Department of Education Extends Medical Student Loan Deferment
[Posted 11/08/07]

The U.S. Department of Education announced last week that it would extend the “20/200” economic hardship loan deferment program for one year, until November 1, 2008. Congress had eliminated the 20/220 pathway on October 1 as part of the College Cost Reduction and Access Act of 2007, which would have meant that thousands of medical residents currently relying on the loan deferment program would have been forced to immediately begin making extremely large loan payments or go deeper into debt at a time when they are still in training. A new income-based loan repayment program created by the new law does not take effect until July 1, 2009.

The one-year extension allows fourth-year medical students and current residents to reapply for economic hardship deferment during the next year, and it provides time for CMA and AMA to pursue long-term legislative solutions to this problem. Legislation was introduced last week that would permanently restore the 20/220 pathway.

For the average resident earning about $43,000 a year and carrying a debt burden of more than $130,000, the 20/220 pathway has been invaluable. Up to 67 percent of entering residents qualify for economic hardship deferment under the program, allowing them to postpone payment on federal loans for three years without accruing interest on the subsidized portion of those loans. Residents qualify if their debt burden is greater than 20 percent of their income, and if their income minus their debt burden is not more than 220 percent of the federal poverty level.

Under the new program slated to take effect in July 2009, loan repayments would be capped at 15 percent of the borrower’s income that is above 150 percent of the federal poverty level.

Contact: Adam Dorsey, 916/551-2056 or adorsey@cmanet.org.