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With student loan payments set to resume in October, Alyssa Schaefer, general manager & chief experience officer at Laurel Road, shares how physicians can prepare to start repaying medical school loans. Also covering the recent SCOTUS decision on student debt relief, interest rates and loan repayment programs. AMA Chief Experience Officer Todd Unger hosts.
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- Alyssa Schaefer, general manager and chief experience officer, Laurel Road
Unger: Hello and welcome to the AMA Update video and podcast. Earlier this summer, the Supreme Court struck down the administration's student loan cancelation plan. And here to discuss how this impacts physicians and what they need to know before payments resume is Alyssa Schaefer, general manager and chief experience officer at Laurel Road in New York.
I'm Todd Unger, also a chief experience officer at the AMA in Chicago. Alyssa, thanks so much for joining us today.
Schaefer: Thanks for having me, Todd. I appreciate it.
Unger: Well, there's still a lot of lingering uncertainty in the wake of the Supreme Court's decision. So why don't we just start by talking about who specifically might be affected by this ruling?
Schaefer: Absolutely. Well, the original plan that the administration had put forward that. As you mentioned, was shot down by the Supreme Court recently—it actually applied to, pretty much, anyone who had federal loans. And that would be inclusive of physicians, residents, fellows, et cetera.
And it was really meant, though, to take care of people that were in lower income brackets. So for example, if you met a certain income limit, you would get forgiveness, up to $10,000 to $20,000 of your federal student loan. So this may have helped some physicians, in terms of residents and fellows, but probably not the vast majority of practicing physicians.
That said, it would have certainly helped other populations and was sort of—you can kind of draw your own conclusions if you think it was fortunate or unfortunate that the Supreme Court did not allow that to pass. However, the administration did put forward some changes in income-driven repayment plans that we believe are actually more advantageous to physicians in general, and a larger population of people, potentially. So there is some really good news on the horizon and people are taking advantage of that every day.
Unger: We'll talk a little bit in more detail about that in a moment. Alyssa, even if they didn't qualify for the administration's student loan cancelation plan, all borrowers have been off the hook, so to speak, in making payments for years, due to the emergency measures that came early in the pandemic. And of course, that's all changing soon. When do payments—when are those set to resume?
Schaefer: That's right. It's been over three years now where people who have federal student loans have not been obligated to pay off those loans or make those payments and interest has not been recruiting. So right now—and we believe this is going to hold steady, even though this student loan holiday, as we call it here, has been extended again and again—I believe there was a total of nine extensions.
But right now, student loan payments are set to resume on October 1, although your interest will start reoccurring—or start accruing interest, I should say—on September 1. So you want to make sure that you have a plan in place and you really start to take the necessary steps, which we could talk about, in terms of getting you set up for that. So again, it's October 1 that payments resume, although interest begins accruing in September.
One thing I think that's really important to mention is that there will be no other extensions of the student loan holiday. And that's because of measures that were put in place in the debt ceiling deal that was passed by Congress on June 2. So again, this is the final call here, a final deadline, of when payments are going to resume, which is October 1.
Unger: Well, given that, what you just said there, how can physicians prepare to repay their loans, especially since residents and fellows are on pretty tight budgets? What steps should they take?
Schaefer: Absolutely. One of the first pieces of advice that we give people is to have a free consultation with a company called Gradfin. Gradfin is actually the nation's leading student loan counseling servicers. They have a great team of deep, deep experts that really know the ins and outs of all the forgiveness plans and all your options, and they can talk you through what might may be best for you.
It's a free 30-minute consultation, so it doesn't take a lot of time. And I should mention, Gradfin was purchased by KeyBank. Laurel Road is also a brand of KeyBank. But Gradfin was purchased by KeyBank just last year, and we have just a great team that can help you talk through your options.
And they will either talk you through your options of you joining an income-driven repayment plan. Maybe you're eligible for a public service loan forgiveness plan. Maybe your best option is to refinance, or perhaps you just stay the course and keep paying on your loan. So those are all things that you want to look into. And I think it really does start with having that free consultation with Gradfin.
