PSLF, yet saving and living like a resident

[canadianoutlaw]

In a recent post on student loans, WCI states "Step 4 is to live like a resident until the loans are gone. Even if you expect PSLF, live like a resident anyway until you save up enough money on the side that you can pay off the debt in case PSLF goes away (or is capped) and you aren’t grandfathered in."

 

If you are pursuing PSLF for a significant loan burden, what do you think is the best approach for saving "up enough money on the side" just in case? What investment vehicle/account, etc would you guys recommend for this sort of thing?

(250K in loans, pursing PSLF, interest rate 7%, 5.5 years left to reach PSLF after residency, borrower and spouse in high paying specialties)

 

 

[Psyched]

I'm no expert, but I would personally want to have enough cash put aside for those loans + all the interest accumulated in another 5.5 years minus the payments you will be making after residency. As for the approach, I would think that the safest place would be the highest interest savings account available, in case the market tanks....

Just my two cents as always, but....

 

I am not sure if would put that money aside if I were you and bet on forgiveness being around.

1)ZERO physicians have cashed in on this yet-just imagine the reaction by the media/public if those in the top 1-5% of earners get hundreds of thousands of dollars forgiven?

2) if you and your wife are both in high paying specialties, is it REALLY worth it to bet on the above and commit both of you (if you both owe money, that is) to working full time and for a 501c? Especially if kids, etc are in your future-who knows if one of you may decide to ramp down your hours, etc for several years. If you both work on your credit scores and refinance for a much lower rate, you could easily pay those off in a few years if you are both making a lot of money.

Keep in mind that I hate having any kind of debt, just my thoughts though....best of luck!!

[canadianoutlaw]

Def hear what you are saying here. We will finish residency after the first wave of brave PSLF participants have had a chance to test the system. Hopefully there will be a precedent set before we enter the workforce and have to chose definitively whether we go for PSLF versus refinance.

The current approach is to stay in the IBR programs during residency. Then when we enter the work force and choose the jobs that will give us the most happiness. If they happen to be 501c jobs, then great, we will pursue PSLF. If not, then we will immediately refinance and aggressively pay back loans.

Placing several 100k in a savings account for ~5 years would be a conservative approach, but does make sense. High-paying specialties increases the tolerance for risk somewhat, but certainly wouldn't want to take on too much risk with that side fund. Thanks for you thoughts!

[The White Coat Investor]

I'd invest it aggressively in a taxable account. I mean, I think you'll probably be grandfathered in even if it changes and I don't think letting a couple hundred thousand sit around in cash for five years is wise. This all assumes you're maxing out your tax-advantaged accounts.

[Noah]

October 2017 is the date to watch when the first wave of forgiveness happens. Public reaction, program changes, and potential for grandfathering are all causes for some anxiety.

[The White Coat Investor]

Noah wrote:

October 2017 is the date to watch when the first wave of forgiveness happens. Public reaction, program changes, and potential for grandfathering are all causes for some anxiety.

Click to expand...

I think it'll take some time. Congress doesn't act rapidly. I'd say anyone getting forgiveness in 2017 or 2018 has zero to worry about.

[Zaphod]

The White Coat Investor wrote:

Noah wrote:

October 2017 is the date to watch when the first wave of forgiveness happens. Public reaction, program changes, and potential for grandfathering are all causes for some anxiety.

Click to expand…

I think it’ll take some time. Congress doesn’t act rapidly. I’d say anyone getting forgiveness in 2017 or 2018 has zero to worry about.

Click to expand...

Especially considering the first group will be as a new president and staff is being moved in, etc....no one is likely to be focused highly on the pslf.

[Bonez]

If you're both going into high-paying specialties you also have to consider the following scenario. You both get done with residency and get job offers in private practices making $100+k more than a hospital-employed position at a 501c. Its hard to forecast how much your income potential will be when you get done with residency, but I know people who graduated from my program that are making over $300k more per year than their co-residents who took jobs at non-profit academic centers. I'm sure there was a lot more going into their decision than just the money, but I'd hate to have to bank on being able to get an acceptable job at a non-profit hospital just so I could have my student loans forgiven.