Your Financial Pharmacist FAQ: Student loans
Today pharmacists are graduating, on average, with more than $170,000 of student loan debt. That’s no small chunk of change! On top of that, figuring out how to tackle your loans can be confusing. Between multiple student loan repayment options, understanding deferral and forbearance, and deciding whether to pursue forgiveness, there’s a lot to consider. Here are some of the most common questions I get asked about student loans.
Q: Can I defer my loans during residency?
YFP: The short answer is yes, most federal loans can be deferred for residency. Deferment means that you aren’t making any payments on your loans, but keep in mind that this is not usually preferred if you’re considering pursuing public service loan forgiveness as the deferment period won’t count toward the needed 120 payments for forgiveness. However, income-driven payments are an option to consider. Since they are income-based, a typical resident will have a low monthly payment (and sometimes a $0 payment) and these payments will count toward the 120 payments required for loan forgiveness.
Q: Should I refinance my student loans?
YFP: Refinancing is the process where a private lender pays off your loans, and you end up with a new loan and new terms. You can refinance your federal loans to a private lender or refinance your private loans to another private lender. While lowering the interest rate can be a great benefit, you should consider what you may be giving up if moving loans from the federal to the private system, including the option for income-driven repayment plans and access to forgiveness programs. It’s important to remember there is an administrative forbearance in place until August 31, 2022, so moving any loans from the federal system to a private lender will trigger repayment and interest. For more information on refinancing, check out our current student loan refinance offers.
Q: I’ve heard so many bad things about Public Service Loan Forgiveness (PSLF). Are any pharmacists getting their loans forgiven?
YFP: Yes! Remember that PSLF was enacted legislatively in 2007, and it wasn’t until 2017 that the first group was eligible for forgiveness. There was a lot of confusion and misinformation about the PSLF program early on, leading to negative press scaring some folks away. In 2021, the Department of Education announced a temporary waiver opportunity that has furthered access to PSLF for borrowers. The waiver and the current state of the PSLF program are resulting in forgiveness for some earlier than expected. I recently interviewed three pharmacists who shared their PSLF success stories with getting, in total, more than $700,000 forgiven tax-free.
Q: I’ve heard there are two different forgiveness options available for student loans. What’s the difference between the two?
YFP: Yes, there are two forgiveness options in the federal student loan system; PSLF and non-PSLF. To qualify for PSLF, you must be employed by a U.S. federal, state, local, or tribal government or not-for-profit organization, work full-time for that agency or organization, have Direct Loans (or consolidate other federal student loans into a Direct Loan), repay your loans under an income-driven repayment plan, and make 120 qualifying payments usually over 10 years.
Non-PSLF forgiveness is available to those with federal loans who do not meet the PSLF criteria. There are three main differences between these forgiveness programs. For non-PSLF forgiveness, you don’t have to work for a qualified employer (for all pharmacists working in for-profit organizations or companies, this is an option), you have a repayment period of 20 to 25 years (instead of 10 years for PSLF), and any amount forgiveness is treated as taxable income.
Q: Will the student loan forbearance get extended beyond August 31, 2022?
FYP: I wish I had the crystal ball to answer this question, but I’ve given up trying to guess correctly after being surprised by some of the recent extensions by the Biden Administration. With the midterm elections coming up, if student loans become a topic of interest among voters, we may expect to see further activity here. Stay up to date on forbearance information at StudentAid.gov.6
For more information on student loan repayment options and strategies, check out our blog post The Ultimate Guide to Pay Back Pharmacy School Loans. For those looking for assistance in deciding the best student loan repayment strategy for your personal situation, learn more through 1:1 Student Loan Analysis with a YFP Planning CFP®. Use coupon code YFP at checkout for 10% off.
Tim Ulbrich, PharmD, is the co-founder and CEO of Your Financial Pharmacist (YFP). Founded in 2015, Your Financial Pharmacist is on a mission to help pharmacists achieve financial freedom through fee-only, virtual comprehensive financial planning services via YFP Planning, as well as three weekly podcasts, including the Your Financial Pharmacist Podcast, books, webinars, and numerous online resources.
Disclaimer: The information in this article is provided to you for your informational purposes only and is not intended to provide, and should not be relied on for, investment or any other advice. Read our full disclaimer.