Help with a plan of attack

[hightower]

It depends on what rate you can get refinancing. Some people are saying they’re at 0.5% or something ridiculous. If you’re able to get that low it’s essentially free money and I would take as long as possible to pay it off. If the best you can get is 4-5% then I’d probably prioritize that and pay it off in the shortest time possible pending the rest of your budget.

I personally dont like the idea of taking as long as possible to pay off student debt just because the rates are low. I would bet that 99% of people who do this would also inflate their lifestyle at the same time, do a terrible job of saving, and end up staying in debt for a very long time with little to show for it.
Student loan debt has a negative effect on net worth and your goal should be to turn that around quickly because you are behind your non-doctor peers who have been working and saving alot longer.
Nysoz could probably do it effectively because we know he’s a saavy investor but most non-wci types are not going to behave themselves.

[endo4jc]

I personally dont like the idea of taking as long as possible to pay off student debt just because the rates are low. I would bet that 99% of people who do this would also inflate their lifestyle at the same time, do a terrible job of saving, and end up staying in debt for a very long time with little to show for it.
Student loan debt has a negative effect on net worth and your goal should be to turn that around quickly because you are behind your non-doctor peers who have been working and saving alot longer.
Nysoz could probably do it effectively because we know he’s a saavy investor but most non-wci types are not going to behave themselves.

You make very valid points. I finished fellowship last year with about $240k in student loans. I refinanced to a 5 year variable with Earnest in Feb 2020 just before the Fed dropped the FFR to near 0 so my current rate is 0.41%. I initially had planned to pay it off within 2 years, but I’m now letting it ride. We are almost to 30% gross savings rate towards retirement for 2020 so I don’t feel too much anguish about it. That doesn’t include cash cash savings for home down payment and future car purchase, which probably puts us over 40% gross savings.

Nonetheless, I bet you are correct that the majority of folks would spend the money that should go to student loans.

[Brains428]

You've received a lot of good advice. The only other thing to add is- it's important to keep your head down and not listen to the noise. He'll have colleagues that spend a lot of money coming out of training and you'll have family that'll tell you to "treatyoself." Just gotta grind it out and keep the eyes on the prize. Good luck!

[wideopenspaces]

In your shoes:
80k to retirement
120k to student loans
100k taxes
100k living expenses

Done with loans in 5 years!!

[fatlittlepig]

This doesn't help but thank you.

Anytime

[drwifey]

I’m curious why you were apparently offended by flp’s comment? He brings up a valid point. What do you mean that “you can’t live your life if you dump everything into it?”
I’m assuming that right now as a resident (your husband, not sure if you also have income) your household income is a lot lower than $400k+ correct?
What he is suggesting is that you should continue to live off of a resident salary and use all the additional income he will be making to throw at the loans. You can certainly live just fine now on a residency salary, so you should be able to continue this for a few more years or more until the debt is gone correct?
I agree with his advice. If I were you two, I would pretend that your husband is not getting a raise at all until the debt is gone. Maintain exactly the same standard of living as you do now and throw all the additional income at the debt. You have a MASSIVE amount of student debt and even making $400k a year it’s still a relatively big bill.
Yes refinance if you can get a better rate, term doesn’t really matter imo because your goal should be to pay down the balance asap.
It sounds like it would be helpful for you to really sit down and look at what you’re used to spending now in relation to your current take home pay. Then calculate what you will be taking home under the new salary. Look at the difference between the two. Use that to calculate how long it will take you to pay back your loans. A tax calculator online will be necessary and you will need to tweak it a little after his first paychecks come. But I would guess you’re probably looking at 4-5 years before that debt is gone. That’s IF you do as described above. No one here can give you a more accurate guess unless you provide a lot more info.
I wish I could go back to 2010 when I was in your exact shoes and convince myself to live like a resident until the debt was gone. You’re lucky you found this site when you did so congrats

Yes this is fantastic advice. We do have a massive amount of debt (M.Ed., MPH, DMD) and have been living in a HCOL area for residency. I agree that we’re lucky I found this site (and podcast!). We knew it existed but have been bogged down in survival mode. I quit my job back in March which has given us time to reprioritize and get a plan for our future. Just bummed it took us but oh well.

