Student Loans

[Jabbed]

With the loan deferment ending February 1st, I'm considering refinancing with a private lender. My current rate is 6+% and I'm hopeful that I can get something closer to 3%. I had 400k+ total including spouse's loans, now down to under 300k. The goal is to pay everything off within two years.

Part of me is holding out hope for 10k loan forgiveness (20k in my case with the wife) as that's the number that has floated around the most. If they do 50k I think that it would likely be tied to income restrictions so I'm not expecting to qualify for that.

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[TheComebacKid]

With the loan deferment ending February 1st, I'm considering refinancing with a private lender. My current rate is 6+% and I'm hopeful that I can get something closer to 3%. I had 400k+ total including spouse's loans, now down to under 300k. The goal is to pay everything off within two years.

Part of me is holding out hope for 10k loan forgiveness (20k in my case with the wife) as that's the number that has floated around the most. If they do 50k I think that it would likely be tied to income restrictions so I'm not expecting to qualify for that.

I am in a similar boat. I started with 300k. I work for an organization that qualifies for PSLF, but I read so many horror stories during the Trump years that the program would get canceled, people were not getting their loans forgiven despite following the rules, that I decided to jump ship and aggressively pay off my loans during the COVID loan deferment period. I really crushed the principal in the last year with the 0% federal interest rate and I'm down to 140K now.

I've been hearing some rumblings that PSLF is starting to go through for some folks, although I still haven't met a physician who got their loans forgiven. I do believe it has happened though. Part of me is wondering if I should just refinance and stay on course to pay off my loans in the next 1-2 years. Or if I should try to do PSLF and get whatever I have left forgiven.

It makes me sick to think that I made the wrong call on PSLF and chose to aggressively pay off my loans when there was a chance it could have been forgiven. But such is life I suppose.

I'm leaning towards refinancing and just being done with and hopefully locking a <3% rate from SoFI or Earnest. I would have to make another 4 years of qualified payment anyways and at that point I'm not sure if the amount forgiven would really make that much of a difference.

I just never trusted our government to forgive what amounts to billions of dollars in high interest student loan debt for high income earners like physicians. It didn't seem like PSLF was sustainable but people are now saying that its happening... do you guys know of many physicians who have qualified?

 

[maxxor]

I am in a similar boat. I started with 300k. I work for an organization that qualifies for PSLF, but I read so many horror stories during the Trump years that the program would get canceled, people were not getting their loans forgiven despite following the rules, that I decided to jump ship and aggressively pay off my loans during the COVID loan deferment period. I really crushed the principle in the last year and I'm down to 140K now.

I've been hearing some rumblings that PSLF is starting to go through for some folks, although I still haven't met a physician who got their loans forgiven. I do believe it has happened though. Part of me is wondering if I should just refinance and stay on course to pay off my loans in the next 1-2 years. Or if I should try to do PSLF and get whatever I have left forgiven.

It makes me sick to think that I made the wrong call on PSLF and chose to aggressively pay off my loans when there was a chance it could have been forgiven. But such is life I suppose.

I'm leaning towards refinancing and just being done with and hopefully locking a <3% rate from SoFI or Earnest.

There is at least one surgeon on this board who has gotten their loans forgiven through pslf.

 

[HemorrhagicShock]

I know this is controversial to say but I think physicians using PSLF is total BS. Aside from outlier situations (horror stories like gen peds making high 5 digits) nearly all physicians should be able to pay down their loans with even below average physician income per specialty.

Those who take out loans with the idea that they're going to be forgiven (or worse, without actual thought towards what nearly half-a-mil in debt actually means when it comes to loan repayment) are a great example of financial illiteracy.

It's a big slap in the face for those who were responsible, bit the bullet, and paid off the money they borrowed (as they promised)


EDIT: That said, I don't fault anybody for taking advantage of any loophole, or loan repayment program, or even PSLF (it's the same argument as me making use of a number of tax loopholes to keep more of my gross)... I just simply think the government should get rid of these programs and would never vote or support any program that aims to relieve physician loan "burden"

 

[TheComebacKid]

I know this is controversial to say but I think physicians using PSLF is total BS. Aside from outlier situations (horror stories like gen peds making high 5 digits) nearly all physicians should be able to pay down their loans with even below average physician income per specialty.

Those who take out loans with the idea that they're going to be forgiven (or worse, without actual thought towards what nearly half-a-mil in debt actually means when it comes to loan repayment) are a great example of financial illiteracy.

