Announcement

Collapse
No announcement yet.

Refinancing public loans slowly?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Refinancing public loans slowly?

    Hey all

    heres our background. Dual physician household both early in our careers. Household income is about $650k, household student loans 1.1 million, 900k is public. Neither of us are planning on going for PSLF, we do have a written financial plan allocating $18k per month to student loans and one of us is getting 100k in loan “assistance” from a local hospital.

    Now for the question: we are both thinking about starting with refinancing 100-200 from public loans to private each and aggressively paying that down. The mathematical answer if that’s not a great decision based on interest rates, but given the huge overall amount we both feel that keeping some public may
    mitigate risk of future unknowns. Our thought is to refinance the rest after a year or two once the total sum is more manageable.

    I’d love to hear anyone’s thoughts on this strategy.

  • #2
    What kind of thing happening in the next two years are you worried about, that it would be better to have public loans? Death of one of you? Presumably you have adequate life insurance to mitigate that risk.

    I would refi it all now.

    Comment


    • #3
      Yea, I have no clue what risks you are mitigating by keeping significant public loans beyond the 0% time period. I mean, maybe I understand that if you were talking opposite set up - refinancing 800k and keeping 100k public, but even then I'm struggling to understand exactly what risk you are accounting for.

      Comment


      • #4
        Re risk mitigation the big thing we were thinking about was if either or both of us had a job change that drastically changed our income for the worse then at least the public loans could be paid under an income
        driven plan. It’s unlikely for our income to worsen but both of us are new to our positions within the last couple months and we’re also taking into consideration other physicians experiences during the pandemic

        Comment


        • #5
          If you refinanced $1M at a 3% rate for 10 years, your monthly payment is around $9600 a month. Hefty but still doable on half your household income if you scrape the barrel.

          If you did refinance just a part of it, the mathematically sound part would be to just make the minimum payment on the lower interest refinanced loan and pay back more of the principle of the higher interest loan. Then refinance the rest whenever you felt comfortable.

          But another vote to just refinance it all and live like residents or even students until it's more manageable.

          Comment


          • #6
            Originally posted by AppalachianMDs View Post
            Re risk mitigation the big thing we were thinking about was if either or both of us had a job change that drastically changed our income for the worse then at least the public loans could be paid under an income
            driven plan. It’s unlikely for our income to worsen but both of us are new to our positions within the last couple months and we’re also taking into consideration other physicians experiences during the pandemic
            The risk of you both getting fired I think is relatively low and not worth the cost of delaying refinancing $1M. I would also frame the situation as one where you can’t afford to voluntarily change your job and take pay cut due to the debt burden.

            Comment


            • #7
              I'd private refinance these to a 15 or 20 year term. Rates are super low right now and they might not stay there forever. Then you can make prepayments (or more than the required monthly payment) and private refinance again and again later down the road whenever you can get lower rates.
              Helping student loan borrowers manage their student loans. StudentLoanAdvice.com. [email protected]

              Comment


              • #8
                The “risk” a 2 physician couple faces is in your financial plan. As you mentioned, the Efund would cover this. Brings up the next question,
                Efund with low returns vs paying debt? You don’t have to be FI to have an Efund that makes you comfortable. Solve that and then the math is straight forward. I would suggest building Efund rather than front end debt crushing be considered.

                Comment

                Working...
                X