Advice on financing Medical school and RE investing.

[TravelingMedicine]

Any insight to this would be awesome! I am currently in a place where I am able to pay for medical school out of pocket (investing for the last decade) without taking a student loan out if possible but I feel like this would not be the best situation? or its not worth it as I could take out student loans and continue to let my portfolio work for me throughout these next years rather than paying out of pocket but having 250k+ of debt is daunting. Also based on the current economic status taking debt might not be such a bad idea with this current insane levels of inflation because 250K now might be a lot less down the road.

Additionally does anyone have any experience or insight into buy a property wherever I end up for medical school and rent it out to fellow medical students? Does anyone have any experience with the pros and cons of fha loans for students or if physician loans are possible as a medical student? I am looking to get a property 2nd year and wanted to know if anyone has gone down this route or have advice on loans, financing situation, balancing student debt etc.
Any advice would be appreciated.

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[Chemist0157]

Any insight to this would be awesome! I am currently in a place where I am able to pay for medical school out of pocket (investing for the last decade) without taking a student loan out if possible but I feel like this would not be the best situation? or its not worth it as I could take out student loans and continue to let my portfolio work for me throughout these next years rather than paying out of pocket but having 250k+ of debt is daunting. Also based on the current economic status taking debt might not be such a bad idea with this current insane levels of inflation because 250K now might be a lot less down the road.

Additionally does anyone have any experience or insight into buy a property wherever I end up for medical school and rent it out to fellow medical students? Does anyone have any experience with the pros and cons of fha loans for students or if physician loans are possible as a medical student? I am looking to get a property 2nd year and wanted to know if anyone has gone down this route or have advice on loans, financing situation, balancing student debt etc.
Any advice would be appreciated.

Maybe things have changed, but when I was in medical school, I had subsidized and unsubsidized loans. Stafford loans were I think 6.8% interest. Grad plus loans were...8.5%? Geez. I think I had another loan that started at 4% and ramped up to 8% after school. There's not a lot of margin between those rates and a typical market return. I would also consider that things are running hot, and we will eventually correct towards a mean. I think it would feel bad to opt to take student loan debt if the market crashed.

It does not have to be all or nothing. Maybe take out loans to the maximum that are subsidized then maybe pay the rest of your way on your own? Something like that. 8.5% Grad plus loans felt pretty bad for years and years before I refinanced after training.

 

[Chemist0157]

Also, I got a physician loan near the end of 4th year of medical school because I had a residency contract in my hand. I had heard a match letter was enough...I'm not aware of being able to get a 0% down/physician loan any sooner than that.

 

[mvenus929]

Maybe things have changed, but when I was in medical school, I had subsidized and unsubsidized loans. Stafford loans were I think 6.8% interest. Grad plus loans were...8.5%? Geez. I think I had another loan that started at 4% and ramped up to 8% after school. There's not a lot of margin between those rates and a typical market return. I would also consider that things are running hot, and we will eventually correct towards a mean. I think it would feel bad to opt to take student loan debt if the market crashed.

It does not have to be all or nothing. Maybe take out loans to the maximum that are subsidized then maybe pay the rest of your way on your own? Something like that. 8.5% Grad plus loans felt pretty bad for years and years before I refinanced after training.

As far as I'm aware, there aren't any federal subsidized loans for medical school. Halfway through my med school days, they stopped offering stafford subsidized loans to grad students. And they changed the interest rate to be prime + some percentage, so my fourth year loans actually have a lower interest rate than the rest of them.

 

[FutureInternist]

Any insight to this would be awesome! I am currently in a place where I am able to pay for medical school out of pocket (investing for the last decade) without taking a student loan out if possible but I feel like this would not be the best situation? or its not worth it as I could take out student loans and continue to let my portfolio work for me throughout these next years rather than paying out of pocket but having 250k+ of debt is daunting. Also based on the current economic status taking debt might not be such a bad idea with this current insane levels of inflation because 250K now might be a lot less down the road.

Additionally does anyone have any experience or insight into buy a property wherever I end up for medical school and rent it out to fellow medical students? Does anyone have any experience with the pros and cons of fha loans for students or if physician loans are possible as a medical student? I am looking to get a property 2nd year and wanted to know if anyone has gone down this route or have advice on loans, financing situation, balancing student debt etc.
Any advice would be appreciated.

I am in the “take the loan” camp.

It guarantees no mid year surprises, in case market goes down and you don’t have enough cash on hand to pay for the next semester, jeopardising your future.

Depending on the type of loans you may not have any interest rate accrue during school (or a rate lower than the general market return of 7%), so letting your investments grow for those 4 years seems like a better idea.