It's a big slap in the face for those who were responsible, bit the bullet, and paid off the money they borrowed (as they promised)


EDIT: That said, I don't fault anybody for taking advantage of any loophole, or loan repayment program, or even PSLF (it's the same argument as me making use of a number of tax loopholes to keep more of my gross)... I just simply think the government should get rid of these programs and would never vote or support any program that aims to relieve physician loan "burden"

I actually agree with you. There was a famous clip of a father in Iowa who confronted Elizabeth Warren regarding loan forgiveness and brought up the point about he's being penalized for having done the right thing to help his daughter pay off her loans, while others were getting their loans forgiven.

Part of me says I should just pay it off irrespective of what the government does with PSLF. This was my undertaking and responsibility.

Part of me also says I am underpaid employee for a public university, who got taken advantage of by the medical education industrial complex and I should cash in on this.

I'll probably pay it off and scrap PSLF but it stings.

 

[thegenius]

EDIT: That said, I don't fault anybody for taking advantage of any loophole, or loan repayment program, or even PSLF (it's the same argument as me making use of a number of tax loopholes to keep more of my gross)... I just simply think the government should get rid of these programs and would never vote or support any program that aims to relieve physician loan "burden"

Why...because the earnings potential for physicians is really high?

 

[TheComebacKid]

I think conceptually and ethically there is something wrong with the principle of taking tax payor money to wipe out the debt of other people who knowingly took on debt, sometimes recklessly and irresponsibly. There is less incentive for people to actually work and pay off their loans if they think the government is going to bail them out.

These types of socialist programs ultimately fail. I know its an unpopular opinion in physician circles especially that have astronomically high amounts of debt, but the issue is really the insanely high tuition and medical education costs, especially at for profit institutions. Trying to fix it on the back end by raising taxes or expecting the government to pay for it is not a great solution IMO.

I don't think it applies to just physicians. I think these programs will get taken advantage of by wealthy individuals who pursue degrees in "peace studies" or some other nonsensical career path that has no actual job opportunities or realistic way for them to pay back the loans. Ultimately there is no accountability when people are under the impression they will get bailed out.

 

[Brigade4Radiant]

I paid off my loans if you you PSLF more power to you. If you think PSLF is morally wrong then I hope you keep the same energy for Pharma and Insurance corporations that recieve public funding and Private profit. Like Moderna for example.

I do think it is crap since if you got into an elite education you could have gotten into a state school for free and you had a better college experience while others paid for your elite education and privileges.

 

[Rekt]

Classic. Infighting about physicians getting help with loans, but ignoring we'll pay more in taxes alone than most people make in their life while half our patients are on their 30th year of medicaid, WIC, SNAP popping out their 8th kid.


If you can utilize PSLF, do it. Extreme power to you. Boomers just mad they didn't have the option.

 

[GassYous]

I think conceptually and ethically there is something wrong with the principle of taking tax payor money to wipe out the debt of other people who knowingly took on debt, sometimes recklessly and irresponsibly. There is less incentive for people to actually work and pay off their loans if they think the government is going to bail them out.

These types of socialist programs ultimately fail. I know its an unpopular opinion in physician circles especially that have astronomically high amounts of debt, but the issue is really the insanely high tuition and medical education costs, especially at for profit institutions. Trying to fix it on the back end by raising taxes or expecting the government to pay for it is not a great solution IMO.

I don't think it applies to just physicians. I think these programs will get taken advantage of by wealthy individuals who pursue degrees in "peace studies" or some other nonsensical career path that has no actual job opportunities or realistic way for them to pay back the loans. Ultimately there is no accountability when people are under the impression they will get bailed out.

You know where tax payor money comes from? A large portion is shouldered by highly paid wage earners like us. The very rich and very poor don't pay much at all. PSLF is basically us paying off our own debts.

 

[thegenius]

I think conceptually and ethically there is something wrong with the principle of taking tax payor money to wipe out the debt of other people who knowingly took on debt, sometimes recklessly and irresponsibly. There is less incentive for people to actually work and pay off their loans if they think the government is going to bail them out.

These types of socialist programs ultimately fail. I know its an unpopular opinion in physician circles especially that have astronomically high amounts of debt, but the issue is really the insanely high tuition and medical education costs, especially at for profit institutions. Trying to fix it on the back end by raising taxes or expecting the government to pay for it is not a great solution IMO.

I don't think it applies to just physicians. I think these programs will get taken advantage of by wealthy individuals who pursue degrees in "peace studies" or some other nonsensical career path that has no actual job opportunities or realistic way for them to pay back the loans. Ultimately there is no accountability when people are under the impression they will get bailed out.

