FAQ - Grace periods and consolidation

Justin Berry |

I just finished medical school and have been told I will be in a grace period? What is that and how does it work?

The grace period is a window of time, usually lasting six months after graduation, when you are not required to make any payments. It might sound nice, but a grace period is usually detrimental to the borrower. If a resident is aiming for PSLF, they want to start making payments as soon as possible to maximize the number of payments they make during training while at a lower income. They do not want to wait six months to start. Even for residents not aiming at PSLF, some borrowers will benefit from the REPAYE interest subsidy, and they will not want to delay the start of this benefit. There is a way to get rid of the grace period, but that decision and process must be evaluated on a case-by-case basis.

What is the difference between consolidating and refinancing as it relates to federal student loans?

Refinancing is when you have a private bank pay off your federal student loans and you create a new loan with the bank. The main reason physicians refinance is to get a new loan with a lower interest rate. However, refinancing is an irrevocable decision to leave the federal student loan system which means giving up on PSLF as well as other benefits of income-driven repayment options. Consolidation is an organizational maneuver inside of the Direct Loan system where you take all your individual pieces of federal loans and combine them into one new Direct Loan that is still inside the federal system.

If I want to make sure I find the most efficient student loan repayment strategy for my situation, how do I do that?

Email me at Justin.Berry@northstarfinancial.com. My student loan coaching process is available as a resource for all physicians in training at OHSU, Providence, and Legacy. There is no cost or obligation to you for this service. I have assisted over 1,000 physicians with their student loans, and I am always happy to help!