Economic Hardship deferment vs. Income based repayment

[NL]

Hi! I'm new to myFico and to the forum.  I'm a 4th year med student who will be starting a residency training program in July 2009.  As of this year, resident physicians can not defer loan repayments unless applying through the Economic Hardship Deferment program, which allows deferment for one year.  Aftter the year is up, I'll have to pay loan using income basement repayment or regular loan payments. A residents training salary is only ~$45,000 '(my training program lasts 4 yrs, and I have ~$250,000 in med school debt.  Does any one know how the income-based repayment works?  Also, is it better to enter repayment through the income-based program or defer to give myself time to adjust to a new city?  How would deferment reflect in my credit score (EQ 702)?  Does income-based payment help my credit score or would it hurt the score since the payment would be less than a full payment?  Please help!!

[MattH]

http://www.aamc.org/advocacy/library/educ/ccraaimpact.pdf

[Anonymous]

After years of paying the standard repayment plan for student loans, I moved to income based deferment on my student loan, and I like it because it actually goes by what my income is, not the loan amount divided by months, and I can still make extra payments when I can.  The reporting changed to reflect it, but I really don't think it changed my scores (I paid off my cc's, so my scores actually went up, but I don't think the sl had anything to do with it).  You're not really paying less than a full payment, even if the amount is less than it would be on a standard plan, because, your full payment is whatever they calculate based on your income. So, as long as you pay the amount they say under the income based repayment, you're paying the full amount, it's not reflecting as less.  If that makes sense...

[NL]

Thanks for the reply.  That makes sense.  So, I guess student loans really can't help one's credit score, but can make it worse if you miss a payment...?  Is that right?

[Anonymous]

Yea, late payments on a student loan can bring your score down a lot! I was in deferment for a short time, but the lender had reported it as late (by mistake) and it hurt me badly, but once it was fixed, it jumped back up again.  I think student loans are really good to have in your report, because it shows other lenders how you deal with bigger debts that you pay over a longer period of time, so if nothing else you can establish a really good history.  I've been in deferrment a few times: After I graduated for about six months, and then when I went back to school.  I don't really think being in deferment while you adjust to a new city is bad as long as you're not one of those people that's ALWAYS in deferment or forebearance, for me at least it did show up as "Deferred" on my report, but not as delinquent in any way .  And you might want to read the fine print on your loan, because I know that I was still able to make extrap ayments while in deferment (when I could) without penalties, and then it's just taken off the principal, so I was able to bring my balance down, which was good too, because it shows the original loan amount and the balance, so lenders can see how much you've paid down.