Debt Strategies

Keep Expenses Down: Budget carefully and plan your expenses. To budget your money you must know how much you spend for various living costs (e.g., food, clothing, medical, housing, utilities, books, meals out, recreation, car insurance, credit cards, etc.). Keep track of your expenses for a month so you know how much you are spending. Then compare your expenses with your income and/or financial aid. Look for places to cut spending. Avoid unnecessary borrowing.

Apply for Scholarships: Each year we update all listing of scholarships. This information is available for our enrolled students and applicants who have been chosen to interview. Our students have been fairly successful in obtaining scholarships from groups and organizations on this listing. These awards are not always competitive-- many are restricted by criteria such as county of permanent residence, age, gender, ethnicity, location of high school attended, willingness to serve in the military, religion, etc. Some examples of searchable scholarship databases can be found on these sites: College Board and FinAid.

Know Your Loan Portfolio: Track and manage your federal student loans by accessing your Federal Student Aid (FSA) account. There you can view your federal Title IV loans (federal Stafford, Direct, or Perkins). You can review which school originated a loan, the lender, guaranty agency and loan servicer. You can also track loan status, loan amounts, outstanding principle balance, etc.

Apart from a Perkins loan, your FSA account will not show any loans you owe directly to your school or private lender. Loans you received while at UC Davis can be viewed via your MyAwards under the loans tab. Anything listed in the Type column as Federal are your Direct and PLUS loans and is owed to the Department of Education, check your FSA account for the servicer information. Anything listed as Institutional is owed to UC Davis and Heartland ECSI will be servicing those loans. Anything listed as Private, you will need to go back to the original lender to find out how to access your account and make payments. If you had loans as an undergraduate student at another institution, you should reach out to that institution and verify if you have any institutional loans owed to that campus. Understanding what you owe and who you owe is crucial to building an effective repayment strategy and keeping your loans in good standing throughout repayment.

Save Money During Early Residency Years When Payments May Not Be Required: Some loans may not require payments during the early years of medical residency; this would be a good time to pay down loans where interest is not deferred (e.g.,private and unsubsidized loans). It would also be a good time to set aside funds in preparation for loan payments that will begin in the later residency years.

Carefully Consider Loan Consolidation: Detailed information on Direct Consolidation Loans can be found on the Federal Student Aid (FSA) site or by calling 800-557-7392. Weigh the advantages and disadvantages before choosing consolidation. We generally do not recommend consolidation of your Loan for Disadvantaged Students (LDS) as this loan qualifies for deferment during residency which would stop interest accrual. However, if you have a high federal loan debt balance, are going into public service, and are certain you will qualify for Public Service Loan Forgiveness (PSLF), then you may want to consolidate your LDS to make that balance eligible for PSLF.

Consider Loan Repayment Programs (LRP): Some federal agencies offer loan repayment programs (LRP), examples include the National Health Service Corps (NHSC), the Indian Health Service (IHS) and the National Institutes of Health (NIH). These programs allow repayment of substantial portions of your eligible education debt in exchange for your commitment to work in federally designated health professional shortage areas and typically have a minimum service obligation. The Veteran Health Administration also has an Educational Debt Reduction program for their doctors that qualify. Some states may also have LRPs. If you remain and practice in California, review the California Department of Health Care Access and Information (HCAi) website for California loan repayment programs you may be eligible for.

Public Service Loan Forgiveness (PSLF)- Federal Direct Loans ONLY: Unlike the loan repayment programs which provide funds towards your eligible loans in exchange for a specific service commitment, the Public Service Loan Forgiveness program allows for cancellation of your remaining Direct Loan debt after you've made 120 qualifying on-time monthly payments while working full time for an eligible public service employer.

Perkins Service Cancellation: The Perkins loan program ended with the last disbursements being made in the 2017-18 school year. If you were enrolled in school in the 2017-18 school year or earlier, check your FSA account to see if you have an outstanding Perkins loan. The Perkins loan program has its own unique service cancellation program. Doctors aren't usually eligible for Perkins service cancellation unless they're in the military and get called to active duty, but nurses can qualify for Perkins service cancellation. Contact your Perkins loan servicer for more information on how to apply for service deferment and cancellation if you believe you will qualify.

