Plan of attack for MASSIVE student loans

[captain_sticky_buns]

Hey everyone,

I'm an M2 at a very expensive school for OOS (~95K/yr COA) and have been building out a loan spreadsheet to really figure out what the damage will be. I have no way of reducing my loans unless I get a bunch of scholarships or get some sort of windfall (both very unlikely). I don't think PSLF will apply here as most physician incomes are too high to qualify now with a 20-year repayment. I'm a little freaked out by the numbers and hoping to get some input as to how I should prioritize to try and keep this large sum in check. Key numbers:

Total med school disbursements: $360K

Average loan interest rate: 5.94%

Total loan value at graduation: $409K

Total payment needed to keep the 409K from growing during residency: ~$2,000/mo

With IBR (~$300/mo), value as a PGY-3: $477K

With IBR (~$300/mo), value as a PGY-5: $529K

With such large sums, should I be dissuaded from certain specialties? I'm interested in EM and the surgical subs, but am too far out to really know what I'll end up doing.

 

My plan so far is to try and do residency in a Low cost of living area so I can maximize my IBR payments. Once an attending, refinance and aggressively pay down while still living like a resident. Besides looking for employers who offer loan assistance or sign-on bonuses, are there loan forgiveness programs to look at? I'd ideally end up in the West and don't mind being rural, if that matters. Do residents outside of IM or EM moonlight?

 

[Lithium]

I was lucky not to have huge loans to deal with, but I made a LOT of money as a psychiatry resident working a cush schedule, which allowed ample time to moonlight.  I would go down to a state hospital and work a 36-hour shifts making $100/hour (which is really on the low end), and then drive to the next hospital and work another 36 hour shift (it was easy work).  So you can make well over $100k/year.

The downside to psych financially is that it's a four-year residency.

[Winkleweizen]

************************,  I have nothing to add, apart from avoid any really long residencies that won't offer a significant pay bump ( peds em, endocrinology, rheum, etc)

[conniebird]

Sorry about your loans. I have loans too but not as high. Do what you want to do but keep in mind lifestyle and financials for your high debt burden. Be frugal frugal frugal until loans are paid down. It can be done.

[pulmdoc]

The key to paying back student loans is no different than any other big ticket item: maximize income and minimize spending. Taking a residency outside of a HCOL area can help a ton. Rent, don't buy for housing, and rent as cheap as you can safely do. Learn to cook, and cook food yourself. Moonlight if it is feasible during residency/fellowship. I advise against picking a specialty you don't like for the money, but it's ok for income to break a tie between two specialties you like.

[Zaphod]

Short, well paying residency that allows ample time and opportunity for moon lighting.

[The White Coat Investor]

This has been a huge topic of discussion in my emails lately and I've got some posts coming up about it. But the bottom line is that the larger your debt to income ratio, the longer you have to live like a resident after residency to get to the same place. If your ratio is 1X, then you can probably have them paid off in 2 years. If your ratio is 2X, then 5 years. Thus my typical 2-5 years recommendation. However, I'm now starting to see people in the 3-4X range, particularly dentists. It's really unfortunate, but when those folks decided to go to dental school, they basically agreed to live like residents for 10-15 years after school/training, they just didn't realize it at the time.

Physicians are a little better off, number one because the average physician makes more and the average debt burden is a little less, but also because a physician with a student loan problem at least has the option to choose a higher paying specialty.

As far as your personal plan, the first option should always be PSLF, but if that's not an option, then consider other payback programs and of course, as a last resort, refinancing upon residency completion and living like a resident until they're gone.

I wouldn't spend a lot of time focusing on what to do during residency. The big factors are what specialty you choose (so choose the highest paying one you actually would like to do for 30 years) and what you do with your income the first few years out of residency. Focus your effort there. The other things help too, of course, but they're small potatoes by comparison. It's simply far easier to pay off $400K as an orthopedist than a pediatrician and much easier to throw $100K  year at your student loans when you're living on $75K than when you're living on $150K.

