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400k debt, anesthesia fellow, seeking guidance

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  • 400k debt, anesthesia fellow, seeking guidance

    Hello Everyone,

    I'm an anesthesia fellow preparing myself for the world beyond training, and I would be tremendously grateful for any financial advice you can give me.  I've just started perusing this website and am finally starting to grow my minuscule fund of financial knowledge.  I'm currently an anesthesia fellow with 400k medical school debt with an average interest rate of 6.8%.  I'll be working in academic anesthesia and will be earning approximately $320k/year.  Part of my contract includes a $75,000 interest free loan in addition to a $10k moving bonus, all of which will be added to my first paycheck.  I'll need to move to new city (this summer), buy a car, and furnish an apartment.  I'm single.  I have a couple specific questions:

    1.  Should I continue with Public Service Loan Forgiveness?  I'm currently in my 5th year of training and have made income based repayments in a timely fashion for the duration of my training.  I understand that the matriculation rate is laughably low and I'm assuming that this probably won't work, but in the rare circumstance that it does happen, I don't want to miss out on potentially hundreds of thousands of dollars forgiven.  I was considering making income based repayments, and investing the difference between standard repayments and income based repayments into a mutual fund.  If PSLF doesn't pan out, I'll use the amount saved in the mutual fund to pay off my loans.  I have another 5 years to go.

    2.  What do you recommend I do with my $75,000 interest free loan?  I was considering using $25-35k for car and apartment furnishings, and investing the remaining $40k in a mutual fund (rather than pay off my student loans, for the same reasons as above).

    Any other advice you could give me would be sincerely appreciated.  Thank you very much!

  • #2

    I’m currently in my 5th year of training and have made income based repayments in a timely fashion for the duration of my training.
    Click to expand...

    so your first step is figure out how much will be forgiven in 5 more years, how much is paid in, etc.

    then do the same for re-financing and coming up with a 3-5 year repayment plan.

    What do you recommend I do with my $75,000 interest free loan?
    Click to expand...

    id pay it back first....i wouldn't want to be indebted to my employer.


    • #3
      Loan as in a forgivable loan? I would only use it entirely to pay off your massive student loan. Nothing else. You are 400k in the hole and think it’s ok to got another 75k deeper? And certainly not invest it, it is not your money, it is theirs. Why do you NEED a car? Why do you need to spend so much money furnishing a (rental?) apartment? You are much more poor than the homeless man down the street, live like it. Your 10k moving bonus is way more than enough to buy a decently used car assuming what you have now is not working and get some decent basic furniture. Don’t you have furniture now? If you got nothing to move what is the 10k moving bonus going to? Live like a resident for a couple more years, you will thank me later. Oh, marry rich too!


      • #4
        I would peruse private jobs and try to increase your income out of fellowship, if able. Try to get your debts paid down as fast as possible.


        • #5
          I furnished my apartment using wayfair and Target. I splurged and spent $1400 (tv stand, coffee table and end tables, headboard and frame, couch, rug, dresser, shoe rack, bathroom storage racks). You could probably spend even less than that. If I knew HomeGoods existed at the time, I might have used that.


          • #6
            With that much debt and already 5 years in, I'd continue to pursue PSLF.  Particularly since it sounds like you already have another qualifying job lined up.  $320k for academic doesn't sound that bad, I know many programs are in the $200s.

            Make sure all your ducks are in a row, you are enrolled in the correct program, you have evidence of each payment, etc.



            • #7
              1) Run your number on PSLF. Halfway their!
              2) Interest free loan? Park all $75 in high yield savings like Ally. When they want it, pay them back. If it is forgiven at some point, pay the taxes.
              3) Keep saving a contingency fund in case PSLF doesn’t work out. Pay your account agressively. Just pay yourself if it works out.


              • #8
                What are the repayment terms for your “interest fee loan?”


                • #9
                  I'm not sure what I'd do in your situation.  I hate debt and I'd definitely want it gone. I think I would tell the employer "no thanks" on the 75k loan, unless you're planning on using it to get rid of 75k of high interest student loans.  Even then, I'm not sure I'd bother with it.  It's just shuffling debt around.

                  You're 5 years into PSLF.  That's tempting.  But, I think I'd still want to just get rid of that debt asap.  There are no guarantees that the program will exist in 5 years or that your application will be approved.  That's what bothers me about it.  Others may feel it's worth that gamble.  I guess it comes down to personal comfort level with it.  5 years making minimum payments on 400k is a LOT of interest being paid.  Alternatively, if you lived like Mr Money Mustache for 2-3 years you could get rid of it all and save yourself a lot of interest.  Which would work out better?  I'm too lazy to do the math right now.  That might be a good exercise for you though.  See which one feels right to you.

                  BUT, regardless of what you decide with the loans, I would recommend you not upgrade your lifestyle at all just yet.  Pretend you're still a broke resident (because you kind of are) and work on setting yourself up financially.  Once those loans are gone, you can reward yourself with a nicer car or apartment.  By then, maybe you'll have a significant other ready to celebrate with you.  You'll thank your younger self for being smart early in your career


                  • #10
                    Thank you everyone!  For my interest free loan, I'm given $75k up front on my paycheck, and just a little over $2000 is taken out of my monthly paycheck for 3 years.  Since its interest free I was thinking that investing it would be higher yield than not using it at all.  According to my PSLF calculator, if I continue on REPAYE my total forgivable balance would be around $290k


                    • #11
                      So your interest free loan is basically a 3 year retention golden handcuff- what happens if you want to leave earlier than 3 years?  How much interest will you have to pay back then? And if the market tanks at the same time so the money is actually less than what they gave you?  (just playing devils advocate here)


                      • #12
                        I wouldn't take the loan just to invest it. Again, it isn't your money. Don't invest other people's money.


                        • #13
                          I would personally decline an interest free loan and negotiate for something else instead (for those reading entertaining a contract like this). It’s not your money, and I wouldn’t invest it in anything other than a high yield account until the money actually belongs to you.

                          As for PSLF, have you filed the appropriate forms the last five years?


                          • #14
                            Even though the OP is calling this an “interest free loan,” it is the same structure as every signing bonus/“loan repayment“ that I was offered for employed positions. I ended up taking one of these jobs which offered a signing bonus plus “loan repayment“ upfront and it is incrementally forgiven each pay period over three years.

                            I agree that investing this money in the setting of a $400,000 loan balance is likely not the best move. However, it seems that just sticking this into a high-yield savings account is the other extreme.


                            • #15
                              Spend it when you earn it
                              Invest your savings.
                              Idle cash loses to inflation.
                              Don’t take unnecessary loans.

                              I don’t consider those extreme. Turning down “free money” would be extreme. Conservative yes, lots of debt. Does not need more leverage.