We were planning on living on a resident salary which I have a spreadsheet for and our cost of living will only increase to the amount of maxing out our 401. I had a feeling we were looking at 4-5 years which is a bummer but glad I’m here to problem solve.

Nope not at all offended just genuinely not helped by the advice of taking extra shifts (full time private practice oral surgeon not interested in taking call) or questioning why I’d use the phrase when can we start living our lives. Like anyone else on here, this all comes at great sacrifice and of course there are big dreams that’ll have to wait a bit longer.

I’ll have to come back on and report back on when this massive debt is paid off!

[drwifey]

You've received a lot of good advice. The only other thing to add is- it's important to keep your head down and not listen to the noise. He'll have colleagues that spend a lot of money coming out of training and you'll have family that'll tell you to "treatyoself." Just gotta grind it out and keep the eyes on the prize. Good luck!

Yes, this is what I need to hear! Solidarity.

[drwifey]

Choose a payoff that makes the most sense for your finances. Start with his monthly after-tax salary, deduct housing, average monthly spending from 2019, and 20% for retirement. With what's left you should have a good idea of how long the repayment term should be.

My spouse graduated in 2018 with about half as much debt and similar income. I put us on a 5 year payoff which I considered aggressive but it left plenty of wiggle room. We reprioritized due everything going on in the world and made our last student loan payment this month.

Especially if you're relocating, it'll take 6-12 months to really settle in with these big numbers and start feeling confident about the best direction from your family. Always glad to see another spouse in the group, read often and stick around!

Yes, I love hearing your story! That fact about it taking 6-12 months is exactly what I needed to hear and why I wanted to post our situation. Congrats to you all on the aggressive repayment!

[SerrateAndDominate]

Being new here, you may not be accustomed to FLP's style, but he's got a point.
You sound like you're already on top of things with a budget and plan to keep lifestyle inflation down.

Absolutely look into refinancing loans. That's already too high given the current interest climate. Will add that he Laurel Road does 0.25% discount for autopay and another 0.25% for AMA (not sure about ADA), but the discount will more than pay for the membership

[Hank]

Yes this is fantastic advice. We do have a massive amount of debt (M.Ed., MPH, DMD) and have been living in a HCOL area for residency. I agree that we’re lucky I found this site (and podcast!). We knew it existed but have been bogged down in survival mode. I quit my job back in March which has given us time to reprioritize and get a plan for our future. Just bummed it took us but oh well.

We were planning on living on a resident salary which I have a spreadsheet for and our cost of living will only increase to the amount of maxing out our 401. I had a feeling we were looking at 4-5 years which is a bummer but glad I’m here to problem solve.

Nope not at all offended just genuinely not helped by the advice of taking extra shifts (full time private practice oral surgeon not interested in taking call) or questioning why I’d use the phrase when can we start living our lives. Like anyone else on here, this all comes at great sacrifice and of course there are big dreams that’ll have to wait a bit longer.

I’ll have to come back on and report back on when this massive debt is paid off!

Okay, the fact that your husband is an oral surgeon is a pretty important detail that wasn't immediately clear from your earlier posts. It also may change the calculus on paying off student loans vs. buying into, buying out, or standing up a new practice.

Is your husband an associate, or is he on a partnership track? Does he have a set price or formula to buy into the practice or buy out the existing owner(s)? Any non-compete agreement or other restrictions?

Normally it makes sense to save 20% or more of gross income towards retirement, refinance student loans, aggressively pay off student loans, and live like a resident until you retire the student loan debt. If you want to splurge a little, physicians can give themselves as much as a 50% pay raise over medical resident salaries. However, many dental specialty residents actually pay for their graduate education vs. being paid a salary as an MD/DO resident. (50% more debt per year after residency graduation clearly doesn't make sense.)

