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?
Good question. That's what I asked for, so that's what they gave me. I didn't explore any other options.
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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. -
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?Leave a comment:
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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.
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.Leave a comment:
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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
YMMVLeave a comment:
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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.Leave a comment:
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When the loan is forgiven it is counted as income and is taxed accordingly. I don’t think there is any way around that.
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.
It is a loan if it gets repaid. Otherwise, it is taxable income. No free lunch!Leave a comment:
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Okay, let’s try this from another angle.
What if they offered a contract for $300k, for two years, but if you did not resign with the Hospital after the first contract was up, the second year would be only $210k, and you would have to pay the money that you have received on your last day of work?
My point is not to leave the money on the table, but to negotiate to get the strings attached removed. They have already allocated the “free money” to the position but have placed it in a structure that binds you to them. If you liberate the “free money”, it will truly be free.
I have seen hospitals and groups utilize these techniques to manipulate MDs coming out of training. For a skilled Hospital CFO, we are suckers for the no-so-free “free money” and are willing to believe that it’s free.
If you are going to take the sign on, I would suggest a clause that the sign-on bonus is forgiven if a subsequent contract is not offered by the employer, and a reasonable floor for future contracts. More to the point, have an experienced employment attorney review the contract.
Vagabond MD i agree that the ideal contract would not have any strings attached to it. You seem to be a good negotiator. I admit i am not. I should be. I tried to break free of the loan but couldnt.
Other places where i interviewed offered me 10k-20k as sign on “bonus”. At one place the recruiter always called it a bonus till i got my contract, and it was actually a 25 k loan with the exact same interest rate. Btw I had negotiated for over a month to get this “bonus” increased from 10k to 25k. You are absolutely right the administration and the recruiters are cheeky and not our friends.
My base salary at this place is higher by 30-40K than base + sign on bonus at other places i interviewed. The contract locks my base salary for 2 years. They do extend the time period of base-salary if need be, but none of the physicians in my speciality have needed it. The last new physician to join exceeded her base-salary in 8 months into the contract. Her contract is exactly the same as mine. I feel good about the contract over all. I compared 3 different contracts myself, did not see major differences except this loan. Thus asked the question here. Hey i trust this forum more than any lawyer or financial advisor.
Johanna, i looked up CD rates at different banks, none offer more than 2.15% (>50,000 deposit, >5 yr lock in). You mentioned an interest rate of 3.5%, if i may ask, how did you get that number.
If the only thing that I have done is make you open your eyes a bit wider regarding the "free money", I have accomplished something. It is not "free"; I am sure that you will earn it. Many, perhaps most, docs would blow the loan in homes, cars, loan repayments or whatever, and will be in a weaker negotiating position for Year 3. Just be cognizant of the fact that it is being used as a tool for them to have the upper hand over you when the next contract comes around.
If you can live with that, I am good with it. Good luck!
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When the loan is forgiven it is counted as income and is taxed accordingly. I don’t think there is any way around that.
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.Leave a comment:
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Johanna, i looked up CD rates at different banks, none offer more than 2.15% (>50,000 deposit, >5 yr lock in). You mentioned an interest rate of 3.5%, if i may ask, how did you get that number.
Out of the Bank of Thin Air :-) When I said "current interest rate" I was referring to the rate the OP gave, not market rate. I simply used that figure as an illustration to even out the payback. We typically use high quality corporate bonds in ladders and I don't pay attention to CD rates. Sorry for the confusion - I could have bothered to check, couldn't I?!?Leave a comment:
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I'm with WCI, Johanna, I would take the money but remember the only way to keep it from being a hook is to keep it someplace that you can have access to it at all times. I'm sure the hospital wants you to put it some place that is inconvenient to retrieve it from as Vagabond has said. I would consider just taking it, putting it in Ally, Discover Bank or one of the other high yield online savings accounts and just leave it there. You could move money out for investments as long as you left enough to cover the remaining loan/interest. I don't see why you'd leave it on the table if you can restrain yourself from making it a problem.Leave a comment:
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Why is the hospital doing this? Is it possible to talk to others who were offered this deal? The hospital in my area that offers stuff like this is the inferior one and most people relocate once their contract is up. Always remember that hospital administrators have a different agenda from you. They may wine and dine you but don’t mistake that for friendship
Hatton, the hospital wants to keep as many physicians from leaving as possible. The turn over at this place is relatively high as not everyone can withstand the snow/cold at this place. I guess i am a mutant and actually liked the place and people during fellowship. Only time will tell if i like it as an attending.