There is nothing stopping you from paying the loan amount each year by selling some of the investments, or even making a lump sum at the end of 4th year.

The minimal amount of interest accrued over those 4 years, is negligible and the peace of mind of having the $ to complete medical school.

Also “F you” for being such a “tough” situation… 🤪

 

[TravelingMedicine]

Also, I got a physician loan near the end of 4th year of medical school because I had a residency contract in my hand. I had heard a match letter was enough...I'm not aware of being able to get a 0% down/physician loan any sooner than that.

Thank you. Ill see what kind of loans I can qualify for once I am seriously looking at properties! Maybe I have to wait until having a residency contract.

I am in the “take the loan” camp.

It guarantees no mid year surprises, in case market goes down and you don’t have enough cash on hand to pay for the next semester, jeopardising your future.

Depending on the type of loans you may not have any interest rate accrue during school (or a rate lower than the general market return of 7%), so letting your investments grow for those 4 years seems like a better idea.

There is nothing stopping you from paying the loan amount each year by selling some of the investments, or even making a lump sum at the end of 4th year.

The minimal amount of interest accrued over those 4 years, is negligible and the peace of mind of having the $ to complete medical school.

Also “F you” for being such a “tough” situation… 🤪

I am thinking of taking the loan so I can let the market do its thing and not have to cash out on investments on down turns. I guess it really depends on what kind of loans I can get my hands on. Im hoping I can get a loan that will have no accrued interest until I graduate.

Yea I have been lucky to be in this situation. They should teach personal finance and investments in high school to bring exposure to financial literacy early on. Compounding interest is a beautiful thing!

 

[FutureInternist]

Thank you. Ill see what kind of loans I can qualify for once I am seriously looking at properties! Maybe I have to wait until having a residency contract.


I am thinking of taking the loan so I can let the market do its thing and not have to cash out on investments on down turns. I guess it really depends on what kind of loans I can get my hands on. Im hoping I can get a loan that will have no accrued interest until I graduate.

Yea I have been lucky to be in this situation. They should teach personal finance and investments in high school to bring exposure to financial literacy early on. Compounding interest is a beautiful thing!

School will be tough enough without having to be distracted with rental properties etc, so I suggest not doing any of that (unless you also plan to hire a property manager) until 4th year or later.

 

[pigsinacloth]

I'm pretty sure that student loans are compounded daily (obviously not a problem now that there is no interest rate) and you also have to pay loan fees every time have money dispersed. If I were you I would consider requesting loans and then canceling them before they are disbursed and pay in cash. This way you have the money available in case the market takes a nose dive, but you're not on the hook for a consistent 5is% interest rate and 2is% loan fee. You would need to talk to your school's financial aid office to ask about how much notice they need for you to cancel your disbursement because obviously there is some paperwork that needs to be completed on their end.

I am generally pretty cautious with money so I would rather have no debt than debt and a sizable amount of investments that I could have used to pay them off, so keep that in mind.

 

[mvenus929]

I'm pretty sure that student loans are compounded daily (obviously not a problem now that there is no interest rate) and you also have to pay loan fees every time have money dispersed. If I were you I would consider requesting loans and then canceling them before they are disbursed and pay in cash. This way you have the money available in case the market takes a nose dive, but you're not on the hook for a consistent 5is% interest rate and 2is% loan fee. You would need to talk to your school's financial aid office to ask about how much notice they need for you to cancel your disbursement because obviously there is some paperwork that needs to be completed on their end.

I am generally pretty cautious with money so I would rather have no debt than debt and a sizable amount of investments that I could have used to pay them off, so keep that in mind.

Student loan interest is simple interest on the principal (though, yes, it is charged daily, so the percent you owe in interest daily is your interest rate divided by 365). The interest may be consolidated when you enter repayment (mine was not, but others have said it is) or when you change repayment plans, but otherwise, you are not paying compounded interest.

But yes, you do pay loan origination fees on each disbursement (a portion of the amount disbursed, not a fixed amount).

 

[FlowRate]

Won't your assets be included in your financial aid package? You may not qualify for a lot of subsidized (whether govt or institutional) loans if you have the ability to pay for it outright.

This probably also depends on what sort of accounts your investments are in. It would suck to take a penalty on cashing out tax-advantaged retirement accounts.

If somehow the market crashed prior to a month or two before med school, I'd take loans. If not and your investments are in regular taxable accounts, I'd consider cashing out a significant portion to pay for at least part of med school. If you have multiple different loans with different terms, you could look at it as replacing the higher interest or unsubsidized loans.

