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Advice for a deep-in-debt FP?

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  • Advice for a deep-in-debt FP?

    I have a friend who is finishing his family practice residency.  He was asking me about setting up an IRA (Roth vs traditional, etc.).

    I asked him about his financial situation and he revealed that he owes $460K in student loans!  I felt his top priority should be to develop a detailed strategy to attack that 800 lb gorilla.  As far as how to do that, I'm not sure.  I tend to think the old fashion way is best.  Work extra.  Cut expenses.  Don't buy a house.  Don't buy a new car, etc.  He also needs to look into refinancing and maybe hope for a government bailout like the banks and auto companies get?  Would you put the IRA investing on hold?  What else would you advise?

     

  • #2
    That is an insane amount. Does he/she have a path to loan forgiveness? That may be the best choice, especially if they've been doing ibr already.

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    • #3
      He definitely needs to max out his income, cut expenses and (not) do the things you mentioned above.

      He should look into working in rural or medically under-served areas that pay well. Extra urgent care shifts are a good idea, too.

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      • #4
        It sounds like a bad investment. Going into the nearly $500k of debt and giving up your 20's for a punishing $150k/year job is just a lousy trade-off, IMO. YMMV

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        • #5
          FM should average around $200k/yr.

          Find a loan forgiveness program. Texas expanded its program to include some primary care or psych who aren't only in underserved areas.

          Other than that, just the standard live like a pauper, work a million hours a week advice.

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          • #6
            Is he interested in doing ER medicine? Here in Texas the demand for ER docs is so high that board certified Family Docs doing ER medicine (do not have to be ER board certified) are making $200 per hour (and even higher depending how desperate the facility is) and can get all the shifts they want. If he comes to Texas and does ER medicine and lives like a resident, he could have those loans paid off in a few years. Then he could go to the state of his choice and go back to being a family doc if he'd like. Or just stay in Texas and keep making money!

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            • #7




              I have a friend who is finishing his family practice residency.  He was asking me about setting up an IRA (Roth vs traditional, etc.).

              I asked him about his financial situation and he revealed that he owes $460K in student loans!  I felt his top priority should be to develop a detailed strategy to attack that 800 lb gorilla.  As far as how to do that, I’m not sure.  I tend to think the old fashion way is best.  Work extra.  Cut expenses.  Don’t buy a house.  Don’t buy a new car, etc.  He also needs to look into refinancing and maybe hope for a government bailout like the banks and auto companies get?  Would you put the IRA investing on hold?  What else would you advise?

               
              Click to expand...


              PSLF if possible. Otherwise, refinance and get busy boosting income, cutting expenses and throwing the rest at that gorilla. It would help to marry an orthopedist too.
              Helping those who wear the white coat get a fair shake on Wall Street since 2011

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              • #8
                The NHSC loan repayment program can be quite helpful for primary care physician and psychiatrists.  He just needs to find a service center ideally with a HPSA score of 17 or greater, a job that he wants, and that's 110k in tax free money over 6-years towards student loans.  Obviously Public Service Loan Forgiveness is even more lucrative, so long as Congress doesn't curb it.  From the jobs I looked at, most NHSC eligible jobs are also PSLF eligible.

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                • #9
                  Great comments.  Keep them coming if you have more thoughts.  I will pass them along to him.  I'm not sure of the interest rate he pays.  The residency is a three year program and is part of a non-profit hospital network so potentially he could get credit for those three years if he is enrolled and then maybe have it forgiven after 7 years of working.  I think FP in our area can start in the 160-180K range with a sign on bonus.  It is reasonable to expect to get up to 200K soon after.

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                  • #10




                    I have a friend who is finishing his family practice residency.  He was asking me about setting up an IRA (Roth vs traditional, etc.).

                    I asked him about his financial situation and he revealed that he owes $460K in student loans!  I felt his top priority should be to develop a detailed strategy to attack that 800 lb gorilla.  As far as how to do that, I’m not sure.  I tend to think the old fashion way is best.  Work extra.  Cut expenses.  Don’t buy a house.  Don’t buy a new car, etc.  He also needs to look into refinancing and maybe hope for a government bailout like the banks and auto companies get?  Would you put the IRA investing on hold?  What else would you advise?
                    Click to expand...


