No announcement yet.

Comprehensive advice needed

  • Filter
  • Time
  • Show
Clear All
new posts

  • Comprehensive advice needed

    Hey all, just recently discovered this website and am so thankful I did. As someone who made very poor financial decisions up until the last year or so, it has been a godsend. Here is my current situation (I apologize in advance for length)

    32 years old and single. Just finishing a chief resident year in internal medicine and have accepted a job as a hospitalist at the current hospital I work at. Starting guaranteed salary for year 1 is $256,000 but with the ability to pick up extra shifts, I anticipate my gross will be close to $330,000 – $350,000 as I plan to be aggressive my first few years. I contribute $18000 to my employee sponsored 401K with fidelity this last year and have a balance of $45000 right now after the 4 years of my residency. I only just learned about Roth IRAs so 2016 was the first year that I contributed $5500.

    Stupidly, I took out several private loans in undergrad and medical school which were incredibly high interest and only just recently refinanced $74,000 with SoFi for 2.4% over 5 years. I already have this down to $64,000 and anticipate paying it off in the next 6-7 month as I am able to pick up a lot of extra shifts moonlighting these next few months and just want to be done with it.

    Recently consolidated my federal student loans into REPAYE, and these amount to $294,000 at an average of 6.6% interest. I have made ~36 qualifying payments (of 120) to qualify for PSLF. I am questioning if I want to go through with this though. With various calculations if the program is still around I figure over the next 7 years of payments, I will likely pay ~$200,000 or so towards this, with the remainder being forgiven. The alternative to that is refinancing with SoFi at either a variable or fixed interest rate (2.5 – 3.5%) and put as much money as possible (7k-10k) monthly to pay these off in 3-4 years and then just be done with it all.

    I know decided whether or not to pursue PSLF is a crapshoot. If I do, with an average payment of $2300 a month, I will essentially have in excess of $5000-7000 of money each month that I wouldn’t be putting towards my loan. Clearly I understand that I need to decide whether or not to do PSLF and if I do, accept that it may not be there in 7 years when I’d apply (or be capped) and I’d have a very sizeable amount of interest that accumulated during that time. However, I was hoping the get the advice of those on these message boards who are much more financially savvy than myself. If I choose not do PSLF what should I be doing with that excess 5k-7k/month?


    Thanks all! Also, sorry for the double post!

  • #2

    If I choose not do PSLF what should I be doing with that excess 5k-7k/month

    Click to expand...

    How much do you anticipate being forgiven and how many years would it be before you qualify?  I would consider saving that amount in a relatively safe investment in case the PSLF gets cancelled.


    • #3
      I would start by saving the money in a side account that could be used to pay off the loans quickly. At the end of this year the first cohort of people will have their 10 year PSLF loans forgiven and I suspect we will get a clarification of the program.


      • #4
        It's difficult for me to actually calculate how much I will have forgiven for several reasons. One is that the repayment estimator on the site calculates using 120 payments, whereas at the end of 2017, I will have made almost 40 qualifying payments so the amount that it estimates being forgiven if considerably less than what I would have forgiven. What also makes it confusing is that my income and therefore, payment also will change from year to year based on what my AGI will be. For example, this year I will be paying $730/month until 2018 at which time based on my AGI of this last year, my payments will increase to $1300/month and the next year (based on projected AGI), to $2200/month. I am not Xcel savvy enough to create a calculator that would take all of this into account. By my rough estimates though, if I say I will be averaging $2400/month x 7 years (84 months) = $201,600 total paid. Without even taking into account the interest that would accumulate over those 7 years, just subtracting my current loan of $294,000 I will be saving $93,000. Is there a calculator to see what my outstanding loan balance would be after 7 years @ 6.6% if I only paid $2400/month?

        When you say saving the money in a "side account" -- what type of account do you mean?


        • #5
          The simplest way to balance risk/gain and preservation of capital with ease of withdrawal would be a taxable brokerage account with VTMFX (half low-dividend stocks, half tax-free municipal bonds).

          I'm not necessarily saying that a 50/50 allocation is best for what you need (if all you want to do is preserve, you might consider more of VWUIX, a tax-free bond fund, for example), but it serves as a pretty good all-in-one fund for taxables. Obv you can go as deep as you want with slicing and dicing, or more aggressive with a greater stock allocation, etc. Just a thought.


          • #6
            Thank you! I need to educate myself a bit more on taxable brokerage accounts. Greatly appreciate your information.


            • #7
              I don't see where you made any "very poor financial decisions" as you described above.  You are doing fine for someone right out of residency and the fact that you're here planning how to best pay off your loans shows you're going to continue to do well for yourself

              Though I can't comment on the PSLF questions, I can say that its never a bad decision to pay off loans quickly.  If I were you I would first make sure to get a very healthy emergency fund saved up (6-12 months of living expenses in cash, put it in a 1% interest online savings account and don't touch it).  Then I would start paying off the highest interest rate loans as quickly as possible (and definitely refinance).  Continue to contribute the full amount to your 401K and Backdoor Roth each year.  Resist the urge to upgrade your lifestyle and in 2-3 years you'll be in GREAT shape.  Treat yourself to a vacation or two though

              I'm 35 y/o and 5 1/2 years out of residency and didn't follow the above advice until about a year or two ago.  If I could go back in time, I'd smack myself and tell me to do exactly what I just told you!