Climbing Mt. Debt

Abstract

Federal student debt is different from other types of debt. Traditional time-driven repayment strategies of paying as much as you can as quickly as possible may be contraindicated, depending on your student debt balance and student debt-to-income ratio. The ability to repay using federal income-driven repayment (IDR) plans can greatly increase monthly cash flow and decrease total student loan repayment costs for most recent graduate veterinarians with student debt. This was true before COVID-19, but has been emphasized during the pandemic with the bonus interest and payment suspension applied to federally held student loans. The challenge is understanding the various loan types, repayment options available, and choosing an IDR strategy appropriate for each veterinarian’s circumstances. This often includes student loan forgiveness and a tax liability due 20 to 25 years after starting repayment. Using objective measures for analyzing repayment options, as well as knowing the rules and political landscape around federal student loans, a borrower can create a student loan repayment treatment plan that can lead to increased financial flexibility and improved financial wellness.