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How to prioritize savings/loan payments while a resident?

Home Student Loan Management How to prioritize savings/loan payments while a resident?

  • Avatar mindgamer 
    Participant
    Status: Resident
    Posts: 4
    Joined: 05/12/2019
    Earnest refinancing bonus

    I am starting my road toward freedom from debt and FI as I start my PGY-3 year. I am in my late 30s. There are many issues to tackle including 400K in federal loans, 50K in private loans, no savings yet for retirement etc. All I can say is thankfully I don’t have credit card debt, my financial state of affairs is mortifying. Because I will be a trainee for at least 5 more years (7 total years between residency and fellowship) I had planned on PSLF though the magnitude of my federal debt is hard to stomach. I have my eye on a job in a FQHC. I am trying to find a way to systematically address the debt and savings issues but it’s hard to know what to prioritize.

    Does it make sense to focus now (while a trainee) on getting rid of my private student debt and on starting to contribute to Roth IRA and 403b (employer doesn’t match) while on REPAYE even though my federal debt has a higher interest rate than the private debt? I am leaning heavily toward PSLF but that’s no guarantee so I don’t want to refinance federal debt for lower interest rate just yet. I don’t know how much confidence to have in PSLF and throwing as much $ as possible at retirement and private debt will make it impossible for me to use a taxable account for savings in case PSLF doesn’t pan out. Does it seem reasonable to hold off on this for now while going for the aforementioned?

    Thank you all so much, can’t wait to get my finances in order so I can start contributing they way so many of you do!

    #214124 Reply
    Avatar trebizond 
    Participant
    Status: Resident
    Posts: 88
    Joined: 12/31/2017

    It’s unclear what your salary and your spouse’s salary is. What is your combined income? How much are you having left over at the end of the month?

    I would recommend the following:

    1. Build a minimum $1000 emergency fund in a savings account or somewhere else easily accessible but not too easily accessible for fake emergencies. When you’ve paid off the private student loan, consider increasing to at least 3x your monthly living costs.

    2. Max out a Roth IRA for yourself and spouse.

    3. If there is no employer match for a 403b or 401K, I probably would fund the equivalent of 5% of your salary into one of these accounts. If you run into a program where there is an employer match, then fund it at least to the employer’s match.

    4. Get rid of the 50K private student loan, since it’s small and has higher interest and the potential to improve cash flow.

    5. Aggressively attack the federal loans

    6. Be careful and intentional with the training process. You mention FQHC. Are you going to be doing primary care or a subspecialty? If you have any leeway here, definitely look at the potential compensation of a subspecialty choice. If you do not stand to make any more income doing a subspecialty than in primary care/hospitalist work (e.g. ID, nephrology may make less), strongly consider not doing that fellowship. The extra years of low compensation can have a big impact on the timeframe of paying off the debt.

    7. After training, carefully evaluate COL in targeting your first attending job. It can make a huge difference.

    #214203 Reply
    Avatar mindgamer 
    Participant
    Status: Resident
    Posts: 4
    Joined: 05/12/2019

    Thank you so much for this advice, especially questions re FQHC which I certainly will consider. I’m a psychiatry resident with plan for child and adolescent and forensics. I love both of those sub specialties and they do increase my earning power but I’m regularly thinking about how essential it is to pursue one/both.

    At present my income is about 100K after moonlighting. My partner has an income of 100K, he has no debt. But we are living separately right now due to his job which is something we are trying to rectify as its far from ideal from both relationship and financial perspectives. He lives in a very HCOL area.

    #214270 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3614
    Joined: 01/08/2016
    Disability Insurance

    Married? Filing status?
    I’m a Roth snob, but it will be better from PSLF to do trad.
    EFund yes.
    You should knock out private loan next. Easily done by end of training.

    #214287 Reply
    Avatar mindgamer 
    Participant
    Status: Resident
    Posts: 4
    Joined: 05/12/2019

    Married, file separately. We live apart for now. Better trad IRA than Roth for PSLF? Getting on that EFund ASAP.

    #214298 Reply
    Avatar Panscan 
    Participant
    Status: Resident
    Posts: 725
    Joined: 03/18/2017

    Thank you so much for this advice, especially questions re FQHC which I certainly will consider. I’m a psychiatry resident with plan for child and adolescent and forensics. I love both of those sub specialties and they do increase my earning power but I’m regularly thinking about how essential it is to pursue one/both.

    At present my income is about 100K after moonlighting. My partner has an income of 100K, he has no debt. But we are living separately right now due to his job which is something we are trying to rectify as its far from ideal from both relationship and financial perspectives. He lives in a very HCOL area.

    Click to expand…

    so you make 100k and you can’t max out roth and contribute to 403b at present? if you’re making 100k as a resident you should have some money to put towards debt and retirement. look at your spending

    #214355 Reply
    Avatar mindgamer 
    Participant
    Status: Resident
    Posts: 4
    Joined: 05/12/2019

    Going to be making 100K this coming year, currently making 70K. But just finished paying off a load of medical debt that had been hanging over me for years. I prioritized that above all else, perhaps unwisely. But we are scrutinizing our spending now too because we want to be maximizing retirement as much as possible given how much I can pull in moonlighting.

    #214370 Reply

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