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  • Loan Question

    Hey everyone, had a question for all and wanted to get your thoughts.

    Loans-

    1. about 325K in IBR

    2. 10K on a loan that would have been forgiven if I returned to my home state which I'm not doing now.  Interest rate very high if not payed back in full at end of training.

    I'm currently a pediatric anesthesia fellow and just signed a contract with a private practice group.  I'm currently refinanced and in IBR because I strongly considered staying in academics and wanted to keep the option of PSLF program.  However I now know this isn't an option. I've also started moonlighting so this may factor in as well.  I have a 10K loan that has a very high interest rate if I don't pay it off in a one time payment at the end of fellowship.  My goal is to save $5,500 for my Roth IRA and have the 10K for the loan as well as some money to help with the moving expenses.  I'm confused at some of the refinancing options on the site where it looks like I can get an interest rate more in the 3-4% range. Should I go into forbearance on my loans and save the money that I was putting towards IBR (about $450/month) for these things?  Can I refinance now with one of the other companies and decrease the interest and go into forbearance with them until fellowship ends?  I plan on paying my loans back in 3 years after graduation.

    Thoughts?  Thanks for your input

  • #2
    What are your interest rates?

    How much do you have to put toward that $10k loan, and when?  Is there retroactive interest on it?  It's mathematically best to kill off the one with the highest interest rate first.  Sure, you don't want to lose any money to interest, but seeing as you owe 30x as much on your student loan, if the rate is the same, you'd accrue the same amount in one day on your student loan than you would in a month on that $10k.

    You don't save money by forebearing.  Any money that you don't pay into your loan today accrues interest tomorrow, which will capitalize when you leave IBR, such as to refinance. Of course, if $450/month is worth more to you now than $450/mo + interest when you're a moneybags attending, then you can choose to do that...

    I don't know how the individual private companies handle forebearance - you might have to look into that yourself.  But as soon as you can afford the payment, refi to the lowest rate you can find; if you're paying it off in 3 years, then do a variable rate.  It is very mathematically unlikely that, over so short a time span, interest rates would rise so much to get close to what you'd pay at a higher fixed rate.

    If you can put in $9500/month toward student loans, good for you.  That's what it would cost to pay off $325,000 at 3%.  IDK how much you'd make as a private practice paediatric anaesthaesiologist (enough extra As?), but that's probably about 1/3 to 1/2 of your take-home pay.  That's an excellent mathematical strategy that might be hard to stick with unless you're fully committed, which it certainly seems like you are.

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