Veterinary Student Loans? Here Are a Few Things to Know About Repayment Plans Available

Dealing with a significant amount of student loan debt can feel overwhelming. Fortunately, there are various strategies available to help you manage it effectively. However, navigating these options can be complex. To help simplify things, here’s an overview of some key choices you can consider.

First thing to consider is what type of student loan debt do you have? Federal or Private?

Was it issued by the federal government or issued by a private lender or bank? If your student loans were issued by a private lender, there can be a number of different ways that it was structured, as the terms of the loan(s) are determined by the bank that issued them. However, if the loans are Federal, there are a number of different repayment options that are often available to consider, and the one you choose to pursue can have a big impact on the overall cost of your loans and financial situation as a whole:

Types of Plans:

Income Based Repayment (IBR):

This calculates your payments based off of 15% of your discretionary income if you are NOT a “new borrower” or a borrower on or after July 1^st, 2014. If you ARE a new borrower on or after July 1^st, 2014 your payments are generally 10% of your discretionary income. IBR is a 20 or 25-year repayment plan depending on whether or not you are considered a “new borrower” and at the end of your repayment period, “the remaining loan balance is forgiven if your federal student loans aren’t fully repaid at the end of the repayment period.” Do keep in mind that the forgiven balance of your loan may be considered taxable income the year that it is forgiven, which is something that needs to be planned for.

Pay As You Earn (PAYE):

This plan calculates your payments based off of 10% of your discretionary income if you are a new borrower on or after July 1^st, 2014. Or 15^% if you are not a new borrower. Pay as you earn is a 20-year repayment plan, meaning the remaining balance of your loan is forgiven at the end of the repayment period. This could also be considered taxable income in the year that it is forgiven. (Do keep in mind to be eligible for PAYE you need not have had any outstanding loans prior to October 1^st, 2007, and you must have received a disbursement of a Direct Loan on or after October 1^st, 2011).

Saving for a Valuable Education (SAVE) – formerly REPAYE:

This plan calculates your payments based off of 10% of your discretionary income, with a 20-year repayment period for your undergraduate loans, and 25 year repayment period for all of your graduate loans. The remaining balance of your loan is forgiven at the end of the repayment period. This could also be considered taxable income in the year that it is forgiven.

The SAVE plan also has what is known as an interest benefit, meaning If you make your full monthly payment, but it is not enough to cover the accrued monthly interest, the government covers the rest of the interest that accrued that month. This means that the SAVE Plan prevents your balance from growing due to unpaid interest.

Standard 10-year repayment

This one is pretty simple. Pay your loans off in 10 years. Not always affordable, and surprisingly not always the least expensive over time, but simple nonetheless.

Public Service Loan Forgiveness (PSLF):

This program forgives the remaining balance on your Direct Loans after you have made 120 “qualifying monthly payments” under a “qualifying repayment plan” while working full-time for a “qualifying employer.”

Let’s break that down:

Qualifying Employer:

1. Government organizations at any level (federal, state, local, or tribal)
2. Not-for-profit organizations that are tax-exempt under section 501(c)(3) of the internal revenue code

Qualifying Monthly Payment:

A payment that you make after October 1^st, 2007, under a “qualified repayment plan” (see below), for the full amount due as shown on your bill, no later than 15 days after your due date, and while you are employed full-time by a qualifying employer.

Qualifying Repayment Plan:

1. IBR
2. ICR
3. PAYE
4. REPAYE
5. Standard 10-year repayment

The great news about this repayment plan is that the remaining balance of your loan is forgiven by the federal government, and is not considered taxable income!

Ok, so what do I do?

Great question, and the answer, like most answers when addressing this stuff is: it depends. Sorry! But it’s true. It depends on how much debt you have, what your income is, what the interest rates are, what your income will be, what your family size is, and most importantly, what your financial goals and objectives are. Contrary to what most people believe, dealing with financial matters is more art than science.

Although it may not feel this way, student loans are only one piece of the puzzle, and your repayment plan should be one that supports the entire picture, not just the one that “feels” the best at the time.

Navigating student loan repayment can be stressful, complex, and overwhelming. That’s why I highly recommend consulting a trusted, competent financial planner who specializes in veterinary finances and is well-versed in student loans. Having an expert to guide you through these decisions can be invaluable, helping to reduce stress and potentially save you significant money over time.