Loan question

[confettiflyer]

Don't even bring up the federal housing administration (FHA). They may need a government bailout soon:

http://www.nytimes.com/2012/12/13/business/study-shows-a-pattern-of-risky-loans-by-fha.html

Since the FHA is losing money, they are going to tighten their standards:

http://online.wsj.com/article/SB10001424127887324407504578187780598179510.html?mod=googlenews_wsj

They are going to require more down payment and increase insurance premium.

Oh you and your government agency collapse theories, I'm beginning to think you're a bit paranoid.

Standards have already tightened, anyway (look up exclusion rules).

I can't believe people would buy a house with just 3.5% down payment. You are going to pay a lot more interest and with insurance premium, your monthly payment is going to be much higher. No wonder these people can't pay their mortgage and FHA is losing money.

Yah PMI, but that goes away once your LTV is 80%.

But yup people use these loans...a lot. My friends just put $5000 down payment on a house in Vegas. Dirt ass cheap...but the key there is buying was cheaper than renting, so technically they put themselves in a better position financially.

BTW, the "house" you posted is not really a house. It's a condo/townhouse which means you will have to pay HOA fee (average $200-500 per month) depending on the location.

It's classed as an SFR (not a condo or a PUD). Just saw the HOA dues now, hypothetical pharmacist can still afford it since I was conservative on my calcs originally (or just eat out less, i dunno).



Sooooo.....do you still think the indebted pharmacist can't afford a nice home in LA County? Unless your definition of nice = 10 room McMasion with SHC's purses taking up a whole walk-in closet.

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Members don't see this ad.

 

[confettiflyer]

The defination of AFFORDING is paying off the house, car, etc.

You can't afford it unless it's pay off.

Over what time period?

 

[confettiflyer]

This thread is like herpes.

No matter how bad you want it to go away it just keeps coming back.

 

[BMBiology]

Oh you and your government agency collapse theories, I'm beginning to think you're a bit paranoid.

Did you even read the article? The government just bailed Fannie Mae and Freddie Mac.

Man, you are a pharmacist and you need government subsidies to buy a house? You can't even save 20% down payment for a house? So, you are willing to pay more interest and require to buy insurance premium?

You can't "afford" to buy something when you can only put down 3.5%. I don't care if it is a house, car or that nice TV you wanted. You can't afford it.

That's what I mean when I say a pharmacist who owes 200K in student loan is not better than a college graduate who makes 45K a year but doesn't have any student loans.

People, who are in debt, are always looking for shortcuts and loopholes. They end up borrowing more money and are more in debt.

 

[confettiflyer]

Did you even read the article? The government just bailed Fannie Mae and Freddie Mac.

Yup. So what they got bailed out? They're quasi-governmental anyway, it's like the dang post office. I wouldn't call it a bailout as I would call it "paying the bills."

Man, you are a pharmacist and you need government subsidies to buy a house?You can't even save 20% down payment for a house? So, you are willing to pay more interest and require to buy insurance premium?

Who me? I'm doing the 20% thing once I figure out where I want to live.

That's what I mean when I say a pharmacist who owes 200K in student loan is not better than a college graduate who makes 45K a year but doesn't have any student loans.

Well now we're off the financial talk here...we're getting into job satisfaction, areas of interest, and all that other intangible stuff. The #'s still pan out when you have a potential 30+ years in the workforce.

 

[nafcillin]

This thread is like herpes.

No matter how bad you want it to go away it just keeps coming back.

I started this little gem. All of a sudden everyone is a financial expert : D

I am semi obsessed with my loans. I feel like when I pay off my loans my life will be so much better financially and I can save for vacations, kids college, buy exotic pets. Not sure if this is reality though. At least I wouldn't be financially bound to the career of pharmacy, which I often despise

 

[confettiflyer]

I started this little gem. All of a sudden everyone is a financial expert : D

I am semi obsessed with my loans. I feel like when I pay off my loans my life will be so much better financially and I can save for vacations, kids college, buy exotic pets. Not sure if this is reality though. At least I wouldn't be financially bound to the career of pharmacy, which I often despise

My philosophy: Life > People > Financial > Things

I'm actually chatting about this thread with some people around me. I freely admit my priority in life isn't to minimize interest payments or hell even save for retirement.

