Overview
Many student loan borrowers experience sticker shock when their first payment comes due after graduation.
Why is that?
By default, upon graduating from college or medical school, you’re enrolled in the 10-Year Standard Repayment Plan.
For the average medical resident, this often means a massive payment that can take up as much as three-fourths of their take-home pay.
The good news? There are strategies to manage these hefty payments.
Let’s break down how the 10-Year Standard Repayment Plan is calculated.
Overview
Many student loan borrowers experience sticker shock when their first payment comes due after graduation.
Why is that?
By default, upon graduating from college or medical school, you’re enrolled in the 10-Year Standard Repayment Plan.
For the average medical resident, this often means a massive payment that can take up as much as three-fourths of their take-home pay.
The good news? There are strategies to manage these hefty payments.
Let’s break down how the 10-Year Standard Repayment Plan is calculated.
Subscribe to The Dream Bigger – Physician Edition Newsetter
A weekly newsletter designed for early-career physicians and anyone looking to enhance their financial well-being.
Discover helpful tips, strategies, and insights to dream bigger and take control of your financial future. 🥼
Get student loan updates, money-saving tips, and financial strategies – all delivered to your inbox.
Subscribe to The Dream Bigger – Physician Edition Newsetter
A weekly newsletter designed for early-career physicians and anyone looking to enhance their financial well-being.
Discover helpful tips, strategies, and insights to dream bigger and take control of your financial future. 🥼
Get student loan updates, money-saving tips, and financial strategies – all delivered to your inbox.
10-Year Standard Repayment Plan
After completing medical school, your student loans enter a six-month grace period.
During this time, you’re not required to make any payments on your loans. Once the grace period ends, your loans move into “In Repayment” status, and mandatory monthly payments begin.
By default, your payment is calculated using the 10-Year Standard Repayment Plan.
Much like a mortgage, this plan sets a fixed monthly payment designed to fully pay off your loan balance over 10 years.
The amount is based on your total loan balance and interest rate.
10-Year Standard Repayment Plan
After completing medical school, your student loans enter a six-month grace period.
During this time, you’re not required to make any payments on your loans. Once the grace period ends, your loans move into “In Repayment” status, and mandatory monthly payments begin.
By default, your payment is calculated using the 10-Year Standard Repayment Plan.
Much like a mortgage, this plan sets a fixed monthly payment designed to fully pay off your loan balance over 10 years.
The amount is based on your total loan balance and interest rate.
Choosing the Right Repayment Plan for PSLF Success
Public Service Loan Forgiveness (PSLF) is a program that allows for tax-free forgiveness of remaining student loan balances on qualifying federal loans after 120 qualifying payments (10 years).
To be eligible for PSLF, you must meet the following criteria:
1. Work for a qualifying employer (such as a hospital or non-profit).
2. Have Direct Loans.
3. Make 120 qualifying payments.
4. Be on an Income-Driven Repayment (IDR) plan or the 10-Year Standard Repayment Plan.
Learn more about PSLF here: Public Service Loan Forgiveness
While the 10-Year Standard Repayment Plan is eligible for PSLF, it’s not the best option for those pursuing forgiveness. Since this plan fully pays off the loan in 10 years, there would be no remaining balance to forgive.
The main strategy for PSLF is to minimize payments, leaving a balance that can be forgiven after 120 payments.
Income-Driven Repayment (IDR) plans, which offer lower monthly payments, are ideal for maximizing loan forgiveness. By choosing an IDR plan, you can reduce your monthly payments and leave more of your loan balance to be forgiven at the end of the PSLF period.
Choosing the Right Repayment Plan for PSLF Success
Public Service Loan Forgiveness (PSLF) is a program that allows for tax-free forgiveness of remaining student loan balances on qualifying federal loans after 120 qualifying payments (10 years).
To be eligible for PSLF, you must meet the following criteria:
1. Work for a qualifying employer (such as a hospital or non-profit).
2. Have Direct Loans.
3. Make 120 qualifying payments.
4. Be on an Income-Driven Repayment (IDR) plan or the 10-Year Standard Repayment Plan.
Learn more about PSLF here: Public Service Loan Forgiveness
While the 10-Year Standard Repayment Plan is eligible for PSLF, it’s not the best option for those pursuing forgiveness. Since this plan fully pays off the loan in 10 years, there would be no remaining balance to forgive.
The main strategy for PSLF is to minimize payments, leaving a balance that can be forgiven after 120 payments.
Income-Driven Repayment (IDR) plans, which offer lower monthly payments, are ideal for maximizing loan forgiveness. By choosing an IDR plan, you can reduce your monthly payments and leave more of your loan balance to be forgiven at the end of the PSLF period.
