Loan repayment advice needed

[Trisphorin]

Ms4 here. Our school hosted a loan repayment workshop and i wanted to hear other's opinion on what is the best way to balance enjoying life, pay back loan and invest. I am applying for IM and eventually wanted to go into cardiology (i liked EP and interventional a lot). I have $184,000 in direct unsubsidized loan with intesrest rate ranging from 5-6.8%.No other debt and about $12,000 in bank saving. I don't know where i will train for residency but my #1 is in NJ. I will need to rent an apt if i ended up there. My #2 is close to home so I will probably live at home if I end up there. My gf is also in medicine and shes a MS3 with significant amt of loan as well. My initial plan was to do the IBR payment plan and save up the extra money for an apartment's down payment.

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[tn4596]

I have 120k in loan and in the same specialty. From my research, i am planning to use the repaye plan because they subsidize 50% of unpaid interest acrued during training and aggressively pay down the loan as attending, maybe even refinance once i am done with training. My goal is to live comfortably during training and pay loan as quick as possible as attending. the best deals that i found is either to refinance to lower interest rate (2-3% depending on if you can get it) vs repaye. I think the 50% interest subsidy during training (6-7yrs) + no capitalization is safer than refinance to private loan. There is a video comparing repaye vs paye and show that you save money with repaye. And paye is better than irb because your monthly payment is lower.

 

[abolt18]

Ms4 here. Our school hosted a loan repayment workshop and i wanted to hear other's opinion on what is the best way to balance enjoying life, pay back loan and invest. I am applying for IM and eventually wanted to go into cardiology (i liked EP and interventional a lot). I have $184,000 in direct unsubsidized loan with intesrest rate ranging from 5-6.8%.No other debt and about $12,000 in bank saving. I don't know where i will train for residency but my #1 is in NJ. I will need to rent an apt if i ended up there. My #2 is close to home so I will probably live at home if I end up there. My gf is also in medicine and shes a MS3 with significant amt of loan as well. My initial plan was to do the IBR payment plan and save up the extra money for an apartment's down payment.

This is what I'm planning. I think it's the best option, as was said above.

http://whitecoatinvestor.com/forums/topic/idea-to-enter-repaye-early/

http://whitecoatinvestor.com/what-should-i-do-with-my-student-loans/

 

[InvestingDoc]

I think you're ahead of the game for worrying about loans at this point, so congrats.

Lets break down the loan to see how much interest is being accumulated each month. You have $184k at lets say an average of 6%. That means you will be accruing $1000 a month every month till you pay down some of the principle.

Average salary of a medical resident is ~50k for intern year or lest say $3,300 a month post taxes. Putting a third of your money towards a loan would be quite aggressive when in residency but it can be done. I did it my final year of residency but it meant that I made a lot of sacrifices. Here is my budget in residency.

I agree with other posters above that REPAYE may be your best option to start out. You can take advantage of the subsidized interest while not breaking your budget. The downside is that your debt will be compounding and building since you will not be paying enough just to cover the interest. However, I suspect you will be in this program for a short period of time. If you will be anything like the cardiology fellows at my program, they all made at least 3k a month moonlighting on the side. Many used the money to pay down their loans or save for a down payment for a house.

You mentioned that you want to pay less on your loans so that you can "balance enjoying life, pay back loan and invest." Paying down your loans with 6.8% interest is a guaranteed return. Once you're an attending you will most likely not be able to write off student debt interest anymore, so to me it makes sense to avoid investing in taxable accounts and pay down the debt. Putting money into a ROTH is a good idea though or your 401k if your program offers one.

The route I choose was to refinance my loans to half the interest rate you had. That meant that I was only building <$500 in interest a month , a value which I could spare even as an intern. Your debt is kind of in that middle ground where its no so outrageously large where you have no choice but to enter into a income based repayment plan if you choose to refinance. If you choose to refinance, just know that there are a lot of companies that are hesitant to refinance new residents.

