The Optometrist's Guide to Student Loans

Chapter 2: Federal Programs

If you are not pursuing any loan forgiveness programs or not eligible for tuition reimbursement programs, then the only option is to simply to pay off all your student loans. This can be accomplished on your own either via a federal repayment program, or the more intelligent route, which is refinancing into private loans to get a lower rate (Chapter 4).

There is no set timeline for paying off your loans. You can pay it off today (unlikely, unless you have rich parents or win the lottery) or extend the payments as long as you want (up to 30 years). Remember your monthly payments will be determined by the duration and type of repayment plan.

If you are like most optometrists, you probably took out federal loans to fund optometry schools (or even your undergraduate) via a federal servicer.

These can include Nelnet, Great Lakes Education Loan Services Inc., Navient, and FedLoan Servicing; just to name a few.  While it is possible to make multiple monthly payments to different servicers, your first step should be to use a Direct Consolidation Loan to combine all these loans into one lender.

Consolidating: When you go through a federal lender to “combine” all your student loans together so you can make one easy payment.  All your interest rates are averaged and this average is your final rate (it might be slightly higher or lower). This helps with the convenience of having one single payment.

Types of  Federal Loan Programs

1) Standard Repayment Plan: This usually defaults at 10 years, or up to 25 years (Extended Repayment plan), with the same set payment each month. Usually, the least amount of interest comes with the 10 year repayment period.

 2) Graduated Repayment Plan: Payments start low and then gradually increase as time passes on during the loan duration. This means your payments will be highest at the end.

 3) Revised Pay As You Earn Repayment Plan (REPAYE): Automatically set your monthly payments to 10% of your discretionary income.

Discretionary income is anything that you earn above 150% of the federal poverty level for your family size. If you are married, your spouse’s income will be included into the calculation, thus increasing your monthly payment.

4) Pay As You Earn Repayment Plan (PAYE): Similar to REPAYE, but your maximum monthly payment is 10% of your discretionary income. Payments will actually be lower if you have a high debt-to-income ratio, but will never be higher than compared to the standard repayment plan.

5) Income-Based Repayment Plan (IBR): Similar to PAYE and REPAYE, but your monthly payments will be 10-15% of your discretionary income. Payments are automatically recalculated each year based on your income and family size. Again, your spouse’s income will count toward your total income.

6) Income-Contingent Repayment Plan (ICR): Similar to IBR, but has a higher monthly payment which is 20% of your discretionary income OR fixed amount within a 12 year duration - whichever is lesser.

 3 Great Benefits with  Federal programs:

1) Flexible repayment plans which can be easily changed during times of hardship

2) Total Forgiveness:

  • Assuming there is no co-signer attached, if a borrower passes away or has full/partial disability, all federal loans will be totally forgiven. But If you declare bankruptcy, your federal student loans will NOT be dismissed. The government will have the power to garnish any future paychecks earned.

3) You don’t need good credit to consolidate

Related Articles

Leave a Comment