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Loan refinance

Discussion in 'Emergency Medicine' started by brk81144, Nov 14, 2017.

  1. brk81144

    brk81144 Attending 2+ Year Member

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    Curious what everyone is thinking right now in terms of fixed vs variable interest rates. I know the fed always talks about raising interest rates but I’m wondering what most are choosing in terms of student loan refinance.
     
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  3. bravotwozero

    bravotwozero Chronically ambitious 10+ Year Member

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    WCI has talked about this subject on his blog. If you plan on paying off your loans within 2 years, it's worth just going with a variable rate, they tend to be lower and are unlikely to go up that much in such a short time frame. Also, check your pm.
     
  4. brk81144

    brk81144 Attending 2+ Year Member

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    I was looking at his website but it’s from two year ago. I was thinking that the market may have changed in the past couple of years.
     
  5. njac

    njac Senior Member 10+ Year Member

    I just refi’d with SoFi. The fixed rate they offered me was still only 3.2% so I went with that, but I’m down to the last 40K.


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  6. The White Coat Investor

    The White Coat Investor AKA ActiveDutyMD Physician Partner Organization 10+ Year Member

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    Dude! I just got the SDN 15 year trophy. I think I've spent way too much time on here.

    At any rate, my personal opinion is you ought to be out of student loan debt within 5 years of completion of residency. I mean you could have been done in 4 if you'd had the military pay for it. If you're going to drag it out for 10, 15, or even 20 years, you really made a mistake not having the military pay. I mean, you really want to have loans for as long as I've been posting on SDN?

    So in order to get out of debt in less than 5 years, you need to live like a resident. Until the debt is gone. For some people, that's Halloween of the year they graduate. For others, a year. But for most people, it's 2-5 years.

    In order to come out behind on a variable rate loan, rates need to climb both severely and rapidly. Consider if you're offered 3% variable or 4% fixed. If rates go up to 4% on the variable immediately, the two options are equal. If rates go up to 4% in a year, you still come out ahead on the variable. If you're paying of your loans over 4 years, and rates rise to 6% but don't do it until the last year, you still come out ahead. Besides, if you're making payments large enough to be done in just a few years, even if rates climb rapidly and severely, you're not going to have any trouble making the minimum payment. It just costs you a little extra interest. You gambled and lost, but no big deal.

    But if it is all you can do to make the minimum payment on a 15 year loan because you just had to move into that doctor house as soon as you finish residency and you just had to drive a Tesla bought on credit as a new attending, well, you could get burned with a variable loan.

    If it were me, it would be a 5 year variable loan and I'd pay it off in 2 years.
     
  7. TooMuchResearch

    TooMuchResearch i'm goin' to Kathmandu... Lifetime Donor Classifieds Approved 7+ Year Member

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    Was that a 5 year term?

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  8. EM Junkie

    EM Junkie SDN Donor 10+ Year Member

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    2.46% fixed rate here. I’m gonna stretch that to 15 years for sure!


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    LChristmas likes this.
  9. njac

    njac Senior Member 10+ Year Member

    Yep!


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  10. TooMuchResearch

    TooMuchResearch i'm goin' to Kathmandu... Lifetime Donor Classifieds Approved 7+ Year Member

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    Got it. I went with them too, best rate by just a hair. I went with 7 year fixed, plan to pay off faster but wanted a larger margin of safety.

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  11. Tenk

    Tenk Faculty 10+ Year Member

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    I did a five year fixed out of residency but will actually end up paying them off a bit sooner because I made $100,000 selling a house. Probably should have done variable but that’s ok because I didn’t know I’d sell when I did! The difference between fixed and variable is pretty small in the end compared to not refinancing at all.

    There are very few investments in this world that will net 3-4% with near zero risk (other than you dying and the money being gone but hey you’re dead so who cares!). This is why I am continually confused at people who pay off their loans over 10-15 years. If you view your loans like an investment they are very solid and have a great payoff. Don’t be fooled into small monthly payments over a long term. That’s just someone else making money off of YOU.
     
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  12. coachB

    coachB full fledged member 10+ Year Member

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    $100k invested in the S&P 500 in January 2012 with dividends reinvested would be worth $223.5k today. If you are paying 6-8% annual interest, sure pay off your loans. But I really don't understand the desire to quickly pay off low interest rate debt. The arguments for doing so generally favor psychological factors over math. Just like the oft repeated argument to not finance a depreciating asset (like a car). No, the advice should be to avoid spending a lot of money on a depreciating assets. But if somebody wants to loan me money at 2%, then I'm going to take it.
     
  13. Tenk

    Tenk Faculty 10+ Year Member

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    You could have also lost a ****ton of money. It’s called risk. Reread my post.
     
