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Dear Dr. Debt is an advice column about student-debt management in the veterinary community. It is adapted from Veterinary Information Network and VIN Foundation message boards where veterinarians and veterinary students ask questions and get answers to help them approach borrowing and repayment strategically.

Over the years, thousands of these online conversations have enabled VIN members to learn the good, bad and ugly aspects of student loans. With Dear Dr. Debt, the VIN News Service extends the conversation to the wider veterinary community, featuring advice from student debt expert Dr. Tony Bartels.

Dear Tony,

I have made zero payments toward my student loans since graduating in 2020, and spent the last couple of years focused on other aspects of financial wellness. I pretty much ignored my student loan debt.

Now I wonder if I made a mistake by not paying this down during the U.S. government's pandemic pause, which suspended interest and payments on all federal student loans.

How do you balance between paying down loans right now versus saving for retirement and building an emergency fund? It all feels so overwhelming. If I do decide to start paying toward the loans a little, would I have to select a payment plan or can I just make a payment directly on the principal while everything is still in forbearance?

After graduating, I took an internship that paid $30,500. In August 2021, I got a full-time job as a general practitioner, making $105,000 a year. I left that job in September, and now I practice as a relief/locum veterinarian. Due to this being a more flexible position, my income varies each month. But that soon may change when my partner and I move across the country to Seattle, where I plan to look for an associate position with health benefits.

Because of the move, I will be selling my condo and may have some profits. My financial goals include saving for retirement by investing, paying down my student loan debt and saving for a down payment on a home in Seattle. While I want to pay off my student debt, I still want to live comfortably, so I don't want to be drained financially, either.

I know that the U.S. Department of Education aims to alter income-driven repayment, possibly by phasing out PAYE (Pay As You Earn) and modifying REPAYE (Revised Pay As You Earn). With so much in flux, I need a game plan. What do you think is the best loan repayment plan for my financial situation? Here's a breakdown of my finances: 

Student loan principal: $169,683

Unpaid interest balance: $17,806

Last payment: August 2020

Weighted average student loan interest rate: 5.75% but will drop to 5.5% via autopay

Repayment plan or strategy: PAYE, enrolled for three years

Emergency fund: $10,000

Personal debt: home mortgage of $247,000; no auto loans or credit card debt

Pay structure: independent contractor

Tax status: single

— Need a Game Plan

Dear Game Plan,

It sounds to me like it's time for a student loan "physical exam."

It's not uncommon, this far from graduation, to second-guess how you've handled repayment. I can assure you, you've been doing exactly what I recommend for most indebted graduates: Pay only what your income requires for your student loans, and focus on more critical areas of your overall financial wellness.

I have good news for you: You can pay nothing on your student loans even longer, if you want. As part of the recent pandemic forbearance extensions, income-driven plan renewal dates have been extended again, too. In your VIN Foundation My Student Loans summary, I see that your loans are in PAYE with a recertification date of May 29. According to the U.S. Department of Education, "If your recertification date falls between now and six months after the pause ends, it will be pushed out by one year." 

That means you!

Since your PAYE anniversary is in May, we know your PAYE renewal will be pushed to May 2024. Because you currently have a zero-dollar PAYE payment, there's no good financial reason to change that until you're due to renew, in early 2024. PAYE, like other income-driven repayment plans, ends in forgiveness of your student loan balance after a specified payment period, usually 20 years. 

With nearly three years in PAYE thus far, you'll approach 20% of your PAYE timeline with no payment and almost no interest accruing. You are not going to log a payment greater than zero until your fifth year of repayment. That is a huge bonus for you and many of your class of 2020 colleagues who have been using a repayment plan like PAYE.

Well done following the recently proposed changes to income-driven repayment. It's risky to count on proposed changes because they are not finalized. Right now, the proposed regulatory changes would phase out PAYE and change the terms of REPAYE.

For veterinarians like yourself who graduated during the pandemic forbearance period, confirming that their loans are in PAYE is very important. Borrowers who are using PAYE before the repayment option is phased out can stick with it. However, anyone who is not using PAYE or leaves PAYE after the phase-out will no longer have access. Since you're already enrolled, you can stay with it. 

