Student Loan Repayment While in Residency

[Relentlessrook18]

I am very fortunate to have a wife that will be working while I'm in residency. Though she won't be making a lot, she will have enough for us to live on with her salary alone. What is the best way to start paying back loans during residency? Any certain percentage each month of your income goes to the loans? I hate the idea of just paying back interest, but it seems the resident salary may not be enough to do much damage to the heap of loans I have. Just to note, I'm going into family med.

Also, I recently heard a podcast about a resident that used credit cards with 0% interest for 18 months to pay back her loans, that way it stopped some interest from accruing while she was able to pay back some loans. Anyone have any experience with this? Or any thoughts on this?

Thank you. I appreciate any sincere responses I can get about this.

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[InvestingDoc]

I'm assuming that you have all your loans though the government, if so then read their website about income dependent plans and other ways to repay the loan. https://studentloans.gov/myDirectLoan/index.action.

If you do not log into your loans account after graduation, then 6 months later you will be auto enrolled in a standard 10 year repayment plan.

You're very fortunate to have a wife that is not only working while in residency but is also willing to take on your student loans as you are talking about methods to refinance your loans. Using credit cards I suspect you will be unable to find enough money via this route to finance all of your student loans. Plus, once the 0% is up your APR will be very high. Almost everyone would advise you not to use this method to pay back your loans.

Here is how I think you should approach this problem:

First: ask yourself if you want to enter into an income dependent plan and or PSLF. if so then apply on the website above

Second: if not, then consider refinancing or paying as much as you can during residency. Be warned, that I only know of 2 banks that refinance residents. Most want to refi attendings. Also, if you refinance you loose the ability to take advantage of income dependent plans. Income dependent plans could be a whole series of posts on its own.

Third: Live as cheaply as possible and max out ROTH and 401k contributions


To address your other concern about not being able to pay down the debt while in residency. I refinanced my loans to 3.3% and paid my loans from 110k to 84k after 3 years of residency. There were lots of frugal behavior and moonlighting shifts involved. Throughout residency and paying down debt I was still able to go to costa rica once and buy an engagement ring so its not like I was living too poorly.

 

[Redtwogreen]

I am very fortunate to have a wife that will be working while I'm in residency. Though she won't be making a lot, she will have enough for us to live on with her salary alone. What is the best way to start paying back loans during residency? Any certain percentage each month of your income goes to the loans? I hate the idea of just paying back interest, but it seems the resident salary may not be enough to do much damage to the heap of loans I have. Just to note, I'm going into family med.

Also, I recently heard a podcast about a resident that used credit cards with 0% interest for 18 months to pay back her loans, that way it stopped some interest from accruing while she was able to pay back some loans. Anyone have any experience with this? Or any thoughts on this?

Thank you. I appreciate any sincere responses I can get about this.

I definitely agree w @InvestingDoc -- I think most people would advise against the credit card route. Creative, but if anything goes south that could turn into a huge disaster quickly. We have a whole blog post on what exactly we are doing if you want to check that out (www.redtwogreen.com) but the short version is this- for now, while we aren't earning as much as we will be, we are paying off loans according to highest interest rate first. We have a budget that we stick to religiously, and anything we earn over that goes straight into loans. We have signed up for "repaye" but have no intention of actually having our loans forgiven. We chose repaye bc of the 50% interest subsidy it offers. And again, we pay as much as we possibly can even though we're signed up for repaye. In a few months we will refinance and then continue chipping away at those suckers til they're gone (hopefully within the next 5 years). Hope that helps!

 

[RangerBob]

I agree to sign up for REPAYE--it saves you a whole lot of money in interest subsidies while in residency. Your monthly payment may be higher compared to IBR because it takes your wife's salary into account. If her salary is not that large you likely still won't cover the interest that accrues and while your monthly payment may be slightly higher than if you were on IBR, you get "free money" in the form of Uncle Sam paying part of your interest with REPAYE.

If you plan to aim for PSLF then you may want to just pay the minimum monthly payment and put your extra income aside (max out Roth IRA, maybe invest some money, etc.). We should get a better idea of what will happen to PSLF by next Fall/Winter as I believe the first cohort of people will be eligible for forgiveness at that time.

Developing a budget really helps a lot. Also, if you can learn to be happy with less, that will go a long way. MrMoneyMoustache.com is a great blog to read if you need help and motivation on living a simpler life.

Keep in mind that if you can live happily on a small income, not only does that let you throw a lot more money at your loans (particularly if you keep it up as an attending), but it also means you have both more money to save for retirement as well as less time needed to save for retirement--if you are living on less, you can retire on less, because you don't need to fund an extravagant lifestyle. While I don't intend to retire in my 30's or 40's (nor could I, with my loan burden and anticipated salary), the freedom that comes from having that as an option sure would bring a lot of happiness.

 

[Student Loan Planner]

Would strongly suggest not using credit cards to pay student loans. It's kind of like using a hand grenade to start a fire. It could be beneficial, but the risk is far consequential that any benefit you might get. You would do well to check PAYE married filing separately and compare that to REPAYE to see what the better option is for your family. I like paying a little more under REPAYE, getting the interest subsidy, and hedging your risk of PSLF.