This type loan is pretty standard for this hospital, the amount differs by speciality. My speciality gets offered the one of the highest loan. But i do know some people have left after 2-3 years, and they did not care about the loan.Leave a comment:
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Okay, let’s try this from another angle.
What if they offered a contract for $300k, for two years, but if you did not resign with the Hospital after the first contract was up, the second year would be only $210k, and you would have to pay the money that you have received on your last day of work?
My point is not to leave the money on the table, but to negotiate to get the strings attached removed. They have already allocated the “free money” to the position but have placed it in a structure that binds you to them. If you liberate the “free money”, it will truly be free.
I have seen hospitals and groups utilize these techniques to manipulate MDs coming out of training. For a skilled Hospital CFO, we are suckers for the no-so-free “free money” and are willing to believe that it’s free.
If you are going to take the sign on, I would suggest a clause that the sign-on bonus is forgiven if a subsequent contract is not offered by the employer, and a reasonable floor for future contracts. More to the point, have an experienced employment attorney review the contract.
Vagabond MD i agree that the ideal contract would not have any strings attached to it. You seem to be a good negotiator. I admit i am not. I should be. I tried to break free of the loan but couldnt.
Other places where i interviewed offered me 10k-20k as sign on "bonus". At one place the recruiter always called it a bonus till i got my contract, and it was actually a 25 k loan with the exact same interest rate. Btw I had negotiated for over a month to get this "bonus" increased from 10k to 25k. You are absolutely right the administration and the recruiters are cheeky and not our friends.
My base salary at this place is higher by 30-40K than base + sign on bonus at other places i interviewed. The contract locks my base salary for 2 years. They do extend the time period of base-salary if need be, but none of the physicians in my speciality have needed it. The last new physician to join exceeded her base-salary in 8 months into the contract. Her contract is exactly the same as mine. I feel good about the contract over all. I compared 3 different contracts myself, did not see major differences except this loan. Thus asked the question here. Hey i trust this forum more than any lawyer or financial advisor.
Johanna, i looked up CD rates at different banks, none offer more than 2.15% (>50,000 deposit, >5 yr lock in). You mentioned an interest rate of 3.5%, if i may ask, how did you get that number.Leave a comment:
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When the loan is forgiven it is counted as income and is taxed accordingly. I don't think there is any way around that.Leave a comment:
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We have a sign on loan at my work place too. It’s one of the nice low ~1% interest ones but doesn’t repay until years 4-5-6, so yours sounds pretty good! I agree it is basically free money, especially if it is being repaid yearly. I kept mine in cash until I had worked there for a bit and knew that it was a good fit and I was going to be around for the long term. I was also planning on using it for a downpayment for a house, so didn’t want to invest it anyway. It is taxed when it is repaid with the rest of my salary, so really not looking forward to that! I bought my house and salary has continued to go up significantly yearly – sure bad things could happen and it could screw you over, but it sounds like you know and like the place so would be worth the risk.
What do you mean it is taxed when it is repaid? Loans nor their repayments are not taxed, thats what makes these offers so compelling. How are they planning to do that?Leave a comment:
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Okay, let's try this from another angle.
What if they offered a contract for $300k, for two years, but if you did not resign with the Hospital after the first contract was up, the second year would be only $210k, and you would have to pay the money that you have received on your last day of work?
My point is not to leave the money on the table, but to negotiate to get the strings attached removed. They have already allocated the "free money" to the position but have placed it in a structure that binds you to them. If you liberate the "free money", it will truly be free.
I have seen hospitals and groups utilize these techniques to manipulate MDs coming out of training. For a skilled Hospital CFO, we are suckers for the no-so-free "free money" and are willing to believe that it's free.
If you are going to take the sign on, I would suggest a clause that the sign-on bonus is forgiven if a subsequent contract is not offered by the employer, and a reasonable floor for future contracts. More to the point, have an experienced employment attorney review the contract.
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