Why I am not doing PSLF ...

[x10694]

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I have been trying to make sense of this program and it appears there are a lot of information as well as misinformation on line. I am no accountant but I came to the conclusion that this is not for me but I am not 100% sure of my decision so I want you guys to criticize my financial reasoning. Figures are approximately and round up to thousands. A little about myself.

- Anesthesia intern, fist year with plan to do two fellowships
- Total income $ 100, 000 (wife and I)
- I owe $ 165, 000 in student loans (150, 000 principal and 15, 000 interest) @ 6.8%

Plan A : pay it off in 2 yrs.
Total amount paid is $ 175, 000 with (150, 000 principal and 25, 000 interest)

Plan B: PSLF program
Total amount paid: $ 43, 000 + $86, 000 = $ 129, 000
Amount paid during residency+2 fellowships = 12 (months) x 6 (yrs) x $ 600 (PAYE figure) = $ 43, 000
Amount paid as attending = 12 (months) x 4 (yrs) x $ 1800 (10 yrs standard monthly payment figure) = $ 86, 000

It appears that by going PSLF route, I can save around $ 46,000 (175,000-129,000). Figures are approximated so the amount of saving is probably plus/minus $ 20, ooo dollars.

If you guys are in my shoes, which route would you go? Plan A or Plan B?

I am leaning toward Plan A for a number of reasons, in order of importance.

(1) I am not sure if PSLF is going to be around 10 yrs from now, which would be 2023. Ten years is a long time to have a lot of changes happen to this program. Congress can eliminate the program. Forgiven debt can become taxable, which would greatly reduce gains from this program. Physicians can become ineligible, etc.

(2) Taking PSLF route will limit the type of jobs I can get and where I can get them. Many anesthesiologists, while working for nonprofit hospitals, are actually employees of private contract groups.

(3) Pay differential between private vs public job. It may be quite substantial to make taking route B a nonsensical option.

(4) I don't like having debt and I believe that if you borrow money you should pay it back, fair and square. The peace of mind of knowing I am debt free after two years means a lot to me.

I keep running into co-residents who are taking advantages of PSLF and I keep running these numbers in my head and does seem worth it for me, at least for my situation. I mean to go in debt for 10 yrs with hope of gaining $ 50, 000, which may or may not exist down the road. What do you guys think?

[FONT=ARIAL, HELVETICA]$176,940.59​

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[Idiopathic]

while i think the program will be around, and i suspect there may be efforts to improve it and recruit more physicians into certain areas with loan forgiveness strategies, i cant argue with your plan to pay your SL debt off ASAP. As you have kids and an increased demand on your time and finances from those around you (including your spouse), then that 8K a month check becomes harder and harder to cut each month, especially after two fellowships.

 

[Postictal Raiden]

OP, you are very very lucky to graduate with only 160K in debt. I will have 3 times that amount of debt in 4 years. PSLF/IBR/PAYE or a similar program must exist or half of future doctors will go bankrupt.

That being said, If I were you, I pay back the 160K using the standard 10-year repayment plan. You will have paid a total of 60K in interest using this method. Sure it is 4 times the amount of interest that you pay if you go with option A, but it's not that bad considering inflation and having more cash to spoil yourself after having spent nearly a decade in school.

 

[Silent Cool]

I have been trying to make sense of this program and it appears there are a lot of information as well as misinformation on line. I am no accountant but I came to the conclusion that this is not for me but I am not 100% sure of my decision so I want you guys to criticize my financial reasoning. Figures are approximately and round up to thousands. A little about myself.

