Menu

Disadvantages to forebearance?

Home Student Loan Management Disadvantages to forebearance?

  • Avatar wcinewbie 
    Participant
    Status: Physician
    Posts: 37
    Joined: 09/30/2017

    I’m currently paying off my student loans at a fairly aggressive rate considering my salary.  Unfortunately, my first job is not going to work out.  While I would like to continue to aggressively pay off my student loans, I won’t be able to maintain the rate while I’m transitioning jobs.  Is there any downside to forebearance?  I would ideally also like to save money towards partnership/asc buys which I’m unable to do with my current student loan rates.

    It looks like going into forebearance would require, at least with earnest, a no cause termination from my employer, which I will expect soon.  Otherwise, I would initiate termination myself.

    #197977 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 298
    Joined: 06/18/2018

    Is there any downside to forebearance?
    Yes. The interest taxi meter keeps spinning away, and that usually gets capitalized once you enter back into repayment.

    How expensive that ends up being depends on what your interest rate is. I’d bet your rate is fairly high.

    If you can’t make payments, you can’t make payments. But to go into forbearance just to save money in hopes of a partnership or ASC buy in for a job you don’t have yet which may never materialize doesn’t really seem like a smart plan, unless your loans are at like 2% or something lower than the rate of inflation.

    #197981 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3033
    Joined: 01/08/2016
    I’m currently paying off my student loans at a fairly aggressive rate considering my salary.

    Click to expand…

    does that mean you are paying extra?

    stop the extra payments and save as cash….

    you should already have an EFund to support you for 6 months as well….right?

    While I would like to continue to aggressively pay off my student loans, I won’t be able to maintain the rate while I’m transitioning jobs.

    Click to expand…

    yea….so you stop the extra and keep the minimum. youll be out what, 1-4 months maybe max?

    I would ideally also like to save money towards partnership/asc buys which I’m unable to do with my current student loan rates.

    Click to expand…

    you mean interest rates? or the rate you are paying?

     

    you are having the problem of: you can have anything but not everything….

     

    #198071 Reply
    Liked by Zaphod, Lordosis, Tim
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 338
    Joined: 02/11/2019

    I guess the question is are you paying more then the bill or did you finance it in a way that you have high payments and a shorter term?  While you have a job you can probably refinance to a better rate and increase the term to a lower payment so things are less stressful when you are out of work.  Then just start overpaying again when you get back to work to finish off the loans.

    Partnership buy ins should wait for you to be able to afford it.  From the information we have it seems you cannot afford it.

     

    Make sure sure you have an EFund

    “Never let your sense of morals prevent you from doing what is right.”

    #198072 Reply
    Liked by LizOB
    Molar Mechanic Molar Mechanic 
    Participant
    Status: Dentist, Small Business Owner
    Posts: 341
    Joined: 10/29/2017
    Partnership buy ins should wait for you to be able to afford it.

    Click to expand…

    Assuming the partnership buy in makes sense, then this is wrong.  Your income should go up or at worst break even the day you become a partner.  Your debt burden goes up as well, but the only questions when making that decision are if it makes sense with your life ambitions and plans, if it makes financial sense, and if someone will loan you the money.  Don’t equate business debt with personal debt.

    #198080 Reply
    Liked by Hank
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 338
    Joined: 02/11/2019
    Partnership buy ins should wait for you to be able to afford it. 

    Click to expand…

    Assuming the partnership buy in makes sense, then this is wrong.  Your income should go up or at worst break even the day you become a partner.  Your debt burden goes up as well, but the only questions when making that decision are if it makes sense with your life ambitions and plans, if it makes financial sense, and if someone will loan you the money.  Don’t equate business debt with personal debt.

    Click to expand…

    The OP is talking about a future buy in with a job he does not have.  I would not start saving money now.  I think he has better use for his money then a hypothetical buy in.

    I otherwise completely agree with your point that if there is a good ROI then it could be worth it.

    “Never let your sense of morals prevent you from doing what is right.”

    #198097 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 298
    Joined: 06/18/2018

    @molarmechanic
    “Assuming the partnership buy in makes sense, then this is wrong. ”

    Didn’t read the OP, did you? He’s getting canned from a current job, no partnership or ASC buy in is available or even on the horizon…so, since no buy in opportunity exists, safe to say it doesn’t make sense in this case.

    #198102 Reply
    Avatar DCdoc 
    Participant
    Status: Physician
    Posts: 327
    Joined: 06/14/2016

    If this is just a temporary job change, you shouldn’t be out of work for more than a couple months? Just drop payment to a lower amount and keep on plowing through. Forbearance seems silly. How long have you been an attending? Surely you must have sufficient cushion to keep paying the loans at the minimum amount for a couple months until paychecks start coming in again, then bump it back up to the aggressive rate. Is there something else going on?

    #198103 Reply
    Liked by Zaphod
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 5400
    Joined: 01/12/2016

    When this situation started you should have stopped over paying and started up an emergency/transition fund.

    Maybe the best thing to do would be to refinance or change your payment term to longer until you get the new job.

