Graduating Veterinarians:
File a tax return before graduation
As the name implies, Income-Driven Repayment (IDR) plans require income documentation to calculate your minimum monthly payment. The “gold standard” information for IDR applications is the Adjusted Gross Income (AGI) from a recently filed federal income tax return. As long as you have a tax return that is no more than two years old, you can use the AGI from the newest of those tax returns as your income information for your IDR application. As a graduating veterinarian, filing a tax return can significantly increase your opportunity to have a very low, if not zero, minimum monthly payment for your student loans for at least the first 12 months after graduation.
Why should I file a tax return before graduation?
Most graduating veterinarians do not have a robust income during their final year of veterinary school. In fact, you may not even be required to file a federal tax return. For 2024, the minimum income for single federal filers is $14,600. If your income is under the amount requiring you to file a federal tax return, you can still choose to voluntarily file your tax return. Even if your parents claim you as a dependent, you can file your own individual tax return, so you have an AGI you can use to apply for an IDR plan.
It shouldn’t cost you anything but time to file a tax return before you graduate. The IRS provides a list of providers who can help you file your taxes for free.
With a tax return showing a low, zero, or even negative AGI available, you’ll ensure a very low or $0/mo minimum payment due for your federal student loans for at least the first 12 months of repayment after graduation, no matter when you apply. You’ll also start earning IDR forgiveness credit, just in case you can use it later.
Use your bonus time with a low or zero monthly payment to jump-start your overall financial wellness: getting to your first post-graduation paycheck, building an emergency fund equal to 3-6 months of your post-graduation expenses, building your long-term tax-advantaged retirement savings, paying down less flexible debt (credit cards, personal loans, private student loans), and starting dedicated funds for other opportunities (buying a home, starting a family, starting/buying into a practice, weddings, etc).
Married before graduation? Check out the Married Borrowers WikiDebt page for more information.
What happens if I don’t have a tax return available when I apply for IDR?
Without a recent tax return AGI available, you will need to use your current income information. That will either be a paystub or some form of pay information that is no more than 90 days old. If you do not have income at the time you submit your application, you also have the option to indicate that you do not currently have taxable income. For example, if you submit your application before you start your first paid position after graduation, you could indicate that you do not currently have taxable income.
However, please note that timing is critical for getting your loans into repayment. After graduation, your veterinary school loans will enter a six-month post-graduation grace period where no payments are due. Submitting your IDR application too early during your grace period can result in non-processing, and you could see your loans automatically enter a fixed 10-year repayment plan after your grace period ends. At that point, you would need to use your current income information to apply for IDR.
Student loan grace period time is not forgiveness-eligible, even if you choose to make payments. The only way to end your grace period early is to apply for a Direct Consolidation and choose the “do not delay processing” option. As part of your consolidation application, they will ask which repayment plan you would like to use. If you apply for IDR during the consolidation, then you can use your recent tax return or current income information to have your minimum payment calculated.
Having a recent tax return on file increases your opportunity to have a low or zero minimum monthly payment with an IDR plan, no matter what you’re doing or when you start after graduation.