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  • How to approach loans

    Hi, I'm currently a fourth year medical student who will be starting residency soon. I was hoping for some advice about how I should go about paying off my loans.

    I am coming out of school with 90,000 of loans, 60,000 of which is no interest and 30,000 of which contains a one year grace period and then begins at a 5% interest rate.
    I'm starting residency in a low-medium cost city and I'll be making about 58k per year. Should I enroll into any of those loan programs or should I just pay off the 5% interest loan asap? Thanks!

  • #2
    I would pay it off as quick as you can but more information is required. What is your residency in? What are you career goals...private practice vs. academics, etc.?

    Comment


    • #3
      yeah more information is needed. is the 60k no interest loan from family? or is it a current federal loan with no interest? is the 30k a private loan accumulating interest now and payments deferred or no interest now and 5% starts in a year?

      in any case with relatively low loan amounts it would make more sense to just pay it off rather than worrying about pslf. build your emergency fund, fully fund your roth IRA and invest that into index funds. take advantage of any employer match you may have for 401k/403b you might get.

      other than that, pay off the 5% interest loan when you can. take as long as possible to pay off the no interest loan. if you still have money in your budget left over, consider taking advantage of more tax deferred space if you want to.

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      • #4
        Originally posted by Nysoz View Post
        yeah more information is needed. is the 60k no interest loan from family? or is it a current federal loan with no interest? is the 30k a private loan accumulating interest now and payments deferred or no interest now and 5% starts in a year?

        in any case with relatively low loan amounts it would make more sense to just pay it off rather than worrying about pslf. build your emergency fund, fully fund your roth IRA and invest that into index funds. take advantage of any employer match you may have for 401k/403b you might get.

        other than that, pay off the 5% interest loan when you can. take as long as possible to pay off the no interest loan. if you still have money in your budget left over, consider taking advantage of more tax deferred space if you want to.
        the 60k loan is from a private "scholarship" which charges 0% interest. It's essentially an interest-free loan that I have to start paying back slowly (1% of total 1 year after graduation, which then goes up to 3% the year after that over the span of 10 years).

        the 30k loan is from school loans which charge a flat 5% interest. repayment starts 1 year after graduation.

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        • #5
          Originally posted by jxl200 View Post

          the 60k loan is from a private "scholarship" which charges 0% interest. It's essentially an interest-free loan that I have to start paying back slowly (1% of total 1 year after graduation, which then goes up to 3% the year after that over the span of 10 years).

          the 30k loan is from school loans which charge a flat 5% interest. repayment starts 1 year after graduation.
          I would use this year to do what Nysoz suggested by building an emergency fund, get any match available from your residency 401k/403b, and fund your Roth. You should also look into whether or not you'll be eligible for a health savings account. Once this year is almost up, I would see if there are any options to refinance your 5% loan and then start paying that off. I'd pay the minimum on your 0% loan during residency. You can take care of that loan once you're an attending and already maxing out everything else.

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          • #6
            take as long as possible to pay off the 60k "scholarship" as it's essentially free money.

            I'm assuming the 30k school loan is accumulating interest and payment is deferred until 1 year after graduation. take the first part of the year to figure out your finances and budget. build up your emergency fund. once you have those squared away then you can figure out what to do with excess money.

            any employer match in a 401k/403b is essentially 100% return on your investment so you should take advantage of that if possible.

            next is funding a roth IRA. being in a l-mcol area, you should be able to max this as well. I would fund this and invest in index funds. currently the stock market may go down further in the short term but in a retirement fund that you won't use for 20-30 years, it'll recover or we have bigger things to worry about. hopefully the time frame you would be putting money in here we will have already started to recover.

            after that then pay off the 5% loan. if you have good credit, you may be able to refinance that to a slightly lower rate

            Comment


            • #7
              Originally posted by Nysoz View Post
              take as long as possible to pay off the 60k "scholarship" as it's essentially free money.