For many dental specialists, take-home pay is dramatically higher as a practice owner vs. being an employee for Heartland, Aspen, Western Dental, or some other big chain. To buy into a practice, you need to have the right amount of cash in your personal accounts, amount of experience, credit score, and whatever else the practice lending shops at the banks are looking for. Oddly enough, if you paid off $200k in student loan debt but have only $25K in the bank, you're considered a worse lending risk than someone with $75K in the bank who paid off only $50K in student loans over the same time period. The first person clearly increased net worth more, but doesn't have the liquid cash to be considered as good of a risk for a practice acquisition loan.

Save 20% of gross income towards retirement, continue to rent, see if practice ownership sooner than later will help you achieve your family's goals, and consider putting that M.Ed. to use in the local public schools. Only your family can say what makes sense for childcare, having a spouse as an office manager, or pursuing a separate career. However, a school teacher can be an excellent complementary career for a practice owner. Health insurance, pension, generous 401(k) and 403(b) contribution limits, plenty of time off in the summer, excellent subsidized or free preschool / childcare (depends on the district). Obviously a personal choice, but there are many school districts in many parts of the country where teaching is a good job on its own merits and it also lets you sock away far more money into qualified funds and use the school's health insurance instead of paying a ton to cover everyone as a small business owner.

[drwifey]

Okay, the fact that your husband is an oral surgeon is a pretty important detail that wasn't immediately clear from your earlier posts. It also may change the calculus on paying off student loans vs. buying into, buying out, or standing up a new practice.

Is your husband an associate, or is he on a partnership track? Does he have a set price or formula to buy into the practice or buy out the existing owner(s)? Any non-compete agreement or other restrictions?

Normally it makes sense to save 20% or more of gross income towards retirement, refinance student loans, aggressively pay off student loans, and live like a resident until you retire the student loan debt. If you want to splurge a little, physicians can give themselves as much as a 50% pay raise over medical resident salaries. However, many dental specialty residents actually pay for their graduate education vs. being paid a salary as an MD/DO resident. (50% more debt per year after residency graduation clearly doesn't make sense.)

For many dental specialists, take-home pay is dramatically higher as a practice owner vs. being an employee for Heartland, Aspen, Western Dental, or some other big chain. To buy into a practice, you need to have the right amount of cash in your personal accounts, amount of experience, credit score, and whatever else the practice lending shops at the banks are looking for. Oddly enough, if you paid off $200k in student loan debt but have only $25K in the bank, you're considered a worse lending risk than someone with $75K in the bank who paid off only $50K in student loans over the same time period. The first person clearly increased net worth more, but doesn't have the liquid cash to be considered as good of a risk for a practice acquisition loan.

Save 20% of gross income towards retirement, continue to rent, see if practice ownership sooner than later will help you achieve your family's goals, and consider putting that M.Ed. to use in the local public schools. Only your family can say what makes sense for childcare, having a spouse as an office manager, or pursuing a separate career. However, a school teacher can be an excellent complementary career for a practice owner. Health insurance, pension, generous 401(k) and 403(b) contribution limits, plenty of time off in the summer, excellent subsidized or free preschool / childcare (depends on the district). Obviously a personal choice, but there are many school districts in many parts of the country where teaching is a good job on its own merits and it also lets you sock away far more money into qualified funds and use the school's health insurance instead of paying a ton to cover everyone as a small business owner.

Really good thoughts. Yes he is an oral surgeon so his earning potential is there but I just wanted to start with those base numbers because we aren’t there yet. We have a sweet setup for partnership which was intentional after learning from peers graduating before him go in with a single doc or take out loans for partnership. So we’re all set there but came here to get those reinforcement details or todos like “20% towards retirement, continue to rent, give yourself a small raise," etc. Thank you. I can see how easy is it to inflate your lifestyle at first.

You know I will say that I’ve supported us through the world of education for the past 9 years and there will definitely be a time and place for me to return to the workplace. Completely agree about teaching being a strong retirement setup. We’re moving across country and had two babies in 2.5 years (and one of us wants another), and with my husbands surgical schedule and no family in town, I’m delighted to be able to put family first and take care of all the details in getting us settled. Chief year has been worse than intern year so this was hands down a great decision for our mental health and future planning. I also have a lot of wealth training to do

[drwifey]

Being new here, you may not be accustomed to FLP's style, but he's got a point.
You sound like you're already on top of things with a budget and plan to keep lifestyle inflation down.