I agree with 100% of what you wrote. The person I was referencing though above said he would

never vote or support any program that aims to relieve physician loan "burden"

I'm just wondering if would vote for programs to relieve other kinds of loans.

It's a difficult problem to solve as we need education to get ahead in society, but educational costs vastly outpaced wage inflation. When I was a teenager college costs so much less, relative to the average wage at that time. Now it's astronomical. I don't know what the solution is.

 

[bravotwozero]

It's a difficult problem to solve as we need education to get ahead in society, but educational costs vastly outpaced wage inflation. When I was a teenager college costs so much less, relative to the average wage at that time. Now it's astronomical. I don't know what the solution is.

I do. Stop issuing, or at least grossly curtail, student loan offerings. Colleges go all out in building stadiums, huge gyms, brand new dorms, administrator salaries etc then pass on the costs to students. They know that students will get that money from loans and give it to them, which allows them to increase their costs faster than inflation. Cut off the loans, and you cut off the college gravy train.

There's a reason tuition is so much cheaper in Canada. I paid 5k a year in tuition in undergrad. The most you could borrow from the government there was 8k a year, with an interest rate of 1%. I didn't even need the loan money. I'd make more than enough working jobs in between each college year to cover my tuition costs.

 

[Apollyon]

There's a reason tuition is so much cheaper in Canada.

I had NO idea you were a Canuck! I'm guessing Alberta??

 

[bravotwozero]

I had NO idea you were a Canuck! I'm guessing Alberta??

Dual us/Canadian citizen, yes. But no, Toronto.

 

[Apollyon]

Dual us/Canadian citizen, yes. But no, Toronto.

No kidding! I mean, the only thing I think of when I see your name is Texas! CFNY is the only thing on the radio!

 

[Groove]

Just refinance and pay them off instead of letting interest accrue while paying minimum and hoping for a miracle in that Uncle Sam will forgive your massive medical education debt. The public will never support loan forgiveness for any physician who makes 6 figures. It's just not going to happen. They'll support the barista who owes 25-50K but not us.

I'm still waiting to see a doc post on here that legitimately got his/her 200-400K loans forgiven through that program. I'll believe it when I see it. I've got a colleague a few years out who has common sense and is paying his down while his wife (PCP) continues to cling to hope in PSLF.

To give the OP a little bit of hope: I owed 400K when I graduated and paid it all off within ~4 years. It's doable. Uncomfortable? Sure, but doable. I didn't live like a pauper during that time either but I did work a lot of hours.

 

[maxxor]

Just refinance and pay them off instead of letting interest accrue while paying minimum and hoping for a miracle in that Uncle Sam will forgive your massive medical education debt. The public will never support loan forgiveness for any physician who makes 6 figures. It's just not going to happen. They'll support the barista who owes 25-50K but not us.

I'm still waiting to see a doc post on here that legitimately got his/her 200-400K loans forgiven through that program. I'll believe it when I see it. I've got a colleague a few years out who has common sense and is paying his down while his wife (PCP) continues to cling to hope in PSLF.

To give the OP a little bit of hope: I owed 400K when I graduated and paid it all off within ~4 years. It's doable. Uncomfortable? Sure, but doable. I didn't live like a pauper during that time either but I did work a lot of hours.

There are some who have posted in the practicing physician forum.

 

[aafisahar]

I know this is controversial to say but I think physicians using PSLF is total BS. Aside from outlier situations (horror stories like gen peds making high 5 digits) nearly all physicians should be able to pay down their loans with even below average physician income per specialty.

Those who take out loans with the idea that they're going to be forgiven (or worse, without actual thought towards what nearly half-a-mil in debt actually means when it comes to loan repayment) are a great example of financial illiteracy.

It's a big slap in the face for those who were responsible, bit the bullet, and paid off the money they borrowed (as they promised)


EDIT: That said, I don't fault anybody for taking advantage of any loophole, or loan repayment program, or even PSLF (it's the same argument as me making use of a number of tax loopholes to keep more of my gross)... I just simply think the government should get rid of these programs and would never vote or support any program that aims to relieve physician loan "burden"

bull****, there's no compunction in letting raytheon's ceo make 20 million a year on the government dole but when the literal backbone of society is using a program as intended, it's abuse? **** that

 

[HoosierdaddyO]

Haha like seriously… to those that say shame on doctors using PSLF. We literally have been screwed over every step of the way financially…. Not until the ripe old age of 40 (that’s if you play your cards right) can you actually say you’re “building wealth”. The amount of years that we weren’t making a salary (compound interest anyone), the amount of years we weren’t getting a 403b/401k etc (compound interest anyone), the amount of years we had to take out ridiculous loans and pay them off!!! Physicians are allowed to get a damn break here and there. And for those that say… well you’re finally making 300k plus. Yea well I’m also 300k in debt in addition to starting almost 8 years behind all my equally smart friends who didn’t have to accrue as much debt to go into programming or IT or finance etc. the level of intelligence as a whole that doctors have, they could have done anything and not been so far behind the curve as my mid 30s friends who took those other jobs! Yes I’m allowed as someone who literally serves the public day in and day out and literally works a job that is beyond selfless… I’m ok with getting some of my ridiculously uncalled for student loan debt paid off just a little bit!!!!!