I try to go that route, but when faced with the decision of saving for tomorrow or spending for the experience, I will go for the latter. My youth running out is constant, life could end tomorrow, but I don't want to find myself debt free and with tons of $$ laying around but too old to enjoy it.

Debt will be paid off eventually, money will be there, so don't worry about it. Might not seem that way with the amount of arguing/calculating I do...but I do derive quite a bit of glee from clever legal workarounds.

Why work hard when you can be sneaky?

 

[pezdispenser]

Even so... Assuming a net pay of $6000 (after withholding + 6% 401k), and putting the max allowable $2700/mo toward PITI on that stretch of a house you got, that leaves you with $3300 a month to do other life stuff.

I agree with the first part about net pay being $6,000/month, possibly even lower at $5,500 with Social Security going 4.2%->6.2%, possibility of going over the fiscal cliff (+~3%), or if you have high state income tax.

But now you're missing the student loan payment. You said $1,290 on IBR so that leaves $2,010 for other 'life stuff' like:

- food
- utilities
- phone
- internet
- TV
- gas
- car insurance
- car registration
- tires and maintenance
- etc

Put in your own numbers and you'll see the budget is starting to get very tight

 

[confettiflyer]

I agree with the first part about net pay being $6,000/month, possibly even lower at $5,500 with Social Security going 4.2%->6.2%, possibility of going over the fiscal cliff (+~3%), or if you have high state income tax.

But now you're missing the student loan payment. You said $1,290 on IBR so that leaves $2,010 for other 'life stuff' like:

- food
- utilities
- phone
- internet
- TV
- gas
- car insurance
- car registration
- tires and maintenance
- etc

Put in your own numbers and you'll see the budget is starting to get very tight

How the hell did you get from $6k - loan payment = ~$2000?

But anyway, forgot about the payment. Still... I spend about half that, and this assumes you go right up to the maximum limit on home buying. Assuming you're a single pharmacist with no dependents, there's no need to buy a 3-4 bedroom house.

If I were that hypothetical pharmacist, I'd rent or buy a small condo and blow the rest of my $$ on electronics and booze.

 

[pezdispenser]

How the hell did you get from $6k - loan payment = ~$2000?

$6000 take home pay - $2700 PITI - $1290 IBR = $2010

 

[nafcillin]

That's a great philosophy, confetti! I knew there was a reason I liked you!

 

[owlegrad]

This thread moved quickly. I guess when you keep repeating the same things the conversation can move briskly.

 

[owlegrad]

Oh you and your government agency collapse theories, I'm beginning to think you're a bit paranoid.

I thought you were a smart guy. You are just now starting to think that?

 

[rxlea]

When this thread starts spreading to others, then we have to worry

 

[All4MyDaughter]

This thread moved quickly. I guess when you keep repeating the same things the conversation can move briskly.

All you really need to know is that the government will give you a puppy today, take it back tomorrow and collapse into financial ruin on Tuesday.

 

[confettiflyer]

$6000 take home pay - $2700 PITI - $1290 IBR = $2010

ah my bad, for some reason i thought we were discussing BMB living at home with parents (yeah don't ask)

 

[confettiflyer]

All you really need to know is that the government will give you a puppy today, take it back tomorrow and collapse into financial ruin on Tuesday.

Government puppies?!?! I'M SO IN.

Do I pick that up with my government subsidized crack?

 

[BMBiology]

A4M and confet- if you guys combine your debt, you guys can be twice as poor. Just think of the government subsidies!

 

[All4MyDaughter]

What??????????

I BEEN GOOD!!!!!! Instead of using all my Christmas money on new clothes and stuff I used it all to pay off my credit card debt!!!!

I didn't get anything for Christmas except for a box of Godiva chocolates and a pair of uggs.

At least I am credit card debt free..(FOR NOW anyways! )

Are you serious? You didn't get anything for Christmas except Godiva chocolates, uggs and enough money to pay off thousands of dollars in credit card debt. Are we supposed to feel bad for you?