Other Benefits: Federal loans that are owed back to the Department of Education may qualify for a 0.25% interest rate deduction for utilizing automatic recurring payments from your back account. You may qualify for the interest rate reduction on your Direct Loans even when you qualify for $0.0 payments while on an Income Driven Repayment (IDR) plan, so you should sign up for automatic payments with your federal Direct Loan servicer even if you aren't required to make a payment.

If you have a private loan, check with the lender/servicer for any special repayment programs/incentives that might be available.

Income-Driven Repayment (IDR): When the lender/servicer calculates a minimum required monthly payment based on a borrower's income and household size instead of paying the loan off in a specific amount of time. IDR generally yields lower monthly payments than the traditional time-driven plans, especially during training years when a borrower's income is lower. There are also partial interest subsidies with some of the IDR plans that make them more beneficial to use during training years than a forbearance. Borrower's must re-certify their income annually to keep a payment based on their income and household size.

For those eligible for federal loans IDR is only available on your Federal Direct Loans. Those that were ineligible for federal loans, but received the California Dream Loan, an income-based repayment plan is available.

Note: the federal IDR plans are not the same as the California Dream Loan income-based repayment plan.

Deferments and Forbearance effectively postpone or reduce payments on your eligible loans assuming you apply on-time and meet certain criteria.

• Deferment: If the loan is subsidized, a deferment will postpone any payments on principal or interest coming due. If the loan is unsubsidized a deferment will only postpone payments on the principle, but interest will still accrue.
• Forbearance: Only payments on principle are postponed, interest accrues on all loans subsidized or unsubsidized.

Any outstanding interest from a deferment or forbearance period may be required to be repaid monthly, by the end of the forbearance period, or potentially may be capitalized (added to the principal), depending on the loan. A forbearance could also shorten the overall repayment term, resulting in a higher minimum payment post-forbearance than what was required prior to the forbearance, so it's important to work with your lender/servicer and make sure you understand how each of these benefits will affect the repayment of your loan. Deferments and forbearance must be applied for annually (they are not granted for more than 12 months at a time but may be granted for a shorter period) and usually have a maximum lifetime benefit.

• Federal Direct Loans: do not have a residency deferment option and most will not qualify for an Economic Hardship Deferment. Income Driven Repayment (IDR) will be the best option for most during residency, especially those working towards Public Service Loan Forgiveness (PSLF). However, forbearance is required to be granted by the loan servicer on Stafford/Direct Loans when the borrower is serving in a medical residency program and requests it.
• Loan for Disadvantaged Students/Primary Care Loan: have a full residency deferment benefit. You must certify your residency participation annually on the appropriate deferment from and submit to Heartland ECSI, starting from the end of your grace period.
• Perkins Loans: do not have a residency deferment benefit and most will not qualify for an Economic Hardship Deferment.

Doctors with outstanding Perkins loans that choose not to consolidate them into the Direct Loan program and would like to postpone payments during their residency but don't qualify for an economic hardship deferment will need to file for a forbearance every 12 months from the end of their grace period. Check with your lender/servicer as you may be required to pay the interest monthly or by the end of each forbearance term. Interest is not allowed to capitalize on a Perkins loan. 

Nurses in residency programs can file for service deferment working towards Perkins cancellation if they're licensed and considered full-time during their residency. Contact your Perkins servicer if you have questions.

The California Dream Loan does not have a residency deferment but does have an income-based repayment option, Economic Hardship Deferment, and forbearance benefits. You must submit your request for the appropriate benefit to Heartland ECSI starting when the grace period on your loan ends.

Other UC Davis Campus/Institutional Loans: All other UC Davis campus/institutional loans have internship/residency deferment benefits of varying lengths. Refer to your promissory notes for specifics. Use the Continuing Education Deferment request to certify your residency participation for all eligible campus/institutional loans and submit the completed request to Heartland ECSI on an annual basis starting from the end of the grace period on the loan.