- Anesthesia intern, fist year with plan to do two fellowships
- Total income $ 100, 000 (wife and I)
- I owe $ 165, 000 in student loans (150, 000 principal and 15, 000 interest) @ 6.8%

Plan A : pay it off in 2 yrs.
Total amount paid is $ 175, 000 with (150, 000 principal and 25, 000 interest)

Plan B: PSLF program
Total amount paid: $ 43, 000 + $86, 000 = $ 129, 000
Amount paid during residency+2 fellowships = 12 (months) x 6 (yrs) x $ 600 (PAYE figure) = $ 43, 000
Amount paid as attending = 12 (months) x 4 (yrs) x $ 1800 (10 yrs standard monthly payment figure) = $ 86, 000

It appears that by going PSLF route, I can save around $ 46,000 (175,000-129,000). Figures are approximated so the amount of saving is probably plus/minus $ 20, ooo dollars.

If you guys are in my shoes, which route would you go? Plan A or Plan B?

I am leaning toward Plan A for a number of reasons, in order of importance.

(1) I am not sure if PSLF is going to be around 10 yrs from now, which would be 2023. Ten years is a long time to have a lot of changes happen to this program. Congress can eliminate the program. Forgiven debt can become taxable, which would greatly reduce gains from this program. Physicians can become ineligible, etc.

(2) Taking PSLF route will limit the type of jobs I can get and where I can get them. Many anesthesiologists, while working for nonprofit hospitals, are actually employees of private contract groups.

(3) Pay differential between private vs public job. It may be quite substantial to make taking route B a nonsensical option.

(4) I don't like having debt and I believe that if you borrow money you should pay it back, fair and square. The peace of mind of knowing I am debt free after two years means a lot to me.

I keep running into co-residents who are taking advantages of PSLF and I keep running these numbers in my head and does seem worth it for me, at least for my situation. I mean to go in debt for 10 yrs with hope of gaining $ 50, 000, which may or may not exist down the road. What do you guys think?

[FONT=ARIAL, HELVETICA]$176,940.59​

.

I think that, given your modest debt load and being in a high-paying field, you don't even need to think about PSLF. You could pay off that debt in less than a year. If you were a general internist carrying 450K at 6.8% (there are many people in that boat!), then I would do PSLF.

 

[redtomate]

To compare plan A and B you should include the time value of money in plan B. I.E. with all that extra cash that you did not spend paying down your debt, what could you do with it? Even if you assume a small return of 3% annually, I would guess PSLF will be the better choice.

 

[IlDestriero]

I applaud you for wanting to pay back your debt and not ride on some government payback scheme that you don't really need.
Having said that, if it is there and you qualify, you're entitled to use it.
I would research it fully and have a professional look it over to determine the qualifications, tax implications, etc. before committing one way or the other.
One other thing, if you are in a program now, they'll not likely completely pull the rug out from under you later, but I wouldn't bank on being able to join any particular program several years from now.

 

[x10694]

Redtomate,
I agree with you. If the program is still around, and I do end up working academic or my job qualifies, then whatever return I get out of monies is mine to keep: I don't need to get rate of return above 6.8 because whatever interest accumulate will just be forgiven. However if the program is no longer around, I become ineligible, or have a private practice job, then I need to hit above 6.8% return as I would have to repay all the interest that has been accumulating the past 10 years. People often say I have to do PSLF because I have so and so amount. It is more compelling for high debt people to do PSLF but the risk is also higher. If after 10 yrs you cannot have your debt forgiven, for whatever readon, then you better have invested all that monies (hopefully with ROR at least 6.8%) you decided to keep instead of paying loans back because you will have to payback all the accumulated interest.

IIDestriero
One thing I have learned, I may be wrong, is that you are neither in nor out of this program. At the end of ten years, you get your documents and apply. This is not like a military scholarship where you get into a program and are guaranteed through a contract. I do wonder how likely is that if any amendments are to be made, the law will stipulates people will be grandfather in ... hard to say. Public have very little sympathy toward forigivng debts to high income people.

 

[chessknt]

Think of PSLF as a nice perk rather than a valid repayment strategy. People who are angling to maximize their PSLF payoff are accruing way more interest on their loans because they only pay the minimums on the lowest payment plan possible. If PSLF disappears, which I believe it has a very good chance of doing, especially for doctors, then you have just lost one of the most expensive gambles of your life aside from your education. Think about it--you are relying on the empathy and fiscal responsibility of the federal government....

