Menu

Have 150k in loans- getting large inheritance- pay off loans or PSLF?

Home Personal Finance and Budgeting Have 150k in loans- getting large inheritance- pay off loans or PSLF?

  • Avatar beepos 
    Participant
    Status: Resident
    Posts: 2
    Joined: 07/16/2019
    Splash Refinancing Bonus

    Hi Folks,

     

    I’m a new intern with 150k in student loans, all from med school. I’m an IM intern, probably going to do Cardiology and likely Interventional after that. There’s a good chance I’ll be working for a nonprofit after that too

    At this point, ‘m staring down the barrel of 7-8 years more of training. Luckily my dad beat some financial sense into me as a kid, and throughout undergrad and in a gap year, I maxed my Roth. I’m planning on doing at least that throughout Residency and fellowship if not more, as life permits.

    My grandpa, when I was a newborn, bought a small building in a city in a country that has rapidly industrialized in the last two decades. That shabby building is now in one of the most expensive areas of that city now. I own a 1/3 portion of that building, and that’s worth around 200k USD now. My dad plans on selling it in a few years- it’s getting around 7k USD in rent per person per year right now, but as none of us live in that country anymore and it has byzantine rules/corruption, my dad wants to sell.

    Once I get this money,what should I do? I know I’m in a fortunate situation

    1)Pay off Loans

    2) Once I’m settled, use the money as down payment for a house and try to use PSLF.

    3) Put the money in an investment account and just invest in the Vanguard 500 or something safe but with decent returns. And let life dictate what to do- if Private Practice, just pay off loans.If nonprofit, PSLF and use the money for house or something

    Option three seems the wisest to me, but I’m no financial guru

     

    #230850 Reply
    Avatar PedsFIRE 
    Participant
    Status: Physician
    Posts: 4
    Joined: 06/11/2019

    Pay off the loans. Would be pretty amazing to be in residency/fellowship with no loans or obligations

    #230860 Reply
    Liked by Zaphod
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8113
    Joined: 01/09/2016

    Missing some facts. Are you saying your grandpa has passed and your dad now owns the business? Or you inherited 1/3 and your dad inherited 2/3? Is the building worth $200k or your share (my assumption)? How much has it appreciated since you inherited?

    Depending upon when you inherited and how much time passes until your dad sells, you may owe income taxes – must take them into account. Since you mentioned that your dad will be selling “in a few years”, I think you may be trying to make this decision too soon. A lot of things can happen in a few years. My last choice of the above is #2, but you may find yourself adding to your list before it sells. $7k rent per year doesn’t sound too appealing, but I’m thinking maybe so in the country it is located? Or did you mean “per month“?

    Also – welcome to the forum gang!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #230861 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 700
    Joined: 06/18/2018

    Your option 3 seems to be the best bet.

    Save/invest the extra cash. If you’re eligible for a 401k at your training program that allows you to Roth your contributions, use the extra cushion to fill that up in addition to your Roth IRA. You’re likely in the lowest tax bracket you’ll be in for a long time.

    Keep working hard and learning about personal finance so you can manage your money wisely and honor your grandfather’s legacy.

    #230878 Reply
    Avatar Kamban 
    Participant
    Status: Physician
    Posts: 2484
    Joined: 08/01/2016

    PSLF being around in 7 years when you finish your IM and Cardiology and interventional cardiology fellowship seems more remote each day. But who knows how the political winds will blow.

    I would do option 4. Get into a saving and reducing debt habit. Use that money, when it comes to you, to be placed in an index fund investment for long term growth and help achieve FI. In the mean time live like a resident and start attacking student loans even during residency and fellowship if you have extra money after all tax protected savings like Roth, 401K etc. The 150K is a small amount in the total income stream in your life and you should try and get rid of it soon. Then start saving for a house, family etc.

    #230885 Reply
    Avatar Dont_know_mind 
    Participant
    Status: Physician
    Posts: 947
    Joined: 11/21/2017

    I’m curious, which country is the property in?

    #230891 Reply
    MPMD MPMD 
    Participant
    Status: Physician
    Posts: 2488
    Joined: 05/01/2017

    No real wrong answer here. The clean thing is just to pay off loans. Starting off life w/ $50k in the bank and no debt as a cardiologist is going to be sweet.