(I get that people upthread mentioned no more govt subsidized--but plenty of schools have institutional subsidized loans.)

 

[TravelingMedicine]

Won't your assets be included in your financial aid package? You may not qualify for a lot of subsidized (whether govt or institutional) loans if you have the ability to pay for it outright.

This probably also depends on what sort of accounts your investments are in. It would suck to take a penalty on cashing out tax-advantaged retirement accounts.

If somehow the market crashed prior to a month or two before med school, I'd take loans. If not and your investments are in regular taxable accounts, I'd consider cashing out a significant portion to pay for at least part of med school. If you have multiple different loans with different terms, you could look at it as replacing the higher interest or unsubsidized loans.

(I get that people upthread mentioned no more govt subsidized--but plenty of schools have institutional subsidized loans.)

I have flexibility in which account I can cash out on so that isnt too big of a problem. I plan on calling the financial aid office of the school to see what kind of options I can go with and how they will determine my aid. I assume they will include my assets into the calculations but I feel like I can also find a way to get loans another way if absolutely necessary.

Im worried about cashing out due to the tax burden that I may incur due to california tax laws. Long term gains and short term gains are taxed the same (RIP) hence why I was considering moving money into RE to have better tax benefits + open a LLC to offset gains due to business expenses.

The more i talk about it I think I just need to talk to a financial adviser + school financial aid office.

 

[Neopolymath]

I have flexibility in which account I can cash out on so that isnt too big of a problem. I plan on calling the financial aid office of the school to see what kind of options I can go with and how they will determine my aid. I assume they will include my assets into the calculations but I feel like I can also find a way to get loans another way if absolutely necessary.

Im worried about cashing out due to the tax burden that I may incur due to california tax laws. Long term gains and short term gains are taxed the same (RIP) hence why I was considering moving money into RE to have better tax benefits + open a LLC to offset gains due to business expenses.

The more i talk about it I think I just need to talk to a financial adviser + school financial aid office.

Skimmed the thread so maybe I misread. You can borrow federal loans up to the CoA for med school regardless of what assets you have.

 

[HopelessMS]

I am also in the camp of maxing out the student loans and leave your investments in the market. If you have not done so, you must fill out FAFSA https://studentaid.gov/h/apply-for-aid/fafsa which your financial aid office will direct you to do ASAP. It opens every Oct 1, I believe. If you are starting this summer or fall (2022), then it behooves you to fill out FAFSA quickly as California might have grants that you can possibly qualify for as determined by your school's fin aid office. These grants are first come first serve, at least in my state. Ex. During my 2nd year, I did not fill out my FAFSA until early Feb and I missed out on a $3000 grant from my state in my fin aid package since the funds had run out for that year.

On FAFSA you will be required to upload your prior year tax return and a report will be sent to your school's financial aid office. I believe your income will determine how much loans you qualify for, not your assets. If you end up not qualifying for much federal loans, look into institutional loans. My school gives them as a part of my financial aid package and the interest rates are lower that the federal rate and no interest accrues until I graduate. Can't beat interest free institutional loans for 4 years. Last resort would be private student loans, but only if interest rate is low, low, low...

While not in the same financial footing as you when I started as a MS1, I had a goal to max out of on my financial aid and put any refunds into the market. To date, I have a decent portfolio of stocks that I have acquired while in medschool and my ROI has been significantly higher than the federal student loan rate I am paying. Since I was aware that income would determine my fin aid package, I deliberately just acquired stocks, collected dividends, and let them appreciate. The income I have received from the dividends are negligible and did not affect my fin aid package. I qualified for the max amount each year.

Now in my last year, I started employing the Wheel strategy and selling weekly covered calls from my holdings to generate more return as I won't need any more fin aid for next year, and reinvesting the premiums into acquiring more shares. Therefore, I welcome the current bear market as I can acquire more of my underlying shares at a discount.

 

[Monocles]

OP I am curious - it sounds like you already had a fairly significant career. Why the med school path if you are looking for RE? Just speaking from personal experience as a diehard leanFIRE guy, but medicine is one of the most grueling and roundabout ways ever if your ultimate goal is retirement. I won't hit my retirement goal until well into my mid 30s... whereas if I had known about FIRE right out of college I would have picked a different field altogether without the decade of opportunity costs.

 

[TravelingMedicine]

I am also in the camp of maxing out the student loans and leave your investments in the market. If you have not done so, you must fill out FAFSA https://studentaid.gov/h/apply-for-aid/fafsa which your financial aid office will direct you to do ASAP. It opens every Oct 1, I believe. If you are starting this summer or fall (2022), then it behooves you to fill out FAFSA quickly as California might have grants that you can possibly qualify for as determined by your school's fin aid office. These grants are first come first serve, at least in my state. Ex. During my 2nd year, I did not fill out my FAFSA until early Feb and I missed out on a $3000 grant from my state in my fin aid package since the funds had run out for that year.

