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Managing Debt During Medical Residency
In response to the growing needs of our medical residency clients, Graduate Leverage created GL Advisor, an advisory service that helps medical residents lower the cost of their student loan debt by providing analysis, personalized plans and implementation support. Strategies include maximizing subsidies afforded by federal programs such as Income-Based Repayment (IBR).
Despite significant future earnings potential, medical school graduates typically have high levels of debt and a relatively low medical resident salary. To manage this immediate lack of discretionary income, many medical residents rely upon forbearance to postpone payments during their medical residency. As a result, medical residents forgo thousands of dollars of potential savings. GL Advisor addresses this challenge by providing residents with dedicated support, comprehensive analysis, and carefully tailored debt management strategies. We also provide a Medical Residency/ Relocation Loan program comparison chart which is available to those pursuing a career as a health professional in an allopathic or osteopathic residency program.
The GL Advisor service addresses a current void in the market as recent medical school graduates often have few places to turn for advice and typically do not have the assets to attract the attention of a traditional financial advisor. Additionally, the vast majority of financial planners do not comprehend the nuances of a medical graduate’s debt burden. Other resources such as lenders may not have the incentive to promote certain loan repayment options or government programs such as IBR. University financial aid offices can be a great resource, but following graduation, a busy medical resident’s access to this resource is typically limited. GL Advisor understands the unique needs of medical residents and serves as a true advocate throughout your medical residency.
Clients of GL Advisor receive the following: a personalized integrated financial plan, assistance with the qualification for federal student relief programs, support from an assigned advisor, and federal and state tax preparation services tailored to new professionals with student loan debt. All aspects of our program are designed to improve your financial well-being and net worth. During medical residency the primary areas of focus are:
- Lowering the cost of your debt
- Addressing liquidity needs resulting from relatively low resident salary
- Saving you time so you can focus on your career
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Savings Opportunities for Medical Residents
The increased burden of debt and its effect on those who seek higher education prompted the government and other organizations to create programs through which portions of student loan debt can be forgiven. These programs are not well known to the general public and qualifications and requirements vary greatly. GL Advisor helps clients maximize the use of these programs by providing detailed analysis, guidance and instructions on how to benefit from programs such as Income-Based Repayment (IBR), Public Service Loan Forgiveness (PSLF), Federal Consolidation, and Economic Hardship Deferment (EHD).
Historically, many medical residents qualified for deferment and used it as a way to postpone payments and gain government subsidies. However, due to recent regulatory changes, this option is now available to very few medical residents. As a result, most medical residents choose to suspend payments by utilizing medical residency forbearance because the payments are unmanageable on a medical resident salary. However, forbearance is a costly option for residents because all loans accrue interest.
IBR Based on Medical Resident Salary
Fortunately, IBR, a program that became available July 1, 2009, can significantly reduce monthly payments for medical residents. IBR takes into account a medical resident’s salary and limits monthly payments to 15% of the resident’s discretionary income. IBR also provides a subsidy to prevent additional interest from accruing on the subsidized portion of a resident’s loans. A medical resident must qualify for the subsidy each year (based on their adjusted gross income) and the subsidy component is available for a maximum of 3 years. IBR has a loan forgiveness component that forgives remaining balances on the applicable loans after 25 years of monthly qualifying payments. However, due to significant salary increases following residency it is unlikely many physicians would benefit from the IBR forgiveness program.
Public Service Loan Forgiveness
In addition to IBR, there is another government program that provides loan forgiveness and is available to medical residents. It is called Public Service Loan Forgiveness (PSLF). The majority of medical residents are uniquely positioned to benefit from the Public Service Loan Forgiveness Program. This program provides tax-free forgiveness for a borrower's outstanding balance after the borrower has made 120 qualifying payments on his/her federal loans. Medical residents often meet the employment qualification criteria because many are employed by nonprofit hospitals or universities. This provides medical residents an opportunity to essentially earn credit towards forgiveness during their medical residency. Following medical residency, employment opportunities at nonprofit entities such as hospitals, hospital-owned practices, and universities provide ample opportunities for physicians to complete the program requirements without sacrificing career or lifestyle aspirations.
These and other programs and strategies all have nuances that must be fully understood to ensure eligibility and maximize the benefits. GL Advisor helps clients determine eligibility for the programs, understand the potential benefits, and develop and implement strategies to maximize savings from interest subsidies and forgiveness as appropriate. Medical residents in a variety of specialties are finding our service extremely valuable as we are helping them achieve significant savings.
Sign up to receive a free personalized assessment. One of our experienced advisors will analyze your loan portfolio and send you an assessment that will outline your student loan history and highlight savings opportunities resulting from specific debt management strategies.
If you have additional questions and would like to speak to an advisor, please contact us at 877-552-9907.
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GL Advisor is a division of Graduate Leverage, LLC.