Question...Advice needed

[isailfast]

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Loans are something that I hate, and like most medical students/residents I get a horrible pit in my stomach when I talk about them. Nevertheless I need to face them head on, and it will be better for me to deal with them than ignore them. I was hoping to put my situation up here and get some advice because it seems there are many knowledgeable people on this forum. Here it goes:

I went to a private US med school (rank does not matter), borrowed mainly for tuition, and about half of my living expenses. No private loans, mostly 6.8 percent fixed interest rates, I was able to consolidate at around 4.8 percent for the first two years, the rest are at 6.8. I finished with a total of about 180kish in debt, give or take a few thousand. I have chosen a very competitive and highly reimbursed specialty (one of the top 5 average salaries of doc’s by most surveys). I will finish my residency in four more years, and most residents start in the 300-400 range, as an associate, after that they can regularly climb to the mid 500’s to 600’s as a partner, private obviously. The mid-to high 700’s are not out of the question, but rare. Academics do well too though, in the low 300’s usually. That being said I was told my financial aid office that I would not qualify for IBR when I finished residency, for either academic or private practice so I put all my loans into forbearance when I started this year....

I was just married this past year, and my wife makes about the same as me, 45kish a year. We live in a pretty cheap area of the country, and rent a nice place for around a 1k per month, and are able to save about 800 a month in the good months; none in the months when we have to travel/buy new furniture, etc.

My question is am I missing something that I should be doing about my loans? Is it dumb to be saving 800 a month now? I am hoping to buy a decent 300k ish home in about 4 years, my reading indicates I will need at least a 30-40 k down payment for that. Also it seems like my loans after residency will have grown to around 255-260k, which is not terrible if I am making around 300 a year...right??

Anybody have idea as to things I should be doing differently???

Helpful comments would be much appreciated from the knowledgeable people on this forum!! Thanks so much!!!

 

[illegallysmooth]

Loans are something that I hate, and like most medical students/residents I get a horrible pit in my stomach when I talk about them. Nevertheless I need to face them head on, and it will be better for me to deal with them than ignore them. I was hoping to put my situation up here and get some advice because it seems there are many knowledgeable people on this forum. Here it goes:

I went to a private US med school (rank does not matter), borrowed mainly for tuition, and about half of my living expenses. No private loans, mostly 6.8 percent fixed interest rates, I was able to consolidate at around 4.8 percent for the first two years, the rest are at 6.8. I finished with a total of about 180kish in debt, give or take a few thousand. I have chosen a very competitive and highly reimbursed specialty (one of the top 5 average salaries of doc's by most surveys). I will finish my residency in four more years, and most residents start in the 300-400 range, as an associate, after that they can regularly climb to the mid 500's to 600's as a partner, private obviously. The mid-to high 700's are not out of the question, but rare. Academics do well too though, in the low 300's usually. That being said I was told my financial aid office that I would not qualify for IBR when I finished residency, for either academic or private practice so I put all my loans into forbearance when I started this year....

I was just married this past year, and my wife makes about the same as me, 45kish a year. We live in a pretty cheap area of the country, and rent a nice place for around a 1k per month, and are able to save about 800 a month in the good months; none in the months when we have to travel/buy new furniture, etc.

My question is am I missing something that I should be doing about my loans? Is it dumb to be saving 800 a month now? I am hoping to buy a decent 300k ish home in about 4 years, my reading indicates I will need at least a 30-40 k down payment for that. Also it seems like my loans after residency will have grown to around 255-260k, which is not terrible if I am making around 300 a year...right??

Anybody have idea as to things I should be doing differently???

Helpful comments would be much appreciated from the knowledgeable people on this forum!! Thanks so much!!!

You have a relatively low amount of debt and you are going into a crazy high-paying specialty. Relax. If you want to avoid paying more than you need to, then pay it off as quickly as possible while saving for that down payment for your home. I don't thikn it's dumb to save when you have such a low interest rate. If possible, put that money into a CD. That's just my opinion.

You're fine.

 

[mx_599]

are you for real? this being your first post...a rather verbose one at that.

apparently you got into a tough residency and did well on boards. we know you are not dumb.

I have to ask, "Am I missing something?"

wtf are you asking?

let me help. live mostly off wife's salary for JUST ONE FREAKIN' YEAR

use your money to pay off loan.

hope that helped

🙄🙄

no wait, you need 3

🙄🙄🙄

😀

 

[TMP-SMX]

Why are you in forbearance? Go into IBR during residency. By doing forbearance you will end up paying more for no reason.