We get taxed like we are rich… but most of our net worth is in the red, at least for a 5 to 10 year period post graduation… to me that’s BS!!! And for all of you pleading heart do gooders that say well you shouldn’t have done medicine, or don’t do it for the money!!! It’s call making a living and I’m allowed to make a living without being messed over on all fronts by the govt, the patients and all the physical time I lost serving all of the above lol!!!!

 

[TheComebacKid]

Nobody is saying that physicians shouldn't take advantage of PSLF. You should make financial decisions that benefit yourself and benefit your family. I don't think you need to fall on the sword here because it's "noble", if PSLF is the best option for you, by all means, do it. And if it the math 100% added up for me, I would do it as well.

But I think it's deceiving to think that Uncle Sam is just giving you a nice pat on the back for all your hard work and you "deserve" this. I really disagree with that mindset. You are not owed anything for free. When you sign a promissory note, you know how much debt you took on. I think it's irresponsible to just assume that someone else will pick up the tab. There are people who get into Famous Expensive Medical School, and Less Prestigious but Cheap Medical School and choose the more expensive route. Why does everyone else have to pay for that personal decision?

To whomever said that we are paying taxes as physicians and so the money is coming back to us, it's also going to every single person who has 50K in undergrad student loans for being an Gender Studies major that qualifies for PSLF. No matter how much tax money you pay, my experience is that you rarely see direct benefit from it.

Physicians are not getting screwed on the loan forgiveness side. We are getting screwed by medical training institutions that gouge us, and residency programs that underpay us. Address the root cause of the problem, taxes and endless government spending never fixes everything. Politicians don't give a s*** about you and how hard you worked and sacrificed and how your friends have more money because they went into investment banking or IT with less debt. Nobody hands out money out of the goodness of their hearts.

I really hope that people who are banking on PSLF get what they are expecting. But if the initial rollout of the program with rejections for forgiveness for thousands of borrowers is any sign of things to come, I fear people will disappointed. I truly hope I'm wrong.

 

[HemorrhagicShock]

Haha like seriously… to those that say shame on doctors using PSLF. We literally have been screwed over every step of the way financially…. Not until the ripe old age of 40 (that’s if you play your cards right) can you actually say you’re “building wealth”. The amount of years that we weren’t making a salary (compound interest anyone), the amount of years we weren’t getting a 403b/401k etc (compound interest anyone), the amount of years we had to take out ridiculous loans and pay them off!!! Physicians are allowed to get a damn break here and there. And for those that say… well you’re finally making 300k plus. Yea well I’m also 300k in debt in addition to starting almost 8 years behind all my equally smart friends who didn’t have to accrue as much debt to go into programming or IT or finance etc. the level of intelligence as a whole that doctors have, they could have done anything and not been so far behind the curve as my mid 30s friends who took those other jobs! Yes I’m allowed as someone who literally serves the public day in and day out and literally works a job that is beyond selfless… I’m ok with getting some of my ridiculously uncalled for student loan debt paid off just a little bit!!!!!

We get taxed like we are rich… but most of our net worth is in the red, at least for a 5 to 10 year period post graduation… to me that’s BS!!! And for all of you pleading heart do gooders that say well you shouldn’t have done medicine, or don’t do it for the money!!! It’s call making a living and I’m allowed to make a living without being messed over on all fronts by the govt, the patients and all the physical time I lost serving all of the above lol!!!!

Yes.. these were all things you willingly chose at an age where you had the knowledge to understand downstream implications of said career choice and the required loans. You also knew at that time you'd make 200+. If you didn't, well this is your fault for not doing your homework.

I know many residents that maxed out their Roth IRAs every year in residency. They lived frugally, focused on learning their craft, and when they came out they were all making 200+ which should put you in a great position to pay back what you owe. They still lived a fairly lean life, but one that was comfortable, even some with kids. They're able to enjoy various outdoor activities, send their kids to good public schools, and seem to be doing great.