    #198145 Reply
    Avatar adventure 
    Participant
    Status: Spouse
    Posts: 1035
    Joined: 10/24/2016
    It looks like going into forebearance would require, at least with earnest, a no cause termination from my employer, which I will expect soon.  Otherwise, I would initiate termination myself.

    Click to expand…

    I think I’d be asking… does this matter for future jobs, and not about forebearance.

    Resigning might not be a bad option.

    #198151 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4084
    Joined: 05/13/2011

    I’m currently paying off my student loans at a fairly aggressive rate considering my salary.  Unfortunately, my first job is not going to work out.  While I would like to continue to aggressively pay off my student loans, I won’t be able to maintain the rate while I’m transitioning jobs.  Is there any downside to forebearance?  I would ideally also like to save money towards partnership/asc buys which I’m unable to do with my current student loan rates.

    It looks like going into forebearance would require, at least with earnest, a no cause termination from my employer, which I will expect soon.  Otherwise, I would initiate termination myself.

    Click to expand…

    Why not just quit paying for a few months? Just to keep Earnest from reporting you to credit agencies and dinging your credit score? That’s really the only difference. Otherwise, the loan acts the same- the interest keeps piling up and there are no payments made.

    I’d just call up Earnest and let them know what’s going on and see what they recommend. If they’re not flexible, maybe refinance with someone else into a 20 year and then at the new job refinance back into a 5 year or something. But I think Earnest is one of the more flexible of the companies, so I bet they work with you to either stop payments or have a lower payment for a few months.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #198154 Reply
    Liked by Zaphod
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 338
    Joined: 02/11/2019

    Actually that is a good point.  When I was overpaying my loans at one point my next payment date was 2 years in the future.  It usually does not work like a mortgage and if you over pay you can let the payments catch up to you if you stop for a time.  Check with your plan though.

    “Never let your sense of morals prevent you from doing what is right.”

    #198157 Reply
    Avatar wcinewbie 
    Participant
    Status: Physician
    Posts: 37
    Joined: 09/30/2017

    Some basic background.

    I’m from a HCOL area and moved to practice in a LCOL area to take advantage of the geographic arbitrage.  Unfortunately, before partnership was obtained, the practice underwent a corporate sell-out completely eliminating partnership as well as imposing large geographic non-competes.  If I don’t accept the new contract, I should expect no cause termination which is a requirement for going into forebearance.  Alternatively, I can just put my notice in once I’ve secured a job.  I’m done with the LCOL experiment and will plan to move back home.  While I have an e-fund, I’m currently paying the loans at a rate that I would not be able to maintain with the lower salaries in the HCOL area.  I would assume it’s better for your credit score to go into forebearance vs. missing loan payments or even refinancing to a lower rate?  Hopefully, after a year my salary in the HCOL area will rise enough for me to resume paying at the rate I did before.

    #198189 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 5400
    Joined: 01/12/2016

    Some basic background.

    I would assume it’s better for your credit score to go into forebearance vs. missing loan payments or even refinancing to a lower rate?  Hopefully, after a year my salary in the HCOL area will rise enough for me to resume paying at the rate I did before.

    Click to expand…

    You are partially incorrect (forbearance doesnt affect and neither does refinancing, both better than missing) and it frankly makes no sense. It has zero to do with your credit score its simply a choice how fast/hard you pay them back.

    It sounds like you just want to forbear for some odd reason. Just extend the term even if refinancing is how its done. Forbearance makes little sense. Stretch out your current employment as long as possible and give as little clue to your plans as necessary, it can take a while to find a job let alone get credentialed and start earning.

    #198215 Reply
    Avatar wcinewbie 
    Participant
    Status: Physician
    Posts: 37
    Joined: 09/30/2017

    Some basic background.

    I would assume it’s better for your credit score to go into forebearance vs. missing loan payments or even refinancing to a lower rate?  Hopefully, after a year my salary in the HCOL area will rise enough for me to resume paying at the rate I did before.

    Click to expand…

    You are partially incorrect (forbearance doesnt affect and neither does refinancing, both better than missing) and it frankly makes no sense. It has zero to do with your credit score its simply a choice how fast/hard you pay them back.

    It sounds like you just want to forbear for some odd reason. Just extend the term even if refinancing is how its done. Forbearance makes little sense. Stretch out your current employment as long as possible and give as little clue to your plans as necessary, it can take a while to find a job let alone get credentialed and start earning.

    Click to expand…

    I currently have a relatively low fixed interest rate (4%).  Presumably if I forebear I retain the interest rate but if I refinance I’ll end up with a higher interest rate?  Unfortunately, I’m limited by how much I can stretch out my employment.  The new contract also requires a longer notice of termination which is not compatible with the standard notices in the HCOL area.  Unlikely practices in the new area will wait for me to finish my termination period when they have a line of highly qualified candidates able to start sooner.

    #198248 Reply

Reply To: Disadvantages to forebearance?

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

you're currently offline

Notifications Mark all as read  |  Clear