Has the Economic Hardship Loan Deferment Come to an End?

How would you feel if your mortgage lender told you out of the blue that your monthly payments had increased 20%? Or what if your car dealership told you that you have to start paying back 100% of your monthly statements next week instead of waiting until the end of the grace period? Would you be angry and upset?

Sure you would.

Well, what if I told you that the U.S. government just told us that we have to start paying back our medical education debt immediately – without warning? Forget the three years of deferment many of you agreed to when you consolidated your debt. The government wants your money now – and this time it’s not just a “what if.” This is really happening.

On September 27, 2007, Congress and President Bush signed into law the College Cost Reduction and Access Act (H.R. 2669) which eliminated an important pathway for medical residents to pay back their loans. Only four days later, the law became official, making it impossible to mount sufficient lobbying efforts against the new legislation in time.

The specific pathway that was eliminated was the “20/200 pathway,” part of the Higher Education Act. According to the Association of American Medical Colleges, 67% of medical residents qualify for economic hardship under the rule. Those residents will need to start paying back their loans immediately and will not be allowed to complete their term of eligibility in the old deferment plan. Congress will not enact a new loan cap until July 1, 2009.

Visit the American Medical Association’s to learn more about this change and to find out how you can urge Congress to offer interim relief until July 2009.

Michael S. Cicchetti, MD
PGY3 – UVA
The University of Virginia Health System

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