The REPAYE Strategy for Residential Orthodontists to Save Interest Charges

In a recent interview on July 16, 2021 with Jan Miller, nationally recognized student loan repayment expert, Jan described a strategy using the REPAYE income-driven repayment plan that would save orthodontists thousands of dollars. With over 23 years of experience within the financial services and student loan sector, Jan is a nationally recognized expert in finding pathways through student loan debt. 

Not only does he have the expertise to manage your student loan repayment, he is also a personable and relatable advisor. Jan will get to know you through relationship building and work from an understanding of your personal dreams and financial goals. Just as you chose to specialize in orthodontics, when it comes to your student loan repayment, you need a specialist. Jan is a highly informed student loan specialist, who keeps on top of the latest trends and knowledge in the quickly-changing student loan field. 

In this article, we will give an outline view of REPAYE, one of the four income-driven repayment plans. But, your student loan situation is unique, so the best path forward is contacting Loyall Group so we can connect you with Jan Miller, a student loan expert. 

When Orthodontists Chat About Student Loans 

John graduated from dentist school ready to complete his education as an orthodontist with entrance into a competitive residency. He already had $290,000 in student loan debt, an amount that is common among dentists. Since most residencies charge tuition, he was on a path to double the amount of student loan debt he had by the end of his education. 

John wanted to make the best possible decision. After talking with several classmates about their student loans, he initially thought he would put his loans into deferment while he got through residency. With deferment, he wouldn’t have to start paying the loans back, although they would still accrue interest. But then he had lunch with a graduated orthodontist, Emma, and she shared her student loan strategists’ inside information. 

Emma shared that she applied for an income-driven repayment plan for her student loans, the Revised Pay As You Earn (REPAYE) plan. Her residency was unpaid, so her payments were $0 a month. Best of all, during the first three years of the plan, during the time she was in residency, the Federal Government subsidized 100% of the accruing interest on her loans. 

John decided to take a look into this plan. Emma shared her strategist’s phone number, and he called to set up a meeting so that he too could create a specialized plan for his loan repayment. 

What is REPAYE? 

The Revised Pay As You Earn Plan (REPAYE) is the newest income-driven repayment plan for student loans. While there are three other plans [link to Loyall Blog “Understanding the 4 Income…”], each with their benefits and qualifications, REPAYE has the largest interest subsidy of them all and is eligible to the most borrowers.  

Introduced in December of 2015, REPAYE is a revision of the Pay As You Earn (PAYE) Plan. the revision was necessary because PAYE has a “new borrower” limit on its program. Two of PAYE’s qualifications were that: 

  • You didn’t have any loans taken out before October 1, 2007 AND 
  • You did have a Direct Loan or Federal Family Education Loan taken out on or after October 1, 2011. The Direct Loan could be a Direct Unsubsidized, Direct Subsidized, Direct PLUS, or a Direct Consolidation (with an application received after Oct 1, 2011). 

These two qualifications weeded out many borrowers. REPAYE opened the doors to any borrower with any Federal Loan. 

Other benefits of REPAYE are similar to the other loan repayment plans. REPAYE uses your adjusted gross income and 150% of the poverty line to calculate your discretionary income. Then it takes 10% of your discretionary income and divides that number by 12 to find out your new monthly payment. 

After 20 years for undergraduate loans and 25 years for graduate loans, any remaining balance is forgiven. Because Congress passed in 2021 a bill that exempted taxes on forgiveness amounts through 2025, it is hopeful that similar tax bills in the future will help borrowers on the taxes due for forgiveness. 

Who is Eligible for the REPAYE Plan 

You must have a Federal Loan to qualify for the REPAYE program. Private and defaulted loans won’t qualify. The only loans that won’t qualify are Parent PLUS Loans; these loans qualify for the income-contingent program

To begin, you’ll need to apply for REPAYE. Each year, you’ll have to recertify with income verification. While payments are capped at 10% of your discretionary income, this payment does rise each year if your recertification shows increases in your income. If you are married, you’ll have to include your spouse’s income into the calculation as well. 

How Can I Use REPAYE to Save Money During Residency? 

New orthodontist residents can save money through REPAYE’s lowering the monthly payment amount and their interest subsidy feature. During residency, you may be facing a surprising number of new costs, including insurance requirements and possibly tuition. REPAYE will significantly reduce your monthly payment. In fact, if your residency doesn’t have a salary, you could be eligible for a $0/month payment, keeping you in good standing on your loans. 

Saving money through REPAYE goes beyond cutting your monthly premium into an affordable payment. One of the biggest factors in saving you money during residency is getting a handle on your accruing student loan interest. Colleen Greene, DMD, MPH, shared on Dental Economics that the interest on her loans was the same monthly payment as her rent. And she isn’t alone. This 2017 report from the American Association of Orthodontists states that the average monthly repayment is $4,819 with a 6.8% interest rate. One orthodontist shared in the report that the interest on their student loans amounted to $26,000.00 per year, on a $100,000 per year salary. 

REPAYE has the opportunity to give you a huge boost in paying your loans while saving money on interest. During the first three years of the program, the Department of Education subsidizes 100% of the unpaid interest on your loans. After the first three years, they subsidize 50% of the unpaid interest on your loans. This saves you from interest capitalization, unpaid interest that is put back as principal to your loans. So, while you make the 20-25 years of required payments before forgiveness, you will save yourself thousands of dollars. 

An Example of Thousands of Dollars Saved 

Let’s say that John’s $290,000 student loan debt has an average 6.8% interest rate. John’s total monthly payment for his loans over 25 years would be $2,013 per month. His residency has a salary of $40,000/year. John is single, and he will be in his residency for three years. 

First, we can use the REPAYE formula to calculate his new monthly payment. You can find the poverty line at the Federal Register

$40,000 – $19,320 = $20,680 

$20,680 * 10% = $2,068 

$2,068 divided into 12 months = $172.33/month 

He will already be saving $1,840 per month in the REPAYE plan – $22,080/year. Let’s take a look at his interest subsidy to see how much more he will save. 

Since $172/month will not pay back all his interest, the Department of Education will pay the unpaid interest for the first three years, then half his interest for the remainder of the time John is in the REPAYE program. Based on these charts by DoctoredMoney, John could end up saving between $7,155-$7,905 in interest. His interest rate will be cut to between 3.64-3.94% instead of 6.8% for the time he is enrolled in REPAYE. These are significant savings each year! 

Should You Apply for REPAYE? Get a Strategist for Personalized Counsel 

Everyone’s student loan situation is unique. Your life is personal to you – your dreams, family size, income levels, career goals. It might be tempting to try to use an online income-driven repayment calculator to find out how much you can save on REPAYE. But, we wouldn’t recommend it. An online calculator won’t assess your goals or individual needs and desires. 

We suggest connection instead. Connection with an experienced counselor, who will walk with you through your journey and create a strategy that aligns with your goals. To understand if REPAYE is right for you, and if you qualify, contact Loyall Group today. We will connect you with Jan Miller, a nationally recognized expert waiting to listen to your story and guide you on the path that is right for you.