We agreed to spending limits in our family this Christmas. I spent less than $100 on each of my kids (about 3 gifts each), $50 on my husband, $25 each on my sister and her husband and $30 to $40 per niece/nephew. I think that's plenty. Money and gifts aren't love, or even really that important.

 

[BMBiology]

Are you serious? You didn't get anything for Christmas except Godiva chocolates, uggs and enough money to pay off thousands of dollars in credit card debt. Are we supposed to feel bad for you?

We agreed to spending limits in our family this Christmas. I spent less than $100 on each of my kids (about 3 gifts each), $50 on my husband, $25 each on my sister and her husband and $30 to $40 per niece/nephew. I think that's plenty. Money and gifts aren't love, or even really that important.

Remember to write a check to the department of education as well!

 

[confettiflyer]

Remember to write a check to the department of education as well!

that's your job apparently

 

[All4MyDaughter]

that's your job apparently

I have not yet written them a check... people still write checks?

 

[confettiflyer]

I have not yet written them a check... people still write checks?

See other thread, they come in handy now and again. Letter of the law it lets me move income into 2012 with some of my accounts due in early 2013 and everything is kosher legally (hey they gave me the check, i technically got paid). No leeway with credit cards =( that ish is time stamped.

 

[All4MyDaughter]

See other thread, they come in handy now and again. Letter of the law it lets me move income into 2012 with some of my accounts due in early 2013 and everything is kosher legally (hey they gave me the check, i technically got paid). No leeway with credit cards =( that ish is time stamped.

I actually use checks for a few things (not the DOE, though). I pay my contractors (one intern and one pharmacist) with checks because it's easier for business record keeping (I'm very low tech in that regard) and I pay myself every two weeks with a check ONLY because my bank is dumb and can't link my business and personal accounts, so no electronic transfer for that.

 

[SHC1984]

Are you serious? You didn't get anything for Christmas except Godiva chocolates, uggs and enough money to pay off thousands of dollars in credit card debt. Are we supposed to feel bad for you?

We agreed to spending limits in our family this Christmas. I spent less than $100 on each of my kids (about 3 gifts each), $50 on my husband, $25 each on my sister and her husband and $30 to $40 per niece/nephew. I think that's plenty. Money and gifts aren't love, or even really that important.

I bought a Herve Leger dress for $2538 but I sold the dress for $2000 on Ebay. The rest of my credit card bill is mainly from the root canal and crown I had to get when I was in Texas!

My parents paid it off b/c it's mostly for my teeth.....Root canal does NOT count as a gift! Parents are suppose to paid for my medical expenses!

I got rip off!

 

[Momus]

I bought a Herve Leger dress for $2538 but I sold the dress for $2000 on Ebay. The rest of my credit card bill is mainly from the root canal and crown I had to get when I was in Texas!

My parents paid it off b/c it's mostly for my teeth.....Root canal does NOT count as a gift! Parents are suppose to paid for my medical expenses!

I got rip off!

I paid $800 cash for a root canal procedure without a crown when I was still in school. Did not have dental insurance and was too damn broke to pay for the whole root canal + crown = $1500. I did not have the crown for that 1 tooth until 4 years later. I did not want my parents to pay that much when I knew I could get the same stuff done for $200 for everything back in my home country. Dental cost in USA is ****ed up, 2 hour work charges $2000. Now, I drive 25 mins to Tijuana and pay ~$300 for everything fillings, crown, whatever you want with the top dentists there (still cheaper than paying with my dental insurance in USA LOL)

 

[SHC1984]

I paid $800 cash for a root canal procedure without a crown when I was still in school. Did not have dental insurance and was too damn broke to pay for the whole root canal + crown = $1500. I did not have the crown for that 1 tooth until 4 years later. I did not want my parents to pay that much when I knew I could get the same stuff done for $200 for everything back in my home country. Dental cost in USA is ****ed up, 2 hour work charges $2000. Now, I drive 25 mins to Tijuana and pay ~$300 for everything fillings, crown, whatever you want with the top dentists there (still cheaper than paying with my dental insurance in USA LOL)

I know! Dentists make an insane amount of money in the USA! That's why I was in dental school before!