Yes the programs exist, yes you should make avail of them. Nobody is frustrated at you getting a "fair" shake within the confines of your individual situations.

However, if we are being truly honest programs like PSLPSLFP (or whatever) should be reserved for those with far less income potential than ours.

As mentioned this is a contentious topic, and I get it.

 

[HoosierdaddyO]

Drumroll everyone…. PSLF was created in 2007…. So yes yes it went into my consideration for my career. So yes I am going to take advantage of something that was in place well before I went and attended and graduated med school.

This is not something that passed last year and us greedy millennials want it. This has been in effect for 14 years and I will take advantage of it because it was in my financial planning when I considered the pros and cons and costs of med school… mic drop 🤷🏼‍♂️!!!

FYI I also agree about the decision of people and feeling like Uncle Sam/big brother will take care of me… and I do feel the root cause is the cost of school and the low salaries during residency. And the initial group of people rbag didn’t get PSLF we’re mainly bc they had the wrong loans or not enough payments and still applied anyways. Most of everyone who qualifies (which ks quite specific, and yes you need to do your homework to make sure you’re in that specific category) have been getting approved .

Also have a piggy bank on the side in case it all blows up and I need to pay that stuff off quickly lol

 

[Groove]

The problem with PSLF is that you are paying a gigantic amount on interest each year in the hopes that the debt will be forgiven. My 400+K debt was generating around 27K each year. That's 27K BEFORE I could pay anything on principal. Spending a few years paying something like that with an unreliable debt forgiveness program is financial suicide.

 

[sloh]

And jobs that qualify for PSLF generally aren’t that appealing.

 

[TheComebacKid]

The problem with PSLF is that you are paying a gigantic amount on interest each year in the hopes that the debt will be forgiven. My 400+K debt was generating around 27K each year. That's 27K BEFORE I could pay anything on principal. Spending a few years paying something like that with an unreliable debt forgiveness program is financial suicide.

This was my thinking as well and why I started aggressively paying off my loans. But there are folks who instead will put their anticipated monthly payments into some other investment vehicle that gains interest hopefully as a similar rate as their debt while making the minimum number of payments to qualify for PSLF under an IDR plan. Then if PSLF falls through, they have all the money available and set aside ready to pay off their debt. If their loans are forgiven they keep their investment.

If I was going to go push forward with PSLF that's probably how I would do it.

 

[GonnaBeADoc2222]

Just refinance and pay them off instead of letting interest accrue while paying minimum and hoping for a miracle in that Uncle Sam will forgive your massive medical education debt. The public will never support loan forgiveness for any physician who makes 6 figures. It's just not going to happen. They'll support the barista who owes 25-50K but not us.

I'm still waiting to see a doc post on here that legitimately got his/her 200-400K loans forgiven through that program. I'll believe it when I see it. I've got a colleague a few years out who has common sense and is paying his down while his wife (PCP) continues to cling to hope in PSLF.

To give the OP a little bit of hope: I owed 400K when I graduated and paid it all off within ~4 years. It's doable. Uncomfortable? Sure, but doable. I didn't live like a pauper during that time either but I did work a lot of hours.

Groove alludes to an important side note. DO NOT cosign any of your spouse's loans. Student debt is one of the only types of debt not considered to be "community property" in many states, so in the event of a divorce, you will not be responsible for them. That is, unless you cosign them.

I graduated residency with roughly 200k in loans, refinanced and paid off in about 18 months. (Now ex) wife in fellowship going for PSLF with about 230k in loans. I was not responsible for any of that when we split. Nice little parting gift.

 

[e30ftw]

I graduated residency in 2015 with $310k at 7.2%. Refinanced to 4.5% and had it all paid off by mid 2018.

Never had interest in a PLSF job since I didn't really trust the program.

I signed the promissory note so I paid off the loan.

Definitely didn't live like a resident either and this was at pretty average EM compensation in a MCOL outdoorsy city.

Still basically have the same lifestyle just invest 50% gross income instead of paying off loans.

 

[Siggy]

Now here's the fun question.

I'm going through refinancing now (the 0% COVID rate hit just before I got my post fellowship contract) and the rates I'm getting are ~2.5% for 10 years.

Pay off ASAP or pay minimum and invest in VTI/VXUS/VNQ?

 

[emergentmd]

Except for really unusual circumstances, why would anyone with potential high income work in a hard to fill job for lower pay than they can get working in a better environment? Even if you are one of the few altruistic docs, why would you depend on the government who has really screwed up loan forgiveness?

To all the well off people who make alot of money, I toast you for finding every legal loophole, programs to save money. Who seriously would knowingly and voluntarily pay more taxes so the gov can waste it?