 

[Idiopathic]

why do we think it would disappear? there are going to have to be strategies both to encourage people to practice medicine and to help offload the massive debt incurred

 

[Mac or Miller]

There are some things to throw in regarding IRB/PSLF. First, any subsidized loan interest that your payments don't cover during IRB is picked up by the feds for 3 years. Second, there is a limit to the income deduction you can take on your tax return for student loan interest. Third, I assume that your income is $0 as an MS 4 (not sure about the spouse). Your first IRB payments will be less than the quoted amount because it will be based on your last year's income. The first "working" year will only be half a year of income for most new interns, and the IRB payment for that year will not be calculated until the following May. To this point, most people don't realize their true level of IRB payments until they have completed PGY-2 which for gas is half the residency.

Planning on doing 2 fellowships this far in advance shows a level of thought not entertained by nearly any new resident I've ever met, so you're ahead of the game.

You can memorialize your intent to participate in PSLF by filling out this form:

http://studentaid.ed.gov/sites/default/files/public-service-employment-certification-form.pdf

You do not "enroll" for it in advance, though, and it is a repayment only program meaning that you can only truly apply for it after the 10 years is done.

I know very few residents who have heard of PSLF and very very few who have taken the initiative to consolidate, apply for IRB, and plan on a public service career 10 years in advance. Most residents believe that their future wealth negates any thought they need to dedicate toward planning to participate in PSLF, and the majority I know who have significant debt just forbear during residency for the same reason.

As for the survivability of PSLF, I do think that it should apply to physicians who do pass on private jobs that can outpay non-profits and academic centers by over $100K/year in many cases. I think you'd be a ***** to voluntarily pass on a huge salary discrepancy just to have loan money forgiven. The feds realize that public service jobs cannot compensate for the loans people have to take out these days. What would really behoove them is to figure out a way to make medical education cheaper.

I don't think that they will flat out cancel the program because student loan relief is big right now, and I feel new docs will not make up a large percentage of the first applicants. The doctors who get paid the least often do the shortest residencies which means that they will not have a whole lot eligible for forgiveness. If you think about it, the more you have forgiven, the more income you have probably passed on otherwise.

Keep in mind that the only debt that can be forgiven is Direct money. Right now, there are still a lot of people who have some of their loans with other lenders.

The threat to docs in PSLF lies in long-residency/fellowship training specialties or those who do fellowship after fellowship after fellowship. Take a guy who borrows $300K, does pediatric surgery which may necessitate 2 years of research (which could be paid with an NIH stipend) between the residency and the fellowship. That guy may become a millionaire AND have half a mil in loans forgiven as well.

Here is really the only question you need to ask yourself IMO: How bad do you need your money now? Do you have kids? Big mortgage? Live in an expensive city? If you don't need the money right now, I say pay the loans off. If you need some of the cash for a little bit of comfort, start out on IRB or PAYE (assuming you are eligible) and see how it goes.

If you do need some of the money right now, consolidate, enroll in IRB, make some payments for maybe a year, see how it plays out, etc. You can revisit the topic a little later without much disadvantage to you. Also paying a little more than the IRB payment won't hurt you anyway if you choose to.

 

[chessknt]

The feds dont have to encourage doctors do anything--there are droves of eager premeds who will snatch up any spot at any price and by the time you get out at the other end of residency you have no choice but to practice medicine or be a debt slave. Furthermore doctors have little real political sway on the federal budget; when it comes time to cut grandmas entitlements vs. cut a benefit for the working middle upper class, I am going to guess they will go with the group that is both more numerous and more likely to vote.

It is fine to recognize that it exists and utilize if your circumstances allow but doing everything you can to minimize payments in order to maximize your benefit is a huge gamble. Better off taking it to vegas IMO--better odds and more fun.