Income Based Loan Repayment

[dtrack22]

Meet a doctor with $895,000 in student debt whose balance has surged on an income-based repayment plan: 'It's just wildly out of control now'

Lots of things wrong with this scenario. You could avoid most of them. But it highlights the possible debt to income ratio problems that will be faced by younger DPMs in the near future. Especially as younger folks become more comfortable with debt and this fantasy that the government will just wipe it all out for them. Consider this person who supposedly makes “five figures” in Private Practice Podiatry, could have a $300k tax bill due as soon as this outrageous balance is actually forgiven. Nuts.

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[air bud]

Meet a doctor with $895,000 in student debt whose balance has surged on an income-based repayment plan: 'It's just wildly out of control now'

Lots of things wrong with this scenario. You could avoid most of them. But it highlights the possible debt to income ratio problems that will be faced by younger DPMs in the near future. Especially as younger folks become more comfortable with debt and this fantasy that the government will just wipe it all out for them. Consider this person who supposedly makes “five figures” in Private Practice Podiatry, could have a $300k tax bill due as soon as this outrageous balance is actually forgiven. Nuts.

Sounds like you should go to a state podiatry school....

 

[newfeet]

I thought I was bad. I just applied for pslf. I have the 120 qualified payments. We will see what happens.

 

[icebreaker32]

Saw a headline for this story, but did not read it or know it was a podiatrist……..figures. We are are surely not a saturated profession.

Reducing enrollment at the schools PERMANENTLY to below 300, makes too much sense…..better residency training for all, higher quality students, the horrible jobs would eventually go away and most that graduated would get a good job and use their training.

I am so wrong, the answer is obviously to open more schools, create more fellowships and tweak the boards.

 

[GreenHousePub]

Reading her story and something is seriously off. I think that even if this lady was given free school she still wouldn't be doing well. She got her DPM over 25 years ago and is still working a job for "five-figures?" I guarantee what's discussed in the article is the tip of the iceberg for her poor decisions.

 

[heybrother]

Its an impressive story about how a small amount of money can grow into a large fortune through the power of compounding.

Wait. Oh. Its debt? Oh damn.

I suppose its technically possible could have have assets that she doesn't want to touch/use to pay down because of the treatment debt sometimes receives. There's another story out there about a orthodontist who went to USC and is a million in debt. He makes like $200K and pays some variation of 10-15% through one of the IBR programs. There was a great deal of freaking out about it on the dental forums. The thing that always comes back is the question of the tax bomb at the end. I haven't read up on that in a long time. Until the tax bomb comes the funny thing is that you could have reasonable income and IBR would produce a very controlled payment albeitwith ultimately spiraling debt and an out of control situation at the end. Like it creates a situation where you really just theoretically don't care - you make $200K a year and pay $20-30K in perpetuity until it all goes to hell.

 

[msuDPM]

Meet a doctor with $895,000 in student debt whose balance has surged on an income-based repayment plan: 'It's just wildly out of control now'

Lots of things wrong with this scenario. You could avoid most of them. But it highlights the possible debt to income ratio problems that will be faced by younger DPMs in the near future. Especially as younger folks become more comfortable with debt and this fantasy that the government will just wipe it all out for them. Consider this person who supposedly makes “five figures” in Private Practice Podiatry, could have a $300k tax bill due as soon as this outrageous balance is actually forgiven. Nuts.

CARES act did away with taxability of ALL federal student loan forgiveness, no longer just PSLF. Only difference now is 10 years vs 25 years.

 

[dtrack22]

Reading her story and something is seriously off. I think that even if this lady was given free school she still wouldn't be doing well. She got her DPM over 25 years ago and is still working a job for "five-figures?" I guarantee what's discussed in the article is the tip of the iceberg for her poor decisions.

Well it sounds like she’s doing Medicaid nursing home work which is basically working for free. Even Medicare with a secondary nursing home work doesn’t pay dick.

