Student Loan Pay Off - How Quickly?

[Med0000]

I think it would be interesting for those that have aggressively paid down their student loans to share their path to ZERO. I am trying my best to live frugally until they are GONE.

Original: $270k

Year #1 $196k

Year #2 $120k

Year #3 $69k (as of today) - expect to be at ZERO by end of year!

 

Anyone else aggressively paying their student loans off?

 

[wideopenspaces]

I went to med school in Texas, so tuition was pretty cheap. And my husband was working full time. So I only took out 70k. And 20k of that was to pay off the 20% of our 80/20 loan we used to buy our first house because the interest rate was something like 13% and student loans were at 6% ish. Looking back, that was crazy! Who lets people buy houses with nothing down? But it worked out well for us. I paid the interest and a little principal every month from the time we took out our first student loan, so the principal never grew. When we sold our house to move for residency, I paid back that 20k, plus some because we made about 18k on the sale of the home. Then we kept making payments in residency and within 6 months of graduating from residency, it was all paid off. It's a great feeling, that's for sure! You've worked really hard, can't wait for you to finish them off!

[OralMaxillofacial]

Went to dental school and medical school.  Paid off before I left residency.  Wife income wasn't crazy (all dentists and physicians will out earn her).

Beginning (Fresh DDS grad) - $215k loans

Tuition for MD - $48k paid in cash over three years out of wife income

Paid all debt 4 years after graduating dental school.  Total payments about $300k.

 

No kids

 

Didn't buy a home

 

My car is cheaper (but actually newer) than all the assistants and residents I worked with in residency.

 

We used "snow ball method" and paid smallest loans first since it was more exciting that way.  Subsidized were last though.  The math is close enough when you get rid of loans quickly though.  Interest rates were 6.8-8.6%.

 

[ACN]

Another question.  I recently refinanced with Link Capital and thus have teh $0 payments in residency.  Should I start electively paying $100-200 in interest payments per month to keep it from capitalizing at the end or just save the extra money and go party?  8-)

[conniebird]

I'd like to know at which interest rate do peeps  suggest paying off loans aggressively?

 

I have loans at:

~10K @ 5% - paying this off this year

~$30K @ 4% - paying off with 2-3 years

the rest - 150K ish K at 3.5% and less, like 1.75%, so not in a hurry here.

[EDDOCMOM]

I am 3 years out of residency, only took out loans for Med School and had about $280,000, + husband's undergrad loans so total >$300,000.  Will be paying off loans by middle/end of 2017 (4 years out).  Most of my loans were at 6.8% but just refinanced at 2.75% for $187,000 of that.  Following the snowball and Dave Ramsey plan (somewhat modified) and plan to pay off mortgage in 10 years.  Both cars paid for (one in cash but it was cheap, did buy a new mini-van and have learned our lesson but paid off in 17 months at 0.9%) and not planning on any big events/trips until student loans are gone.  Hoping to then relax a little bit.  Husband currently stays home with the kids, in 4 years planning on going back to work and earn $70,000+ at that point. Can't come soon enough - it's tiring!

[Zaphod]

EDDOCMOM wrote:

I am 3 years out of residency, only took out loans for Med School and had about $280,000, + husband’s undergrad loans so total >$300,000.  Will be paying off loans by middle/end of 2017 (4 years out).  Most of my loans were at 6.8% but just refinanced at 2.75% for $187,000 of that.  Following the snowball and Dave Ramsey plan (somewhat modified) and plan to pay off mortgage in 10 years.  Both cars paid for (one in cash but it was cheap, did buy a new mini-van and have learned our lesson but paid off in 17 months at 0.9%) and not planning on any big events/trips until student loans are gone.  Hoping to then relax a little bit.  Husband currently stays home with the kids, in 4 years planning on going back to work and earn $70,000+ at that point. Can’t come soon enough – it’s tiring!

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You paid off a 0.9% loan early? Thats like below inflation, like you're being paid to keep your money, I dont consider anything under inflation a loan, its a gift. Obviously, I have very different views about this kind of thing, which is why this place is great.

[Joseph]

I paid off student loans very aggressively.  In fact, it was the topic that led me to meeting WCI (EmergDoc) when he commented on the thread on Bogleheads. The rest has changed my life.

My student loans were at 2% but they are no more.

[NaOH]

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[conniebird]

I think WCI recommends paying off anything above 4% aggressively, I can't recall the exact % tho.