    Some quick and dirty calcs on PSLF calculators would lead me to believe that if you stayed at a 501c3 you’d probably end up with a little bit of forgiveness? REPAYE and going for PSLF probably does come out slightly ahead mathematically but a more accomplished spreadsheet nerd would need to run it all out. I think it’s going to be close. I plugged in $60k income and $150k loans and your REPAYE is about $350/mo so not going to make much of a dent. But then if you jump to $500k as an interventionalist (which is possible) you are going to be paying about $4k/mo and if you do that for 3 more years you’re basically going to pay off your own loans.

    Please don’t take my calcs as gospel this is a weak area for me but my final vote would be to pay them off and move on w/ life. Heck you could pay them off and use that extra few hundred dollars a month to spend on yourself in residency and still be in great shape. I mean not that we recommend car payments but that’s a car payment on a nice vehicle if that’s what you’re into or a really nice vacation once a year. I’m a big fan of doing things in residency that keep you sane.

    #230906 Reply
    Liked by Tim
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2374
    Joined: 03/01/2018

    The future is unknown and plans can change. I would not settle on a plan for PSLF given that loan amount and anticipated field. Property (potential) sale is years off anyway and things can change. You will owe taxes with the sale. In whatever year that happens you should do some tax planning to minimize gains taxes.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #230912 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1825
    Joined: 02/11/2019

    That is way less then 1X loans if you are general IM.  It will be nothing compared to a cardiologist +-

    Even if you were not getting this money I would just pay off the loans.  The standard 10 year repayment would only be around 1500 a month.  A resident can handle that.  Throw a little more and it can be gone by the end of training.  Plus with that money coming your way you will have plenty to invest in retirement as well.

    Starting your career at a net worth of zero is a win.  You would have to try to fail.

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

    #230954 Reply
    Avatar wa2106 
    Participant
    Status: Physician
    Posts: 184
    Joined: 11/29/2017
    Earnest refinancing bonus

    That is way less then 1X loans if you are general IM.  It will be nothing compared to a cardiologist +-

    Even if you were not getting this money I would just pay off the loans.  The standard 10 year repayment would only be around 1500 a month.  A resident can handle that.  Throw a little more and it can be gone by the end of training.  Plus with that money coming your way you will have plenty to invest in retirement as well.

    Starting your career at a net worth of zero is a win.  You would have to try to fail.

    Click to expand…

    I don’t think most residents can easily handle $1500/month but otherwise I agree.  Usually a proponent of PSLF but in this case I don’t think it will yield much for you.  Just pay them off when you’re able.

    #230955 Reply
    Liked by Tim
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1825
    Joined: 02/11/2019
    I don’t think most residents can easily handle $1500/month but otherwise I agree.

    Click to expand…

    I never said it would be easy.  But that is less then a third of the average salary.

    Get a cheap place.  Eat at the hospital.  Learn how to be a doctor.

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

    #230960 Reply
    Avatar wa2106 
    Participant
    Status: Physician
    Posts: 184
    Joined: 11/29/2017
    I don’t think most residents can easily handle $1500/month but otherwise I agree. 

    Click to expand…

    I never said it would be easy.  But that is less then a third of the average salary.

    Get a cheap place.  Eat at the hospital.  Learn how to be a doctor.

    Click to expand…

    Not what I would recommend even if possible.  It’s OK for residents to live like residents.  Save 15% of gross salary – split between savings and retiring debt.  Live on the rest.  Residency is stressful enough as it is to also feel deprived.

    But if I had a $200k windfall I can assure you I’d pay off the rest of the debt.

    #230985 Reply
    Liked by TheDangerZone, Tim
    Avatar SValleyMD 
    Participant
    Status: Physician
    Posts: 462
    Joined: 05/12/2016

    If u do end up in cards, combined with your mindset and what you’ve proven already means you’ll be extremely wealthy by mid career

    So u can’t go wrong with this.

    My vote for simplicity sake is to pay off loans

    #231037 Reply
    Liked by MPMD, AZPT
    Avatar AZPT 
    Participant
    Status: Other Professional
    Posts: 115
    Joined: 02/02/2019

    I never imagined truly how good I would feel once my loans were paid in full.

    I have 2 friends in year 4 of PSLF.

    Did I mention how good they DONT yet feel?

    #231172 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2817
    Joined: 01/03/2017

    I wouldn’t even think about it and I’d pay off my loans.

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

    #231178 Reply
    Liked by MPMD

Reply To: Have 150k in loans- getting large inheritance- pay off loans or PSLF?

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

Notifications Mark all as read  |  Clear