My parents paid over 6K for my braces when I was 14yo. 2K to get my wisdom teeth taken out. And $200 for a filling! My root canal was $1000 and my crown was $843.

Dentists makes TOO much money and they have great job security too. Too bad I can't take blood or bad breathe so I had to drop out!

 

[Guitarmacy]

This is true. Why would it ever take more than 2 to 3 years to pay off your student loans?

Lol naive. Not everyone has your lifestyle.

 

[All4MyDaughter]

1. 2011
2. 185K after all the interest was added
3. I signed up for IBR since I did a residency. My payment is about $450/month. Since I started working in July 2012, I have made my regular payments + an extra payment of 10K. I'm getting ready to make another large lump sum payment (amount TBD).
4. 6.8 on the Staffords and a little higher (can't remember) on the Grad Plus.

Just submitted my IBR paperwork for the year, and made a lump sum payment of approximately 38K. Yay!

 

[R xxx]

Just submitted my IBR paperwork for the year, and made a lump sum payment of approximately 38K. Yay!

Goshh..somebody is rich. Adopt me!

 

[All4MyDaughter]

Goshh..somebody is rich. Adopt me!

Not rich. I got paid for some contract work plus cashed in a long term savings account that was proceeds from an insurance policy.

But, depending on your skills at housework and child care, I would consider adopting you.

 

[timbutt2]

1. 2012
2. 172k incl/ interest
3. About 22,000 paid.
4. 6.25% grad and <3% undergrad.

 

[fauxden]

I will now brag

2013
41k
none paid yet
11k at 6.8% and the rest at 3.4%

 

[rx2010]

1. 2010
2. $38k
3. Paid off in 7 months
4. 5-6%

 

[BMBiology]

1) what year did you or will you graduate?
2) how much do you have in loans for pharm school plus undergrad?
3) if you are out of school, how much have you paid off?
4) what is your interest rate?

*Bump

 

[Jibby321]

1) what year did you or will you graduate?
2) how much do you have in loans for pharm school plus undergrad?
3) if you are out of school, how much have you paid off?
4) what is your interest rate?

1. 2017
2. 0 for undergrad. Hopefully just a little over 100k after pharmacy school.
3. Plan on continuing to live at home and pay alot off quickly.
4. 6.8 %

 

[type b pharmD]

*Bump

Nice. Cant wait for this one to heat back up! I will bite ! (And keep coming back)

My final #s will come out to $340k .. avg interest of 7.5%

My payback strategy will be to watch and wait.. kick the can down the road on $850/month ibr payments. Either a win by inflation, win by retiring outside of the us (or going "off the grid") or win by forgiveness. Worst case scenario is paying 15% for forseeable future (ie into retirement) which is still substantially lower than principal + interest (by at least $300k).

The underlying support for this is that there are no such thing as debtors prison anymore. With ibr, it should be impossible to default on any student loan. Even if you do, as many have mentioned before me, it is not like a court will find against you to withhold more than 10-20% adjusted income due to significant hazard of perverse incentives. Now, granted ibr itself could be viewed as a significantly perverse incentive.. it is what it is . There are no debtors prisons. Taking your professional license or garnishing wages to a significant extent would all but guarantee non payment. In reality (gauging from the numerous student loan disaster news stories) all of these "fees" , "penalties" and collection / servicing agency scams that can be tacked on are nothing but numbers on someone's spreadsheet. . Since payment is tied to income via either ibr , icr , icr-a (aka paye) , or through liens, none of those garbage penalties will ever realistically be collected on since the balance has no relation to payback under most conceivable schemes. They are just corporations trying to get the govt to transfer money to them and get a slice of the free money pie scheme that is higher ed.

To play devils advocate again... why would someone attempt to pay back a loan like this when gov will offer a 15% or 10% of adjusted income payment plan ? Even if I pay into retirement (planning to retire well before 50) which.. technically you could go into limitless ibr forbearance ie paying income adjusted $50/month payments.. these loans are never being paid off. It is not smart to pay 100-500k more than you need to .

For someone with <$200k .. conventional strategy still applies.. you should at least consider actual payback.

