INCOME-BASED REPAYMENT PLANS MAY EASE THE BURDEN OF STUDENT LOANS

CHAD ROSEN, O.D., M.B.A., F.A.A.O., an assistant professor at the Michigan College of Optometry, says he wishes he had known more about his options for student loan repayment, so that he could have planned better.

“There are things I would have considered doing differently had I known what I know now,” he explains. “The earlier you take an interest in and actively learn about your finances, including budgeting and spending habits, the easier it will be to manage what is headed your way upon graduation. I hate hearing students talk about having to put off their ideal position after school because they need to manage the burden of debt they have waiting.”

Dr. Rosen is a 2012 graduate of the Pacific University College of Optometry. He completed his cornea and contact lens residency at his alma mater and took his education one step further by completing his M.B.A. from Ferris State University in 2016.

A SIMILAR STORY

Like most of us, Dr. Rosen says he financed his undergraduate and graduate schooling with Federal Direct Loans that had an average interest rate of 6.8%. In addition, he says he took out alternative loans through a private bank in his home state, North Dakota, during his last two years of schooling. These loans, he says, had an average interest rate of 5.75%.

REPAYMENT

“During my residency, I was able to defer my loan payments,” he explains. “Looking back on it, I wish I had gone into one of the Income-Based Repayment (IBR) Plans [offered by the U.S. government],” he explains.

IBR Plans set your monthly payment at an affordable amount based on your income and family size, according to Federal Student Aid (studentaid.ed.gov ). Four plans fall under this umbrella:

• Revised Pay As You Earn Repayment Plan (REPAYE Plan)
• Pay As You Earn Repayment Plan (PAYE Plan)
• Income-Based Repayment Plan (IBR Plan)
• Income-Contingent Repayment Plan (ICR Plan)

(See http://bit.ly/1BBhqcd for information on each.)

Dr. Rosen says he is currently on the Public Service Loan Forgiveness (PSLF) program, which, according to the Federal Student Aid website, forgives the remaining balance on the borrower’s Federal Direct Loan after he or she has made 120 qualifying monthly payments under a qualifying repayment plan, or one of the IBR plans, while working full-time for a “qualifying employer,” which is defined as a government organization, not-for-profit and public service provider.

“For me, the best method was to apply for the PAYE and the REPAYE plan. In both plans, they [the government] evaluate your ‘discretionary income,’ which is your adjusted gross income minus the poverty guidelines for your family size,” he explains. “Typically, both plans limit your payments to ~10% of discretionary income over 20 to 25 years.” Dr. Rosen went with one of these plans and adds that there is a caveat to the IBR plans:

“We haven’t seen the full results, as the first people to go through them were just able to apply for student loan forgiveness in the fall,” he says. “This means anyone in this program needs to hope their applications will be accepted and the remaining Direct Loans are forgiven.”

All four IBR payment plans result in forgiveness if your loans are not repaid by the end of the repayment period. This will depend on factors, such as how quickly your income rises during your repayment period, according to the Federal Student Aid website.

REFINANCING?

In addition to finding the right repayment plan, Dr. Rosen, like other recent graduates, looked in to refinancing his other loans.

“I actually looked in to refinancing with multiple groups to see what they had to offer. The private bank I went through didn’t have any great refinancing offers for me at the time and would only consolidate, which took a weighted average of all the interest rates, so I kept [the alternative loans] separate and still have one monthly payment for them,” he explains. “I looked in to these other groups that have gained publicity/popularity, such as SoFi and Laurel Road, and these companies offered what appeared to be great rates, but they were only up to a maximum amount of loan refinancing of ~$40,000.”

He adds that these groups are now allowing much larger amounts to be refinanced, so he would encourage anyone to get the details from the lenders.

A WORTHWHILE INVESTMENT

While Dr. Rosen acknowledges student loans are a drag, he says he is happy with his choice to pursue the profession of optometry.

“While [the loans] are technically considered debt, I feel optometry student loans are a great investment,” he says. “Investopedia lists the definition of an investment as, ‘an asset or item purchased with the hope that it will generate income or will appreciate in the future.’ By that definition, I see knowledge as an asset that can provide not only future financial results, but positive job and life satisfaction as well.” OM

DR. O’BRIEN started her private practice cold in Denver. She is heavily involved in private practice student programming with Optometric Insights, the Vision Source MentorOD Program and, most recently, began working with iCare Advisors to help others pursue their cold start private practice dreams.