accounts are not being offered. Does this hold any weight? Any additional details?

Ben 05.11.20 Reply

That’s correct, but it depends on how much you earn:

However, there is no big reason to do a pretax tIRA if you have access to a 403b/401k at work. You’ll want to have a Roth IRA in the future, and tIRA would need to rolled over to another account in order to make use of “backdoor” contributions when you have higher income anyway. If the fund selections aren’t great, you can move them over to another account in the future when you switch employers or you open your own individual 401k (say for any moonlighting 1099 income you earn).

Johnson 05.13.20

Follow up to this.
So my employer does not offer 401/403, but offers an HSA. Should I max out that account first, or open a tIRA or Roth IRA and contribute to both? (currently a resident, going PSLF)

Johnson 05.13.20

Or even wait until I can moonlight and start my own 401k? Thanks Dr. White

Ben 05.18.20

If you’re doing a high-deductible health plan already (or the one they’re offering is decent), then I would do the HSA now. It’s a great vehicle, will also reduce your AGI and result in lower IDR payments the following year, which will save you more money if you eventually get PSLF.

MK 05.11.20 Reply

This may be a dumb question but I promise I read your book and I still don’t understand this completely, so I want to do REPAYE and maximize the interest subsidy, have about 130k in loans and not going for PSLF, and I’m about to graduate. Initially I was going to consolidate as soon as I graduated and then start making payments then, but now with the 0%, I’m thinking I should consolidate in September so that I dont waste and interest subsidy between now and then. However, how does the income certification/payments work? Like if I consolidated in June and did 1 year of payments at zero (because I made 0 in last years tax return), versus if I consolidated in September, would I still get 1 year of payments at 0? I guess what I’m asking is when your payments change based on your income, is it a fixed time each year or based on you certify your income or something else?

Ben 05.11.20 Reply

Yes, 12 months from when you certify. So if you keep your grace period, then it’ll be 12 months from November-ish.

Janelle L 05.13.20 Reply

Thoughts on fidelty zero fee funds vs vanguard? Is this a loss leader and can they raise fees on their funds later on?

Ben 05.18.20 Reply

They are analogous. They won’t raise the fees on the index funds. You can have an efficient low-fee portfolio with Vanguard, Fidelity, or Schwab no problem.

John 05.18.20 Reply

Hey Ben,

Loved your book. Read it cover to cover. I’ve recommended it to classmates. Few questions.

1. I graduated on 5/16, and keeping PSLF on the table, I want to consolidate ASAP. On my loan servicer site it says the loan status of my Stafford loans are in “Grace,” but the loan status of my Graduate PLUS loans are in “Post-Enrollment Grace Period.” If they’re in “Post-Enrollment Grace Period” will they be picked up in the consolidation process?
2. Maybe dumb question, the paranoid side of me has to ask. If I consolidate ASAP, capitalization will occur but interest won’t suddenly start re-accumulating and payments won’t be immediately due? None of that would start until September I presume.
3. I get married in a week, and my spouse makes almost 100k a year. I’m thinking apply for consolidation NOW, before I get married, so I don’t have to include my spouse’s income and tax info on the application which will in turn affect my payments. I understand when I re-certify in 12 months I’ll have to include her income. Foresee any potential problem with doing this?

Ben 05.18.20 Reply

1. Yes that should be fine. PLUS loans normally don’t have a grace period, so the term they use when giving you one for grad plus can be different.
2. Correct. Current discussion also points to the current Cares Act benefits being extended until 2021.
3. No problem doing that. Since they are a high earner, you would have a much larger PSLF benefit just picking PAYE and filing taxes separately.

John 05.18.20

Thanks Ben. Regarding #3, then comes weighing the benefits of married filing separately under PAYE and receiving a larger PSLF benefit vs REPAYE & the tax benefits of married filing jointly. My student loans right now (principal + interest) are ~280k. No guarantee I’ll go for PSLF just keeping it on the table. My spouse and I need to run the numbers. The math seems complicated.

Steph 05.25.20 Reply

Hi Ben,

This July I start a general practice residency for 1 year and my significant other is starting his oral surgery residency (6 years). We both have significant loans (200,000 for me + 300,000 for him mostly federal) so my plan after reading your book is to start the REPAYE program and consolidate for September if the Cares act does not get extended. My question is, since I am in a short residency program and we plan on getting married in a year or two, does this make a difference to my significant other being enrolled in the REPAYE program? I understand that the marriage loophole is closed and once I start working I hope to be making at least $100,000 in my first year, so his AGI will increase. You wrote that REPAYE is generally the best when both people in the relationship have similar debt and income, but once I leave my program I’ll be making significantly more than him and I plan to also try to heavily attack those loans while my boyfriend is in his training. What are your thoughts on this strategy?


Ben 05.25.20 Reply

“Best” and “good” always depend on your long term goals. If your goal is to pay your loans down yourself, then you never have to worry if payments end up higher in REPAYE. That just means making faster progress. Once you’re married your family payment will be divided by loan amount, so a greater amount of that mandatory payment will go toward his loans.

If you do refinance while on REPAYE and he stays federal, *that* can be a challenge for some folks cash flow wise because that whole monthly payment will still be due (and now go toward his loan) and you’ll now have a private loan to pay for as well. Again, not a problem if you can afford it and are paying them down (but bad for PSLF).

Steph 05.26.20

Would this situation make the argument that he should enroll in the PAYE program if I privately refinance so that we could file separately?

Ben 05.26.20

That is correct.

Steph 06.17.20

I know this is a month later…but what are the implications if he starts off with REPAYE, and then changes over to PAYE once we are married (September 2021)? If he saves monthly in a high yield savings account and then pays that directly to the federal student loans before he changes to PAYE, will that help with the interest capitalization? Do you ever recommend switching from REPAYE to PAYE after just one year in this situation?

Thanks for all the advice!

Ben 06.17.20 Reply

Depends on long term goals. You lose a month of qualifying PSLF payment during a switch, so it that’s the goal then not really for only year. Otherwise, if you plan on mitigating the accrued interest prior to the capitalization step of switching plans, there isn’t really any downside, except that lower payments simply mean more accruing interesting and more money spent in the long term.

Daniel 07.26.20 Reply

I recently graduated med school and would like to consolidate my student loans to enter REPAYE since I just started residency. I know you said that that it takes about 2 months to consolidate and enter REPAYE. Do you think it is a good time now to apply for consolidation since the COVID interest freeze will end Sept 30th?

Ben 07.26.20 Reply

For PSLF considerations, yes you want to be in repayment as soon as possible, so sooner the better. Otherwise, it doesn’t really matter.

Whether grace period or repayment, The CARES Act means it’s still 0% and $0 payments. Also, there’s a very good chance the period will be extended in the upcoming bill. Both dems and republicans have supported prolonging the period, the bigger question is how long to do so.

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