Job Perk: Paying off your loans

[anoncurious]

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I understand that some practices, when recruiting young post-residency physicians, offer to pay off their loans as a bonus for joining the practice. Can anyone comment on how prevalent/common this is? Also - say you don't have any loans; do you benefit from this practice in any way (ie they give you X amount of money instead of paying off loans)?

Say you are in residency and have X amount of loans and you have the option to pay it off now or postpone payment. Would it be wise to forgo paying off loans in hopes that a practice offers to pay them off for you?

 

[GeraldMonroe]

While I've never been there, this is a simple question of economics.

Money doesn't come from thin air. If a practice offers to pay off your loans, they have to offer you less compensation elsewhere. I know of no tax benefits, so basically, every dollar of loans they pay off comes out of the practice's accounts, and you could have negotiated to have that money paid directly to you instead.

No, it is not wise to forgo repayment for this reason. If you have loans at 6.8%, you are guaranteed a 6.8% return on every dollar of loans you pay off.

 

[anoncurious]

Thanks for your response. I read somewhere, however, that often times the loan forgiveness does not, in fact, come from the practice itself, but rather, that it is a recruiting tool used by the group's affiliated hospital that is given in return for a commitment of time in the area..can anyone with experience either confirm or deny this?

Thanks!

 

[nontrdgsbuiucmd]

somewhat related.. I read an article about a physician shortage somewhere in rural new york, the county or local government was offering to repay med student loans in return for the commitment to stay in that area for a certain number of years.

As a businessperson for 10+ yrs in a variety of settings, my opinion is that your question will not be answerable in a generic, broad way -- there may be certain underserved areas that would pay this type of bonus for bringing in needed physicians, but Beverly Hills is not going to pay for a plastic surgeon's med school loans as they don't have a shortage of this type of specialist.. this has got to be a supply and demand type thing.

Suggestion would be to contact some hospital groups about this in the areas you're looking at, and maybe a few big, united healthcare/kaiser type organizations to see if they offer this type of incentive through local practices in any locations in which they have lots of presence.

 

[anoncurious]

Thanks for the response..as a business person, I was wondering if you could answer this: Say there is a doctor applying for some position somewhere and there is this type of loan forgiveness program in place (whether it be through a hospital, or through the rural health care programs, etc). Is it typically reasonable to assume that if you DON'T have any med school loans, you could request that they give you whatever money they would have provided to absolve your loans?

Essentially - will you be 'out of luck' if you happen to have paid off your loans and they have this kind of program, or could you get them to pay you whatever they would have if you did have loans?

 

[GeraldMonroe]

Essentially - will you be 'out of luck' if you happen to have paid off your loans and they have this kind of program, or could you get them to pay you whatever they would have if you did have loans?

Panda Bear, M.D. has a lot to say about that. Read this blog post. http://www.studentdoctor.net/pandabearmd/2009/03/28/old-school-and-other-things/

Essentially, yes. If they were willing to spend $100k paying your loans, you have the negotiating power to get them to apply that $100k to your salary instead. This isn't like getting a job at Megacorp as an interchangeable office worker, where you have to take the employment contract they offer. Megacorp might decide to offer some kind of benefit or bonus you don't actually need, but you can't get the money they would have spent added to your salary.

A fully trained doctor is much more valuable than that, and you have a lot more power to ask for what you want. In general, they need you more than you need them, and they'll end up giving you every dollar they were willing to pay if you bargain for it.

Atul Gawande describes how he was asked to set his own salary in a New Yorker column I don't have the link to at the moment.

 

[nontrdgsbuiucmd]

Yes I'd agree, the way the company looks at this (my employer has discretion about hiring salaries; I see compensation data in my role) is that there's a range that they can pay. Absent a government policy or program that would reimburse only med school loans directly, any private entity would not care if they pay you directly, or if they repay the student loans. They'd look at the total $$ paid. The better you are at negotiating (i.e. get multiple offers, don't show your hand too early, etc) the better you come out in the negotiation.

