Student loan expert!!

[bananas85]

I have a massive student loan debt.

My income as a hospitalist is decent and fluctuates depending on how many extra shifts I pick up.

I am trying to plan, to see what would be the best way to tackle the loans. I called Nelnet (my loan servicer), but a lot of their answers varies depending on the skill level of their customer service rep.
For eg. a week ago, the customer service rep told me, that the interest accruing on my loans is 11 dollars a day, which did not seem right, but she assured that since i am under the REPAYE plan the government picks up the intersted that is not covered by my student loan payment. I call back a week later and i was told the interest accruing is 111$ a day and the system not 11$ a day.

Is there a student loan expert I can talk too, that can help me better understand my options and come up with a plan? if so how do i find them?

thanks

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[chessknt]

You don't need an expert... pay everything you dont need for living expenses and retirement match (if applicable) to your loans every month. Reduce expenses to accelerate.

Any variation from this will result in you paying more interest.

 

[Acoustic]

You don't need an expert... pay everything you dont need for living expenses and retirement match (if applicable) to your loans every month. Reduce expenses to accelerate.

Any variation from this will result in you paying more interest.

I'd disagree that it's this simple. People make whole careers out of financial planning so to me it feels short sighted to assume that as a doctor you know all there is to know about gigantic financial decisions. I mean, our profession is notorious for having terrible personal finance skills.

For instance, it might be a good idea to try get on a payment plan that is as low monthly as possible but still spend the max you can on savings. This would come in the form of paying down specifically the high interest loans, because depending on the terms your payment might not be allocated to those first. You obviously have to pay down monthly interest first, but extra should go to highest interest first. Even then it might not be the best financial opportunity to get rid of loans as fast as possible if you can get rid of high interest loans. If you only have say have loans at 5%, it might be better to instead put extra monthly money into investment or retirement accounts, where the average percent return might be higher than 5% even in a conservative portfolio.

Take my advice with a grain of salt, but the point is that these are big money decisions that require serious planning, and the OP should consider speaking to a professional financial planner.

 

[chessknt]

I'd disagree that it's this simple. People make whole careers out of financial planning so to me it feels short sighted to assume that as a doctor you know all there is to know about gigantic financial decisions. I mean, our profession is notorious for having terrible personal finance skills.

For instance, it might be a good idea to try get on a payment plan that is as low monthly as possible but still spend the max you can on savings. This would come in the form of paying down specifically the high interest loans, because depending on the terms your payment might not be allocated to those first. You obviously have to pay down monthly interest first, but extra should go to highest interest first. Even then it might not be the best financial opportunity to get rid of loans as fast as possible if you can get rid of high interest loans. If you only have say have loans at 5%, it might be better to instead put extra monthly money into investment or retirement accounts, where the average percent return might be higher than 5% even in a conservative portfolio.

Take my advice with a grain of salt, but the point is that these are big money decisions that require serious planning, and the OP should consider speaking to a professional financial planner.

It really is that simple though. Financial planners are like travel agents but cost a lot more and most of them are not giving you the best advice because that minimizes their profit. A cpa for tax efficiency is a different story and relationship.

Op: Go read bogleheads forums and educate yourself on this topic. If you still feel you need a financial planner at least you will know how to recognize if they are trying to rip you off.

 

[Acoustic]

It really is that simple though. Financial planners are like travel agents but cost a lot more and most of them are not giving you the best advice because that minimizes their profit. A cpa for tax efficiency is a different story and relationship.

Op: Go read bogleheads forums and educate yourself on this topic. If you still feel you need a financial planner at least you will know how to recognize if they are trying to rip you off.

It's not that simple if you for instance over a year put $10k to pay off a 5% interest loan instead of putting that $10k into a retirement or investment portfolio that is earning 7-10%. Lost opportunity cost.

 

[chessknt]

It's not that simple if you for instance over a year put $10k to pay off a 5% interest loan instead of putting that $10k into a retirement or investment portfolio that is earning 7-10%. Lost opportunity cost.

That is an unrealistic rate of real return especially in today's market. Maybe you should go read the boglehead forums too.

