Advice for a deep-in-debt FP?

[The White Coat Investor]

farsizabon wrote:

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.

 

Click to expand...

Welcome to the forum. I wrote this post with someone like you in mind:

https://www.whitecoatinvestor.com/what-to-do-if-you-have-monster-debt/

I recommend people keep student loan debt to less than 1X gross income. I think 2X is pretty doable without extreme sacrifices. In the 3-4X range, extreme solutions are required. Beyond about 4X, it kind of becomes impossible. You're at 480/170= 2.8X. Not insane, but recognize that even more so than most FPs, you need to live a very middle class lifestyle for quite some time in order to get to where you want to be by career end.

PSLF could have a very dramatic effect on your financial life. Be sure to consider it very seriously. If you decide to go for that (assuming your job qualifies) then no, don't make any extra payments or refinance. If you don't decide to do that, then try to refinance, but don't be surprised if they don't let you, or only offer you a 15 year loan at 6% or something. Your debt to income ratio doesn't make you look like a great bet, so they will charge you more.

 

[hightower]

Tell him to look into doing moonlighting in addition to his full time FP job.  I'm assuming he's young, fresh out of residency, used to the abuse of a residency schedule.  He should be able to work a couple of extra weekends a month as a hospitalist doing moonlighting.  It pays well and he can take all that extra cash and start paying off the debt.  Also, strongly encourage him to continue to live way, way below his means until he gets that debt under control.  That is an insane amount of student loan debt.  I had only half that amount and the stress of it hanging over my head was almost too much to handle at times.  I hope you're able to get through to him.  Tell him to start reading up on this website as well!  That's what finally got my attention.

[StarTrekDoc]

This is going to sound weird for this forum. I applaud you for sticking to your chosen field and style of practice despite the huge economic disadvantages and available potentials out there. Money isn't everything.

That said, there are a few things that you may be able to tweak with your chosen settings.

Savings. Read up on the backdoor Roth. The front door is blocked by income, but the backdoor isn't. Therr is some steps there, so be familiar with the timing.

Locums/earnings. Paid on the lower side. Your preferences appear to be in line with work that VA and jail system may have opportunities. They will negotiate rates and terms directly especially if you have availability.

Expenses. Roommate perhaps? That would be the next if you don't mind that. Living in urban is the highest cost on your radar and this can help but not for a lot of people.

Again, kudos for going into field of your choice. The hole is deep but the shovel is sufficient to get it going over a standard thirty year career.

Congress better keep it's promise. Lots of public service folk banking on it over the years and first crop due this fall.

[jfoxcpacfp]

1. I don't understand the Roth IRA statement. It appears part of your sentence got cut off but, given the facts, you should qualify for a backdoor Roth contribution. If you have a pre-tax IRA and your moonlighting pays by 1099, it's a simple matter to set up a SOLO-k and roll your IRA into it.


2. You said you moonlight "as needed". With no family responsibilties, "as needed" s/b "as much as possible" (imho) - of course, not so much that you reach burnout.


3. I leave the loan forgiveness calculations to the student loan experts. I can give you the contact information of the person I refer to if you want to p.m. me. The cost for a detailed analysis is super-reasonable (< $500) and well worth it. If you can continue to work 6 more years at a qualifying institution, that appears to me the way to go.

 

[Complete_newbie]

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.

[farsizabon]

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.

 

[MrsIMDoc]

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.

[hightower]

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.

[jfoxcpacfp]

[jfoxcpacfp]

WealthyDoc wrote:

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?

[WealthyDoc]

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.

[SwanSong]

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.

[The White Coat Investor]

WealthyDoc wrote:

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.

[RocDoc]

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!

[DMFA]

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.