need help! 260k in debt!

[bloomingdale]

med student debt sucks...and I have too much of it.

To tell you a little about myself, I am a late 20s medical student who is starting a 5 (1+4) year radiology residency this upcoming July. I have no assets and I am nearly $260,000 in debt due to school loans (principal plus accrued interest thus far). Not the best situation and it totally sucks.

All figures include principal + interest thus far
133,000 of it is at 6.8%
87,000 of it is at 7.9%
40,000 of it is at 8.5%

I have a 6 month grace period until December when all of the accrued interest thus far will capitalize.

I think I have some saving grace but want to get your opinion on how to proceed. What I am thinking:

My father owns a paid off home in the city I am doing my residency so I will be able to save a large chunk of money per month on rent. My dad has proposed that he is willing to take a HELOC (at ~4.75%) on his primary home to help me pay back my 7.9% and 8.5% loans and I would be making those payments to pay off my loans rather than rent. In addition to this, I would be paying my 6.8% loans based on IBR. This wouldn't decrease the principal I have to pay but would substantially decrease the total amount of money that I have to pay back over time.

Do you think this is a good idea? I figure as a radiologist, the likelyhood of finding a job in the public sector for the loan forgiveness program is nil and I dont want to be in academics.

My other option is to just pay everything at the same interest rate it is at now and end up paying a much higher loan amount. I would be paying based on income—so ~400/month during residency, and ~3-4k/month afterwards.

Thank you so much, I know it is a long post but your input will be super helpful!!!

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[medicalmom]

Not sure if the 8.5% is a government loan or a private loan but I assume that the 6.8% is a stafford loan and the 7.9% is grad plus loans. The later two you should consolidate them all into one loan through direct loan consolidation and you will have a lower interest rate of 6.5% and THEN set yourself up for IBR. Consolidation is the best thing when you have multiple loans I highly do not advise that you pay each loan separately because you will just end up paying more in the long run.

 

[JacobMcCandles]

Not sure if the 8.5% is a government loan or a private loan but I assume that the 6.8% is a stafford loan and the 7.9% is grad plus loans. The later two you should consolidate them all into one loan through direct loan consolidation and you will have a lower interest rate of 6.5% and THEN set yourself up for IBR. Consolidation is the best thing when you have multiple loans I highly do not advise that you pay each loan separately because you will just end up paying more in the long run.

How do you figure he'd get 6.5% interest rate if he consolidates a 7.9% loan and a 8.5% loan? They do a weighted average of the interest rates so it's basically the same interest rate (I also believe they'll hack off .25%) on the two loans and the final rate will be between 7.9-8.5%. Consolidation on student loans these days don't allow you to get much better interest rates, they're merely for convenience.

 

[Dirt]

Not sure if the 8.5% is a government loan or a private loan but I assume that the 6.8% is a stafford loan and the 7.9% is grad plus loans. The later two you should consolidate them all into one loan through direct loan consolidation and you will have a lower interest rate of 6.5% and THEN set yourself up for IBR.

8.5% is also grad plus, they went up in the last 4 years.

Your 6.5% on consolidation is totally bogus, the rate is the weighted average.

OP. That is very nice of your dad. The problems with HELOC? You lose all federal student loan benefits. That means no IBR, no Forbearance, no Deferment, no PSLF, no other forgiveness that may come up. In addition, silly things like your loans being discharged upon your death no longer apply.

Could it work out? Sure. Would I risk losing all the benefits of federal student loans to save 3-4%? No.

I would just consolidate, pay under IBR, and overpay as much as you can afford since you have the luxury of not having to pay rent. I am in the exact same boat you are except I have more loans and have to pay rent...

 

[freaker]

That's nice of your dad. It would really stink for him if you wound up disabled or worse in more respects than one. It would strongly consider taking out a life insurance policy large enough to pay off your debts at the very least if you decide to do this. Your dad is taking a risk. It would be pretty cheap to a get a 10-year term for that amount--maybe 10 bucks per month or so.