 

[whoknows2012]

That is an unrealistic rate of real return especially in today's market. Maybe you should go read the boglehead forums too.

You are absolutely simplying something that isn't as straightforward as you suggest. In addition to rate of return of an investment (ie the possibility of it being near or above your interest rate) there is something to be said about the value (i.e. Inflation) of one dollar and ease of giving up said dollar today as compared to 10 years from now. If someone in my position pays everything besides what I need to live to my loans while in training (7 years) it makes a nominal difference. At the end of training I can afford 3k a month payments easier than I can afford 1k a month payments now (I pay $600). I contribute a ton to my 403b and all told my wife and I still save a decent amount. I am banking on PSLF but even without it I'd keep my loans payments where they are. We can eat into a whole aside about PSLF but if there is even a 10% chance that I'd get my $250,000 in loans forgiven tax free I'd take that chance! (The real chance is much higher but no one knows for sure)

I enjoy having a life after studying and training through my 20's. My wife and I save, contribute >10% into our retirement accounts and live in a big city comfortably (obviously she makes a decent income too). To say that mentality is "wrong" is missing the point. Everybody has a different situation and therefore requires different advice.

 

[chessknt]

I didn't tell him how to live I told him to take whatever is left over after however he chooses to live and apply it to his loans to pay them off as fast as possible after any guaranteed retirement match. Any variation from this will most likely cost more than investing that money unless his interest rate is very low or he has some insider trading knowledge that can beat the expected real returns in the 3-6% area. It will be even harder to beat if he puts it in some parasitic actively managed account with an expense ratio of over 1% at the advice of a commissioned 'professional.'

I intentionally did not mix pslf in to this because there is no obligation or proof that this will come to fruition for physicians. Keeping loans at high balances to maximize this benefit is a potentially steep gamble.

 

[Acoustic]

That is an unrealistic rate of real return especially in today's market. Maybe you should go read the boglehead forums too.

It isn't really, no. Especially in today's market. My conservative portfolio has already made 12.1% this year.

 

[InvestingDoc]

Since OP asked what the best way to tackle the loans, the answer is most likely refinance to the cheapest interest rate and pay as aggressively as possible. It's okay to inflate your lifestyle a bit, but staying in a income dependent repayment plan will often not even cover the interest on many new doctors loans. We need more details OP.

What is your current debt load, income per month/year, and other fixed monthly expenses? If you have 6 kids and stay at house spouse + house + cars this will change your numbers quite a bit from someone who is single with no debt other than student loans.

As for the other people talking about opportunity costs, its real but know your risk tolerance level.

 

[chessknt]

It isn't really, no. Especially in today's market. My conservative portfolio has already made 12.1% this year.

People though the same thing about real estate and .com stocks too.

Market valuations are exceeding all time highs. While it is possible that it could continue to go up indefinitely history would suggest otherwise. S&p500 inception annualized real returns are only 7% and that included huge bursts of growth associated with major technological advances since the 1920s. To think were going to beat this going forward is optimistic in the extreme. Most wise investors would take a guaranteed 6.8% loan interest return in a heartbeat.

 

[Acoustic]

People though the same thing about real estate and .com stocks too.

Market valuations are exceeding all time highs. While it is possible that it could continue to go up indefinitely history would suggest otherwise. S&p500 inception annualized real returns are only 7% and that included huge bursts of growth associated with major technological advances since the 1920s. To think were going to beat this going forward is optimistic in the extreme. Most wise investors would take a guaranteed 6.8% loan interest return in a heartbeat.

Right. Never said it would be like that forever, I agree the average is closer to 7. However this is often more than the interest on a student loan.

 

[whoknows2012]

I ran the numbers for my own situation and will post it shortly when I have access to a computer but I'll say this. If you get 200k in loans forgiven that is the equivalent of 300k in pre tax dollars. Invest that amount in a portfolio that grows 5% over 10 years and that turns into Around 350k. Compare that to having to pay down the 200k and you're talking about lost earnings close to $600,000 and that's just at 10 years. This is an extreme example just to point out that while it is a gamble it's one that for most it's worth taking unless you're just entering into repayment right now and then Id probably start out in it and wait and see how it looks at 2-3 yrs and make a call then.