Bottom line for you: If you want to be a pediatrician, family doc, or similar income specialty, you'd better plan on spending a few years in academics after residency. If you want to be an emergency doc, ENT, or orthopedist, you'll be okay with the "standard" WCI plan to live like a resident for 2-5 years after residency.

[EH]

this sounds quite painful but doable. I don't know people with that much school debt but where I live most people are paying 800-1000k for a house often plus some loans so not really that much different than your loans plus a mortgage in a lower cost of living area. Sounds like you have a good plan and will optimally avoid a long residency but otherwise I would choose what you love and it will work out in the end.

[Hatton]

This is crazy!  I am so glad that I went to medical school when I did.  Believe it or not no one really talked or worried about their loans.  Everybody had them.  Nobody picked their residency based on being able to pay back their loans by moonlighting.  I think the cost of medical school needs to be addressed some how.

[Psyched]

I second making sure you go to a low COL area for residency at a place that allows moonlighting if possible. I agree with WCI that in ENT, EM, Ortho you would be just fine. I also have to put a plug in for psych. If I worked Ortho hours I would easily make as much as many do with much less stress, but I don't care to. Doubled my salary last year of residency moonlighting and got paid good $$ hourly to literally sleep most of the night being the Doc on call at a state hospital at my last moonlighting gig, and most of my friends from residency are making mid 200's easily working no nights, weekends, holidays. You can easily add $100k+ a year in psych doing easy, low risk moonlighting 1 weekend a month.

[captain_sticky_buns]

So I shouldn't just do internship and then solo practice as a GP?  

I didn't really think about this when I posted, but if I did ortho with fellowship for example, I'd only be 4 years from PSLF. With PAYE payments capped at a max of $4,500, I'd pay a maximum of ~$230K; including residency ($300 x 6yrs) and attending payments ($4,500 x 4 yrs) with over $450K being forgiven. Not that bad actually. Maybe I don't need to worry so much. Here's to hoping I stay 'grandfathered in' even if PSLF gets capped or gutted.

It seems like EM or another 3 year residency would be trickier because I'd have to really weigh whether staying in academia for 7+ years would outweigh the increased income + needing to pay off those loans entirely.

[homanga]

Pick a specialty that you will be happy in post-loan life. Basing your speciality choice on loan repayment alone is a recipe to be miserable working just about the time you finally pay off your loans. That being said EM will allow moonlighting opportunities end of EM2 and EM3 year at many places; something to consider as it could help curb interest etc.

[VagabondMD]

hatton1 wrote:

This is crazy!  I am so glad that I went to medical school when I did.  Believe it or not no one really talked or worried about their loans.  Everybody had them.  Nobody picked their residency based on being able to pay back their loans by moonlighting.  I think the cost of medical school needs to be addressed some how.

Click to expand...

I agree. The cost of education continues to climb while reimbursement is forever being squeezed. Eventually, we will reach an inflection point where the cost of attending medical school is simply not worth it--if we have not already reached it!

Good luck to the OP and all the others in a similar situation.

[DMFA]

Why is PSLF not an option? Other than concern for it being capped, cancelled, etc.

[captain_sticky_buns]

I was getting confused when looking into it, because IBR & PAYE are standalone programs separate from PSLF. I initially thought it wouldn't help much because if you do PAYE but don't take PSLF, you make payments for 20 years before the balance is forgiven (25 w/IBR); and it is treated as taxable income. In my case, that would mean paying $500K-$700K towards the balance of the loan, and then taxes on an additional $200K-$500K when it is forgiven.

However, WCI's post and others made me revisit it and PSLF is a pretty good deal, if I can work with an eligible employer. No matter the specialty or pay, my calculations for forgiveness at 10 years means I'll pay ~$150k-$300K for my loans, with ~$500k forgiven, not taxed.