Absolutely look into refinancing loans. That's already too high given the current interest climate. Will add that he Laurel Road does 0.25% discount for autopay and another 0.25% for AMA (not sure about ADA), but the discount will more than pay for the membership

This is great, thank you!

[Budgetmaestra]

So you have an absolutely shocking amount of student debt. I know lots of people have student loans but yours are extreme. I usually tell people with $300k student loans they are massively in debt and need to focus and continue living like residents. Those will be a weight around your neck for a long time unless you go aggressive into them. Those student loans are so large that you may be in a debt cycle where money is tight for the rest of your life unless you attack them now. Attacking them in five years will only be harder. You have to do it now.

I’d first refi into a low rate. I’d also max pre-tax retirement accounts.

Then I’d increase your current budget by 30% (so if you were living off of $4/month now it will be $5,200). That still means rent a small apartment, keep using older cars (no new mini-van), no new furniture, or fancy clothes or gadgets. Everybody gets “one hill to die on” and yours seems to be you staying at home, so that means everything else is on the chopping block. All signing bonuses, bonuses, tax refunds, inheritances or other windfalls should go to clearing that debt.

Live like that for 3 years and aim to pay down at least $150k per year, but preferably $180k. ($15k/Month). In three years the majoritet of those plans are gone. Even if you do it for only 2 years at $180k that’s half of your debt.

Dh and I paid down more than $230k of student loans within 11 months of him graduating on a similar base salary, with two little kids. I work so we also paid daycare. All signing bonuses, a smaller inheritance, small profit from a house sale, money from
working extra shifts, etc went to student loans. We even drove our moving van ourselves and sent the $7,500 relocation stipend to student debt.

[drwifey]

So you have an absolutely shocking amount of student debt. I know lots of people have student loans but yours are extreme. I usually tell people with $300k student loans they are massively in debt and need to focus and continue living like residents. Those will be a weight around your neck for a long time unless you go aggressive into them. Those student loans are so large that you may be in a debt cycle where money is tight for the rest of your life unless you attack them now. Attacking them in five years will only be harder. You have to do it now.

I’d first refi into a low rate. I’d also max pre-tax retirement accounts.

Then I’d increase your current budget by 30% (so if you were living off of $4/month now it will be $5,200). That still means rent a small apartment, keep using older cars (no new mini-van), no new furniture, or fancy clothes or gadgets. Everybody gets “one hill to die on” and yours seems to be you staying at home, so that means everything else is on the chopping block. All signing bonuses, bonuses, tax refunds, inheritances or other windfalls should go to clearing that debt.

Live like that for 3 years and aim to pay down at least $150k per year, but preferably $180k. ($15k/Month). In three years the majoritet of those plans are gone. Even if you do it for only 2 years at $180k that’s half of your debt.

Dh and I paid down more than $230k of student loans within 11 months of him graduating on a similar base salary, with two little kids. I work so we also paid daycare. All signing bonuses, a smaller inheritance, small profit from a house sale, money from
working extra shifts, etc went to student loans. We even drove our moving van ourselves and sent the $7,500 relocation stipend to student debt.

Yes it's horrifying truly (some of his college, his expensive grad program, my master's degree, out of state dental school). We won't have this inheritance of which you speak and yes I'm lucky that I can stay home (a decision we made together). We'll be able to do at least 15k a month on the budget I have set for the coming years and more depending on production. That's impressive how quickly you knocked out 230k! Congrats.

[Budgetmaestra]

Yes it's horrifying truly (some of his college, his expensive grad program, my master's degree, out of state dental school). We won't have this inheritance of which you speak and yes I'm lucky that I can stay home (a decision we made together). We'll be able to do at least 15k a month on the budget I have set for the coming years and more depending on production. That's impressive how quickly you knocked out 230k! Congrats.

That’s great to start with the $15k in your budget. Anything extra coming through the door also gets paid to that debt. If his production numbers are good you may be able to knock it out entirely in 3.5 years.

If you have several different loans it is very satisfying to knock them out one by one. Life gets easier for every loan you can check off your list.