My specific financial plan

[alfranky]

---

Members do not see this ad.

I will be graduating on May and hopefully will be starting my residency soon after. I have been thinking about my debt and I would like to get some opinions to see if I understand the big picture.

I think that what I decide will depend where I go for residency.

I’m going to use some round numbers to make this easy.

Let’s say that my debt is $200,000 of which $180,000 is unsub and $20,000 is sub. I’m single and my Payee is going to be around 6% of my salary above the poverty line etc. Around $2400.00

Scenario A

My residency is in a state where my take home pay is $30,000 and the COL is $25000.00 + payee payment.(New York ,Boston)

Basically my options are very limited. I will have to take the payee route since I will have no money to make any extra payment. My understanding is that the interest of the sub loan will be cover by the government for three years but my interest in the unsub loan, that are the bulk of my debt, will accrue and my debt will increase approximately $12000 a year.

If I do a residency + fellowship at the end, my debt will be around $300,000

Scenario B

My residency is in a state where my take home pay is $32,000 and the COL is $16000.00 (New Mexico)

I could refinance my debt with a private company; let’s say a 4% interest.

My yearly interest will be roughly $8000.00 and since I will have disposable income I could pay $8000.00 to the principal. Since the principal will be less each year, at the end of 6 year I could have reduced the debt to $130,000.

What is your guy opinion? What are the flows on these scenarios?

 

[DrMeowMeow]

I will be graduating on May and hopefully will be starting my residency soon after. I have been thinking about my debt and I would like to get some opinions to see if I understand the big picture.

I think that what I decide will depend where I go for residency.

I’m going to use some round numbers to make this easy.

Let’s say that my debt is $200,000 of which $180,000 is unsub and $20,000 is sub. I’m single and my Payee is going to be around 6% of my salary above the poverty line etc. Around $2400.00

Scenario A

My residency is in a state where my take home pay is $30,000 and the COL is $25000.00 + payee payment.(New York ,Boston)

Basically my options are very limited. I will have to take the payee route since I will have no money to make any extra payment. My understanding is that the interest of the sub loan will be cover by the government for three years but my interest in the unsub loan, that are the bulk of my debt, will accrue and my debt will increase approximately $12000 a year.

If I do a residency + fellowship at the end, my debt will be around $300,000

Scenario B

My residency is in a state where my take home pay is $32,000 and the COL is $16000.00 (New Mexico)

I could refinance my debt with a private company; let’s say a 4% interest.

My yearly interest will be roughly $8000.00 and since I will have disposable income I could pay $8000.00 to the principal. Since the principal will be less each year, at the end of 6 year I could have reduced the debt to $130,000.

What is your guy opinion? What are the flows on these scenarios?

I don't think refinancing 200k of debt with a private company would work out. I applied to many places to refinance only 42k of my loans and the best rate I got was 5% interest over 5 year plan which meant over $700/month payment or 6% interest over 10 years which may not be much better than your current federal interest rates. I have a super high credit score and above avg resident salary too. You most likely wouldn't be able to afford the monthly payment plan for 200k even with the 10 year plan cause it would be like $2000/month

Have you looked into PSLF? It's where you'd pay 10 years of income based payments then the rest is forgiven. You'd only end up paying like 150k total over the course of 10 years. You have to work for nonprofit for 10 years but residency counts

 

[Psai]

If you do paye you pay 10% of takehome which is 300 a month being 3,600 a year. Gov't pays half your interest, you will accrue roughly 5,000 a year for however long your residency is. Say 4 years, you will pay about 15,000 and your 200,000 will become 240,000.

Refinancing now is a nightmare. Only 2 companies do residents that I know of. One has no money (linkcapital), the other (drb) offered me 6.1% for 10 years which is basically what I have now except I can half the interest with paye/repaye and no federal protection. So it was a totally crap offer and it took them 2 months to get back to me.

 

[alfranky]

If you do paye you pay 10% of takehome which is 300 a month being 3,600 a year. Gov't pays half your interest, you will accrue roughly 5,000 a year for however long your residency is. Say 4 years, you will pay about 15,000 and your 200,000 will become 240,000.

Refinancing now is a nightmare. Only 2 companies do residents that I know of. One has no money (linkcapital), the other (drb) offered me 6.1% for 10 years which is basically what I have now except I can half the interest with paye/repaye and no federal protection. So it was a totally crap offer and it took them 2 months to get back to me.

