This set of frequently asked questions is the result of real questions posed by graduating students at Midwestern University. It has been organized into eight different categories; as additional topics are developed, more content will be added.
Deferment, Forbearance and Grace Period Questions
1. Do we qualify for the intern/resident forbearance?
Yes. You are eligible for a medical / dental forbearance when going into an approved internship or residency. You may find it easier to use your servicer's website to apply or download an application. Get your servicer's contact information at www.nslds.ed.gov.
2. If so, does it benefit us more to do an alignment forbearance first or just proceed with the intern/resident forbearance?
Good question! Once you are ready to begin repaying your loans it makes a lot of sense to bring your loans into alignment just to simplify life. We'd suggest getting the internship or residency forbearance in place first; while you may want to discuss the alignment forbearance, you will probably want to do this later.
3. I have a disabled child. Her therapy is expensive. Is there a deferment for that?
Unfortunately, there are no deferments for your child's situation. You might call your servicer, explain the situation and then see if there might be some forbearance options that might be granted. Really expensive treatments might have an impact on your Adjusted Gross Income (AGI) so you might qualify for IBR as well. With IBR and a multitude of variables, payments can sometimes be reduced dramatically. See if you qualify or what your payments would be at www.ibrinfo.org
4. How do you apply for economic hardship deferment? What are the requirements to qualify?
Economic Hardship deferment is granted one year at a time for a maximum of three years. You can qualify based on your income if you are working full-time and your monthly income does not exceed the larger of A) The federal minimum wage rate or B) 150% of the poverty line income for your family size and state. (In 2012, the poverty line for a family of two living in the 48 contiguous states is $15,130). Other eligibility requirements apply.
An economic hardship calculator that will help you determine if you may be eligible is online at: www.finaid.org/calculators/economichardship.phtml.
5. Should we wait until after grace period to get deferment?
Yes. Remember that different types of loans have different grace periods so you will need to track these by loan type. As your grace period is nearing completion, then apply for your deferment or forbearance. Be sure to allow sufficient time for the servicer to process your request. As always, monitor your account to make sure that the deferment or forbearance is in place.
6. I am wondering if I will have six months after I complete my residency where I won't need to make payments and if the interest on my subsidized loans will be taken care of for me?
You do not have a grace period after you complete your residency. The grace period pertains only to the time after you graduate or are enrolled less than half time.
7. I got a bill for $640 for my Grad PLUS due June 12th. Is it too late for a forbearance? Also, would I go into default if unable to pay by tomorrow?
As noted above, we would highly encourage you to contact your servicer immediately and request a forbearance; they can backdate your forbearance and cover your $640 as long as it's not in default. For servicer contact information, go to www.nslds.ed.gov
1. Where can we get a copy of our MPN?
Log in to StudentLoans.gov.
2. How can we obtain a copy of the graduation exit PowerPoint presentation for future reference?
A copy of the PowerPoint is typically posted within our Sensible Stategies Canvas course.
3. Will the presentation and links be available after the graduation exit webinar? Also, are we able to schedule an appointment with Midwestern's Financial Aid Office after we graduate?
Yes, the presentation is available - both the PowerPoint and the recorded webinar (if applicable). A great feature of the webinar recording is the option to go to the exact slide of interest; this should be a valuable reference.
We would be pleased to set up an appointment after you graduate; for Glendale graduates, you can call 623.572.3321 to schedule this or send us an email at email@example.com. Graduates of the Downers Grove campus can call 630.515.6101 or contact us by email at firstname.lastname@example.org.
4. Do you have any links/references to financial planners (Chartered Financial Planners - CFP's) in the area?
While we can't recommend any particular certified financial planners, there are some websites that you can go. Two options include:
1. The consolidation plan doesn't sound so great, but what I am wondering is, how many different payments should I be expecting to make each month? I have Sub/Unsub/Grad PLUS loans.
Check with your loan servicer. Sometimes they can combine all of your separate loan payments into one payment without consolidating them. A consolidation may be required if you have multiple servicers and want just one loan payment.
2. I consolidated my undergraduate student loans. Will there not be a grace period for these loans upon my graduation from grad school?
Loan Consolidation has many positive benefits; unfortunately, once the consolidation occurs, there is no grace period. but you can request loan forbearance if you're unable to make payments.
Public Service Loan Forgiveness Program
1. I spoke with the Department of Education yesterday and they told me that all doctors are eligible for the public service loan forgiveness, even working at private hospitals as an attending. Is this true?
