How common is loan repayment in benefits packages?

[ImNotBritish]

I am an EM intern currently on IBR. I had planned to put a few hundred dollars a month toward my principal during residency to knock the balance down. Then I saw an SDN post where someone mentioned that so many attending positions offer loan repayment that it can be a waste to try to pay down principal while a resident. It suggested putting extra money during residency elsewhere (roth, 401k, somewhere? ) so as not to waste this potential future benefit. Is loan repayment really that rampant, specifically in EM? I thought I was being proactive and all, but maybe I'm misguided. Can anyone give insight on this?

---

Members don't see this ad.

 

[ImNotBritish]

Oops- meant to put this in the EM forum. If a mod is available to move it for me, I'd appreciate it.

 

[smq123]

Thread moved to EM. I'd also suggest searching through White Coat Investor's posts to see if he has discussed this.

 

[usrael]

I am an EM intern currently on IBR. I had planned to put a few hundred dollars a month toward my principal during residency to knock the balance down. Then I saw an SDN post where someone mentioned that so many attending positions offer loan repayment that it can be a waste to try to pay down principal while a resident. It suggested putting extra money during residency elsewhere (roth, 401k, somewhere? ) so as not to waste this potential future benefit. Is loan repayment really that rampant, specifically in EM? I thought I was being proactive and all, but maybe I'm misguided. Can anyone give insight on this?

There are definitely deals out there, but they are typically in less desirable locations and may not cover as much as you think.

If you want to control your loans and not the other way around, pay the IBR minimum during residency and if you go into acadmics consider the gov. Loan forgivness. If you go into the community consider refinancing assuming you are paying 6.5% interest like everyone else (recently) and interest rates remain low when you graduate.
Definitely pay the IBR min or elese chances are you will be sorry you didn't.

 

[TheLionheart]

There are definitely deals out there, but they are typically in less desirable locations and may not cover as much as you think.

If you want to control your loans and not the other way around, pay the IBR minimum during residency and if you go into acadmics consider the gov. Loan forgivness. If you go into the community consider refinancing assuming you are paying 6.5% interest like everyone else (recently) and interest rates remain low when you graduate.
Definitely pay the IBR min or elese chances are you will be sorry you didn't.

What kind of loan forgiveness is available for academic physicians? Does it count under the PSLF program, or are you referring to something else?

 

[usrael]

What kind of loan forgiveness is available for academic physicians? Does it count under the PSLF program, or are you referring to something else?

There are loan forgiveness sign on bonuses if you sign-on for a less desirable location (community)..then there is the PSLF loan forgiveness (only if consolidated with the gov.) for physicians working for non-profits (typically academic positions, but not all of them).
The latter is forgiven 6 or 7 years out of residency and the former is offered upfront.
My humble opinion: Pay back your loans as soon as you can at the lowest interest rate available. I refinanced 6.5-->4 but gave up any chance for PSLF (my choice, might not work for you) as I wanted to be in control of my loans and make my career decisions that are not tied into my loan burden .

 

[The White Coat Investor]

Speaking as an employer, I don't care one bit if your compensation goes toward your salary or your loans. It's all the same to me. Thus, you shouldn't assume that there is a job out there where you'll be screwed by paying down your loans EXCEPT A 501(C)3 JOB WHERE THE GOVERNMENT (RATHER THAN AN EMPLOYER) WILL FORGIVE YOUR LOANS.

Jobs in terrible locations who offer loan payback will be perfectly willing to offer you a higher salary without loan payback if that's what you want. That's what job contract negotiation is for. I wouldn't avoid paying down your loans for this reason. That doesn't mean you should pay down your loans, as you may have better things to do with that money (perhaps getting a match in your 403b or funding a Roth IRA or something or buying disability insurance) or you may later take a job that qualifies for PSLF.

As a general rule, most residents should stick with IBR/PAYE minimum payments throughout their training and then make a decision at the time of residency graduation as to how to proceed with their loans (i.e. go for PSLF or refinance them at a lower rate and pay them off quickly.)

 

[tima]

Don't employers just move money from one section to another in your package? For example you might get some loan repayment, but you will start with a lower salary, won't cover moving expenses, etc. It's just more money up front.

 

[DeadCactus]

I've made posts arguing against putting more than the minimum against loans during residency in favor of putting it in a Roth IRA, you may well be referencing my posts. My argument has been based on a few ideas:

1) There are employers and programs who will give you extra money in the form of loan payments beyond just shuffling money around. Yes, many are related to government employment or service. There are NO programs that give you extra money to put in your retirement account. The extra interest on whatever you could squeeze off as a resident, especially when countered by the gains in your retirement vehicle, is worth waiting to see where you end up working in my opinion.

2) The government will keep you disciplined about paying off loans. No one is going to keep you disciplined about "paying yourself first". Being disciplined about saving is part conscious decision and part habit. The sooner you make saving a habit, the stronger it will be once you have real income. Then you'll only be left fighting the urge to spend more than you make rather than a two front war where you also have to fight the urge to put off saving to spend more today.

3) Physicians have limited opportunities to invest in post-tax investment accounts especially at a low tax rate. I think maximizing this at every opportunity is more likely to be of real benefit in the end-game than paying off a few thousand in relatively short-term loans.

 

[ImNotBritish]

Thank you all for the replies. I am not planning to go for PSLF, necessarily. At this point I'll likely end up back in my home area after residency, and there are few jobs there that qualify. (Although of course a lot could change in 2.5 years.) The idea of not making career moves based on strictly financial ties resonates with me, so I appreciate all of the food for thought. I'll stick with minimum payments for now until I've done some more research, but I'm thinking I will likely start looking in the Roth direction.

 

[manny99]

Thank you for all the posts so far they are very helpful.

I have two options coming out of residency that I am considering.

1.) I am from the rural Northwest which is probably some of the lowest paying jobs in EM. I would love to go back but have some serious debt, so PSLF would be a huge help. Alot of the jobs are 501c so that is not the concern but counting on PSLF is very scary!!! If I make minimum payments counting on PSLF and it doesn't happen I would be a slave to huge debt for a very long time.

2.) I could just forget about PSLF and find the highest paying job in the country, pay off my loans and relocate to my dream location. The issue is living in a less desirable location for a few years with my family.

I am strongly favoring option 2 but would love to do option 1, my faith in government forgiveness is weak.

Would love to hear some opinions on this. Thanks.