Maybe you should only focus on the high interest loan? If you could swing a payment that would take care of the loan in 60-months, PenFed has a 1.99% HELOC over 60-months. Then do an IBR consolidation on the remaining two loans and plan on paying them off.

You're in a lot better position than many physicians who aren't reimbursed as well and have similar levels of debt.

 

[bloomingdale]

Thanks guys for the helpful posts. I crunched some numbers and found that the total cost of the loan would be around 60k cheaper if I did a HELOC. However, it will be tough to pay because most require a 1% payment every month which would be difficult to handle. Looks like IBR and possible loan forgiveness for me.

Freaker: I am not affiliated with any of the organizations listed to register for Penfed. Do university residency programs with a VA count somehow?

Any suggestions on how to make a short term return on investment greater than 8.5%?

Our generation of physicians is really getting the shaft: decreasing reimbursements coupled with high student education loans and increasing liability...

 

[Igor4sugry]

Thanks guys for the helpful posts. I crunched some numbers and found that the total cost of the loan would be around 60k cheaper if I did a HELOC. However, it will be tough to pay because most require a 1% payment every month which would be difficult to handle. Looks like IBR and possible loan forgiveness for me.

Freaker: I am not affiliated with any of the organizations listed to register for Penfed. Do university residency programs with a VA count somehow?

Any suggestions on how to make a short term return on investment greater than 8.5%?

Our generation of physicians is really getting the shaft: decreasing reimbursements coupled with high student education loans and increasing liability...

I would consolidate all those loans via Direct Loan Consolidation Program and get them into IBR. During your residency you can live frugally and use money to pay down the loan (or at least the interest). Then sign up for PSLF, after residency work another 4 years in a non-profit hospital and your balance is discharged.


If I were in your position I would not involve your parents in this ridiculous education loan mess we have to deal with. The $60k saved is not worth the hassle with payment derangement between child and parent. Plus it puts your parents home at risk if something happens. Radiology will allow you to pay this back.

Our generation of physicians is really getting the shaft: decreasing reimbursements coupled with high student education loans and increasing liability...

I totally agree. I'm starting residency now with $190k in loans and after all expenses accounted for I have barely anything left. Being a resident & young doc with $200k+ in dept is quite humbling. What gets me are the attendings in their 50s that tell you how cheap it was for them to go to med school.
Medicine is no longer a way to become rich, but it will definitely give you quite a comfortable living.

 

[freaker]

You can become a member of PenFed by making a $10 or $15 donation to one of their supporting groups. I did it to refinance my car down to 1.99%. I never served in the military, and it wasn't a problem nor a hassle to get that taken care of. I'll probably refinance my house through them, too.

That said, involving your parents is something I'd generally advise against. If you want to involve them, and they're willing to take on that risk, I'd make sure to limit yourself to the loan you could pay off in residency.

It would be particularly nice if you could swing life insurance and disability insurance, as you'd guarantee your dad he'd get his money back aside from getting kicked out of residency.

 

[abhikala1]

You can become a member of PenFed by making a $10 or $15 donation to one of their supporting groups. I did it to refinance my car down to 1.99%. I never served in the military, and it wasn't a problem nor a hassle to get that taken care of. I'll probably refinance my house through them, too.

That said, involving your parents is something I'd generally advise against. If you want to involve them, and they're willing to take on that risk, I'd make sure to limit yourself to the loan you could pay off in residency.

It would be particularly nice if you could swing life insurance and disability insurance, as you'd guarantee your dad he'd get his money back aside from getting kicked out of residency.

Thats nice advice

 

[maseface]

I'd say you're in a pretty GOOD position actually. I'm starting medical school with a family and my wife and I already have a combined 45k in student loans plus another 20k in existing consumer loans. But I would say definitely do not involve your father. Live at his house if that's an option but don't do business with family or friends. It can get messy easily.

 

[CardiacLion]

So OP, how did you fair? Care to update us?

Sincerely,

a curious about to be indebted, incoming first year lol.