To all the docs and rich Americans who use every tax loophole, took advantage of the PPE funds even though they didn't need it, and sheltered their estate from the gov I toast you.

I took advantage of a doc jumbo loans years ago at a 2% interest rate that was not available to the majority of the public and had zero remorse even though I could have easily afforded a higher rate.

 

[PianoMedic]

Now here's the fun question.

I'm going through refinancing now (the 0% COVID rate hit just before I got my post fellowship contract) and the rates I'm getting are ~2.5% for 10 years.

Pay off ASAP or pay minimum and invest in VTI/VXUS/VNQ?

This is my debate as well. Mine is just above 2.5% for a 7 year fixed rate loan. My initial plan is to split the amount I was going to apply to taxable investments or loan payoff 50:50 and apply evenly to both. This is after maxing our 401k, cash balance plan and IRA contributions each month (Roth or after tax whatever it ends up being come the new year). I decided to take the known quantity of a refinance as pslf wouldn’t be an option for me.

Be sure you read the loan document thoroughly before you sign to see if this is a dischargeable debt on death or permanent disability after refinance. That is one of the major advantages of federal loans is this provision, and some private lenders will keep it. None of them are dischargeable in bankruptcy, however. If you’re paying 1% higher to get from a lender that offers that provision, might not be worth it. I got lucky and my lowest rate came from a lender who had it in the loans documents.

 

[Birdstrike]

I think people should take advantage of whatever financial programs are available to them. You can blame who ever enacted them, or the people that voted for those that enacted them. Blaming those taking advantage of them is misguided.

Expecting people to refuse financial benefits available to them out of "pride" or to benefit "the greater good" is counterproductive. It doesn't benefit the greater good to refuse financial assistance available to you, whether it's a break on loans, taxes or other expenses. It just leaves money in some government treasury that no one is going to notice or give them any credit for.

There's also no point in resenting people for taking such assistance, either. If some stranger somewhere out there refuses such assistance to avoid people resenting them, does it help you? Does it make the people that resent it, any less resentful?

Take advantage of every bit of help available to you. Expect others to smartly do the same. And realize resentment never made anyone richer.

 

[Mushdoc]

My understanding is once you are done with residency you have to pay off 10% of your income per year. Lets say generously you do a 4 year program and a 1 year fellowship. You still have to pay 5 years of 10%. Lets say you are doing an academic job making only 250k/yr. Thats 25k/yr you still have to pay off - or 125k over the next 5 years and then income taxes on what you get forgiven (all the while letting the loan hang over your head and accrue at 6%/yr, which means more income tax you have to pay off when its all forgiven). And who knows if it will even get forgiven. Thats a lot of risk for minimal benefit. If you have 400k in loans, sure, but if you have like 200-300k in loans, not sure it makes sense.

 

[thegenius]

Now here's the fun question.

I'm going through refinancing now (the 0% COVID rate hit just before I got my post fellowship contract) and the rates I'm getting are ~2.5% for 10 years.

Pay off ASAP or pay minimum and invest in VTI/VXUS/VNQ?

I think the theoretical answer is to pay minimum and invest…your rate will be under the rate of inflation, let alone stock market gains over the next few years. Increase inflation drives stock prices higher.

The right answer for you is whether you want to carry debt. I hate debt and paid mine off as quick as possible. I had 5K left on my 0% car interest loan from a few years ago and I just paid that off this month instead of continuing paying $330/month interest free.

What’s your monthly payment?

 

[sylvanthus]

My understanding is once you are done with residency you have to pay off 10% of your income per year. Lets say generously you do a 4 year program and a 1 year fellowship. You still have to pay 5 years of 10%. Lets say you are doing an academic job making only 250k/yr. Thats 25k/yr you still have to pay off - or 125k over the next 5 years and then income taxes on what you get forgiven (all the while letting the loan hang over your head and accrue at 6%/yr, which means more income tax you have to pay off when its all forgiven). And who knows if it will even get forgiven. Thats a lot of risk for minimal benefit. If you have 400k in loans, sure, but if you have like 200-300k in loans, not sure it makes sense.

There is no tax on forgiven amount.


Is PSLF forgiveness taxable?

No. According to the Internal Revenue Service (IRS), student loan amounts forgiven under PSLF aren't considered income for tax purposes.

 

[sylvanthus]

Meh, personally dont care if people think lowly of me for doing PSLF. It was available when I started med school and I took it into consideration when planning every step of my path. If you need to rage against injustice there are far more worthwhile things to rage against.

 

[grt398]

Now here's the fun question.

