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Wednesday, October 3rd 2007

…Or We'll Break Your Kneecaps

The College Cost Reduction Act was signed and delivered into law on September 27th. Amongst its many reforms the act limits deferments of medical student debt while in residency.

Previously, under the 20/200 rule, residents could defer payments on subsidized Stafford (and I guess PLUS) loans (and not accrue interest) if their loans were 20% of their income and their income minus debt burden was not greater than 220% of the federal poverty level. At today’s value of the FPL that would be about $22,500. There’s a hell of a lot of interns who meet those requirements.

Indeed, From AAMC figures over 2/3rds of residents meet those thresholds and were previously eligible for hardship deferment. But no more.

As a substitute Congress has graced us with a cap on payments, to try to relieve the debt pressure,

[O]ne of the newly created programs — the income-based repayment program — caps the level of loan repayments at 15 percent of a resident’s income that exceeds 150 percent of the federal poverty level. A medical resident with $130,000 in debt, for example, would normally make payments of $1,800 to $1,900 a month under a regular 10-year repayment plan. But under the newly created program, payments are capped at $300 to $400 a month based on an average resident’s stipend, which is about $43,000 a year, according to Shick. This will, in turn, “result in a substantial decrease” in what medical residents are required to pay each month, said Shick.

He adds that more medical school residents will qualify for the repayment program than the hardship program. “Previously, residents were able to (defer payments) under the economic hardship plan,” Shick said. “But they now can start making payments under the income-based repayment program immediately after they graduate.”

I’ve semi-defended government subsidized education loans in the past and while I certainly think professional students have been blessed with a lovely way of financing their education and thus shouldn’t complain too much when the stick-and-carrot are pulled a little further away, I also think that as long as the government is going to be in the business of subsidizing my education that this elimination of the hardship deferment option is probably the wrong plan.

That being said, I would hope medical students would never make this a public issue and one to whine about.

Damnit! Feel Sorry For Us!

Consider that the average resident income is ~$43,000 and that the median U.S. household income is ~$48,000. True we’re carrying around essentially another mortgage with some students graduating with upwards of $250,000 in debt but let’s not feel too sorry for medical students.

The changes to our post graduate repayment options are a horse pill and the hardship deferment option should be revived, but I guess I’ll swallow the new College Cost Reduction Act and somehow manage to get by. *rolls eyes*