Fwiw, I am planning on buying a house (fha 5% down on ~150k) in the next 12 months and then cashing that out down the line in the event of adverse legislative events / "tax bombs" , or when we leave the us or go live in the backcountry.

 

[type b pharmD]

Disclosure: Yes I am trying to get people riled up with these posts. I realize they may be damaging to the mindset of the rigid and inflexible pharmacist personality that is pervasive around the profession. I am just trying to wake people up to the idea that "non conventional" strategies definitively become relevant when you have been higher-ed scammed to the tune of >$150k. It is like in they say in investment banking.. if you don't know who the sucker in the room is.. it is probably you. In this society, unfortunately, every major institution trying to extract as much money from everyone else as possible. If you play with a conservative and traditional mindset, the system itself will profit off of you enormously, which is what everyone (govt, loan services, collections agencies) is counting on. The problem for them is: they legally can't.. not with income based payment plans. They are just assuming you will play along like a good little drone and pay for them to live rich instead of you. Hence why most servicers will not talk about ibr/icr/isr/icr-a and will stonewall. They would much rather have you lining their pockets with 6-8% interest than for you to take advantage of your rights.

 

[confettiflyer]

haha, i logged into my account and clicked around, my total balance due INCREASED over the past year while I've been on IBR payments of $350/mo or so.

I'm in a subprime negatively amortizing loan!

 

[Jibby321]

haha, i logged into my account and clicked around, my total balance due INCREASED over the past year while I've been on IBR payments of $350/mo or so.

I'm in a subprime negatively amortizing loan!

Is your situation affecting your credit rating?

 

[type b pharmD]

Is your situation affecting your credit rating?

Not likely. Credit rating has almost nothing to do with outstanding debt. It is mostly related to payment history, outstanding credit, and credit application/utilization ratios, as well as usage and frequency of revolving credit.

Creditors love if you consistently stay in high amounts of debt if you pay them in full and on time. To them, the more you use credit, the better (if you reliably pay them their cut).

As an example, I have a decent history(<5 missed payments over 10 years) but have at least 300k In ed debt +/- 5k consumer debt , and my score was 700.. until I increased my outstanding credit when taking advantage of store cards (which I never used.. 5k of outstanding open credit which has dinged me down to 680 or so) . Easiest way to improve credit score is by closing outstanding / unused credit.

 

[Jibby321]

Not likely. Credit rating has almost nothing to do with outstanding debt. It is mostly related to payment history, outstanding credit, and credit application/utilization ratios, as well as usage and frequency of revolving credit.

It doesn't look at debt to income ratio?

So as long as you pay your minimum your rating isn't affected?

 

[type b pharmD]

haha, i logged into my account and clicked around, my total balance due INCREASED over the past year while I've been on IBR payments of $350/mo or so.

I'm in a subprime negatively amortizing loan!

Props! Out of all the people on this forum with > 150k loans, you are the only one I've heard from with reasonable strategy and financial mindset. I particularly liked your back of the envelope mortgage calculations

 

[confettiflyer]

The only time credit scores are influenced by outstanding debt is if it's a revolving line of credit and there's a set maximum/limit in place. So if you have a credit card with a $25k limit and your balance is $22k, your score is more adversely affected than someone with a $2k balance against a $25k limit. This is your utilization ratio.

Income has nothing to do with credit score. Ever. Never ever. Income is not reported to credit reporting agencies. Individual lenders/banks/etc... WILL utilize income when determining creditworthiness, but it is not inherently part of your credit file.

And thank you type b....i have have a plan A, B, C, D....you name it. I'd love my plan A to go through but it won't be catastrophic if I have to revert to the remaining plans.

 

[68quebec]

corpsman, i definitely know why u r having 0 debt

 

[type b pharmD]

And thank you type b....i have have a plan A, B, C, D....you name it. I'd love my plan A to go through but it won't be catastrophic if I have to revert to the remaining plans.

Exactly. Regardless of what happens.. I will be paying back what I (and the govt) feel is fair.

Worst case scenario is you pay back ~50-70% of principle plus fees and penalties (In my example, 150-200k total compared to ~500k with standard plan) over 20-30+ years (getting substantial npv savings) ..

