What to do with Sign-on "loan" ?

[VagabondMD]

Zaphod wrote:

EH wrote:

When the loan is forgiven it is counted as income and is taxed accordingly. I don’t think there is any way around that.

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Then its not really a loan then, just deferred income of some strange sort (effectively, tax wise its just like income). Makes it worth less than its face value. This is why it’d be great if you could just convince someone to take off 30k/yr from your salary instead, before you receive it to pay it back.

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It is a loan if it gets repaid. Otherwise, it is taxable income. No free lunch!

[Hatton]

My goal in these posts is for Raj and others who are just finishing their residencies to not think these people are so nice they would not screw you in a contract.  Some big groups and hospitals are honest and above board but just remember their agenda is not your agenda.

[Sneezy]

When I took my current position I got a 100K loan (tied directly toward buying a house or condo) that is forgiven over 5 years

The position is in a HCOL area and the hospital finds that it is an effective way to overcome "sticker shock" when people look at housing (as well as help those just out of training have enough for a downpayment).

Would I have preferred to just get 20k in increased salary each year?  Sure, but this way it seems less like your salary is cut when the loan is fully forgiven; in fact my take home pay increases since I won't have withholding on the value of the loan forgiven (I recognize it is an effective salary cut after 5 years, but I'm sure the average doc doesn't see it that way).

My administration hasn't pulled any funny business and a number of my colleagues have gotten this deal and are quite happy about it

YMMV

[Lindley]

jfoxcpacfp wrote:

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What am I missing? This is free money and everybody is suspicious. Even if he buys a portfolio of 5- $30k laddered bonds at 3.5% (current interest rate) and cashes a rung to invest $30k in the stock market after each year he stays, what has he got to lose? It just seems so obvious to me – please tell me what is wrong with my line of reasoning.

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I didn't read all of the responses, but to the OP and Johanna, my personal experience is this:

When I signed my first contract 3 years ago in the last months of residency, I too was offered a "loan" which was offered to me as part of a "recruitment and retention" contract which also included several thousands of dollars in relocation expense coverage (which we used and were happy to have at the time).  It was a way for the hospital to pay me $30,000 more per year ($90,000 total) and went towards my student loans.  This was not offered to two of my others colleagues who were starting at the same time I was and were pissed when they found out about it several months later because they were not offered the extra money or the moving expenses (because they never asked... duh!!).  The hospital claimed that the Stark Law prevented them from paying me more than 10% over the regional average for my speciality (which I was already offered), so this extra "loan" money didn't go to me directly but was a check written from the hospital directly to the student loan servicer.  Which was nice because it was one less thing for me to worry about.

Anyway, I am 90 days away from completing my 3 year obligation and there have been zero problems.  The terms for paying the loan back, should I have chosen to leave early, are very similar to what you are being offered.  If given the choice again today, I would absolutely do it again.  In fact, I have been offered a similar "loan" at the new hospital I will be starting at in August and I have accepted it as well.  Same 3 year commitment.

That's just my experience and two cents worth.

[Raj]

Thanks for the post Dirty Coast. Did they tell you upfront that the loan would only go to student loans? or is that something you decided?

[Lindley]

Raj wrote:

Thanks for the post Dirty Coast. Did they tell you upfront that the loan would only go to student loans? or is that something you decided?

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Good question.  That's what I asked for, so that's what they gave me.  I didn't explore any other options.