Just as a personal story, I wanted to share, you might be surprised—if you are practicing doctor or a newer doctor in your residency or fellowship, you will probably be eligible for one of those income-driven repayment programs if you're in residency or fellowship. If you're well into your attending years, you might even be eligible for public service loan forgiveness that you didn't already know.
I'll share one personal anecdote story here—that my husband is actually a cardiologist. He's been practicing for many years now, had no idea that he was actually eligible for PSLF, the Public Service Loan Forgiveness program—and just a couple of months ago, got all the rest of his loans forgiven. So it really started with that initial consultation with GradFin.
We can't promise that will be everybody's situation, but it certainly was his situation. And he was surprised. So you definitely want to talk to some experts there.
Unger: Well, that is a nice story. Alyssa, there's been a lot of uncertainty around loan repayments for years. And of course, during that time, residents and fellows have had to move on. They have to sign leases, live their lives, make decisions, without necessarily having a full picture of their finances. If starting to repay their loans now would create too much of a burden, what options do they have?
Schaefer: Again, a lot of them may be eligible for the income-driven repayment plans, so you want to look into that. And what that does—it takes into account your current earnings, and therefore how much of your current earnings can go towards your monthly payment. So it will adjust, essentially, your monthly payment, based on your current earnings, and certainly takes into account you being a resident or a fellow.
And then, I think, you know, just good old-fashioned budget management is something you want to look into. We talk a lot about the 50-30-20 rule, which basically says, you know, 50% of your income should go towards things that you need—your food, your rent, your car payment, et cetera.
30% is really that discretionary income that you would have, maybe, to go out to a nicer dinner or take a vacation, and then 20% used for savings. So you want to factor in your student loan payment, and obviously, that 50% category.
And in the 20%, I think that there are just great options out there. Laurel Road, for example, has a great high-yield savings account now, where you can get a 5% APY, which is one of the highest rates in the market. So you want to really invest.
And sometimes it really just takes opening up a great savings account to do that. But you want to be able to invest as soon as you can. But we typically talk about that 50-30-20 rule as just sort of a quick rule of thumb.
Unger: All right. Well, shortly after the Supreme Court's decision, the administration announced an alternate loan forgiveness plan. Is that something that physicians should be keeping in mind when they're preparing to repay their loans?
Schaefer: So this is another plan that was introduced by the administration after the Supreme Court made their decision. It includes a similar $20,000 forgiveness. To be honest with you, we believe this is going to be a long road, if it does ever get passed. So it's not something I think physicians should necessarily count on. And they should really kind of continue to go down the path assuming that they'll start making payments in October.
Unger: All right. Before we go, I just want to just stress that Laurel Road is a preferred provider through our AMA Member Benefits Plus program. Alyssa, can you talk a little bit about the exclusive benefits that AMA members get with Laurel Road?
Schaefer: Absolutely. Well, we've just had a great program with the AMA for several years now. And if you think about everything that Laurel Road can offer you as a digital bank, anything that we would offer with the AMA program comes at an additional discount to you, or some other benefit.
So if you're applying for a student loan refinance, a mortgage, a personal loan that's specific to physicians, we have resident physicians and attending physicians, personal loans. You would get a rate discount just for being an AMA member, and for us having this program together.
And then, the high-yield savings account that I mentioned—it already has this great rate of 5% APY. You would also get $100 bonus and just, really, $100 kind of automatically into that account once you open that up, as part of the AMA program. So each of our products are really tailored to the physician segment, whether you're a resident, a fellow or an attending. We have different flavors of our products for each one of those segments.
And then, we provide something on top for AMA members as part of this program. So definitely encourage you to take a look at us if you haven't. But specifically, as it relates to student loans, definitely set up your consultation with GradFin, really understand your options as they relate to you.
Unger: And everyone, you can check out more information on the AMA site in our Member Benefits section or look for laurelroad.com/partnerships/ama. Alyssa, thanks so much for being here today. That was pretty important information, given all the changes that are happening.
That's it for today's episode. We'll be back soon with another AMA Update. In the meantime, you can find all our videos and podcasts at ama-assn.org/podcasts. Thanks for joining us today. Please take care.
Disclaimer: The viewpoints expressed in this video are those of the participants and/or do not necessarily reflect the views and policies of the AMA.