 

[isailfast]

My apologies to mx_599 who seems to have been somewhat offended by my first post ever on SDN. Thank you to TMP-SMX and illegallysmooth. Let me clarify my questions, I will attempt to not be "verbose."

The reason I chose NOT to do IBR is mainly because I wanted to save that money for a down payment so I can decrease the amount of time I will be renting. Since we will likely be moving in 4 years to wherever I end up getting a decent job (hopefully closely to my in laws&#8230😉 I will need a down payment. I don't want to ask my parents for help, they already paid for a ton of my living expenses in med school which was in a super expensive city.

Another reason I chose no IBR was I have heard numerous stories about medical centers and private practices making student loan payments for members of my specialty as a recruitment type thing. I have NO idea if this is true or not, but I have heard it from several different sources. So what I really did not want to happen was spend all of the money I could be putting into saving towards making a microscopic dent in my loans, only to find out in four years someone else will be paying them for me…make sense? I don't want to look back and say man, I spent 40k during the last 5 years that I could have had for a down payment. (help me if I am making a mistake here)

I did hear about the loan forgiveness program, which sounded amazing when I first heard about it, especially since I have an interest in academics, however my financial aid office then told me I will not qualify in 4 years…so it would not work for me. I sort of took their word for it, and instead decided to do forbearance…that may have been a mistake, I don't know???

I never really knew much about SDN until after starting residency, and I recently stumbled on this forum. You guys really seem to know a ton, so I figured I would ask for help here.

And just because someone can crush boards, match into a highly competitive specialty says little about their practical intelligence; of which I often feel like I have NONE.

Ended up verbose again, sorry.

 

[mx_599]

My apologies to mx_599 who seems to have been somewhat offended by my first post ever on SDN. Thank you to TMP-SMX and illegallysmooth. Let me clarify my questions, I will attempt to not be "verbose."

[

Ended up verbose again, sorry.

dude, no need to apologize and you did not offend me. but seriously, this is not going to require a money manager. pay it off in 1-2 yrs so you do not have debt on you. don't run out and buy a sports car and house....wait like 2 more yrs

 

[TMP-SMX]

I think you have to assume now that you are going to have to pay off your loans yourself. By going into IBR and making the monthly payments now you don't have to deal with more interest later and annual capitalization of that interest. Plus you do get the small tax deduction for paying interest on loans.

 

[blanche]

first off welcome to the forum.

you are very insightful in saying that "just because someone can crush boards, match into a highly competitive specialty says little about their practical intelligence; of which I often feel like I have NONE"--that already shows more practical intellegence than many we work with.

i don't think you are wrong to forbear instead of taking IBR in looking at your future situation. the only think I would do different if I were you would be to pay $2500/year towards the INTEREST on your student loans (that's going to be a little less than the interest that accrues q year on that debt burden) But that is the max you are allowed to deduct on your tax return for interest paid toward student debt, and will probably get you something like 600-700 back (decreases your taxable income by $2500)

but don't fret too much. you're on the right track!

 

[odieoh]

/agree about paying at least the $2500 interest to get the deduction. Otherwise, if you specialty really pays what you say, you are in a very nice situation.

If you could hold off on buying that house for 2-3 years you could have your loan debt completely wiped out. I used to be in the "rent is just throwing money away" camp. Definitely not now, there is nothing wrong with renting for a few years, in fact in many situations its the best way to go.

 

[thehoosier]

To the OP - I'm an MS3 but think I'll be in a very similar situation to you in about a year. Wife makes a similar salary, similar (slightly higher) loan debt, high-paying field, low cost of living in my area, etc. I was figuring out some financial stuff for residency a while back and this is what I came up with. I'm remembering off the top of my head, but I believe the numbers are all accurate.

During residency - 90K pre-tax is about $5500/mo, after tax, for you and your wife to live on. Renting the $1K place sounds good. IBR for you will be around $850/mo. I think that's plenty doable if you aren't spending freely in other areas (I'm assuming you don't have kids here - if you do, IBR is harder). I plan on doing IBR, but I can see the argument for waiting since you'll make a lot eventually. I just prefer to get everything paid off ASAP.

Post residency - I assumed a starting salary of $300,000. I set a plan to get my loans paid off in three years. Doing this takes quite a bit of that salary, but still leaves you and your wife about $8000/mo after tax to live on. So about double what you were living on after loans in residency. I like this plan because you don't have to "live like a resident", you still get a decent bump in spending ability if you've been itching to buy something, but you aren't living like a rich guy either. Hang tight on that $8K per month for three years - then you're in your mid 30s, debt free, and making a lot of money. I think you can take it from there. 🙂