On FAFSA you will be required to upload your prior year tax return and a report will be sent to your school's financial aid office. I believe your income will determine how much loans you qualify for, not your assets. If you end up not qualifying for much federal loans, look into institutional loans. My school gives them as a part of my financial aid package and the interest rates are lower that the federal rate and no interest accrues until I graduate. Can't beat interest free institutional loans for 4 years. Last resort would be private student loans, but only if interest rate is low, low, low...

While not in the same financial footing as you when I started as a MS1, I had a goal to max out of on my financial aid and put any refunds into the market. To date, I have a decent portfolio of stocks that I have acquired while in medschool and my ROI has been significantly higher than the federal student loan rate I am paying. Since I was aware that income would determine my fin aid package, I deliberately just acquired stocks, collected dividends, and let them appreciate. The income I have received from the dividends are negligible and did not affect my fin aid package. I qualified for the max amount each year.

Now in my last year, I started employing the Wheel strategy and selling weekly covered calls from my holdings to generate more return as I won't need any more fin aid for next year, and reinvesting the premiums into acquiring more shares. Therefore, I welcome the current bear market as I can acquire more of my underlying shares at a discou nt.

Love your journey. I am currently selling covered calls as well and potentially might change it to Cash secured puts to get stocks at a major discount. Im just worried about what the FED is going to do especially since the market/banks are pricing in about 7ish rate hikes in the near future.

I am currently leaning towards taking out loans and just living well below my means to invest the other money. I rather just take the loans and have inflation + market help me.

OP I am curious - it sounds like you already had a fairly significant career. Why the med school path if you are looking for RE? Just speaking from personal experience as a diehard leanFIRE guy, but medicine is one of the most grueling and roundabout ways ever if your ultimate goal is retirement. I won't hit my retirement goal until well into my mid 30s... whereas if I had known about FIRE right out of college I would have picked a different field altogether without the decade of opportunity costs.

I actually have not had a job that paid over 50K (most jobs were 15/hr and my current per diem is 28/hr and I live in the Bay Area). I just got decently lucky through the market and invested early during my high school years (currently mid 20s). If it was for the money I would've just went into tech or get a real estate license where my friends are making 150-200K+ out of college. Money for me is not the goal. Only thing about leanFIRE (I assume this is similar to FIRE where you just pull 4% of your portfolio each year?) is the flexibility to pivot to do other things and generational wealth. It would be hard for me to travel the world etc. def doable but my family grew up poor (until recently) so I dont want money to be an issue in the future for my family and future generations. So i guess my decision to go into medicine is for fulfillment and interest and less so about the money.

Also have you considered locum tenes positions? You become 1099 so you have more flexibility on what you can write off so you can protect a large portion of you income + get a higher paying position in a different location. The only issue with that is if you have a family or SO that cannot relocate with you or if you are willing to travel to work then travel back. A few of the doctors I worked with during my volunteer position in rural NM did that. They worked 12 shifts then went home for a week and a half or others did 4 days straight then 3 days in colorado skiing.

 

[Monocles]

I actually have not had a job that paid over 50K (most jobs were 15/hr and my current per diem is 28/hr and I live in the Bay Area). I just got decently lucky through the market and invested early during my high school years (currently mid 20s). If it was for the money I would've just went into tech or get a real estate license where my friends are making 150-200K+ out of college. Money for me is not the goal. Only thing about leanFIRE (I assume this is similar to FIRE where you just pull 4% of your portfolio each year?) is the flexibility to pivot to do other things and generational wealth. It would be hard for me to travel the world etc. def doable but my family grew up poor (until recently) so I dont want money to be an issue in the future for my family and future generations. So i guess my decision to go into medicine is for fulfillment and interest and less so about the money.

Gotcha. I think coming from a 50k salary max, medicine makes more sense especially if you've been accepted to a med school already. Congrats and best of luck! I genuinely hope you enjoy it as much as you think.

leanFIRE is basically a more frugal version of regular FIRE (vs fatFIRE which is the other direction). SWR is still the same at 3-4% like regular FIRE, but just aiming to live off a smaller portfolio size (ex: 2m total, <60k a year, at least "smaller" from a physician perspective). I know some would even argue leanFIRE as <30k withdrawal a year but sadly that number is personally unrealistic given our geographic location.