This is going to become more common though, even if the “five figure” salary/pay isn’t at all normal after 20 years of work. You’re still gonna see more and more DPMs who have never made much more than $120k, who had $300-500k in student loan debt, and live in HCOL areas who are banking on IBR of student loans. Even the best intentioned person is unlikely to be able to save the hundreds of thousands of dollars they will owe the IRS “IF” their loan is actually forgiven.

Now imagine if you could open your email on any given day and see a message from a recruiter asking for you to come do a 6 week assignment somewhere that will pay you $8,000 per week…nobody would even bother with banking on income based repayments then. If only there was something the profession could do to keep demand for podiatrists artificially high…

 

[Feli]

Well it sounds like she’s doing Medicaid nursing home work which is basically working for free. Even Medicare with a secondary nursing home work still doesn’t pay dick.

This is going to become more common though, even if the “five figure” salary/pay isn’t at all normal after 20 years of work. You’re still gonna see more and more DPMs who have never made much more than $120k, who had $300-500k in student loan debt, and live in HCOL areas who are banking on IBR of student loans. Even the best intentioned person is unlikely to be able to save the hundreds of thousands of dollars they will owe the IRS “IF” their loan is actually forgiven.

Now imagine if you could open your email on any given day and see a message from a recruiter asking for you to come do a 6 week assignment somewhere that will pay you $8,000 per week…nobody would even bother with banking on income based repayments then. If only there was something the profession could do to keep demand for podiatrists artificially high…

"Dr. _______ has been board qualified by the American College of Foot and Ankle Surgeons and certified by the American Board of Multiple Specialties in Podiatry."
-website bio of this poor doc (poor is not a $ joke, I do feel bad for her... although she probably elicited that article to get pub?)

Regardless...
1) ACFAS is not a board.
2) ABMSP is a fake board.
3) I don't think board qual is even legal to advertise - especially an expired incorrect board qual?

There are a million ways to fall flat on one's face in any profession (just read the pharm, PT, chiro, dent forums... wow).
In podiatry, the best way to screw up royal - besides excess spending or gambling or various dumb investments - is absolutely to limit yourself on training/skill/jobs in an already limited profession.

...Being podiatry, we probably need to create a CAQ in personal finance??
Who is not a real accountant or have much training in it... but wants to be chair of that anyways? Experience with GoFundMe is a req. 🙂

 

[dtrack22]

CARES act did away with taxability of ALL federal student loan forgiveness, no longer just PSLF. Only difference now is 10 years vs 25 years.

It wasn’t the cares act, it was the $1.9 trillion stimulus package and it’s a temporary suspension of the tax bomb at the federal level, expiring Jan 2026.

Even PSLF triggers a taxable event at the state level in a couple of states.

Oh well, not my problem, my loans are all paid off. People who keep banking on the government to bail them out will likely never get real far ahead in life.

 

[msuDPM]

It wasn’t the cares act, it was the $1.9 trillion stimulus package and it’s a temporary suspension of the tax bomb at the federal level, expiring Jan 2026.

Even PSLF triggers a taxable event at the state level in a couple of states.

Oh well, not my problem, my loans are all paid off. People who keep banking on the government to bail them out will likely never get real far ahead in life.

Interesting. I could have sworn it was part of the CARES act, but admittedly, like you my loans are paid cash so I didn't pay too close of attention.

FWIW I do think PSLF borrowers will get their forgiveness provided they filed the appropriate paperwork yearly confirming their qualifying payments.

For everyone else, who knows how it will shake out, but those on IBR/PAYE that don't have a track for PSLF likely don't have a solid plan either way sooo...

 

[Feli]

...not my problem, my loans are all paid off...

This is the key. ^^ Good work, man.

