Financial/Loan repayment plan: What to do?

[medstud22]

Hello all,

I just wanted to share my situation with you all and see what advice I can get.

A little background, I am currently in the middle of my residency and have about 32 months to go. I am in a specialty where almost 90+% do a subspecialty fellowship. My current student loan is at about 352K and continually growing at 6.88%. Also married, but no kids, however, do plan to have at least 2 in next 3 years, if all goes according to the plan.

I was recently approached by my hometown hospital (Pretty rural midwest town of about 10k but about 1.5 hrs away from a major metropolis) about an opportunity of a generalist (No fellowship) with a hefty salary. I met up with them with no expectations and they pretty much asked me to sign already. For a 3 year guarantee of 600k+ with signing bonus of 100k and annual stipend while I'm in residency of 25k/year.

I have to say I am extremely flattered as I have never seen anything even remotely close to that, and before they told me all the details, I was sure I was going to decline it as I am still fairly far away for finishing my training. Now I am having second thoughts haha.

I did some math, if I don't refinance my current loan (DRB is now offering refinancing to residents) I will graduate with roughly 428k in the hole. If I do take this job, after all the taxes everything, I should roughly have a paycheck of 25-30k per month. Am I correct? Even if I max 401K contributions and all I should have about 25K.

I then did some recalculation on my loan and I can pay it off roughly in 2 years if I made payments of roughly 18k/ month. It can even go down if I decide to refinance and let's assume I get a rate of 4.5% ( I have excellent credit) to 16 to 17k and a loan amount of about 400k instead of 428 by graduation.

Now here are somethings to consider.
1) I will have to forego the fellowship year ( As of now I planned to do a fellowship in a field that pays less than a generalist, i.e no fellowship)
2) By not doing a fellowship, I will also make 600k+ instead of 60k that I would have made in the fellowship
3) Fellowships are mainly used as a marketing tool to break into big markets in my specialty, therefore, it is safe to say that I will be somewhat limited in where I can practice if I did take this job, so that's a downside.
4) Is paying off all the debt in 2-3 years a good idea and just living off of 7-10K of income for the first couple of years? Any advantages or disadvantages?
5) What about taking this job, paying all the debt off, saving a little bit, and then doing a fellowship after 3 years? Is that even realistic?
6) If I did do a fellowship, my income will likely be around 500k. However, I will likely be able to work in a more desirable area (major metropolis) from what I have seen and heard from my co-residents and MGMA surveys.
7) Signing this early can limit other jobs/prospects that may be out there that I have not explored.
8) And last, what would be your strategy if you were in my shoes with a prospect of having a job that paid around 500k but a student loan that keeps you up at night?


I am leaning towards saying no, but before I do, I wanted to just do a little analysis, I would greatly appreciate any insight.

Thanks

---

Members don't see this ad.

 

[ThoracicGuy]

Hello all,

I just wanted to share my situation with you all and see what advice I can get.

A little background, I am currently in the middle of my residency and have about 32 months to go. I am in a specialty where almost 90+% do a subspecialty fellowship. My current student loan is at about 352K and continually growing at 6.88%. Also married, but no kids, however, do plan to have at least 2 in next 3 years, if all goes according to the plan.

I was recently approached by my hometown hospital (Pretty rural midwest town of about 10k but about 1.5 hrs away from a major metropolis) about an opportunity of a generalist (No fellowship) with a hefty salary. I met up with them with no expectations and they pretty much asked me to sign already. For a 3 year guarantee of 600k+ with signing bonus of 100k and annual stipend while I'm in residency of 25k/year.

I have to say I am extremely flattered as I have never seen anything even remotely close to that, and before they told me all the details, I was sure I was going to decline it as I am still fairly far away for finishing my training. Now I am having second thoughts haha.

I did some math, if I don't refinance my current loan (DRB is now offering refinancing to residents) I will graduate with roughly 428k in the hole. If I do take this job, after all the taxes everything, I should roughly have a paycheck of 25-30k per month. Am I correct? Even if I max 401K contributions and all I should have about 25K.