Best case is paying back 10% or less principle with 0 penalties (either with creative accounting, PSLF or PSLF + creative accounting) ... during which you either get fast resolution or reduced obligations + npv bonus effect, either of which is win.

Win-win economics (ie cost-shifting/avoidance).. .. govts use it.. corporations use it... the upper class use it. Only reason not to is a desire for self sacrifice/abasement or being uninformed.

 

[jrlbc06]

What is your plan for dealing with the tax on the amount being forgiven at the end of the IBR??

 

[type b pharmD]

What is your plan for dealing with the tax on the amount being forgiven at the end of the IBR??

This is where the issue gets a bit tricky.

First, the best case scenario - most indications show that the so called paye/ibr "tax bomb" will be removed by legislation in the next 5-25 years. It is proposed almost monthly at present, and due to changes in demographics/political constituents, is even more likely to go away before our generation's loans are due.

Of course we have to plan on it still being there.

The one substantial piece to consider about this tax is that due to the insolvency exclusion for debt forgiveness income (a hallmark / structural feature of the tax code since forever) .. most people with high forgiveness due to negative amortization (such as myself.. anticipated 750k forgiveness) .. will pay tax on the value of their accumulated assets rather than on the loan forgiveness.

If you can minimize holdings in your name during the months and years prior to forgiveness, you minimize the tax burden. I anticipate a tax of around 15-40k. The types and styles of creative accounting will vary per the individual and are beyond the scope of this thread but suffice it to say that I am planning a highly 'unorthodox' distribution of assets during my career and particularly during the years prior to any anticipated forgiveness related tax, when compared to most health professionals.

For most people who behave wisely (ie cash out refi, leasing when possible, assignment of assets to friends, business ownership, trusts etc) .. the tax bomb will be minimal..

If you stay out of the conventional system at least 20+ years from now, almost 0 tax. Of course this is risky at best but basically gives a 30+% return.

Just like with ibr. You can either live for the present or live for the future. Ideally a combination of both.

 

[notafraid87]

1) 2017
2) about 195k (undergrad + pharmacy + interest)
3) none
4) 6.8

Damnit

 

[BMBiology]

I wasn't planning to reply to type b's posts because I have done it in the past but I want others to have a better understanding of his situation and hopefully learn from it as well.

His problem: he went to an out-of-state pharmacy school and he was hoping to qualify for in-state tuition after the first year. This did not happen. He also used student loan to pay for medical expenses which was also a mistake because unlike debt from credit cards and medical expenses, student loan debt is not dischargeable in bankruptcy court. Including interest, he now owes $340,000. Keep in mind that expects recommend you only borrow 1x your first year salary so around $110-130,000 for a pharmacist.

His plan: enroll in IBR where he would pay 15% of his AGI (for most people, it is their pretax salary minus 401 k contribution) for the next 25 years. For example, if he makes $120,000 a year and contributes $6,000 in his 401 k then he would pay 140,000 x 0.15 = $17,100 a year. This number goes up and down per year depending how much he makes. It also depends on whether his wife works or not and whether they have any children. In this scenario, his take home income he would around $75,000 after taxes, health and dental insurance. So he would need to pay $17,100 out of $75,000 (or 23% of his take home income).

type b's calculated monthly payment is only $850 per month because his wife is not working, they have children. I am not exactly sure how he comes up with
this low monthly repayment assuming he makes a pharmacist salary and works full time but whatever.

Problem with his plan: he would need to pay tax on the amount that is forgiven which would enormous ("tax bomb") because of the accumulated interest on his high principle.

His hope: one day the government would get rid of the "tax bomb" (best case scenario) or he would somehow use "creative accounting" (basically tax evasion) to hid his assets. If the first two scenarios do not work, he figures he would need to pay the "tax bomb" which would leave him with pretty much nothing and he would pay 15% of his retirement (social security, 401 k) until he dies.

Obviously this is not the way a person should live. There is no way for him to pay back the $340,000 in student loans with a pharmacist salary. He is painting a rosy picture but knowing how he got into this situation, I would not be surprised if this does not end well for him and his family.