Thanks Psai. I read that if you do paye, the Gov't only pay the interest of the subsidized loan no the unsubsidezed. Is this accurate?

 

[alfranky]

I don't think refinancing 200k of debt with a private company would work out. I applied to many places to refinance only 42k of my loans and the best rate I got was 5% interest over 5 year plan which meant over $700/month payment or 6% interest over 10 years which may not be much better than your current federal interest rates. I have a super high credit score and above avg resident salary too. You most likely wouldn't be able to afford the monthly payment plan for 200k even with the 10 year plan cause it would be like $2000/month

Have you looked into PSLF? It's where you'd pay 10 years of income based payments then the rest is forgiven. You'd only end up paying like 150k total over the course of 10 years. You have to work for nonprofit for 10 years but residency counts

Thanks Dr.MeowMeow, for PSLF , Does fellowship count in the 10 years?

 

[DrMeowMeow]

Thanks Dr.MeowMeow, for PSLF , Does fellowship count in the 10 years?

Yes fellowship counts too as long as it's at a nonprofit place which I believe most hospitals are

 

[DrMeowMeow]

If you do paye you pay 10% of takehome which is 300 a month being 3,600 a year. Gov't pays half your interest, you will accrue roughly 5,000 a year for however long your residency is. Say 4 years, you will pay about 15,000 and your 200,000 will become 240,000.

Refinancing now is a nightmare. Only 2 companies do residents that I know of. One has no money (linkcapital), the other (drb) offered me 6.1% for 10 years which is basically what I have now except I can half the interest with paye/repaye and no federal protection. So it was a totally crap offer and it took them 2 months to get back to me.

Purefy is a new company that does residents. They have slightly lower interest rate than drb. They offered me 5.95% for 10 years and 4.95% for 5 years and you also can get a 0.25% discount for autopay and another 0.25% discount if you open up a checkings account with some Virginia bank online. I was tempted to do this but i wouldn't have saved that much and I'd rather have the flexibility of having the option to make small payments in case something happened

 

[mvenus929]

Your post doesn't make sense to me, but whatever, we can go with hypotheticals.

PAYE pays subsidized interest that your payment does not cover for three years. REPAYE will pay half of your interest that your payment does not cover forever, you just don't have a cap on your payment. Most residents are not able to cover interest on their loans.

Refinancing as a resident is going to be difficult. Someone has to fork over the money to buy your debt from the government, which some aren't willing to do for residents, and the process is lengthy for those who do. If you do refinance, all of your interest for school capitalizes, so your payment would probably be higher than you think. Furthermore, I think living on 16K, while possible, is probably not realistic even in places where the cost of living is low, so I'm not convinced you'd be able to pay off as much as you think you would. I don't see how paying 8K per year for 6 year would reduce your debt by 70K. That math doesn't make sense.

 

[Igor4sugry]

Your planning of this at this early stage suggests you will be debt free relatively soon after finishing residency. At this point you have some good options.
btw: big post on this "refinance vs PSLF questions" on http://whitecoatinvestor.com/refinance-and-pay-off-or-go-for-pslf/

Yes, your loan balance is large, but as a physician you have the most options to get rid of debt quickly.

1. Stay in REPAYE
--this will qualify you for PSLF if you decide to go this route after residency is finished
--each year submit Public Service Loan Forgiveness Certification Form
https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf
--this will keep track of # of eligible payments you have made

2. Refinancing is not a nightmare.
--this biggest issue is that you will no longer be eligible for any federal loan forgiveness
--it does require some time, and remember that their business is with that are attending or residents with good credit.
--DRB and LinkCapital refinance for residents and looks like Purefy is too.
--remember your refinanced interest gets much better as you become an attending.
--you can also refinance as many times as you like with any company to get a better interest.
http://whitecoatinvestor.com/student-loan-management-issues/

3. Do not do forebearance

4. Do not plan for loan forgiveness after 20-25 years.

5. Plan to live like a resident 2-5 years after graduating and getting rid of debt and amassing savings.

6. Educate yourself, be very skeptical with any financial advisors
http://whitecoatinvestor.com/the-five-big-money-items-you-should-do-as-a-resident/
https://www.bogleheads.org/forum/index.php

What residency these days has take-home pay of 30k?