              I'm assuming the 30k school loan is accumulating interest and payment is deferred until 1 year after graduation. take the first part of the year to figure out your finances and budget. build up your emergency fund. once you have those squared away then you can figure out what to do with excess money.

              any employer match in a 401k/403b is essentially 100% return on your investment so you should take advantage of that if possible.

              next is funding a roth IRA. being in a l-mcol area, you should be able to max this as well. I would fund this and invest in index funds. currently the stock market may go down further in the short term but in a retirement fund that you won't use for 20-30 years, it'll recover or we have bigger things to worry about. hopefully the time frame you would be putting money in here we will have already started to recover.

              after that then pay off the 5% loan. if you have good credit, you may be able to refinance that to a slightly lower rate
              For the emergency fund, I was reading 3-6 months is a good rule of thumb to save? Do I just keep that in a savings account (e.g., Ally)?

              Comment


              • #8
                Originally posted by jxl200 View Post

                For the emergency fund, I was reading 3-6 months is a good rule of thumb to save? Do I just keep that in a savings account (e.g., Ally)?
                3-6 months is reasonable. Any high yield savings account is fine. The days of the 2% interest accounts are going to be gone and interest rates are going to be going lower on these types of accounts.

                Comment


                • #9
                  OP: You have gotten good advice here. You may consider refinancing that 5% loan with SOFI to get a reduced ($100/mo) payment throughout residency.

                  Originally posted by jxl200 View Post

                  For the emergency fund, I was reading 3-6 months is a good rule of thumb to save? Do I just keep that in a savings account (e.g., Ally)?
                  To tag on to this question, I currently have my EF in Ally. I am going to start my Roth IRA with Vanguard. Is there any significant difference or reason to move my EF into Vanguard's Money Market (VMMXX) account?

                  Comment


                  • #10
                    Originally posted by oysterblues View Post
                    To tag on to this question, I currently have my EF in Ally. I am going to start my Roth IRA with Vanguard. Is there any significant difference or reason to move my EF into Vanguard's Money Market (VMMXX) account?
                    - its math
                    - ally 1.5%
                    - VMMXX 1%
                    ..........
                    - VMSXX 2.5%

                    Comment


                    • #11
                      Originally posted by oysterblues View Post
                      OP: You have gotten good advice here. You may consider refinancing that 5% loan with SOFI to get a reduced ($100/mo) payment throughout residency.



                      To tag on to this question, I currently have my EF in Ally. I am going to start my Roth IRA with Vanguard. Is there any significant difference or reason to move my EF into Vanguard's Money Market (VMMXX) account?
                      For emergency funds, I just recommend that you get a decent rate given whatever environment you're in (don't waste your time rate chasing every few months) as well as using whatever online platform you're most comfortable with.

                      Comment


                      • #12
                        https://www.whitecoatinvestor.com/fi...nd-attendings/

                        You might use this.

                        Comment


                        • #13
                          Originally posted by Nysoz View Post
                          take as long as possible to pay off the 60k "scholarship" as it's essentially free money.

                          I'm assuming the 30k school loan is accumulating interest and payment is deferred until 1 year after graduation. take the first part of the year to figure out your finances and budget. build up your emergency fund. once you have those squared away then you can figure out what to do with excess money.

                          any employer match in a 401k/403b is essentially 100% return on your investment so you should take advantage of that if possible.

                          next is funding a roth IRA. being in a l-mcol area, you should be able to max this as well. I would fund this and invest in index funds. currently the stock market may go down further in the short term but in a retirement fund that you won't use for 20-30 years, it'll recover or we have bigger things to worry about. hopefully the time frame you would be putting money in here we will have already started to recover.

                          after that then pay off the 5% loan. if you have good credit, you may be able to refinance that to a slightly lower rate
                          Just found out that my residency doesn't match any 401k contributions In that case, should I just focus on roth IRA each year and paying off the loans?

                          Comment


                          • #14
                            You an look if you are able to contribute to an HSA.

                            Comment


                            • #15
                              Originally posted by jxl200 View Post

                              Just found out that my residency doesn't match any 401k contributions In that case, should I just focus on roth IRA each year and paying off the loans?
                              Given the lack of need to reduce AGI because your loan situation is good, I would focus on your Roth IRA.

                              I would also refi and attack the higher interest loan and eliminate it before residency is up. You could probably ride the lower interest loan at minimum payments through residency.

                              I use VMMXX for EF and home construction saving. I've recently shifted more to VMFXX because of their higher holding in US govt obligations and T-bills-- probably reading too much bogleheads. VMMXX is probably fine. If I were not using the construction portion of my savings in the next couple weeks, I would probably move it to VMSXX.

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