Repair student loan repayment law

A federal legislative change in how medical school graduates repay their loans leaves residents in a financial pinch.

Editorial. Nov. 19, 2007.

The road to becoming a physician is long and, for most, paved with huge student loans. That's followed by not-so-stellar pay in residency. Medical school graduates carry an average of $130,571 in debt. Resident physicians on average earn $43,266 a year.

When it comes to figuring out how high the monthly payments will be, it doesn't take an advanced degree -- or even a calculator -- to do the discouraging math.

The government shouldn't make it any harder on graduates to pay back these loans then it already is. But the recently signed College Cost Reduction and Access Act does just that.

On Oct. 1, it eliminated something dubbed the "20/220" rule. That option had allowed residents eligible for economic hardship to defer payments on subsidized loans for up to three years without accruing interest on the debt. Physicians in training were eligible if they met two criteria: (1) Their debt burden was greater than 20% of their income; and (2) their income minus the debt burden was not greater than 220% of the federal poverty level ($10,210 for single residents and $13,690 for couples). Residents had to reapply for the status once a year.

The majority of residents -- 67% -- met the criteria, according to the Assn. of American Medical Colleges.

The most pressing concern the law raises: A new repayment program won't take effect until July 1, 2009, leaving the training physicians in a financial bind during the gap between programs.

That typical resident with more than $130,000 in loans and a slightly higher than $43,000 salary would have to repay $1,878 a month during the gap year, or put their subsidized loans into forbearance. While in forbearance, training physicians won't have to repay the loan, but they will accrue interest that will have to be paid later. It is extra debt they didn't face under the 20/220 program.