[drdeus]

I'm in my second year out of residency. Between my wife and I (also an MD), we had around 250k in student loans when we left residency. I'm currently down to 140k (refinanced last year with SoFi through WCI) and hope to pay them off completely in the next year or so. Our plan has been to pay the bills, then fully fund each of our 401k's, then each fully fund a backdoor Roth IRA, then the rest goes to student loans until they are paid off. After that, we will try to pay down the mortgage and refinance from 30yr to 15yr and invest more. I hate my student loans, so even though they are a low rate (I chose variable 10 year), I want them gone. If anyone has other suggestions as to how we should be attacking the finances, I am happy to listen!

[MaxPower]

Graduated from fellowship 1.5 years ago and entered repayment with $256k of medical school loans. About $105k was at 2.875 and 4.25%, and the rest was at 6.8%. Refinanced the latter to a 10-year variable loan with DRB.

Also left fellowship with a $90k stipend to pay back (didn't take a job at an HCA facility--that's another story altogether but involved them never replying to several times i applied to one of their open positions). With a stay-at-home mom spouse, and 3 kids by halfway through residency, we were able to do Roth IRAs for both of us for all 6 years (including fellowship year) and 529s for the kids totaling $40k. Paid this back in the first year with sign-on bonus money and part of first year attending salary.

At end of 1 year: $230k

Currently (1.5 years post residency): $198k

At current rate, should be able to pay off variable rate loan in another 20 months or less depending on productivity bonuses.

Would then be able to pay off the other fixed rate loans (if we wanted) in another 20 months (or less, again depending on productivity bonuses), or invest some in taxable accounts and slow the payoff rate of the lowest rate loan.

Doing this while maxing out 403b, 457b, family HSA, Roth IRA (backdoor) for wife and I, and putting about $8k per year towards kids 529 (we get a state deduction).

We also have a 15 year mortgage so theoretically will be entirely debt free in another 13.5 years, if we don't accelerate the payoff even more by snowballing all the student loan monies into the mortgage. Lots of options, to be sure. Will probably split the difference between mortgage payoff and taxable investing.

[PhysicianOnFIRE]

Congrats to all who are working hard towards paying down the loans, and to those who are finished.  Paying down debts over the last 18 months or so has been a good bet.  Money in the markets hasn't outperformed the guaranteed return you've gotten by paying down even a low interest loan.

I refinanced during residency and later paid off both my wife's loans and my own after making regular payments for about 7 years.  In hindsight, it worked out well, the market did pretty well while I maintained the low interest loan.

Being debt-free is wonderful.  The psychological benefit of reducing debt can trump the risk that money in the markets might do better.

 

 

[The White Coat Investor]

conniebird wrote:

I think WCI recommends paying off anything above 4% aggressively, I can’t recall the exact % tho.

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It's different for everyone, but if you're not paying off loans aggressively, I think the money that would be paying them off aggressively should be invested aggressively. i.e. even if you have a low interest rate, you should still be living like a resident for 2-5 years.

I paid my "loans" off in 47 months from residency graduation. I owed 48 months, but saved up a month of "terminal leave" to get out from under that obligation as soon as possible. Trust me when I say there are worse things to owe to another entity than money. We upgraded our lifestyle a bit after 4 1/2 years, then markedly after 8 years. That change matters a lot more than when the loans are technically gone since whether the money goes toward investments or toward paying down debt, it is still building wealth.

[Diggidy]

I'm a 4th year medical student, planning on going into Orthopedic Surgery (We'll see come March 18th, I guess).

I have 230,000$ of federal loan debt -- now obviously since 2013 congress adjusts interests rates based off the 10 year treasury rate, so adding each individual year together, my cumulative interest rate on that 230K in 6%. I have no other debt to speak of.

I wanted to run my plan by you all:

1) Enter into REPAYE during residency & fellowship to take advantage of interest subsidization, which should lower my effective interest rate to ~4%.

2) Pay 2500$/year towards interest (~200$/month) to take advantage of the above the line deduction on interest paid towards federal loans.

3) Open a Roth IRA through Vanguard and invest remaining money into an aggressively positioned, diversified fund (I've been looking at the LifeStrategy Growth fund (VASGX). My finances will be quite a bit different depending on where I end up as far as cost of living is concerned, as well as resident salary; however, I hope to make the full 5500$ contribution if possible. Depending on other finances, I might have to contribute less to the Roth for the first few years while I build a decent emergency fund; although, given my future income in Ortho placing me into the highest tax bracket, I really want to take full advantage of the Roth while my tax rate is low.

 

Opnions?