Student Loan Repayment for Veterinary Internships and Residencies
Conventional wisdom and reflex in the medical training community often says to defer your loans while pursuing internships and/or residencies. However, income-driven repayment (IDR) is often a much better option for veterinarians with federal student debt pursuing advanced education.
Income-driven repayment (IDR) calculates your monthly payment using your taxable income. After making payments for a specified number of years (20 or 25 depending on the plan), your remaining balance can be forgiven, triggering a tax on the amount forgiven. IDR can also lead to Public Service Loan Forgiveness (PSLF) which is a non-taxable benefit with specific requirements, including making payments to your federal Direct loans using an IDR plan while working for a qualifying organization for at least 10 years. The most beneficial IDR plans include Pay as you Earn (PAYE), Revised Pay as you Earn (REPAYE), or Income-Based Repayment (IBR).
If you need help understanding your loan types, go to studentaid.gov, download your federal student aid data file, and upload your file to the VIN Foundation My Student Loans tool. This tool will organize your student loans by type and loan servicer, and you can see your potential IDR plans with the “Income-Driven Repayment Eligibility” function.
Using PAYE, REPAYE, or IBR for internships and/or residencies:
IDR payments are calculated at either 10% or 15% of your discretionary income, depending on the plan. The more beneficial options, like PAYE and REPAYE, use the lower percentage.
On average, veterinary interns and residents earn $30,000-$40,000 per year. This means using a plan like PAYE or REPAYE, your loan payment would be $90-$174/month. If you follow the New Veterinary Graduate Student Loan Playbook, you can achieve a $0/mo payment for at least the first 12 months, if not the first 24 months, of your advanced education. These zero dollar monthly “payments” still count towards IDR forgiveness and PSLF depending on your employment type.
Interest still accrues while using IDR. However, when your income increases, your unpaid interest will not capitalize. Preventing your interest from being added to your principal can save you tens of thousands of dollars during the course of repayment.
CAUTION: If you are enrolled in school at least half-time during an academic internship/fellowship/residency, your school will automatically report your status to the Department of Education. This will result in an automatic loan status change to “deferment.” You may be able to prevent this automatic status change by providing oral and written notice to your loan servicer(s) to waive your in-school deferment and remain in repayment. Do this before starting your academic position and have dated documentation of your request (ie certified mail).