Here are some links were I wrote about my experience

Student loan repayment guide
My budget while in residency

 

[Smart Money MD]

I wondered the same thing when I was in your shoes. I had approximately $160k in loans with the same amount of interest rates as well. Ultimately how much disposable income you want to have can also dictate whether you go with REPAYE. I ended up just paying my interest and some principal as I came across the money during my training, but I also lived very frugally. In retrospect, I would have served myself better had I refinanced through a private company at a lower rate.

If you can tough out the lifestyle situation for about 2 years after you finish your training, you should be able to knock out your entire loan amount no matter what you did during residency/fellowship. Good luck!

 

[digitalunderground]

My loans are in $200K+ range and I am also trying to digest repayment options. Is the pay-e regarded as the best option in terms paying the least per month? I will deferr for the first year of residency which is what most people seem to be doing. Has anyone given thought to the loan forgiveness application? The sell is 10 years of payments and then the principal is forgiven but you have to work at a nonprofit location. I want to make sure that I am reading the fine print correctly here. Is the principal balance truly forgiven in full or does it get claimed as earned income for that particular filing year and I get ravaged on taxes?

 

[fahimaz7]

Why defer? Do IBR or so either similar program that pays your interest on subsidized loans. Your income is basically none for your MS 3 year so you won't pay much that first year of residency.

 

[fahimaz7]

My loans are in $200K+ range and I am also trying to digest repayment options. Is the pay-e regarded as the best option in terms paying the least per month? I will deferr for the first year of residency which is what most people seem to be doing. Has anyone given thought to the loan forgiveness application? The sell is 10 years of payments and then the principal is forgiven but you have to work at a nonprofit location. I want to make sure that I am reading the fine print correctly here. Is the principal balance truly forgiven in full or does it get claimed as earned income for that particular filing year and I get ravaged on taxes?

This is the first year for PsLF. It'll likely get pulled from high income earners!

 

[PistolPete]

This is the first year for PsLF. It'll likely get pulled from high income earners!

We shall see. First PSLFers should be getting news in October.

 

[PistolPete]

Ms4 here. Our school hosted a loan repayment workshop and i wanted to hear other's opinion on what is the best way to balance enjoying life, pay back loan and invest. I am applying for IM and eventually wanted to go into cardiology (i liked EP and interventional a lot). I have $184,000 in direct unsubsidized loan with intesrest rate ranging from 5-6.8%.No other debt and about $12,000 in bank saving. I don't know where i will train for residency but my #1 is in NJ. I will need to rent an apt if i ended up there. My #2 is close to home so I will probably live at home if I end up there. My gf is also in medicine and shes a MS3 with significant amt of loan as well. My initial plan was to do the IBR payment plan and save up the extra money for an apartment's down payment.

Are you going to do PSLF? If not, consolidate loans at lower interest rate and pay off aggressively after residency.

 

[Rishi Garg]

I applied for PSLF. I think its a great program and needs to be utilized more by healthcare professionals. Here's a great series of articles on the application process and what are the pitfalls.
Are You a Healthcare Professional Interested in Public Service Loan Forgiveness?

 

[jm192]

I deferred my 1st 3 years.
One less bill. Allowed me to save $$, and the comfort of having that $$ in the bank is amazing.

I've got a 10 year payment plan in place starting this fall, and I'm excited at the thought of it only taking that long.
Once I see how my finances settle out, I'll throw more $$ at it to cut down the principal.

 

[digitalunderground]

I was considering doing PSLF but if it's going to be stripped then I am not as sure. Should have went to dental school!

 

[PistolPete]

I was considering doing PSLF but if it's going to be stripped then I am not as sure. Should have went to dental school!

No one knows if it will be stripped or not.

 

[CatsAreFunnerThanDogs]

lower interest is key, find ways to renegotiate or to roll up your loans to something that cost less monthly. your earning power will catch up, just want to prolong it.