I think a lot of people would do fine if they just paid a large % of their check to loans right away instead of trying to figure out what "rewards" they can buy them self, the next hot investment, or how to find a way for govt to reduce/forgive their loans and justify paying minimums. The boring yet logical play is to over-pay on the loans. In hindsight, I wish I would have even paid the loan interest during residency also (couple of my co-res did, but I was not smart enough at the time).

It frees up soooo much investing power by getting rid of student loan payment that you can't help but consider early retirement and/or significantly higher lifestyle after that, based on what you want to do. Compounded interest is working either for or against everyone.

From the orig post article, her mistaken hope says it all: "I thought, I'm going to be working with a doctorate in this country so I'll make a lot of money... ." Total cart before the horse.

 

[dtrack22]

I think a lot of people would do fine if they just paid a large % of their check to loans right away instead of trying to figure out what "rewards" they can buy them self, the next hot investment, or how to find a way for govt to reduce/forgive their loans and justify paying minimums. The boring yet logical play is to over-pay on the loans. In hindsight, I wish I would have even paid the loan interest during residency also (couple of my co-res did, but I was not smart enough at the time).

This could spin off into a good retirement/financial literacy thread…

I did get a little lucky. Its not like I had any help from my pay as a podiatrist. I was an associate in a podiatry group, and while we were always fairly frugal, my $100k income wasn’t just blowing debt out of the water. I had a spouse in school who worked and paid all the bills except tuition.

I had a little over $100k in student loans at graduation and maybe $120k when finishing residency. With that size of a student loan I could have still had it paid off within 5 years just being a poorly compensated associate.

I also sold around $850,000 worth of BTC 18 months ago. Like I said, I got lucky.

Its amazing how powerful a good income is without a bunch of monthly payments. This doctor and all podiatry students should start listening to Dave Ramsey. Plenty wont need to worry about it as they start making doctor money out of residency. But the rest of you who are going to come of out residency with a mountain of debt and a tiny $100k per year shovel would be better off taking most of his advice…

 

[underwood]

3rd year resident here planning on repayment once I finish residency….
IBR does sound good on paper (low monthly bill ) however for any doctor unless there is no tax bill… doesn’t make sense because loan will grow outrageously and tax bill will be equivalent to initial loan anyway…..

 

[Feli]

... I was an associate in a podiatry group, and while we were always fairly frugal, my $100k income wasn’t just blowing debt out of the water. I had a spouse in school who worked and paid all the bills except tuition...

Oh for sure. The financially strong/competent spouse or partner can't be understated.
That has been a big boon to my getting ahead also. It definitely allows a bigger % of my own income to hit debt or retirement investing also.

I have seen the 'doctor money' ppl still in plenty of trouble. All it takes is heavy spending that makes big fixed payments (house, car, travel/lux credit cards, etc) and then unexpected change of jobs and/or bad overall market timing that forces an underwater home sale or makes interest become a crusher. Even the big incomes can still have low or almost no savings/invest/pay debt % sometimes... always tempting to make those minimum payments and spend the rest. One can always find plenty of new trips they want to take or things that'd look cool their IG or TikTok. A partner/fam or dating can sometimes cost docs a whole lot lot also... depending on what $tandard$ you try to do those at.

Like I always say to residents and new attendings, if most/all of your MAs drive nicer and newer vehicles than you do, you're doing it right. 😛

...I also sold around $850,000 worth of BTC 18 months ago. Like I said, I got lucky...

Minor details. 🙂

 

[Creflo]

Dave Ramsey is the way to go. When I was just out of residency I went into the military and drove a used motorcycle to work. During the winter I rigged some heated gloves for the cold ride in to work. Bought the wire linings, sewed them into the fingers and palms, connected with red and black wires to RC plane battery mounted on outside of each glove. Basically looked like a bomb apparatus on my gloves, but they never questioned me at the guard gates. I also had bolted on a flat plexiglass plate as a windshield and half cut clorox bottles mounted on the handlebars to break the wind chill on my hands. Many of the enlisted guys had bought nice new cars.