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    childay
    Physician

  • childay
    replied
    Originally posted by Huggy View Post
    At 0.8%, I think you'd be somewhat crazy to pay off debt.
    Just somewhat? Sign me up for some debt!

    Leave a comment:

  • DoctorT
    New Member

  • DoctorT
    replied
    I paid off $250k in student loans at 2.5% in 1.5 years and have zero regrets.

    Leave a comment:


  • triad
    replied
    I took my 1.6% student loan into retirement with me (only 13 years left!). I just couldn't psychologically pay it off. It would have been nice to say I'm debt free but this is taking free money

    Leave a comment:


  • Huggy
    replied
    Originally posted by FrugalBeardMD View Post

    So update for everyone, student loan company updated their discount tiers, and so I now officially have $465,000 of student loans at 0.8% fixed for the remaining 9.5 years of the student loans.

    I feel like 2%, most people felt investing in general was a better decision, emotionally I struggled with that because I hate debt. However, HOLY COW, 0.8% fixed interest!? I feel like now I truly will make minimum payments and put he rest into VTSAX/VTIAX
    I'm curious how your loan rate is so low.

    Fixed 10-year rate of X - 0.55% discount with ACH direct deposit more than 7.5k monthly - 0.25% discount with autopay/ETF.

    Are there any other discounts that I'm missing? At 0.8%, I think you'd be somewhat crazy to pay off debt.

    Leave a comment:

  • Nysoz
    General Surgery

  • Nysoz
    replied
    Just make sure you're investing instead of spending more. Also make sure you choose an asset allocation that's appropriate for you in case there's a pull back in the market and you feel like panicking.

    Leave a comment:

  • FrugalBeardMD
    Member

  • FrugalBeardMD
    replied
    Originally posted by FrugalBeardMD View Post
    Good morning!

    I have been torturing myself over the last few months about the best thing to do with my student loans. I am fortunate to have a high income now and could theoretically get them paid off in the next 1-2 years, BUT the student loan interest rate is now down to 2% fixed on a 10 year repayment that I am in 6 months in to.

    Student loans: $475,000 (Started at 550, paid off 75k so far)

    I have read every article WCI ever wrote on it, and it seems like generally he recommends investing in assets with a "moderate" expected return before paying off debts <3%.

    I have over half my in come auto deposited to a separate account for wealth building, so not a question as to whether I'd spend it rather than invest, just trying to best set up my automatic work flow for this separate account. Max student loans? 50/50? Max invest?

    I already max 401k, HSA, Roth, etc. Investments are VTSAX/VTIAX at market cap weight (60/40 right now)

    I know its in the weeds, but at 2% my overthinking is really in overdrive, would love people's advice!
    So update for everyone, student loan company updated their discount tiers, and so I now officially have $465,000 of student loans at 0.8% fixed for the remaining 9.5 years of the student loans.

    I feel like 2%, most people felt investing in general was a better decision, emotionally I struggled with that because I hate debt. However, HOLY COW, 0.8% fixed interest!? I feel like now I truly will make minimum payments and put he rest into VTSAX/VTIAX

    Leave a comment:

  • Turf Doc
    Med Student

  • Turf Doc
    replied
    Originally posted by Zaphod View Post

    Just a hangover from the GFC and fighting the last war instead of thoughtfully approaching things. You could still at least have refinanced in years past to really low rates (I have a variable rate loan that sits around 1%). Similar for housing arguments back in the day when it more likely will have turned out to be a generationally low buying opportunity.

    For some people it immediately clicks and others they cant shake the "debt is the devil" angle. Debt is a tool, nothing more. You've used it wisely to get here and have a good income, no need to pretend its best use of your money now.

    If we did the extreme debt thing like Ramsey likes to preach about, no one would become a dr in the first place.
    Dave likes to tell people to try and save up for med school or go MD/Phd route or work on the side to get that debt down. Also never hear any mention of PSLF when people call in. Its amazing how terrible his advice is

    Leave a comment:

  • Zaphod
    Physician

  • Zaphod
    replied
    Originally posted by FrugalBeardMD View Post

    Very good point. I guess when I do the thought experiment about whether I'd rather have 0 debt and 0 dollars, verse 400k in debt at 2% and 400k in investments earning market rate, I think I'd sleep easier with the flexibility of having those investments. Not to mention if something were to happen to me my wife would be in a much better situation in the latter scenario.
    Exactly.

    Pretending you're in debt at a net worth above zero as opposed to holding debt is mathematically wrong, and just plain crazy talk. You will usually get follow ups about levering things up massively into insane levels and terms no one would ever give you, but its usual slippery slope stuff.

    I have offered to take anyone up on their "would you take a mortgage size debt and place into the market just because 0% or low rates" quip for the last 5 years or so, no takers ever of course.

    And if you reframe it away from the emotional language the question is actually "is lump sum preferable to DCA"? Which the exact same people would give long explanations about why it certainly is. Oh well.

    Leave a comment:

  • FrugalBeardMD
    Member

  • FrugalBeardMD
    replied
    Originally posted by Zaphod View Post

    Just a hangover from the GFC and fighting the last war instead of thoughtfully approaching things. You could still at least have refinanced in years past to really low rates (I have a variable rate loan that sits around 1%). Similar for housing arguments back in the day when it more likely will have turned out to be a generationally low buying opportunity.