I then did some recalculation on my loan and I can pay it off roughly in 2 years if I made payments of roughly 18k/ month. It can even go down if I decide to refinance and let's assume I get a rate of 4.5% ( I have excellent credit) to 16 to 17k and a loan amount of about 400k instead of 428 by graduation.

Now here are somethings to consider.
1) I will have to forego the fellowship year ( As of now I planned to do a fellowship in a field that pays less than a generalist, i.e no fellowship)
2) By not doing a fellowship, I will also make 600k+ instead of 60k that I would have made in the fellowship
3) Fellowships are mainly used as a marketing tool to break into big markets in my specialty, therefore, it is safe to say that I will be somewhat limited in where I can practice if I did take this job, so that's a downside.
4) Is paying off all the debt in 2-3 years a good idea and just living off of 7-10K of income for the first couple of years? Any advantages or disadvantages?
5) What about taking this job, paying all the debt off, saving a little bit, and then doing a fellowship after 3 years? Is that even realistic?
6) If I did do a fellowship, my income will likely be around 500k. However, I will likely be able to work in a more desirable area (major metropolis) from what I have seen and heard from my co-residents and MGMA surveys.
7) Signing this early can limit other jobs/prospects that may be out there that I have not explored.
8) And last, what would be your strategy if you were in my shoes with a prospect of having a job that paid around 500k but a student loan that keeps you up at night?


I am leaning towards saying no, but before I do, I wanted to just do a little analysis, I would greatly appreciate any insight.

Thanks

It'll be harder to go back to fellowship after being in practice for 3 years.

 

[fakin' the funk]

TL;DR, sorry

With debt that large at that high interest rate, refinancing once you're an attending will be crucial.

If a single year of fellowship boosts your income that much, it may be worth it vs. the opportunity cost of losing a year of attending salary. I would simulate different scenarios in Excel and play with those numbers.

If you do take this offered contract, it would be wise to direct that 25k directly toward your highest rate loans. That way it's not "burning a hole in your pocket," and you won't get "lifestyle creep" when you have massive debt to pay off.

 

[Plastikos]

He said fellowship likely would decrease his pay (because you'd be in a more desirable location). You'd have that signing bonus+25k/year to put towards roth/loan payback for the next 3 years which is huge as well, and would ultimately do an enormous amount of work on the future interest compounding of your loans and by the time you were finished theyd be so manageable you might get them over with in the first year.

Of course you dont want to close any doors, but this is usually a lot less grim than people make it out to be. If you have that much income then of course it makes sense to pay down all your loans as fast as possible.

 

[ResidentSensei]

You provided a ton of information, but I think you missed the most important piece:

Would you stay in your hometown? Do you want to buy a house in your hometown? Does your spouse want to live in your hometown? Do you want to raise kids in your hometown?

I think the answer can be somewhat inferred since you were originally not even going to consider this job. Therefore, here are the two scenarios as I see them:

1) Take the job, be a generalist, take the money and refinance (using SoFi or DRB or whatever) to a very low -variable rate- and plan to pay off most or all of your loans before the rates can change. Stay lean and mean meaning rent a place, reasonable furniture, etc. All the while you keep your network connections strong, and look for a job somewhere else, realizing the job market for a generalist is not as favorable as those with a fellowship. In addition, you keep tabs on your fellowship of choice which you go back to do after finishing your loans. However, as previously stated above, it's hard to go back to being a fellow, especially to go from making 600k to 60k... unless during your first few years as an attending you still live on a fellow's salary. This is difficult for some.

2) Do the fellowship. Use it to break into market you would be more happy in (more metropolitan, I assume). You will accrue more debt because it is yet another year of non-attending money. At this point, you will still need to refinance as above, but likely with a fixed rate and plan to pay it off over a longer course of time. However, this would be where you plan to stay permanently.

There are always variables in any plan, but that is how I see it. Do #1 if you and your wife are both on board with your plan to get rid of the debt, be in your hometown, and live like a fellow for a little longer... all the while knowing that getting rid of that debt will do a ton to your level of stress and increase your happiness level. Do #2 if you if you and your wife do not think you can live in your hometown for 3-5 years, and really need to be in a metropolitan area.