I'm going through refinancing now (the 0% COVID rate hit just before I got my post fellowship contract) and the rates I'm getting are ~2.5% for 10 years.

Pay off ASAP or pay minimum and invest in VTI/VXUS/VNQ?

I've had this conversation with some residents recently...and it comes down to personal preference. The "correct" answer, as mentioned above, is to pay the bare minimum and invest the rest. You're basically giving up free money if you do anything else. Real inflation these days is probably >8% (the "official" rate published is nonsense for a bunch of reasons), and you'll easily earn more than 2.5% on almost any investment...certainly the stock market which has become the default way for people to try and keep up with inflation whether they realize it or not. And let's put some real numbers on this...the CAGR of the S&P500 over the last ~10 years is approximately 13-14%. That's a delta of 10.5-11.5% return on your capital that you're giving up. Even with a more normal return of ~8%, you're talking 5.5% return you would have earned. Over a 30-40 year investment horizen you're talking probably hundreds of thousands of dollars. Early compounding matters a lot.

That said...some people find having debt to be troublesome to them emotionally, and weighs on them, so for those people the quality of life improvement to your happiness makes it worth paying off the debt early. And honestly, that extra capital at 60 or 70 y/o isn't going to make any meaningful difference in your quality of life or that of your loved ones. So I usually tell people do what makes them most comfortable and will make them happiest over the next 10 years.

 

[TheComebacKid]

I think people should take advantage of whatever financial programs are available to them. You can blame who ever enacted them, or the people that voted for those that enacted them. Blaming those taking advantage of them is misguided.

Expecting people to refuse financial benefits available to them out of "pride" or to benefit "the greater good" is counterproductive. It doesn't benefit the greater good to refuse financial assistance available to you, whether it's a break on loans, taxes or other expenses. It just leaves money in some government treasury that no one is going to notice or give them any credit for.

There's also no point in resenting people for taking such assistance, either. If some stranger somewhere out there refuses such assistance to avoid people resenting them, does it help you? Does it make the people that resent it, any less resentful?

Take advantage of every bit of help available to you. Expect others to smartly do the same. And realize resentment never made anyone richer.

We can say you should take advantage of every financial opportunity available to you, while still comment on the possible negative impact of some of these programs. What's best for the individual may not be whats best for a society. Just like an individual may make a personal decision to refuse a vaccine, this has detrimental consequences to society as a whole.

Both myself and other opponents of PSLF who commented in this thread very clearly stated that individual decisions including taking advantage of loan forgiveness are perfectly reasonable. While I can see how my comments may come off as "resentful", I do find issue with people i.e. folks who have rich parents who choose to go to expensive private schools who are getting their loans forgiven off the backs of people who make less money than them. Ultimately social programs like this hurt the poor more than they help them which is contrary to the argument pitched by the people who sell us this stuff.

I see loan forgiveness as problematic for the country as a whole but that doesn't mean individual folks should not take advantage. If it came off as casting blame on individuals taking advantage of these programs, that was never my intention. I do blame policymakers and politicians who promise these programs to get people excited so they can earn more votes without any real meaningful thought to how to pay for these programs and weigh long term downstream effects.

Government officials promising people "free things" in exchange for votes is a story that has been played since the dawn of time. And I don't think it really ever ends well for those who play the game.

 

[Groove]

Now here's the fun question.

I'm going through refinancing now (the 0% COVID rate hit just before I got my post fellowship contract) and the rates I'm getting are ~2.5% for 10 years.

Pay off ASAP or pay minimum and invest in VTI/VXUS/VNQ?

Theoretically, you should be able to make more from your money by investing into your typical index fund or boglehead 3 portfolio but you'll end up paying more interest. The flip side is that you can never psychologically allow yourself to think about retirement unless you've saved an enormous amount and are able to pay it off right then and there. I probably should have gone this route. Half of my loans were at ~2.5% interest before the FED changed rates and the latter half or third was at ~7% I just decided to forego retirement investing and pay it all off for the peace of mind. I'm sure a financial investor would have criticized this method but for me...it released me psychologically from the debt and allowed me to envision retirement with virtually no debt (though I do have a mortgage). Everyone is different. I can't stand debt. Nothing wrong with your method though. After all, that's what most docs did throughout their career when loans were all ~2-2.5%

 

[Groove]

I basically worked around 150-180hrs per month at ~$250-$265/hr and would pay anywhere from 8-12K each month on the same day I got paid. (I was also making AFMD stipend throughout many of those years which probably bumped my pay up to ~300/hr, so that def helped.) So, roughly ~120K each year. Some years it was 140K. After the first couple of years, you really feel acceleration on the principle because you're not getting reamed by the massive interest like you are on the first year (Mine was 400K). It was an incredible feeling making the last payment. I made zero retirement contributions during those 4 years. Like I said, I'm sure a finance expert could nit pick my method but for me....it was absolutely the right thing to do. Some days that first year I would just feel so overwhelmingly depressed thinking about that massive loan whereas today I never have to think about it. That's the part that's really individual. Some people see debt for what it is and don't let it affect them. If you think about it, all these real estate tycoons have gobs of debt that they are carrying around for most of their career. That's why I'm better suited for the stock market and terribly suited for real estate.

