Soon to be resident, high income spouse, lots of loans

[nate1025]

I have what is turning out to be a rather complex financial picture and was hoping the experts here might be able to offer some help.

I am an M4 planning on going into family medicine. I have about 350k in federal student loans average rate is probably around 6%

My fiancé (wife in 2 months) is a pharmacist. She is currently working and will continue to work. I estimate her gross will be in the 140 range. Likely a little higher this year but when we move for residency I expect it to go back down to 140. She has 13k in federal student loans at 3.5% and 80k refinanced with SOFI at 5%.

I am going to train in a rural area and will with all likelihood remain in the same rural state and practice in a rural location (This is by choice - not desperation/financial reasons). Many of the jobs I see are likely to be PSLF eligible if it remains. My plan during residency (estimated combined gross of 190k) is to aggressively pay down her SOFI debt than start piling up cash in the event that I do not go down a PSLF track. I know I am losing some potential interest savings by not paying down (modest) principle and that I will also have negative amortization during this time on my loans.

The problem I am running into is I don't know what is the optimum repayment and tax strategy for our situation. I could go on REPAY but her income will drive up my payment and the 1500/month in payments to SOFI as far as I understand will not be taken into account when it comes to determining 10% discretional for REPAYE. I could go on IBR (I am not PAYE eligible) and we could file separately - but we lose the tax benefits of married filing jointly (not a whole lot in our current financial situation but will grow as our income/family grows) and I am on the hook for 15% still significantly less since it only accounts for my resident salary. The chief problem with this plan as I see it is if I do not go down a PSLF I have gotten murdered on negative amortization in IBR since I've been paying less and not getting any interest subsidy. I would likely end up switching from IBR to Repaye as I transition to practice as the tax implications are more significant, and the 10% vs 15% makes a big difference as I become the greater earner.

Sorry for the text wall - hoping for input on this and any advice. I've done the math - I know either way we do well in the long term but man is this debt keeping me up at night.

N.B.: I have considered just not getting married - but for a myriad of reasons I don't think that is an option for us.

 

[VagabondMD]

I do not have an answer to your question, but the hair on my neck stood up when I read that you had $350k in debt and were going into family practice. While your plan to stay in a rural area, get PSLF, etc. all sounds great, but plans change, and a $350k debt load on top of a family practice career path means that you will have limited opportunities-- buying a house, moving, growing your family, your wife's job opportunities, your wife perhaps interested in going part time, etc., to say nothing of early financial independence, changing career paths due to burnout, illness, or other things that might come up.

 

[akwho]

Vagabond MD wrote:

I do not have an answer to your question, but the hair on my neck stood up when I read that you had $350k in debt and were going into family practice. While your plan to stay in a rural area, get PSLF, etc. all sounds great, but plans change, and a $350k debt load on top of a family practice career path means that you will have limited opportunities– buying a house, moving, growing your family, your wife’s job opportunities, your wife perhaps interested in going part time, etc., to say nothing of early financial independence, changing career paths due to burnout, illness, or other things that might come up.

 

Click to expand...

I think that is a little harsh.  FP in a rural area can get 230k easily after 3 years of residency.  Add 140k for a pharmacist salary and you have 370k/yr in earning power vs 443k in debt.  That's extremely manageable especially in a low cost of living area.  They should be able to have that paid off in under 5 years.

 

I wouldn't do REPAYE with a high spousal income because your monthly payments will be so large you won't benefit significantly from the interest subsidy.  You should probably be looking at PAYE and possibly refinancing with your large combined income.

[nate1025]

Thanks for the response. While VagabondMDs post isn't really useful for me (ships have sailed as they say) it might be helpful for people earlier in training and I think is a good reminder that going to medical school automatically catapults you into making big league financial decisions. I have also had to make peace with the fact that I am going to have do lots of locums/side work as least for a few years coming out of residency to be able to make up for lost years of retirement savings and such to meet other financial goals (which does include financial independence by our mid to late 50s).

 

I am hoping to clarify if we can file jointly for 2017 and then use documentation of my income for IBR (I am not PAYE Eligible) when my loans go into repayment in November of 2018. My intuition is that even if I have to pay based on both incomes for 3 or 4 months until we file 2018 taxes married filing separately then recertifiy we come out ahead for this year (I had zero income) but I don't want to screw it up either. My colleges financial aid folks have basically said they don't know.

[adventure]

I'd recommend you also consider "just paying" for the loans. I'd do that in this manner:

1. refi her loans with Sofi (or other) (again). I'd think you could get a lower rate than 5%.

2. Remember you can pay for loans with a combination of:

• salary


• starting bonus


• other bonus


• https://nhsc.hrsa.gov/loanrepayment/


• state or other local loan repayment options (https://www.ruralhealthinfo.org/funding/types/loan-repayment-programs

Can you guys just set the loans at a 10+ year repayment schedule and start making some progress on them during residency? I know we did. Once residency was completed, we shortened the repayment schedule to better tackle the loans, and use the increased cashflow.

There are lots of FP jobs, in rather rural places that can command serious salary. Add in some ED coverage, or nursing home rounds, and you can have some serious cashflow.

... and on a different note, make sure you set some time and money aside to enjoy the wedding, time with family/friends, and time/meals/adventures with each other. Congrats on that!