Loan Repayment as Part of Employment Contract

[johhnybgood]

For all the attendings out there, how many of you have seen loan repayment as an incentive in your contract? Is this fairly common within EM or mostly just the primary care specialties? If you have seen it, what is the usual yearly repayment stipend?

Thanks in advance!

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[docB]

Forgive my ignorance. How would this work? I know of programs where the government will forgive portions of government loans if you agree to work in certain situations. But that's loan forgiveness. If you're talking about loan repayment are you just having your employer pay your lender directly instead of giving you the money to pay? The only way I could see that being an advantage is if there were a way for them to do that pretax.

 

[JediZero]

Forgive my ignorance. How would this work? I know of programs where the government will forgive portions of government loans if you agree to work in certain situations. But that's loan forgiveness. If you're talking about loan repayment are you just having your employer pay your lender directly instead of giving you the money to pay? The only way I could see that being an advantage is if there were a way for them to do that pretax.

I guess it would also have the advantage of not being included in your permanent salary. So once it's paid off they can effectively drop your pay by 50k/yr or whatever without you complaining about it...

 

[gutonc]

I guess it would also have the advantage of not being included in your permanent salary. So once it's paid off they can effectively drop your pay by 50k/yr or whatever without you complaining about it...

It's more likely that they'd just withhold that amount upfront and then you'd "get a raise" in year 3 or 5 or whatever.

Either way, there's no free lunch. Your employer is going to spend a certain amount of money on you, you can take it in salary alone or salary + "loan repayment" but it's not going to change the amount of money they pay to you or on your behalf.

 

[Groove]

For all the attendings out there, how many of you have seen loan repayment as an incentive in your contract? Is this fairly common within EM or mostly just the primary care specialties? If you have seen it, what is the usual yearly repayment stipend?

Thanks in advance!

I don't really consider it "loan" repayment but more of an incentive bonus that can be structured in a variety of ways but most commonly is tied with commitment duration.

If you can get them to pay your lender directly then I believe you have the potential to avoid tax on that income but it would have to be structured and worded in a very careful manner and even then a CPA would be your best source of information. I found that most "loan repayment" or bonuses were simply monies to be distributed that were largely dependent on how long you were willing to sign up to work at the location. CMGs are most common. My largest offers were from CMGs and smallest were from Democratic groups where the enticement is largely with carrots and "trick or treats" (PUN intended) involving group partnership. I had a bad experience with a Democratic group that was trying to get me to sign and reneged on verbal agreements involving said issues. There's room for haggling and was able to haggle increased bonus and decreased commitment with one CMG in another city but ultimately went with another in my hometown.

Anyway, I'm getting on a tangent. I interviewed a lot and had a variety of offers but I found most involve $$$ for (years). I would not recommend more than 2-3 years commitment and only that if you REALLY need the money (I did...was going through a divorce and was desperate for moving expenses and mega loan repayment) and are very comfortable with the thought of an extended stay at your location. Personally, I would not ever sign more than that length of time, regardless of how long I envisioned myself there. I knew guys that were willing to sign for 10 years (not sure if he did...) and another who signed for at least 5 back in his home town. I found that the security of the bonus and immediate income loses out to risk aversion analysis the longer you sign. (What if you hate the place 8 months into the job? Too bad.. you signed on for 5 years, etc...)

Only take the sign on bonus if it doesn't affect your pay compared to the other providers. Nobody wants to start a job and feel as if they are getting screwed. I'd be more wary of a sign on from a Democratic group as it most likely is going to involve partnership track which is implicit for "gain at your loss" until time of partner and you can guarantee that bonus is going to come out of something that probably has your name on it.

Oh, one more thing. Remember, you most likely will owe income tax on the loan and it will be at your first year tax bracket (not your resident tax bracket...), so calculate accordingly.

 

[JediZero]

I had a bad experience with a Democratic group that was trying to get me to sign and reneged on verbal agreements involving said issues. There's room for haggling and was able to haggle increased bonus and decreased commitment with one CMG in another city but ultimately went with another in my hometown.

...

Only take the sign on bonus if it doesn't affect your pay compared to the other providers. Nobody wants to start a job and feel as if they are getting screwed. I'd be more wary of a sign on from a Democratic group as it most likely is going to involve partnership track which is implicit for "gain at your loss" until time of partner and you can guarantee that bonus is going to come out of something that probably has your name on it.

I have heard things like this from attendings about democratic groups. Whatever incentives they offer you, make sure the track to partnership is in the contract and not verbal. You don't want to wind up playing Charlie Brown to their Lucy holding the football.

 

[johhnybgood]

I really appreciate the replies here. Given me some great food for thought and will give me some things to think about when I am looking at contracts. Thanks again!

 

[docB]

I guess it would also have the advantage of not being included in your permanent salary. So once it's paid off they can effectively drop your pay by 50k/yr or whatever without you complaining about it...

That could be but that's the reverse of the usual "pay goes up the longer you stay" retention bonus schemes. I suspect most groups would not want to front load your money so that you're incentivized to come and gain experience while making more money and then leaving when the pay drops.