Paying off $400K as an FM doc

[JamesJohn12345]

Hello,

So match just happened and it looks like I'm going into FM. Does anyone have experience paying off such a high debt burden ($400K) as an FM doc? Are there any strategies you would suggest?

Thanks!

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[Ironheme]

Well if your place is a non-profit, I would make sure you're filing the Public Service Loan Forgiveness program annually to get credit in case that does actually work. Then I would make sure you're on IBR or something similar. If your place allows moonlighting in your second or third year, you can start to build up more savings/put this towards retirement. Make sure you look into disability and life insurance with student loan rider - whether you feel it's worth it up to you. Try to minimize how much you're being taxed by funding Roth IRAs/HSA accounts. Some states have scholarships/funding for staying in the area after you finish residency. Look into those. Some jobs will offer loan repayment.

After graduation, depending what you do, you can expect your salary as full time FM doc to be anywhere from ~$200k to ~$400k (hospitalist vs FM outpatient seeing a lot of patients vs picking up locum shifts in UC/outpt/hospitalist). Best thing you can do is live like a resident 3-4 years after graduation - with maybe small upgrades (for example, you go from a $50k per year salary as a resident to $200k as an attending, giving yourself a $25k upgrade - say 50 to 75k per year will seem huge). Use that remaining $125k to aggressively pay off your loans as fast as possible, particularly the ones with very high interest rates.

I've noticed people that don't pay off loans will purchase big upgrades immediately after graduating (several friends I know bought new cars, ranging any where from $75k to $100k, a couple bought new houses). This is going to delay paying back the loans and give you further debt. Grats on matching. The White Coat investor website is also excellent.

 

[shaggybill]

You'll get a lot of different opinions on this.

1. Live like a resident for the next 7-10 years and use the majority of your income to whittle it down. You're likely adding $25-29k per year in interest (which will decrease as you pay it off) but it's going to take a while.

2. Get on an IBR type payment plan and just plan on using 10-15% of your income towards your student loan payment. Save an additional $750-1000 per month (invest or put into interest bearing account) to pay the tax bomb at the end of the 25 years (loan forgiveness). This isn't seen as the best financial decision necessarily, but it lets you live a little. You have to decide which is most important to you.

3. Get on an IBR plan and pay 10-15% for the rest of your income producing years. You don't have to have the loan forgiven. Just keep paying on it and you won't have the tax bomb. When you retire, you'll just have to pay 10-15% of whatever income you get from your retirement plan.

 

[shaggybill]

One other thing, do your best to get on an IBR plan immediately after starting residency. If I remember correctly, if you do this, the government (ahem tax payers) will pay the interest on your subsidized Stanford loans for the first three years. I did not do this, but I would have saved myself a crap ton of money if I had.

 

[Sardonix]

One other thing, do your best to get on an IBR plan immediately after starting residency. If I remember correctly, if you do this, the government (ahem tax payers) will pay the interest on your subsidized Stanford loans for the first three years. I did not do this, but I would have saved myself a crap ton of money if I had.

This is my plan. REPAYE is looking pretty nice right now.

 

[AMEHigh]

Depending on where you live states often have student loan payback for primary care if you work in certain areas. Google your state plus primary care student loan foregiveness. In my state there are 2 options and one will get you 100k in 2 years and one will get you 120k in 3 years.

 

[SXMMD]

Read ibr plans carefully. REPAYE does not benefit everyone equally, judge your circumstances accordingly. Definitely seek out an ibr plan though. Also look into student loan refinancing for lowering your interest. Both ibr and loan refinance have there advantages amd disadvantages, judge according to your circumstances

Here is an anecodotal example of "living like a resident after residency" at work. At a pretax salary of 55kish in the midwest my take home is about 36k. I live comfortably with my wife on 24k single income home. After I graduate, I will double my budget to 50k, cash in pocket, not pre tax income. At an attending pre tax income of about 220k take home is about 144k after tax. Minus the 50k budget I have for myself, thats 96k that goes to loans. 400k loans? Thats 4 years and some change. 50k cash in pocket budget is different than 50k pretax income... so don't freak out when people say live like a resident. It's not that bad. Do that math for your region to get your own numbers, but don't be too anxious.

The numbers above are very, very simple math and doesn't account for ira, 401k and other mechanisms by which you can increase your wealth. There is hope.

 

[shaggybill]

This is my plan. REPAYE is looking pretty nice right now.

That's the plan I'm on.

 

[Postictal Raiden]

If this COVID-19 crisis pans out the way it is expected to, repaying your student loans will be the last of your priorities.

With that said, many people with similar debt go into FM. In fact, I think with the exception of surgical subspecialties, the return on investment from pursuing something like interventional cardiology (8 years of training) is not that great when taking in consideration the opportunity loss.

Say you make 230k as a FM doc and can make an additional 100k from locuming at urgent cares. In the 5 extra years of training to become an interventional cardiologist, you would've produced 1.65M while instead of 300k (fellowship salaries). The 1.35M difference is enough to pay off your entire debt and even a mortgage.

Now one could argue that over a 30-year long career, the differential in pay between IC and FM is more than enough to offset the delayed gratification. However, I wouldn't really count on things staying the same for another 30 years.

Train fast and get out and starting making hay while sun still shines.

 

[JamesJohn12345]

I just want to thank all of you for your responses. This loan situation has always made me feel uneasy and it's feels great knowing that I have so many wonderful colleagues that I can reach out to when I'm unsure of my next steps.

 

[Splenda88]

I just want to thank all of you for your responses. This loan situation has always made me feel uneasy and it's feels great knowing that I have so many wonderful colleagues that I can reach out to when I'm unsure of my next steps.

You are not alone... Most med students who did not have financial help during med school are in the red anywhere from 300k-400k... The good news is that most PCP can manage to make ~300k assuming they want to put in the hours.

Live for another 4 years a little above your resident salary ~70k-80k (which is plenty of $$$ in most part of the country) so you can pay that loan quickly...

 

[Splenda88]

If this COVID-19 crisis pans out the way it is expected to, repaying your student loans will be the last of your priorities.

With that said, many people with similar debt go into FM. In fact, I think with the exception of surgical subspecialties, the return on investment from pursuing something like interventional cardiology (8 years of training) is not that great when taking in consideration the opportunity loss.

Say you make 230k as a FM doc and can make an additional 100k from locuming at urgent cares. In the 5 extra years of training to become an interventional cardiologist, you would've produced 1.65M while instead of 300k (fellowship salaries). The 1.35M difference is enough to pay off your entire debt and even a mortgage.

Now one could argue that over a 30-year long career, the differential in pay between IC and FM is more than enough to offset the delayed gratification. However, I wouldn't really count on things staying the same for another 30 years.

Train fast and get out and starting making hay while sun still shines.

The 1.35M difference (~900k post tax) would be more than enough to pay my student loan and 400-500k mortgage where I am... I am a nontrad physician, but imagine someone who finishes residency at ~ 30, that individual would be mortgage free at 35 with no student loan. That individual can pretty much retire at 45.

One thing also you did not take into account is the interest on the loan ballooning while someone is going thru fellowship...