At this point it comes down to Stress of Debt versus Location. One more caveat is that for many doctors, their 1st job is seldom their last, even if it is the dream job in the dream location.

Either way, make sure you are both on board 100% with the decision. Happy wife, happy life.

-Sensei

 

[bc65]

I would do the fellowship and keep my options open. As suggested above, the real issue is, would you and your spouse want to live in your hometown? If not, forget it. If you would consider it, then tell them you are willing to do it but they have to wait for you to finish your fellowship. Otherwise, don't it. You clearly feel that the fellowship is something you want to do, so don't lock yourself into this job by not doing the fellowship. If they won't extend the offer a year while you do the fellowship, then they probably won't be very accommodating later on other issues either.

 

[medstud22]

Thanks guys

My wife does not mind living in a smaller place for 3-5 years. She is on board with that, even long term, if I get busy and it's a good gig. Ultimately, we want to be financially independent and debt free before 40, that's our number 1 goal. I do like a subspecialty that I'd like to pursue but being financially independent is more import at, not to mention I can still do a ton of subspecialty cases as a generalist.

I have decided not to sign at this point but haven't said no altogether either. I have just told them it's too early and I want to give it another year or so before committing in writing. That'd give me more time to explore other options and reflect on everything else.

 

[medstud22]

Bumping this thread for an update.

Currently 20 months away from graduation and in the midst of application process for a fellowship. As I previously mentioned, I didn't take the initial offer and stalled. Now they have come back for even a more lucrative offer, which just appears too good. I was wondering if I can get some opinions:

Base Salary of 700K+ and total comp of 800K+ with loan repayement, sign on bonus, and paid call. This was guaranteed for 3 years initially but they are now willing to guarantee even more years, so I'm assuming I can ask for 5 if I wanted.

Loan situation: Currently 378K and growing at 6.8%.

According to MGMA and AMGA, 800K is roughly around 70-80th percentile in my specialty. So it is fairly attainable.

I will be 35 by the time I graduate and the first priority is financial independence. Would like to pay off these loans ASAP, hopefully under 2 years.

It would be nice to do a fellowship but a fellowship would likely mean I'd be competing with other guys in a large metro area and my income will likely be much lower, at least to begin with. Of course I can take this job even after doing a fellowship, but that will mean losing on 700k+, because it's as general as it comes.

Any opinions/comments are welcome.

 

[ThoracicGuy]

Bumping this thread for an update.

Currently 20 months away from graduation and in the midst of application process for a fellowship. As I previously mentioned, I didn't take the initial offer and stalled. Now they have come back for even a more lucrative offer, which just appears too good. I was wondering if I can get some opinions:

Base Salary of 700K+ and total comp of 800K+ with loan repayement, sign on bonus, and paid call. This was guaranteed for 3 years initially but they are now willing to guarantee even more years, so I'm assuming I can ask for 5 if I wanted.

Loan situation: Currently 378K and growing at 6.8%.

According to MGMA and AMGA, 800K is roughly around 70-80th percentile in my specialty. So it is fairly attainable.

I will be 35 by the time I graduate and the first priority is financial independence. Would like to pay off these loans ASAP, hopefully under 2 years.

It would be nice to do a fellowship but a fellowship would likely mean I'd be competing with other guys in a large metro area and my income will likely be much lower, at least to begin with. Of course I can take this job even after doing a fellowship, but that will mean losing on 700k+, because it's as general as it comes.

Any opinions/comments are welcome.

Can you see yourself living in that location for 3+ years? Have you worked in that hospital to know what the actual job might be like? There's a reason why they feel they have to offer such a high salary.

This would give you the ability to pay off your loans quickly.

 

[st2205]

How much would having 5 years of experience help you break in to other markets? From the sound of it, you're interested in fellowship but mostly doing it for marketability(?). How long is fellowship? How saturated is the market for generalists in places you want to be long-term? It sounds like a good deal. But not really being in your specialty (or knowing what it is -- have a good guess, though), me saying it sounds like a good deal is a little meaningless.

 

[Plastikos]

Is it for sure impossible or simply harder to not be fellowship trained, cuz it sounds kind of crazy financially. I get its harder, but you hear this for lots of specialties and it doesnt bear out usually in practice if you're simply good at what you do. Sure, there may be a few very competitive places that are really tough, and if you are definitely planning to live there its another thing for sure.

