New law ends loan deferment program

The AMA wants Congress to reinstate the plan to protect residents from unexpected loan repayments.

By Myrle Croasdale, AMNews staff. Nov. 5, 2007.

A new education financing law has many residents questioning how they will manage to start paying back their medical school debt while continuing to train as physicians.

On Sept. 27, President Bush signed into law the College Cost Reduction and Access Act, eliminating a widely used loan deferment program that allowed many residents to delay making loan repayments for three years without accruing interest.

Although the Assn. of American Medical Colleges does not know how many first-year residents took advantage of the deferment option, about two-thirds were eligible for the program that compared salary and debt size to determine whether a resident could afford repayments for the year.

The new law ended that deferment program Oct. 1. A new repayment plan created in the legislation is not slated to start until July 1, 2009. It is unclear what will happen to residents with deferments now that the program is closed, experts said. They may have to start making payments right away or they may be able to continue deferring their payments for the 2007-08 academic year. Either way, with no program in place for the 2008-09 academic year, a resident, regardless of salary amount, who owes $130,000 would have to repay $1,878 a month during that time or go into forbearance, according to the AAMC. Under forbearance, residents don't make loan payments; but they accrue interest on the borrowed money that they will have to repay later.

Once the new program is in place in 2009, that typical first-year resident making $43,000 would see payments decrease to $350 a month.

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