I think a lot of these loan repayment deals through CMGs are drying up but I have a few colleagues who signed on at the right time and got 150K in loan repayment over 3 years through some of the big CMGs. That's the absolute way to go if you can still find those offers. When I joined the same CMG a year ago, they didn't have any big sign ons anymore. Apollo paid me like....~40K for 2 years back when I originally signed on with them. I'd have loved to get a 150K sign on. That's nuts.

 

[Birdstrike]

... that's what most docs did throughout their career when loans were all ~2-2.5%

I agree that if your loan rate is low and your investment return high, it sometimes pays to be less aggressive with loan repayment and more aggressive with investing.

I was lucky enough to lock in student loan rates in the 2.5-2.9% range before Obama changed the loan system. I chose aggressive investment over aggressive loan repayment. At the time I had what was an average medical student loan balance for the era, and a less than $0 net worth.

Nearly 20 years later I still owe half of my original loan balance, but my net worth has grown to 17 times what my original loan balance was and 34 times greater than the remaining balance, via investing in the market and company ownership.

On the contrary, I've been aggressive with home loan repayment, which also is a low interest rate (just over 3%), primarily because I don't want a house payment in retirement.

 

[HoosierdaddyO]

Of note with PSLF… you sign a legal binding promissory note with the federal govt so once you’re in the system if PSLF, the govt is legally obligated to fulfill their end of the agreement. So hypothetically if a new Congress comes in and wipes away the program. It does not change for people who are 5 or 6 years in and don’t qualify yet. It might be gone tho for potential future people. So I’m not too concerned either wise they will have a pretty large lawsuit on their hands lol

 

[Jabbed]

Of note with PSLF… you sign a legal binding promissory note with the federal govt so once you’re in the system if PSLF, the govt is legally obligated to fulfill their end of the agreement. So hypothetically if a new Congress comes in and wipes away the program. It does not change for people who are 5 or 6 years in and don’t qualify yet. It might be gone tho for potential future people. So I’m not too concerned either wise they will have a pretty large lawsuit on their hands lol

Can't sue the federal government my man.

 

[HoosierdaddyO]

Can't sue the federal government my man.

You 100000% absolutely can sue the federal government or an entity of the govt… Yes there are sovereign immunity clauses but that doesn’t mean that you cannot sue the government, happens all the time

 

[GonnaBeADoc2222]

Of note with PSLF… you sign a legal binding promissory note with the federal govt so once you’re in the system if PSLF, the govt is legally obligated to fulfill their end of the agreement. So hypothetically if a new Congress comes in and wipes away the program. It does not change for people who are 5 or 6 years in and don’t qualify yet. It might be gone tho for potential future people. So I’m not too concerned either wise they will have a pretty large lawsuit on their hands lol

Um...you may want to recheck that promissory note. It specifically says you "may" be eligible for forgiveness. There is nothing that guarantees PSLF. It was enacted by an act of congress and can be modified by an act of congress.

 

[HoosierdaddyO]

Um...you may want to recheck that promissory note. It specifically says you "may" be eligible for forgiveness. There is nothing that guarantees PSLF. It was enacted by an act of congress and can be modified by an act of congress.

Every potential repeal of PSLF has been towards new arrivals into the program. So any future repeal will most likely grandfather current participants. While yes never never ever ever trust the govt.

But the other point that was more just a general point. Individuals can and have sued the federal govt lol!!

 

[Kryptocoin]

Everything usually reverts to the mean. We pay for these things one way or the other. With inflation at 6-8% and the govt paying off student loans and giving away stimulus checks, whatever you saved on having your student loans repaid will be spent on higher prices in non-discretionary spending---home prices, groceries, gas etc.

I don't fault any doctor for taking advantage of PSLF. But there's no free lunch. There never is.

I'm 100% debt-free and sleep well at night. I made it a mission to pay off my student loans early. Credit cards paid off every month. Do whatever makes you sleep well at night.