 

[AlmostAnMD]

Not to hijack a thread, but I've got a question along similar lines and OP and I are in a similar financial spot.

Starting residency soon and if I want to down the road as an attending and refinance and pay it off, would it make sense to at least consolidate my loans and try to get a better interest rate while I'm paying IBR as a resident? My loans vary from 5.5% to 7.8% and I'm just wondering with a consolidation if I can beat it down to 4 or 5 % for one consolidated loan. Then refinance as an attending for an even better rate.

 

[alfranky]

Your post doesn't make sense to me, but whatever, we can go with hypotheticals.

PAYE pays subsidized interest that your payment does not cover for three years. REPAYE will pay half of your interest that your payment does not cover forever, you just don't have a cap on your payment. Most residents are not able to cover interest on their loans.

Refinancing as a resident is going to be difficult. Someone has to fork over the money to buy your debt from the government, which some aren't willing to do for residents, and the process is lengthy for those who do. If you do refinance, all of your interest for school capitalizes, so your payment would probably be higher than you think. Furthermore, I think living on 16K, while possible, is probably not realistic even in places where the cost of living is low, so I'm not convinced you'd be able to pay off as much as you think you would. I don't see how paying 8K per year for 6 year would reduce your debt by 70K. That math doesn't make sense.

Hi Mvenus929,
I mentioned 16 K for 6 years so that is 96,000 on payments that will reduce the debt 70K.

Regarding living on 16K a year, I'm a very low maintenance person. Out of those 200K, 110K was for tuition and I still will have like 20K left that I will be using for moving and interviews. So in the 4 years of medical school I lived on 70K. An average of 17.5K a year and this was not even in a place with low COL. Granted that I was not paying for health insurance or telephone bill since they were in my the family plans and my parents pay for that. They also pay for my clothes. So, probably that saved me 5K a year. During residency, I will be cover under the hospital’s insurance plan. My parent will still be paying for my phone bill and I have enough clothes to last me a few years. I’m planning to still use my 2005 car. I hope it last a few more years.

 

[alfranky]

Your planning of this at this early stage suggests you will be debt free relatively soon after finishing residency. At this point you have some good options.
btw: big post on this "refinance vs PSLF questions" on http://whitecoatinvestor.com/refinance-and-pay-off-or-go-for-pslf/

Yes, your loan balance is large, but as a physician you have the most options to get rid of debt quickly.

1. Stay in REPAYE
--this will qualify you for PSLF if you decide to go this route after residency is finished
--each year submit Public Service Loan Forgiveness Certification Form
https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf
--this will keep track of # of eligible payments you have made

2. Refinancing is not a nightmare.
--this biggest issue is that you will no longer be eligible for any federal loan forgiveness
--it does require some time, and remember that their business is with that are attending or residents with good credit.
--DRB and LinkCapital refinance for residents and looks like Purefy is too.
--remember your refinanced interest gets much better as you become an attending.
--you can also refinance as many times as you like with any company to get a better interest.
http://whitecoatinvestor.com/student-loan-management-issues/

3. Do not do forebearance

4. Do not plan for loan forgiveness after 20-25 years.

5. Plan to live like a resident 2-5 years after graduating and getting rid of debt and amassing savings.

6. Educate yourself, be very skeptical with any financial advisors
http://whitecoatinvestor.com/the-five-big-money-items-you-should-do-as-a-resident/
https://www.bogleheads.org/forum/index.php

What residency these days has take-home pay of 30k?

Thanks very good information.

 

[DrMeowMeow]

Not to hijack a thread, but I've got a question along similar lines and OP and I are in a similar financial spot.

Starting residency soon and if I want to down the road as an attending and refinance and pay it off, would it make sense to at least consolidate my loans and try to get a better interest rate while I'm paying IBR as a resident? My loans vary from 5.5% to 7.8% and I'm just wondering with a consolidation if I can beat it down to 4 or 5 % for one consolidated loan. Then refinance as an attending for an even better rate.

Where can you consolidate loans to 5% and continue to pay IBR? I don't think there is an option for that

 

[Psai]

Your planning of this at this early stage suggests you will be debt free relatively soon after finishing residency. At this point you have some good options.
btw: big post on this "refinance vs PSLF questions" on http://whitecoatinvestor.com/refinance-and-pay-off-or-go-for-pslf/

Yes, your loan balance is large, but as a physician you have the most options to get rid of debt quickly.