 

[psych]

I'm looking at a huge amount of loan debt whenI graduate medschool and even more $$$ when I finish residency/fellowship.
I will probably end up a psychiatrist. Starting salary is supposedly 165k. Is it possible to negotiate a 65k salary and 100k loan repayment/yr for 3+ years?

 

[EagerCraft]

Wouldn't any money a company pays on an employee's loans be considered taxable income? So, if they are paying for your loans at $100K and you are getting a $65K salary, you'll end up w/ like 40K a year to live on until the loan is paid off -assuming your employer is also paying for liability insurance? Without the benefit of being able to write off the payments on your own taxes, seems better to negotiate extra money and pay your own loans off unless you can afford to live like a resident for 3 more years.

 

[psych]

Wouldn't any money a company pays on an employee's loans be considered taxable income? So, if they are paying for your loans at $100K and you are getting a $65K salary, you'll end up w/ like 40K a year to live on until the loan is paid off -assuming your employer is also paying for liability insurance? Without the benefit of being able to write off the payments on your own taxes, seems better to negotiate extra money and pay your own loans off unless you can afford to live like a resident for 3 more years.

Ha, yah I'm going to owe 375k when I graduate medical school --> which is going to turn into 425k when I finish my fellowship (even with paying loans during my training!). Therefore without some sort of loan repayment/forgiveness I'm going to have to live like a resident until I'm 40.
Good point because my plan doesn't work if I have to pay taxes on the 100k - there would be no $$$ left to live on.

Is loan repayment/forgiveness taxable?

Also I always see advertisements for 25k or up to 100k in loan repayment/forgiveness, is there an overall limit to the amount?

 

[yadayadadude]

Of course you have to pay income taxes on any loan repayment benefit. There's no free lunch here. I suppose there's a small advantage in that you'd get out of payroll taxes on the loan repayment amount. But income taxes, you have to pay 'em. The only exception I know of is that if you get loan repayment from the NIH, they pay the income tax (effectively making the total grant amount somewhat higher).

 

[ThinkTooMuch]

i plan on marrying a filthy rich widow and have her pay my loans. isnt this what everyone does? 😀

 

[thebeatgoeson]

So loan repayment programs through employers count as taxable income?

Is there a way to work this so that you could end up in lower tax bracket? And that way you would have to spend less of your (decreased) salary servicing the added tax from your loan payment...?

Something like...
drop salary by x amount, increase loan repayment through company by y amount, deductions (home interest, etc. etc.) account for z amount....

 

[dragonfly99]

yadayada
is correct about the NIH loan repayment program.
I believe that for most of the hospital and employer provided loan repayments, you have to pay taxes on the income, which sucks.

 

[Sol Rosenberg]

So loan repayment programs through employers count as taxable income?

Of course.

Is there a way to work this so that you could end up in lower tax bracket? And that way you would have to spend less of your (decreased) salary servicing the added tax from your loan payment...?

Something like...
drop salary by x amount, increase loan repayment through company by y amount, deductions (home interest, etc. etc.) account for z amount....

No. Basically any money that anyone else gives you (with very few exceptions) is taxable. Period.

Most of the tax loopholes that you hear about (i.e. working the system to end up in a lower bracket) involve deductions and/or reductions to income. One such reduction to income is the INTEREST that you pay on your loans (can be deducted from your income,) but not the principal. But my point is (once again) that any money paid to you (or to someone else on your behalf) by someone else is taxable.

 

[montessori2md]

yadayada
is correct about the NIH loan repayment program.
I believe that for most of the hospital and employer provided loan repayments, you have to pay taxes on the income, which sucks.

This is only true if you are working for a private firm. Non-profits and government agencies can do the appropriate paperwork to result in a tax break for the employer and no income tax for the employee (some employers are not aware of this, and you as a candidate should bring it up if they don't). This is why getting 100k in loan repayment may not equate with 100k in salary if you don't want loans repaid. You'll both pay taxes if it's straight salary, which means it's cheaper to repay loans.