Method 1: Using the 10-Year Standard Repayment Formula
To calculate your monthly payment, use the 10-Year Standard Repayment Formula below:
Method 1: Using the 10-Year Standard Repayment Formula
To calculate your monthly payment, use the 10-Year Standard Repayment Formula below:
Method 2: Calculating with an Online Student Loan Calculator
If you prefer an online tool, search for a “Student Loan Calculator.”
Websites like Calculator.net offer user-friendly calculators where you can input your loan details.
Method 2: Calculating with an Online Student Loan Calculator
If you prefer an online tool, search for a “Student Loan Calculator.”
Websites like Calculator.net offer user-friendly calculators where you can input your loan details.
Method 3: Building Your Own Calculator in Excel or Google Sheets
For spreadsheet enthusiasts, set up a simple formula in Excel or Google Sheets using the PMT function.
Method 3: Building Your Own Calculator in Excel or Google Sheets
For spreadsheet enthusiasts, set up a simple formula in Excel or Google Sheets using the PMT function.
Introducing Dr. Don!
Dr. Don, a recent medical school graduate, is eager to understand his monthly payment under the Standard 10-Year Repayment plan. Let’s illustrate examples using each of the three methods outlined above.
Dr. Don’s Student Loan Details:
☁️ Loan Balance: $260,000
☁️ Average Interest Rate: 6.8%
Introducing Dr. Don!
Dr. Don, a recent medical school graduate, is eager to understand his monthly payment under the Standard 10-Year Repayment plan. Let’s illustrate examples using each of the three methods outlined above.
Dr. Don’s Student Loan Details:
☁️ Loan Balance: $260,000
☁️ Average Interest Rate: 6.8%
Method 1: Using the 10-Year Standard Repayment Formula
To calculate your monthly payment, use the formula below:
Method 1: Using the 10-Year Standard Repayment Formula
To calculate your monthly payment, use the formula below:
Method 2: Calculating with an Online Student Loan Calculator
If you prefer an online tool, search for a “Student Loan Calculator.”
Websites like Calculator.net offer user-friendly calculators where you can input your loan details.
Method 2: Calculating with an Online Student Loan Calculator
If you prefer an online tool, search for a “Student Loan Calculator.”
Websites like Calculator.net offer user-friendly calculators where you can input your loan details.
Method 3: Building Your Own Calculator in Excel or Google Sheets
For spreadsheet enthusiasts, set up a simple formula in Excel or Google Sheets using the PMT function.
Method 3: Building Your Own Calculator in Excel or Google Sheets
For spreadsheet enthusiasts, set up a simple formula in Excel or Google Sheets using the PMT function.
Conclusion
As we’ve seen, no matter which method Dr. Don used to calculate his monthly payment under the 10-Year Standard Repayment Plan, the result was the same — $2,992 per month.
For most medical residents, with an average salary of $60,000 and a take-home pay of around $4,000 per month, affording this payment is simply not realistic.
Thankfully, by actively enrolling in an Income-Driven Repayment (IDR) plan, there are ways to significantly reduce the monthly payment. In many cases during training, payments can be reduced to as low as $0 per month.
Conclusion
As we’ve seen, no matter which method Dr. Don used to calculate his monthly payment under the 10-Year Standard Repayment Plan, the result was the same — $2,992 per month.
For most medical residents, with an average salary of $60,000 and a take-home pay of around $4,000 per month, affording this payment is simply not realistic.
Thankfully, by actively enrolling in an Income-Driven Repayment (IDR) plan, there are ways to significantly reduce the monthly payment. In many cases during training, payments can be reduced to as low as $0 per month.
Start Dreaming Bigger,
Finally Take Control of Your Student Loans!
Start Dreaming Bigger,
Finally Take Control of Your Student Loans!
It All Begins with a Diagnosis…
At Dream Bigger Financial, we’re dedicated to setting early-career physicians on the right financial treatment plan.
With a comprehensive diagnosis, we guide you towards financial peace of mind, ensuring you can be your best self for your loved ones and patients.
Considering financial planning?
We’re currently accepting new patients!
If you prefer self-diagnosing,
join us on social media!
We regularly share tips and tricks on lowering taxes, managing student loans, saving for retirement, and guiding you to live your best financial life.
Michael Putterman, CFP®
☁ Virtually serving clients nationwide ☁
It All Begins with a Diagnosis…
At Dream Bigger Financial, we’re dedicated to setting early-career physicians on the right financial treatment plan.
With a comprehensive diagnosis, we guide you towards financial peace of mind, ensuring you can be your best self for your loved ones and patients.
Considering financial planning?
We’re currently accepting new patients!
If you prefer self-diagnosing,
join us on social media!
We regularly share tips and tricks on lowering taxes, managing student loans, saving for retirement, and guiding you to live your best financial life.
Michael Putterman, CFP®
☁ Virtually serving clients nationwide ☁