Loan Repayment Strategies for 2X DTI - Student Loan Planner.com

[TravisRADMD]

I have an approx 2X debt to income ratio (based off a signed contract to start July 2020).

After listening to Dr. Dahle's most recent podcast with Travis from Student Loan Planner I am now officially confused on the correct strategy to tackle this monster I got strapped to my back.

Up until this morning I superscribed to the financial camp of paying them off HARD, QUICK, AND FASTTTTT. Travis from Student Loan Planner seems to to demonstrate that the math shows that over a 20-25 year period an IBR model for people in the 2X DTI range would save money in the longer term compared to a 5-10 year conventional refinancing.

I want ZERO DEBT ASAP but I also fear missing out on investment opportunities for the next decade if I commit to a 5-10 yr conventional refinancing.

If i'm confident that I will use all monthly savings to invest(partly to cover tax bomb of course) then is this 20-25 year loan service commitment worth the risk?

[jacoavlu]

radiologist with 2x debt to income? Either a lot of debt, or a low paying job. I'd pay off the loans, and goal to increase income.

[The White Coat Investor]

I think you know my opinion, at least if you read the blog. You now also know Travis's. Good luck with your decision.

https://www.whitecoatinvestor.com/i-...t-forgiveness/

[TravisRADMD]

Yes, Dr. Dahle. I read that blog post and do know/understand your opinion. I completely agree for the most part but I'm having such a hard time arguing against the long term math. People mostly aspire for a big house and a car after training but all I do is talk about saving and investing once I'm done. Just always seemed so heart breaking to push those aspirations back another 5 years. I had come to peace with it until that podcast. Now I Just wish someone could let me borrow their finest crystal ball for a day.

[Tim]

I have a hard time seeing ANYONE commit to a 20-25 year commitment for ANYTHING other than a spouse or a child.
The options are painful financially with the interest factor IF anything changes. To me it is crystal clear when you add your current age to the time you pay the tax bomb and lament not paying it off sooner.

[TravisRADMD]

I think I'm more likely to refinance. That being said I would love to here what Travis has to stay. Do you think its worth ~ 500 to give him the chance to sway me? Seems like you can't even chat without a formal consult.

[xraygoggles]

You didn't give any concrete numbers, but I'm confused how you could have a 2:1 DTI ratio as a radiologist.

Even the lowest starting salaries I have seen start around 350k for the first year, with partner pay much higher. Does that mean you have 700k debt?!

If your debt is lower than that, then your job is an outlier (in a bad way). Either you have an academic job or you are not full time would be my guess. Having said that, rads offers you so many different opportunities for extra pay. Locums and telerads are both very lucrative, and I have done both over the past year to expedite debt paydown, even though my base salary was above the average.

Anyways, as per your question, I would buckle down, work your butt off, and pay down the debt in less than 3 years.

[TravisRADMD]

Thanks for responding. 2:1 is conservative. I have an alternative work model but my salary is still very competitive. I also rather not include moonlighting and side hustles but yes I will maximize every source of possible cash flow. I would agree though. Also, not interested in being in potentially variable contract with the fed for the next 25 years. I'm going to pay it off.

[xraygoggles]

Hmm, I'm just letting you know that your worth is being undervalued at your current job. There has been a sharp uptick over the past year in rads hiring demand, so you can easily find a better job, if you wanted to.

I'm on track to pay down 300k+ debt in 2 years, and can't wait to be finished in 2020. You can certainly do it in less than 5 if you keep your eyes on the prize.

[2thFxr]

.

[Lordosis]

Wow rads makes that much? Good for you guys.

The nice thing about paying it off quickly is the behavioral aspect. You flex that frugality muscle for a few years paying back that loan it is not easy to turn it off. Once the loan is gone you direct the firehose of cash into a brokerage account and before you know it you are light-years ahead of everyone else.

[TravisRADMD]

Thank you. Agreed.

[Brains428]

If you're sitting on over 500k of debt, I think it would be worth talking to the student loan adviser. I would still shoot for under 5 years. I get the numbers that were said in the podcast. I paid mine in 16 months. No regrets.

Oh, and I would probably question any "alternative work model" that gets you to 2:1 DTI as a radiologist.

[Sergio Estavillo]

Out of curiosity, ran some numbers through my IDR calculator. I think most of the fields are self-explanatory.

Not captured is if you refi the loan. Assuming you're able to secure a 4.5% for 10 years, your monthly on $600k is $6,218 or nominal cost of $746,200. Also assuming an effective tax rate of 40% at an AGI = $300k, net after tax is $180k -> net after refi payment = $105k. Your after tax, after refi payment income suggest an aggressive repayment strategy. My thoughts...

[TravisRADMD]

Thanks Sergio. When I run the numbers I also seem to get total payments for each that are usually within short range of each other plus or minus. I've used the fed's website as well as studentloanplanner.com's calculators. Do you mind sharing your IDR calculator? is that excel? I like it lot.

[jacoavlu]

40% effective tax rate is way too high for AGI $300k

[xraygoggles]

Agree with jacoavlu, more like 35% effective, and probably even less if you are in a tax-free state.

[Sergio Estavillo]

40% effective tax rate includes federal & CA income tax, Social Security and Medicare tax. If the effective rate is too high, then additional free cash flow. This would support a more aggressive repayment strategy.

[KaxainSmile]

What types of investment opportunities do you feel you’d be missing out on? Retirement accounts? Real estate? Are you in a hot real estate market? What is the interest rate on your loans? Lots of needed information.

[xraygoggles]

40% effective tax rate includes federal & CA income tax, Social Security and Medicare tax. If the effective rate is too high, then additional free cash flow. This would support a more aggressive repayment strategy.

I live in CA, and have less than 40% effective tax with a much larger income. Pre-tax deductions help a lot.

I think he likely has more cash flow available.

[TravisRADMD]

So I'm going to refinance. I going to do a 10 year fixed refinance for the flexibility in case unexpected expenses arise but I do plan on paying at last 50-75% more than the monthly minimum payment and likely refinance into a shorter term loan in a few years if the numbers make sense. My question is how short of a pay period is required for a variable rate to make more sense?

[tylerjw12]

Commondbond offered me a 5 year fixed, 5 year variable. We don't intend to get to the variable portion.