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130K debt, M4 matched in ophthalmology. What is the best way to go forward?

Home Student Loan Management 130K debt, M4 matched in ophthalmology. What is the best way to go forward?

  • Avatar zzzcor 
    Participant
    Status: Student
    Posts: 6
    Joined: 01/11/2019

    Thank you in advance for any input.

     

    -Current M4 matched in ophthalmology, waiting on PGY1 year position

    -expected 130k total in debt by graduation, interest rate in 5.3-6%

    -14k in Roth IRA. Haven’t contributed since medical school.

     

     

     

    Questions

    -Can I refinance student loans as an M4 without the job yet?

    -are you allowed to refinance your loans for indefinite number of times? I want to continuously check if I can get lower rates..

    -When I estimated the rates through Ernest, I was getting 5.1-5.5%. Is this considered low or high?

    -Given that I will start working coming this July, should I max out Roth before paying off refinanced loans or the other way around? Can I contribute to this past year too (2018)?

    -Do you have any other recs?

     

    Thank you very much!

     

     

    #180603 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 4217
    Joined: 01/08/2016

    welcome.

    go read the entire blog.

    and the book.

    and the book list.

     

    -Can I refinance student loans as an M4 without the job yet?

    Click to expand…

    some will with future contract, but why would you?

    -are you allowed to refinance your loans for indefinite number of times?

    Click to expand…

    yes if rates are lower.

    5.1-5.5%. Is this considered low or high?

    Click to expand…

    high

    should I max out Roth before paying off refinanced loans or the other way around?

    Click to expand…

    yes

    Can I contribute to this past year too (2018)?

    Click to expand…

    as long as you do it before april

    #180624 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2686
    Joined: 01/03/2017

    1.) I’m not sure if any lenders will until you start getting a paycheck but it won’t hurt to see. Some might take a contract but you probably won’t be signing your contract until June or so. Some lenders (at least DRB, which is now Laurel Road, did) may have a program where you can pay $100/month while you’re a resident.

    2.) You can refinance as many times as you’d like. In my personal opinion, I don’t think rates are going to go anywhere but up in the short and medium term as they have been at historical lows for a while now.

    3.) Depends on a number of factors, including your credit score. That used to be high but I suspect over the next 5-10 years that may be low.

    4.) I would try to max out your Roth. That’s valuable space you can never get back. I would also see if your program has a 401k or 403b and put in enough to get a full max if they offer that.

    5.) Have fun and do as little medical stuff as you can until residency starts.

     

     

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #180625 Reply
    Liked by jfoxcpacfp
    Avatar orthodoc2018 
    Participant
    Status: Physician
    Posts: 74
    Joined: 07/18/2018
    alpha investing

    I would prioritize contributing to Roth IRA (wish I had during residency!). As far as student loans is concerned, you’re probably best off just doing REPAYE and taking the subsidy on unpaid interest. You’ll probably end up with a lower effective interest rate than why Earnest is offering.

    #180629 Reply
    Liked by jfoxcpacfp
    Avatar mpdoc 
    Participant
    Status: Physician
    Posts: 37
    Joined: 04/05/2017

    You can only contribute to Roth IRA for 2018 if you had earned income in 2018

    #180633 Reply
    Avatar centrebaseball 
    Participant
    Status: Resident
    Posts: 35
    Joined: 04/14/2017

    First, congrats on matching into ophthalmology. It is a great field and having just finished residency / fellowship, I was starting my WCI journey along with the growth of the site. In general, try to enjoy life right now, spend frugally and enjoy the next six months because they will be the easiest you will have for a few years.

    Next,

    -Can I refinance student loans as an M4 without the job yet?
    Maybe, but I wouldn’t assuming you are in REPAYE. Just pay the interest and let the government subsidize half. At your loan amount, the interest is likely fairly small now and once you become an attending you can crush 130k in no time.

    -are you allowed to refinance your loans for indefinite number of times? I want to continuously check if I can get lower rates..
    You can refinance multiple times, but each one will be a hard credit pull, so likely won’t help you if you try and check every month.

    -When I estimated the rates through Ernest, I was getting 5.1-5.5%. Is this considered low or high?
    Seems high. Again, would consider REPAYE as the option of choice until training is over.

    -Given that I will start working coming this July, should I max out Roth before paying off refinanced loans or the other way around? Can I contribute to this past year too (2018)?
    I suspect you didn’t have any income as an MS3/4 in 2018 so no Roth available for you this year (unless you have a spouse who made money?). Enjoy the next six months, find a good place to live (rent) in whatever city you go to. Plan on taking your first 6 paychecks and saving 1000 each month and max a Roth for 2019. Do your best to max a Roth each year in residency (my wife and I only half funded Roths during residency and I look back and regret that).

    -Do you have any other recs?
    In short, enjoy the last six months of med school with friends / experiences prior to everyone moving and scattering with their lives. Keep your spirits up during intern year, especially because it can feel mind numbing when you want to do ophtho. Save as much Roth space as you can throughout 4 years of residency (and learn as much as you can about the eye!). Your income will drastically increase once you are finished training and that is when you can plan on crushing the student loans. During residency just try to keep them at bay and not getting larger.

    Hope this helps and welcome

    #180718 Reply
    Liked by jz
    Avatar Panscan 
    Participant
    Status: Resident
    Posts: 1008
    Joined: 03/18/2017
    Earnest refinancing bonus

    refinancing as a resident isn’t a good idea unless you are moonlighting a bunch and making a ton, are super frugal(ie save like 50% gross) or you have a spouse with good income. ie you have to be able to actually make a significant dent in your loans. if you are going to let them sit where they are or slightly grow then REPAYE is almost always better.

    with REPAYE your effective interest rate is anything from roughly 1/2 -3/4 of your actual interest rate (it can be half if you submit for a 0 income and thus your subsidy is literally half your accumulating interest). You’re never going to refinance for 2.75% or half of whatever your current interest rate is. you additionally keep flexibility of PSLF. so for most people, even if you have intention of paying off loans you should stick to REPAYE while a resident and then once attendinghood hits, refinance and crush the loans.

    there are exceptions to the above, but general rulr

    so if you refinance at 5.1 % you are going to pay more in effective interest than you would with REPAYE. Look into how the interest subsidy works. If you have 130k of debt at 5.5%, you have roughly 7k in interest per year. if you make average resident money your REPAYE payment would be like 300/ month. so 7k/12 = ~ 600 of of interest accumulation per month. you’d pay 300 so the difference is 300, which government covers half of. so your effective interest rate would be like 4.1 % ( 5.5% x 3/4).

    If you refinance you don’t get that subsidy and you will have more interest accrue while a resident.

    #180721 Reply
    Avatar mapplebum 
    Participant
    Status: Spouse
    Posts: 297
    Joined: 04/17/2018

    Congrats on the match! I didn’t thoroughly read the responses but I wouldn’t make any major decisions about finances until you know where you’re going to live next year.  Also, unsure if you want / can do this but when mine matched early it was halfway across the country from where we were living and he’d only applied to local-ish intern years. Since the traditional match isn’t until March I suggested he try to get an interview at the intern programs in his residency location. He was able to interview at two programs and landed a sweet TY position. It meant we only had to move once and with all his free time before residency (that was not tongue in cheek it was a fantastic year) we were able to explore our new city.

    Ophtho has become even more competitive since mine was in med school, way to go it’s a huge accomplishment.

    #180829 Reply

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