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  14. coachB

    coachB full fledged member 10+ Year Member

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    Yes, you could have. Of course the time period I used was a bull market and not reflective of average results. However, over almost any sufficiently long time period, the theory holds. I read your post. And it sure doesn't make much sense to look for "no risk" investments for a significant portion of your net worth when you are just starting your career if your goal is to accumulate wealth.
     
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  15. Tenk

    Tenk Faculty 10+ Year Member

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    Ok since apparently you can’t read and just want to make things up I will break it down for you piece by piece. I never said dump all your wealth into your loans. I said that student loans are a stable worthwhile investment with zero risk. All other investments have risk. House has risk. Stock market has risk. I made $100,000 on my house I only lived in for two years so that beats the S&P 500 to ****. Was it no risk? Hell no. Was it a good investment in hind sight? Hell yes. I actually put my wealth into multiple markets and avenues rather than investing in just one area and I’d totally advise anyone to do the same. Paying off government loans over a 10-year period at a 7-8% interest rate is just plain stupid and you’d be better off refinancing and paying them off more aggressively. Sure you could technically make more money flipping houses or investing with that money in high risk endeavors but you could always lose more money. No risk >>> risk. Do whatever the hell you want though, it’s your life not mine. Peace.
     
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  16. BoardingDoc

    BoardingDoc Don't worry. I've got my towel. Physician 7+ Year Member

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    I hear everything you're saying. I think coachB does as well. Your above statement is the crux of what coachB (and I) would disagree with. Yes, it is important to see your loans as a guaranteed rate of return. However, arguing that someone is stupid for stretching out a refinanced loan at 2.5% so that they can instead invest in index funds over the long term which historically have made 7% after inflation and before tax loss harvesting is not a particularly defensible position. Yes,I know you stated a 7-8% government loan, but in the same breath you said you were better off both refinancing it and paying it down aggressively. The former is demonstrably correct. The latter is a matter of personal risk tolerance, as there are significant benefits to NOT pay it down aggressively once you've refinanced.
     
  17. Tenk

    Tenk Faculty 10+ Year Member

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    I never said anyone is stupid for not aggressively paying off a 2.5% fixed rate loan. I said people are stupid for riding on government loans at 7-8% for 10+ years and not refinancing. You are much better off refinancing your loans. The more "aggressively" part was a comparison between riding government loans versus refinance. I didn't mean throw in all your extra wealth in addition to the refinance. I just meant it as a comparison between a 10 year government repayment versus something like a 5 year refinanced option which is a hell of a lot more aggressive in comparison. Also, maybe some of the confusion here is that people are thinking I put an extra $100,000 into my loans. I did not. I spread it around like I do with all my investments. House, loans, market, private, and my personal favorite: guns and ammo.
     
  18. coachB

    coachB full fledged member 10+ Year Member

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    Just to be sure, I reread your post again. That is definitely not what you said. Here is what you said:

    That definitely does not refer to government loans at 7-8% or the comparison between riding government loans versus refinance. If you think 3-4% is "very solid" with "a great payoff" then so be it. Thanks for now clarifying what you "meant" though.
     
  19. shoal007

    shoal007 2+ Year Member

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    I am with tenk here. We are in the best bull market in recent history. Even bogleheads are going nuts. This will not last. Student loans at above 4% should be paid off aggressively. Bogle predicts real growth after inflation in TSM of 3% in the coming decades.

    I did some math and for me as a w2 nonprofit hospital employee I chose to stay with pslf over paying my loans off in 3 years with refi. The risk is +/- 60k if it falls through with baseline as refi. Diversify

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  20. brk81144

    brk81144 Attending 2+ Year Member

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    So I went 5 year fixed at 3.3. Decided I didn’t want to take the risk of the variable for what would come out as ~5000 savings over the 5 years if it takes that long to pay them off
     
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  21. The White Coat Investor

    The White Coat Investor AKA ActiveDutyMD Physician Partner Organization 10+ Year Member

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    I like that you looked at the risks and made a conscious decision. Seems like a easy way to pocket $5K to me though!
     
  22. The Physician Philosopher

    The Physician Philosopher ASA Member

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    I followed WCI's advice and refinanced at a variable rate. Am putting substantially more towards the loan each month than required and expect to be paid off 2 years out of training.

    I will say that I found some interesting differences between the companies. SoFi, for instance, wouldn't let me combine my wife's loans (masters in education) with mine. So, would have had to refinance twice. Commonbond not only let me combine them so that it is just one payment, but has a policy that if I die, all the loans are forgiven since they are in my name. That includes my wifes loan. Pretty sweet deal, though there rate was about 0.25% higher than SoFi.
     

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