1. Stay in REPAYE
--this will qualify you for PSLF if you decide to go this route after residency is finished
--each year submit Public Service Loan Forgiveness Certification Form
https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf
--this will keep track of # of eligible payments you have made

2. Refinancing is not a nightmare.
--this biggest issue is that you will no longer be eligible for any federal loan forgiveness
--it does require some time, and remember that their business is with that are attending or residents with good credit.
--DRB and LinkCapital refinance for residents and looks like Purefy is too.
--remember your refinanced interest gets much better as you become an attending.
--you can also refinance as many times as you like with any company to get a better interest.
http://whitecoatinvestor.com/student-loan-management-issues/

3. Do not do forebearance

4. Do not plan for loan forgiveness after 20-25 years.

5. Plan to live like a resident 2-5 years after graduating and getting rid of debt and amassing savings.

6. Educate yourself, be very skeptical with any financial advisors
http://whitecoatinvestor.com/the-five-big-money-items-you-should-do-as-a-resident/
https://www.bogleheads.org/forum/index.php

What residency these days has take-home pay of 30k?

Linkcapital has no money to loan, drb took several weeks to get back to me with an interest rate that is basically the same as what I have now even though I have good credit

 

[calvnandhobbs68]

I'm going to throw my hat in with Psai and say that generally refinancing isnt worth it. The best rates I've seen on those sites usually dont get any better than 1-2% max less than the federal loan rates and are usually less than that unless you have near perfect credit (usually around .5-1% shave off your interest). Not worth it in my opinion to go through all that hassel AND most importantly lose all your federal protections. All those payment plans are no longer an option once you refinance. Most importantly perhaps (not to be morbid) your federal loans will all be discharged if you die. You may need a cosigner for the refinancing if your credit isnt great and you can bet the private company will go after anyone they can for the money. Again, not worth it in my opinion to shave maybe 1% off the interest rate.

 

[keifernny2]

I'm going to throw my hat in with Psai and say that generally refinancing isnt worth it. The best rates I've seen on those sites usually dont get any better than 1-2% max less than the federal loan rates and are usually less than that unless you have near perfect credit (usually around .5-1% shave off your interest). Not worth it in my opinion to go through all that hassel AND most importantly lose all your federal protections. All those payment plans are no longer an option once you refinance. Most importantly perhaps (not to be morbid) your federal loans will all be discharged if you die. You may need a cosigner for the refinancing if your credit isnt great and you can bet the private company will go after anyone they can for the money. Again, not worth it in my opinion to shave maybe 1% off the interest rate.

refinancing fed loans isn't always worth it. refinancing private loans is often worth it (if you can save more than a few % on interest).



Sent from my iPhone using Tapatalk

 

[235009]

I will be graduating on May and hopefully will be starting my residency soon after. I have been thinking about my debt and I would like to get some opinions to see if I understand the big picture.

I think that what I decide will depend where I go for residency.

I’m going to use some round numbers to make this easy.

Let’s say that my debt is $200,000 of which $180,000 is unsub and $20,000 is sub. I’m single and my Payee is going to be around 6% of my salary above the poverty line etc. Around $2400.00

Scenario A

My residency is in a state where my take home pay is $30,000 and the COL is $25000.00 + payee payment.(New York ,Boston)

Basically my options are very limited. I will have to take the payee route since I will have no money to make any extra payment. My understanding is that the interest of the sub loan will be cover by the government for three years but my interest in the unsub loan, that are the bulk of my debt, will accrue and my debt will increase approximately $12000 a year.

If I do a residency + fellowship at the end, my debt will be around $300,000

Scenario B

My residency is in a state where my take home pay is $32,000 and the COL is $16000.00 (New Mexico)

I could refinance my debt with a private company; let’s say a 4% interest.

My yearly interest will be roughly $8000.00 and since I will have disposable income I could pay $8000.00 to the principal. Since the principal will be less each year, at the end of 6 year I could have reduced the debt to $130,000.

What is your guy opinion? What are the flows on these scenarios?

In addition to much of the good advice you've gotten above I just want to make you aware that scenario A is not consistent with reality. Residency programs in high cost of living cities generally pay more and your take home will be much more than $30k. Programs in NYC and boston start at mid-to-high $50k as a PGY1.


Sent from my iPhone using SDN mobile app