You must always verify if the private hospital is an eligible non-profit employer and has a 501 (c) (3) designation from the IRS. The hospital you will be working for can easily answer that question; additionally the IRS has a database you can check, http://www.irs.gov/app/pub-78/, for a listing of eligible employers.
2. There aren't a lot of residency programs at 501(c) (3) institutions. Then your years in residency can count toward public service in the forgiveness plan. Some of us with 6-7 year residencies will only have 3-4 years in a 501 (c) (3) institution to participate.
Indications are that more and more students with high debt levels and lower starting salaries will be examining options combining the attractive lower monthly payments with the Income Driven Repayment options and the Public Service Loan Forgiveness Program. Qualified employers include federal, state and local government, military service as well as the public service organizations noted above. As suggested, keep meticulous records documenting your employment; another point to remember is that the 120 months need not be consecutive.
3. What public (government) employers qualify as eligible employers for the PSLF Program?
Any federal government, state government, local government, or tribal government entity (including the military, public schools and colleges, public child and family services agencies, and special governmental districts) is an eligible employer for the PSLF Program.
1. When and where can we choose a repayment plan? I have not been able to yet when I contact lenders. When does that become available? They still don't allow it yet.
At the time you graduate, once you're in your grace period, you can choose your repayment plan before your grace period ends. At the time you graduate if you have any loans that do not have a grace period, then choose a payment plan or ask the servicer for a forbearance to give you time to decide on what you want to do. But it all happens after you graduate; lenders or servicers won't put you into a payment plan before you graduate.
2. Can you switch between options? Choose Extended at one time then change it to one of the Income-Driven Repayment plans later?
Yes, most federal repayment options are incredibly flexible.
3. Is there ever a pre-payment penalty on federal loans?
There is no prepayment penalty on ANY federal student loans; if you can pay anything faster, then that is always a huge benefit.
4. Do we have to make a decision (about repayment) if we are starting school again in the fall?
If you are continuing as at least a half-time student this fall at an eligible school, you do not need to make a decision regarding repayment at this time.
5. When you say we will be automatically enrolled in the Standard 10 year repayment program if we do nothing, is that something that we need to do before our graduation date or will we have time after graduation to take care of it? Am I correct to understand that you can change your repayment option annually? So if we are auto-enrolled into the Standard 10 Year Repayment Plan upon graduation, will we be stuck in that for one year?
You should request a repayment plan while in your grace period after graduation. No, you are not stuck in the Standard 10 Year Repayment Plan for one year. You can change your repayment plan as you need to meet your changing circumstances.
6. I have a lot going on this next year and was thinking that the Graduated Repayment Plan would be a great option to start, since I can save a little more money for my upcoming wedding. Can I do the plan, paying only interest, for just one year instead of two?
Yes, you can switch plans after a year. The Graduated Plan may be your least expensive monthly payment, but you should use the loan calculators or speak with your loan servicer to make sure. It depends on a lot of variables - and if your payments end up higher than you can afford that first year, you can still get one-year forbearance and make interest-only payments during that time on your own. You can always choose a plan for a period of time and later switch if you want a different plan.
Loan Servicer Issues
1. Does every loan servicer that bills interest annually offer a chance to pay it before it capitalizes?
Yes, you will get periodic interest statements from your loan servicer, and you can pay interest at that time. It is a good practice to check with the loan servicer as to how frequently you will be billed and insure they have your most current address. Always specify on your check what it's for (interest or principal) unless you are paying with a coupon book.
2. When is the deadline to pay the interest that has accrued until graduation (i.e., Direct loans) to avoid that interest being added to the loan principal?
It is always best to call your loan servicer and determine their exact policy and payment due dates; loan servicers may have different rules in terms of due dates, applying payments and interest capitalization. On your unsubsidized loans, interest accrues on a daily basis in school and is added to the principal when your loan enters repayment. To insure that the payment is received on time, it is best to set up a bill payment option with the loan servicer or your bank.
1. Could you talk about the tax deduction benefits of paying down interest during residency? What is the maximum amount of student loan interest that can be deducted each year ($2,500?), and is this advisable to pay for the tax benefit as well?
Up to $2,500 of interest on your student loans may be tax deductible each year. If single and your income is $65,000 or less, the maximum of $2,500 can be deducted; if married, you can utilize the full deduction up to $135,000 of income. The deduction phases out as your income increases; for single borrowers, it phases out at $80,000 and at $165,000 for married borrowers. For full details, go to page 41 of the IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf
Obviously, this tax deduction is valuable while in residency if you can pay the interest. We would suggest you consult your tax advisor or financial consultant to develop a plan to maximize this benefit.