MS4; Loans: $175k Govt; $155k Private; 6 years of training: What to do?

[whattodo]

My title just about sums up my situation. I am heading into a speciality with an anticipated attending salary of $200-450. I am unsure about my plans re: remaining in academics vs private practice. The 200k salary represents academics right after fellowship, and the 450k represents a private practice salary 4 years out from fellowship. Of course, who can predict the salaries of a decade from now.

My private loans are deferrable during residency and fellowship (they are something like 7%); I am also open to refinancing them. What would your plan be for this mix? My school gave me 10k per year of their own loans in lieu of government loans, and I am just realizing how much this screwed me.

I am thinking of PAYE for the government loans on the chance that I remain in academics and have them forgiven. Still, liquidity is important because I hope to have a child and support a spouse at around year three of residency. I am thinking PAYE (as opposed to REPAYE) because my spouses and my combined income will be between 100-110k for the first 2-3 years of residency.

Any particular insights or thoughts come to mind about the most effective way to approach paying this debt mix?

[jsr52]

Money can't buy happiness. Can't remember where I've read this, maybe WCI posted about it before but humans get no added happiness benefit after a salary of >70,000 or so. Yeah, I know hard to believe. Moral of the story is, if you have a passion to teach or want to pursue a career in research go into academics and you'll likely qualify for PSLF. If you don't go into practice in the community. You probably didn't go to med school for money, so don't choose your career based on money. I'll let the others touch more on the loan strategy.

[The White Coat Investor]

I just read the title, but it's screaming PSLF.

[Dreamgiver]

It will be very hard to support your wife and a child on a resident's income and that loan burden (it will be close to 500K but the time residency is over). Perhaps your wife can keep working in some capacity? Budgeting is going to be everything for you, knowing that you will be able to barely keep up with interest during residency if you are serious about it. Who knows what will be of PSLF by the time you are done...

[StarTrekDoc]

#1:  Choose the specialty that you're going to be happy in; not the rich specialty.  Otherwise, you'll be unhappy and high burnout risk no matter your situation.

#2:  Determine with wife where long term plans (residency, post residency) are in location and careers for both along with family.

#3:  Things change in residency.  People go in looking to subspecialize or general practice and end up flipping; others enter with PhD/Dual degrees in mind, but go the other way; others change residencies entirely --- all these situations can happen.

#4:  Refi is a potential, but do consider alternative options -- military if that appeals is a potential;  WCI stated:  PSLF is an option and need to be aware of that with refi

 

You'll be fine during residency with the level of income and deferring payments or minimal payments.  Even on the low end of academic (200k is VERY low end) you'll be x2 annual debt salary and that's tolerable with ability to dig out in 10 years and ~5 years if PSLF remains available (or other form of loan forgiveness).

[jsr52]

PSLF will be on the table for you. If any changes are made to the program it will impact new borrowers,
Or old borrowers who haven't transferred their loans to the fed.

Where you end up living will also have a huge impact on how much you can throw at loans.

[adventure]

Dreamgiver wrote:

It will be very hard to support your wife and a child on a resident’s income and that loan burden (it will be close to 500K but the time residency is over).

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Respectfully, I disagree. Residents don't have to pay back loans, and seems like they're pulling in 110k/year. That's plenty. You can even support a family of 3 on 60k/year. That's not unreasonable by any stretch. Also, worst case, the extended graduated repayment plans make the early payments really low.

Go for PSLF. Pay the loans back when you are an attending if PSLF doesn't fit. Don't worry about PP/academics now - too many variables looking 7 years down the road. I'd save as possible, both for an emergency fund, a getting started with a kid fund, a m/paternity leave fund, and if there is extra, you have it around to use on any non-PSLF loans.

[whattodo]

Thanks for all the responses, I really appreciate it. We do actually have a $40-50k emergency fund that sits in an account with a guaranteed 4% interest rate. I didn't mention it at first because I didn't want to throw off the discussion about whether to use it on private loans now, because liquidity is important to us. As a non-trad, we want to have the option to have a kid sooner than later if we choose (having a kid is a personal priority over the absolutely fastest way to pay off the debt).

It sounds like the best plan for us is to sign up for PAYE to avoid incorporating my spouse's salary for the first 2-3 years until she stops working. Also, possibly refinance the private loans, if the minimum monthly payment is low enough, or simply defer them until I'm an attending, and attack them then.

[jsr52]

Emergency funds seem to be getting bashed on this forum and rightfully so. I was about to start one a few months back and decided eh not worth it as a future high income earner. A decent credit card can get most physicians out of an emergency, and most can pay it back the next month and avoid any interest. We are fortunate enough to be in a field where long term job security is excellent. The 4% interest rate on that account is nice, but if your planning to spend this money in the future for say a home down-payment, then its not really an emergency fund, its a saving account.

[whattodo]

Ah, yes. The money is not intended for an "emergency". It is specifically intended as a baby/spouse staying home fund. I have always interpreted the term "emergency fund" as a generic term for a pile of money, but I see that is not accurate.

[StarTrekDoc]

whattodo wrote:

Ah, yes. The money is not intended for an “emergency”. It is specifically intended as a baby/spouse staying home fund. I have always interpreted the term “emergency fund” as a generic term for a pile of money, but I see that is not accurate.

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That's a pretty safe bet --  baby drains A LOT and puts a very different perspective into life priorities when they arrive.

[Golfing Doc]

where are you getting a guaranteed 4% interest rate?

[whattodo]

Here:

 

https://www.myconsumers.org/personal/checking/free-rewards-checking

 

You have to play these little games, but it's worth it, especially if you have an account in your spouse's name as well. You get a guaranteed 4.59% on $20k in your account if you use your debit card 15x in a month (buy 15 Amazon gift cards in a row), spend 1k on a CCU credit card in a month (I used to do a lot of manufactured spending, so this is where you buy 2 $500 visa gift cards at Kroger, take them to the customer service counter and buy a 1k money order to deposit in your bank account), and get some sort of direct deposit (you can also just set up your ally account to deposit $200 and withdraw $200 every two weeks to forget about this). It's probably too much hassle for two physicians but my spouse has time to run about and do this kind of stuff during the day. Probably an hour of work each month for both accounts and it adds up to 2k per year in interest. There are a bunch of other similar guaranteed interest checking accounts all there, all with similar schemes.

[StarTrekDoc]

Yes!  Days of Paypal back in the day had things like that and days of Manufactured Spending to get points on cards for travel   That's a good and easy one to maintain, just have to make it a habit.

[Dreamgiver]

adventure wrote:

Dreamgiver wrote:

It will be very hard to support your wife and a child on a resident’s income and that loan burden (it will be close to 500K but the time residency is over). 

Click to expand…

Respectfully, I disagree. Residents don’t have to pay back loans, and seems like they’re pulling in 110k/year. That’s plenty. You can even support a family of 3 on 60k/year. That’s not unreasonable by any stretch. Also, worst case, the extended graduated repayment plans make the early payments really low.

Go for PSLF. Pay the loans back when you are an attending if PSLF doesn’t fit. Don’t worry about PP/academics now – too many variables looking 7 years down the road. I’d save as possible, both for an emergency fund, a getting started with a kid fund, a m/paternity leave fund, and if there is extra, you have it around to use on any non-PSLF loans.

Click to expand...

My comment was in reply to the OP's statement about his spouse quitting work around year 3 of residency