    For some people it immediately clicks and others they cant shake the "debt is the devil" angle. Debt is a tool, nothing more. You've used it wisely to get here and have a good income, no need to pretend its best use of your money now.

    If we did the extreme debt thing like Ramsey likes to preach about, no one would become a dr in the first place.
    Very good point. I guess when I do the thought experiment about whether I'd rather have 0 debt and 0 dollars, verse 400k in debt at 2% and 400k in investments earning market rate, I think I'd sleep easier with the flexibility of having those investments. Not to mention if something were to happen to me my wife would be in a much better situation in the latter scenario.

    Leave a comment:

  • FrugalBeardMD
    Member

  • FrugalBeardMD
    replied
    Originally posted by TXDoc21 View Post


    This is why I invest and pay off student loans. I didn’t want to drag the large loan amount on for 10 years or more. And I didn’t want to miss out on getting my taxable account going. So I do both.

    I’ve loved getting it to <300, <200 and I will love when I don’t owe anymore money on my schooling. With modest returns I should be able to get the brokerage account to 750K by that same point (sorry everyone for summoning the next bear — at least there were will be a sale!). I felt this was a better balance then getting the student loan balance to zero and then end up with $0 in the taxable account. Compound interest needs time.
    Agree on the time issue! Additionally, while being debt free will be great, the idea of hitting debt free in a couple years but then having 0% outside of E fund and retirement accounts also causes stress.

    I did some math and essentially figured out how much I'd need to invest aggressively to be FI in 10 years, and thankfully I will still have left over to over pay some on student loans or to over invest. Feel very fortunate to be in a good position, as truly either way my net worth should have a massive positive upswing over the next few years.

    Leave a comment:

  • Zaphod
    Physician

  • Zaphod
    replied
    Originally posted by FrugalBeardMD View Post

    That’s fair point, thank you!

    The truth is that the max I’ll pay in interest over 10 years is 60k, and it goes down from there. Surprised by how this is a hard decision, after years of reading and listening to WCI feels anathema to not pay off loans in 2 years, but I think that these crazy low interest rates are relatively new.
    Just a hangover from the GFC and fighting the last war instead of thoughtfully approaching things. You could still at least have refinanced in years past to really low rates (I have a variable rate loan that sits around 1%). Similar for housing arguments back in the day when it more likely will have turned out to be a generationally low buying opportunity.

    For some people it immediately clicks and others they cant shake the "debt is the devil" angle. Debt is a tool, nothing more. You've used it wisely to get here and have a good income, no need to pretend its best use of your money now.

    If we did the extreme debt thing like Ramsey likes to preach about, no one would become a dr in the first place.

    Leave a comment:


  • TXDoc21
    replied
    Originally posted by FrugalBeardMD View Post

    That’s fair point, thank you!

    The truth is that the max I’ll pay in interest over 10 years is 60k, and it goes down from there. Surprised by how this is a hard decision, after years of reading and listening to WCI feels anathema to not pay off loans in 2 years, but I think that these crazy low interest rates are relatively new.

    This is why I invest and pay off student loans. I didn’t want to drag the large loan amount on for 10 years or more. And I didn’t want to miss out on getting my taxable account going. So I do both.

    I’ve loved getting it to <300, <200 and I will love when I don’t owe anymore money on my schooling. With modest returns I should be able to get the brokerage account to 750K by that same point (sorry everyone for summoning the next bear — at least there were will be a sale!). I felt this was a better balance then getting the student loan balance to zero and then end up with $0 in the taxable account. Compound interest needs time.

    Leave a comment:


  • CalMD
    replied
    Invest and student loans are not mutually exclusive, especially the loan rate is 2%. If OP is comfortable with the ups and downs investment, investment should have much higher return.

    From personal experience, we invested and paid only the monthly minimal student loan after residency. This was in an era when the student loan interest rates were between 5-8%. After 5 years, investment gain far surpassed the student loan amount so we paid off the student loans in years 5-6. Similarly with mortgage, and this is in the SF Bay Area. The most painful part was actually selling appreciating property/equity and paying capital gain tax.

    I vote for tilting more toward investment, and have a goal to pay back the debt once investment gain reaches certain goal. This would be akin to a form of diversification and asset reallocation.

    Leave a comment:

  • FrugalBeardMD
    Member

  • FrugalBeardMD
    replied
    Originally posted by Zaphod View Post

    Its not a return its a fee. its a fixed maximum, and you can only recoup a certain %. Thats the hurdle, dont fall for the "return" framing, its wrong and detrimental to analysis.
    That’s fair point, thank you!

    The truth is that the max I’ll pay in interest over 10 years is 60k, and it goes down from there. Surprised by how this is a hard decision, after years of reading and listening to WCI feels anathema to not pay off loans in 2 years, but I think that these crazy low interest rates are relatively new.

    Leave a comment:

  • Zaphod
    Physician

  • Zaphod
    replied
    Originally posted by tylerjw12 View Post
    The rate may be low, but the total dollars the loan is costing you at 400k still seems like a lot to me. I'd keep applying extra aggressively for another 200-250k, then think about backing off some.
    Its still smaller than gains by investing so how does that change things. Size shouldnt matter as long as its covered.

    Leave a comment:

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