Managing student loans and personal debt in residency

[da8s0859q]

Given the more recent PSLF, IBR, and removal of deferment for federal loans, I thought I'd ask for advice with my own little situation.

I'm headed to an EM residency with a six figure federal loan balance on two separate accounts at 6.8%, still south of $200k even with interest since day one of med school, but that's right now. Have not consolidated and nothing is in repayment yet. On top of that, there are some significant credit balances across several other accounts which have piled in med school and through residency interview season.

I'm looking into a reasonable-interest, substantial personal loan, if available, to knock out at least some of the higher-interest credit balances and buffer the move to residency several states away.

Luckily, my residency is in a modest COL area. I will be pretty far from people important to me and would ideally like to have some creature comforts as far as a nice place to call home and whatnot.

As far as my federal loans are concerned, I've managed to get myself confused on what option is best given the above. My question is this: given the earning potential for EM, should I just go for forbearance, keep the little extra income every month in residency, let the interest capitalize after residency, and deal with it as an attending? Would IBR with its ~$300/mo payments (for me, iirc) be worth the missing money on a resident's salary, and how exactly does loan forgiveness with IBR work again? What about PSLF?

Thanks in advance.

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[da8s0859q]

Reading up on options but still would appreciate thoughts.

 

[pianoman511]

First of all, while many people forbear during residency, its not the best idea. While you think that there will be savings, you have to remember that in general med students have no income during their 4th year of med school so your first year of IBR payments will be super low. Your second year of payments will be based on 1/2 year of resident salary, so only your third year would be based on a full year of resident salary. The IBR plan is 15% of your discretionary income. The other benefit is that payments during residency count towards the 25 year forgiveness plan.

The other thing to remember is that if you have any subsidized loans, the govt will pay the interest over the amount that you pay under IBR. It may not be a huge savings, but it will help a little bit. If you choose to forbear you basically forfeit that option.

The reason that PSLF may not be a great option is related to how EM works. Many employers are either private contractors/groups or national groups instead of being employed by a hospital. They are usually not 501(c)(3) or nonprofit corporations and therefore do not qualify for PSLF. There is also no guarantee that PSLF will stick around.

Depending on the interest rate of your credits cards/interview season expenses, etc. a personal loan may not be a bad idea. Something to also remember is that you will likely not have a paycheck until a few weeks in to residency, so that is another set of expenses.

This is not a plug, but I used GL for student loan related stuff and while there is opinions on both sides here on SDN I have been pretty satisfied. They take care of all your student loan stuff so you don't have to and honestly with all the craziness of intern year it helps to have someone else dealing with that stuff. They also do your taxes for you which is another great point.

Given the more recent PSLF, IBR, and removal of deferment for federal loans, I thought I'd ask for advice with my own little situation.

I'm headed to an EM residency with a six figure federal loan balance on two separate accounts at 6.8%, still south of $200k even with interest since day one of med school, but that's right now. Have not consolidated and nothing is in repayment yet. On top of that, there are some significant credit balances across several other accounts which have piled in med school and through residency interview season.

I'm looking into a reasonable-interest, substantial personal loan, if available, to knock out at least some of the higher-interest credit balances and buffer the move to residency several states away.

Luckily, my residency is in a modest COL area. I will be pretty far from people important to me and would ideally like to have some creature comforts as far as a nice place to call home and whatnot.

As far as my federal loans are concerned, I've managed to get myself confused on what option is best given the above. My question is this: given the earning potential for EM, should I just go for forbearance, keep the little extra income every month in residency, let the interest capitalize after residency, and deal with it as an attending? Would IBR with its ~$300/mo payments (for me, iirc) be worth the missing money on a resident's salary, and how exactly does loan forgiveness with IBR work again? What about PSLF?

Thanks in advance.

 

[da8s0859q]

Thanks for laying it out like that. Definitely helps.

What I'm trying to figure out is just how much IBR would save over forbearance in the end. (I'm also with GL as a servicer.)

I came across this -- http://www.benwhite.com/medicine/medical-school-loans-during-residency-ibr-or-forbearance/ -- which says a few things you just said. Basically seems like there is no reason NOT to do IBR for PGY1, and it's still a pretty decent idea for PGY2.

Other than any added hardship in shelling out the couple hundred bucks a month in PGY2 and $300-$400/mo in PGY3, and having to refile annually, I'm not sure I see a drawback to IBR. Is there one I just don't understand?

Given that EM docs have a pretty good earning potential after residency, I'd like to think that I'd be one to pay down my loans as fast as possible to (a) limit interest damage, provided I'm not losing out to higher-interest investments and (b) have the monkey off my back.

 

[Debt Free Doctor]

Given that EM docs have a pretty good earning potential after residency, I'd like to think that I'd be one to pay down my loans as fast as possible to (a) limit interest damage, provided I'm not losing out to higher-interest investments and (b) have the monkey off my back.

I would definitely go for the pay debt off aggressively route rather than PSLF program/IBR.
damage control on interest is actually guaranteed, high, and tax free "return" which often time beats taxed/investment/volatile income.
I'd start aggressive payments in residency or ASAP instead of just going for IBR, which allows negative amortization.