Better to pay off loans?

[doctorhopefully]

I will be starting Internal medicine residency (civilian) this June. After finishing in 3 years, I would like to join the Navy, either active duty or reserves (not sure yet).

Thanks to academic scholarships, I only have $60,000 in loans, at 4% interest. My dad has offered to pay it off before starting residency.

However, since the Navy offers loan repayment (I think $40,000 per year for Active duty, less for Reserves), would it be better to keep this debt? Would I be losing out on money by paying off now?

If I pay off now, would I be able to negotiate a higher salary/bonus upon joining the Navy, since I wouldn't have student loans?

thanks!

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[ActiveDutyNavy]

I will be starting Internal medicine residency (civilian) this June. After finishing in 3 years, I would like to join the Navy, either active duty or reserves (not sure yet).

Thanks to academic scholarships, I only have $60,000 in loans, at 4% interest. My dad has offered to pay it off before starting residency.

However, since the Navy offers loan repayment (I think $40,000 per year for Active duty, less for Reserves), would it be better to keep this debt? Would I be losing out on money by paying off now?

If I pay off now, would I be able to negotiate a higher salary/bonus upon joining the Navy, since I wouldn't have student loans?

thanks!

Remember this is not a gift, it comes with a commitment. Also, pay attention to the italicized sentence. IMO, HPLRP is rarely a good financial decision.
Pages - Health-Professions-Loan-Repayment-Program-(HPLRP)

Health Professions Loan Repayment Program (HPLRP)

The Health Professions Loan Repayment Program (HPLRP) provides an incentive to new accessions to enter the Navy, and current active duty medical personnel to extend their active duty commitment through the payment of professional educational loans. The maximum yearly loan repayment is $40,000, minus ~25% federal income taxes, which are taken out prior to lender repayment. Payments are sent directly to the lending institution on behalf of the HPLRP participant. BUMED Note 1110 is published each year and provides guidance for active duty professionals who want to apply for the HPLRP. Assistant Secretary of Defense for Health Affairs (ASD(HA))Policy 08-006 is the authorizing instruction for the HPLRP Program.

Who is HPLRP Eligible?

1. Must be qualified for, or hold an appointment as a commissioned officer in one of the health professions and sign a written agreement to serve on active duty for a prescribed time period.
2. Be fully qualified in a health profession that the Secretary of the Navy has determined to be necessary to meet identified skill shortages.
3. Must not be a current HPSP or FAP participant.
4. Be enrolled as a full-time student in the final year of a course of study at an accredited educational institution leading to a degree in a health profession other than medicine, dentistry, or osteopathic medicine.
5. Be enrolled in the final year of an approved residency program leading to specialty qualification in medicine, dentistry, or osteopathic medicine.

 

[Perrotfish]

thanks! I agree it's a commitment. But let's assume I will be joining the Navy anyways (regardless of my loan status). Then, wouldn't it be "better" for me to have loans, so that I don't miss out on money? Or would they offer me something else, in place of HPLRP? in that case, I should pay off my loans now, and I won't be missing out on "free" money if I do enlist in 3 years.....

The Navy direct assescion bonus is a very similar amount of money, but cash. I think it's better to wait but you can run the numbers

Why do you want to join? Are you aware you will mostly likely be doing outpatient medicine?

 

[doctorhopefully]

The Navy direct assescion bonus is a very similar amount of money, but cash. I think it's better to wait but you can run the numbers

Why do you want to join? Are you aware you will mostly likely be doing outpatient medicine?

Thanks. I googled the accession bonus, but couldn't find too many details. I'm trying to run the numbers, but difficult to do so, without knowing the details. I will pay accumulate $12,000 in interest over the next 3 years, so I'm trying to figure this out asap.

 

[WernickeDO]

Another option you could consider is if your father is willing to pay off your loans is have him do so, then pay him back at a reduced or zero interest rate. That would save you the interest costs, which would be considerable. That saves you from any military commitments. If you want to serve you can always join later or become a contractor if you want to take care of soldiers.

 

[doctorhopefully]

Another option you could consider is if your father is willing to pay off your loans is have him do so, then pay him back at a reduced or zero interest rate. That would save you the interest costs, which would be considerable. That saves you from any military commitments. If you want to serve you can always join later or become a contractor if you want to take care of soldiers.

But if I pay off now, and end up joining later, wouldn't I be missing out on the loan repayment? I know HPLRP requires a commitment (1 year, I think, for every $40,000 of loans repayment). But if I do join, I would want to serve at least 1 year, anyways. So it's not necessarily a burden/commitment.

It would be a different story if I had $100K loans, then that would requires a few years commitment.

 

[WernickeDO]

I see, so I think the real question is whether or not you want to join, which carries its own risks and benefits. As someone with a minimal amount of loans and only a few year away from making a good living, I'm not sure there is much of a financial benefit to you doing HPLRP (although I am not very knowledgeable about the program). Consider this: When you graduate from IM, if you enter military service you will earn somewhere between 120-140k (someone please chime in if those numbers are off). If you are civilian and just do hospitalist work for a year, you will earn 250k+. That's more than enough to pay off those loans, all the interest, and maybe buy a soda pop too.

Also consider that you may want to go on to fellowship after IM. That's a whole different can of worms in the military. You will likely have to defer fellowship for a year or two, and if you do it in the military you will owe more time.

So that leaves just wanting to serve in the military, which is a question only you can answer. Know that the more money or benefit you accept now will lead to more limitations later. If you truly want to serve then you have to be okay with being an officer first and a physician second. From what I can tell from my position, you don't have much financially to gain from the military and you stand to lose a lot of freedom and flexibility if you join.

 

[John1513]

Remember, there is another option like PF posted - join as a board certified doc and get the big sign-on bonus : often a significant sum.

This is different from the loan repayment program of .mil

Also, there is also the option of public service loan forgiveness.

But all this is dependent upon your initial intention to join the armed forces.

Do you truly know what you are signing up for in Milmed? Have you read most of the Essential Wisdom stickies here on SDN?

Have you spoken to active duty doctors?

Does your future/current spouse truly know what this life entails?

Just some food for thought.

And yes, fellowship concept is a whole ‘nutha topic!

 

[DMBandFan86]

But if I do join, I would want to serve at least 1 year, anyways. So it's not necessarily a burden/commitment.

Correct me if I am wrong, but the 'minimal service requirement' still applies to post-graduate physicians entering the military. You can't just choose at least 1 year for service.