                    I think you gave him excellent advice. As to whether to contribute to an IRA, it depends on other details, such as if he will qualify for PSLF, age, benefits available at attending job. Hate to see him pass up an IRA contribution, but there are other more pressing priorities, it appears. Perhaps he has a spouse who makes a decent salary?
                    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #11
                      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                      • #12
                        I had 260k in loans last year at this time.  I'm down to 143k today and I'll be down to 104 in the next few months.  I'm a hospitalist and through working extra shifts, refinancing my house, and selling crap I didn't need including expensive hobbies, I was able to get myself in a much better position in very little time.  The point is that if he's persistent and careful, its not that bad.  However, if he drags his feet for even a few years the interest on that much debt is going to really take over.

                        He needs to get an emergency fund first and foremost.  Then, pay off all consumer debt as quickly as possible (credit cards).  Look into refinancing his loans into lower interest rate loans if possible.  I'm assuming since he just got done with residency his rates are probably stupid high.  Set up his 401K to withdraw only enough to get the full company match (this is temporary).  Learn to carefully budget each month's expenses.  Take out exactly enough money from each paycheck to cover those expenses, both fixed (rent, car payment, minimum payments on student loans, etc) and variable (food, gas, entertainment, etc).  Also, set aside a little money each month for personal spending (such as a vacation, clothes, gifts for people, etc)>  That way he can enjoy life a little while he's paying off debt.  Set that money aside automatically each pay period into separate accounts.  I had my paychecks set up to be delivered to one checking account, then my ally checking account would automatically withdraw from that every 2 weeks, then it would be distributed from there into the correct savings accounts.  That way I was forced to follow the plan and I couldn't overspend and I could also see exactly how much money I had for each category.

                        If he is careful and is willing to work extra doing moonlighting or seeing more patients each day, he could get a handle on that debt in 3-4 years.

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                        • #13
                          If he is interested in a FM position, we have a position open in my practice making at least $220,000 with $120,000 loan forgiveness, however it is not eligible for PSLF. PM me if interested (I know this is not supposed to be advertising so please delete if inappropriate, part of my point is that higher paying jobs do exist in primary care). If he is eligible for PSLF then should try to find something that would allow for that.

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                          • #14
                            Dear All, thank you for your kind thoughtful comments and forgive me for the uber late response. I am the resident that Wealthy Doc was talking about. I am currently an attending at the same institution that I finished my residency as it qualifies for loan forgiveness. after reading your posts here are the questions you had answered:

                            age 34

                            single with no children

                            income 170k through my family medicine job. I also pick up Urgent care and addiction moonlighting jobs as needed on weekends that pay about 100/hr.

                            my loan is all federal and stafford and currently at 480K. my interest is 7.3%.

                            4th year of IBR participation.

                            I no longer qualify for Roth IRA due to include. I am matching my company's 401K contribution.

                            my two questions:

                            1- how do you forecast the loan forgiveness in 6 years from now? worth waiting and hoping for the best? making minimum payments to IBR and investing my extra income?

                            or

                            2- should I aggressively start to pay my loan and negotiate a lower interest rate or should I invest?

                            3- If I am to invest, should I invest in 401K or individual/brokerage account or both?

                             

                            currently I live like a resident still, drive a Prius, studio apartment downtown where i like to live and no additional loans or credit card expenses or expensive hobbies except occasional weekly dinner or yearly trip.  I appreciate your guidance and advice as i look forward to becoming debt free and be able to flourish my financial state.

                             

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                            • #15
                              Do all that you can to refi

                              I am of the opinion that primary care DOES offer a good opportunity to open your own practice. I personally would focus on that after you have maxed your "saving" options. To me moonlighting isn't as good as having your own practice where you can generate 500k (I personally know 2 PCPs who do this literally just doing bread and butter cases - BP/Diabeted/cough etc management). Heck if you can Botox / do some procedures then can reach 600k+ income.

                              Think big.

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