You've had a lot going on during the past few years, and I disagree that you've ignored your student debt. You consolidated your loans quickly after you graduated, secured a zero-dollar payment in PAYE and started your forgiveness clock ticking about as quickly as possible, and have been working on your financial wellness. You own a home that you're about to sell at a profit, you're moving and learning your way through the veterinary profession.

This is exactly what you should be doing.

You have not made a mistake by not making payments. If fact, I've spent a ton of time trying to get our colleagues who have been making payments during this no-interest period to request refunds of pandemic-period payments — a lesser-known benefit of the pandemic forbearance provisions. There's no mathematical reason to make payments to your loans during this special forbearance period.

If your student debt-to-income ratio (DIR) is less than 1.0 when interest restarts — meaning your debt balance is lower than your annual income — consider putting the payments you would make toward your student debt in a high-yield savings account that earns 4% or so, and later pay your student loans just before the forbearance benefits expire. That would have the same impact as making regular payments now, but you'd earn some interest and have more money to execute that plan.

If your DIR is less than 1.0, your payment under PAYE will be close to what you'd pay under a standard 10-year repayment plan. Assuming your DIR remains less than 1.0, and you have more than 10 years of payments remaining, you are likely to completely pay off your loan before reaching forgiveness. In that case, paying a bit extra just before interest reaccrues could be a good financial move. 

If your DIR will be greater than 1.0 after the forbearance period ends — which may be the case for you — continue making minimum income-driven payments while boosting your overall financial wellness. By the time interest begins to accrue again and you have a payment greater than zero, you will have nearly four years of qualifying forgiveness payments in PAYE. The longer you have no or low student loan payments, the more likely you are to reach forgiveness. Continuing to pay the minimum using PAYE and planning for the potential tax that's assessed when you reach forgiveness will save you money and give you more cash flow.

If you earn enough to pay off your balance before reaching forgiveness in the next 15 to 16 years, that means you're doing pretty well financially! If not, no big deal. Start planning for the potential tax on forgiveness, and continue doing what you have been doing.

Personally, when it comes to balancing student loan payments with retirement and investing, I save and invest aggressively. This makes my student loans a rather insignificant and temporary blemish on my balance sheet. Not having to make a student loan payment for nearly three years and counting has helped to boost my savings and ingrain savings habits.

By doing nothing with my student loans, I have moved closer to forgiveness without having to pay, and without my balance changing. What's more, tax respite could be on the horizon: Provisions of the American Rescue Plan Act, enacted in March 2021, exempt all discharged student debt from counting as taxable income. Right now, the law applies only to student loans forgiven between 2021 to 2025, but I believe that could be extended. 

Regardless, federal student loans are becoming less risky. Less risk means it makes even more sense to prioritize other financial things ahead of your student loans. When it comes time for student loan interest and repayments to resume, I'll make the required payments based on my taxable income, family size and recent tax filing. I'll continue to watch my savings and investments outgrow my student loan debt, make sure to prepare for any tax due on forgiven loan balances, renew my income documentation on time (sometime in 2024), keep one eye on inevitable changes to the student loan repayment landscape, and go about enjoying life.

So that you, too, can make this happen, I suggest that you:

• examine your student debt at least once a year using the VIN Foundation My Student Loans tool, and run the Student Loan Repayment Simulator;
• verify your eligible income-driven plans. If that includes PAYE, make sure you are enrolled before it is phased out;
• build an emergency fund that is equal to six months of your average monthly expenses;
• maximize your tax-advantaged savings opportunities (401K, Roth IRA, health savings account) and work toward other financial goals, such as buying a home or starting a practice.

If you anticipate reaching student loan forgiveness, request a refund of any payments made during the forbearance period and start a forgiveness planning fund. If you don't think you'll reach forgiveness, put what you might otherwise be paying on your student loan debt into a savings account until your forbearance benefits are about to end and interest resumes.  

As your repayment date approaches, re-evaluate: What is your DIR? Are major life changes on the horizon? Will you still be able to build overall financial wellness if you make payments on your loans above what's required? Are you projected to reach forgiveness using an income-driven plan, whether you make additional payments to your student loans or not? These questions are important to consider when crafting your post-pandemic forbearance student loan repayment strategy.