Like the SAVE plan, unpaid interest will be waived (plus a $50 subsidy), although with the higher payments required, there will be fewer people with unpaid interest. This will have the nice benefit of ensuring federal student loans do not balloon during residency as they did prior to the implementation of SAVE. If applicable, every child you have will also reduce your monthly payment by $50. Current borrowers can (and often should) stay in their current IDR plan until mid-2028, when they must transition to either IBR or RAP. Given its legal challenges, those in SAVE may wish to transition even earlier.

The group of borrowers hurt the most by changes was those whose strategy had been PAYE forgiveness because of a very high debt-to-income ratio. Under PAYE, after making payments for 20 years, the remainder of the debt was to be forgiven. Although this was not as attractive as PSLF (which comes after 10 years and offers tax-free forgiveness), it did not require the borrower to work full-time for a non-profit employer. In fact, the borrower did not have to work at all if they had access to other funds to make required payments. Now, these borrowers will have to transition into either IBR (which offers forgiveness after 25 years) or RAP (which offers forgiveness after 30 years). That could make a difference of hundreds of thousands of dollars in additional payments and taxes.

Finding the Best Strategy

Although the new rules themselves can be confusing, the best student loan strategies require an even higher level of thinking. For example, taking a slight pay cut to work in academia and qualify for tax-free PSLF forgiveness six or seven years out of training might have made a lot of sense when all of the loans were federal. When half or more of the loans are private, the amount of forgiveness may now be substantially lower than the additional amount earned in a non-academic position.

Your student loan strategy can be affected by how you file your taxes, which type of retirement account you use, and which IDR program you choose. Given all of the changes, now is a good time to visit with an informed advisor or even consult with a specialized student loan advisor to work out the best personalized strategy for you moving forward. Although change is never fun, it is likely that student loan policy will be far more stable over the next four years than it has been since the onset of the pandemic, allowing physicians to plan their financial future better than has been possible in recent years.