My fellowship while providing excellent experience and head and shoulders above other surgeons as far as training goes doesnt really get me more money. I had a lot more experience and day 1 confidence and moved to a type of practice instantly rather than over decades...but it certainly wasnt necessary and I dont make any more money (though I certainly do well consider time spent working...so that does really count).

 

[medstud22]

So I am an Ortho resident. About 90% of graduating ortho residents do fellowships. Fellowships are not competitive and all of them are 1 year. Fellowships don't necessarily increase your income, unless you do spine. I have no interest in spine. According to recent salary surveys, generalists are making just as much or more than subspecialits, other than spine.

I really enjoy general ortho, would love to do it, but it makes me a little wary that most jobs in desirable areas want fellowship trained guys, even if the job is for general ortho... mainly for marketing reason. Still, plenty of general jobs, will just have to be in medium to a small town.

Another reason to do one would be to get more comfortable and get more cases to have under my belt, but my program is really strong operatively so I already feel pretty comfortable with bread and butter stuff. In fact, if I did take this job, I'll likely be losing some of my skills due to rural area/small hospital.

The hospital has a hard time recruiting any young orthos and usually have locums filling in. They do have a full time surgeon who is an older gentleman and will likely retire in next 3-5 years.

 

[st2205]

Another thing to look at is how comfortable you are being there. If you sign for 5 years, would having that additional time make it easier / more flexible for securing a generalist job in another location because you don't have a specific time crunch to find a gig in a different city?

 

[RangerBob]

Honestly, orthopedic surgeons make so much money that you should just do whatever you'll be happiest doing. Regardless of whether you get this job (which sounds like it pays more than the subspecialty ones you're considering), you're still going to make very good money. The $500k salary if you pursue a fellowship is still a TON of money. You can easily still pay off all your medical school loans in 2-3 years while still living comfortably. I mean, assume that you pay a whopping 40% in taxes (which you shouldn't, but lets just round up for argument's sake). That leaves you with $300k left over after taxes. If you live on $80k (which is actually a ton to live on post-tax, considering that your current pre-tax salary is not even that high), that leaves you with $220k per year you could put towards your loans. Your loans would be paid off in two years. During those two years you could rent a house to get an idea of what neighborhoods in the area you want to live in (as well as if you actually like the job and want to stay there), and then after those two years you can ramp up your lifestyle like crazy.

If you didn't want to pay off your loans that quickly, you can easily live quite comfortably while still putting a ton towards your loans. Maybe you just start your "attending lifestyle" now and live off $200k post tax and pay $100k/yr towards your loans. When your loans are paid off you just keep living the same lifestyle and use that extra $100k for retirement, investment, college savings, etc.

Obviously you can pay your loans off far faster if you take the current job, but I'm just trying to point out that you're in the very fortunate situation of being able to earn a ton of money. The odds are strongly against that $100-200k salary difference making any difference whatsoever in your happiness. But, where you live and what you do on a daily basis will have a huge impact on your happiness. If I were in your shoes (and I wish I was, because I owe a boat-load of money and am looking at an average PM&R salary of ~$200k), I would go the route that would make my family and I the happiest.

 

[jacksparrow82]

You will be making a ton of money as an Ortho attending so you will have no problem paying back your loans. However, you still do need to be careful the first few years to make sure your save up an emergency fund (I would say 5oK is probably smart) and start paying off your debt big time while resisting the urge to upgrade your life style. But, I agree that at this point the number one priority is to find a position in which you will be happy and comfortable. The worst thing you could do is sign a contract for a place that is going to cause burnout. Make sure you find a position that provides the kind of hours, call schedule, and days off that you will be really happy with. There's no reason to settle. And make sure that you have colleagues that you like and get along well with. Happiness is more important than money and money will not make you happy. Also, make sure you and your wife really think long and hard about the kind of life you want that will make you both happy. Location is super important. If you love your hometown, then go for that job. If you're not in love with your hometown, look elsewhere. Don't set yourself up for being unhappy. Congrats on being almost done!