billyParticipantStatus: PhysicianPosts: 155Joined: 04/07/2016
@billy – Take a look if you happen to qualify – it sounds like it’s been awhile though….Click to expand…
Thanks, I looked at the link. I think you still need to have the student loans to qualify for reconsideration. They were paid for long ago- Once I was rejected for the forgiveness I paid them off very quickly.June 8, 2019 at 1:31 pm MST #220171BubbadogParticipantStatus: PhysicianPosts: 21Joined: 06/06/2019
Yearly cost of attendance $65,000-$70,000.
Med students can borrow $40,500/yr as unsubsidized direct loans. Beyond that, it’s Grad Plus loans which currently come with a 4.3% origination fee and a 7% rate. If she misses out on PSLF, that gamble will have cost a substantial sum. Even if she does get it, you’ll probably only come out mid five figures over just paying it from the get go after 10 years of repayment.
Electing to spend 300k for her to go medical school, then hedging that she’ll be low paid after investing that time and money is certainly a curious thought experiment.
It’s interesting that someone who currently works in medicine would encourage their kid to go to medical school at a cost of 70k/yr.Click to expand…
Maybe a hybrid approach would work best. By this I mean have my daughter borrow $40,500 a year for four years and pay the remaining balance as she goes. Basically, have her borrow only the cheapest money. After medical school, we could assess the viability of PSLF and see if her chosen specialty will likely match up with PSLF. If not, I could just pay off her loans at the end of medical school. I completely understand that an approach like this is somewhat of a gamble and has a few hurdles to jump through. Certainly paying as she goes is the simplest. In the end, it may be what I end up doing. I don’t have a tremendous amount of faith in PSLF until I see more people have their loans forgiven. I am not opposed to letting her graduate from medical school with some easily manageable amount of student loan debt (50-100K???). I don’t really follow your your rationale about hedging she’ll be low paid or why someone in medicine would encourage their child to go to medical school. Being a physician has provided me with a wonderful life. I am merely exploring all of my financial options for helping my daughter with her medical education.
I really appreciate all of the points of view.
Thank YouTimParticipantStatus: AccountantPosts: 2822Joined: 09/18/2018
Investment returns – costs of student loans = net investment, potential returns depends upon PSLF (loan forgiveness is the main component.
What is you edge? Your daughter of course. Different personalities self select specialties and career paths that fit the PSLF mold. You might noodle where you think she might end up. Unfortunately, this would be a 14 year investment with losses increasing until the payoff.
All depends upon your edge, what path you think she will take., after all you have data and a track record and know her better than any admin committee.
Time will tell.
The great thing, your loss is capped at the cost of attendance. Your on the hook for that anyway.
The carrying cost for four years might be a good bet, depending on your edge.June 8, 2019 at 7:47 pm MST #220246Dont_know_mindParticipantStatus: PhysicianPosts: 905Joined: 11/21/2017
I think you are confusing the possible return from investing it in the stock market. But this is irrelevant as that is a risky investment and repaying it is not. You may also be being seduced by the potential for what seems to be free money, which actually it isn’t either.
You can calculate the return for PLSF at 14 years from now if it is successful. I haven’t calculated it, is it in the order of 6% p.a, in after tax dollars ?
The cost of capital, in after tax dollars you should know.
If the probability of PLSF is in the vicinity of 50% or below, you can calculate the expected return from this strategy, which to me seems to be low or negative (but I could be wrong as I have not looked at the details).
You should probably also get advice from your accountant too.
To me it seems an odd way to structure the investment.
If you wanted to take a gamble on the stockmarket, would you not pay off the student loan in your child’s name and draw a mortgage debt or margin loan in your name for the 300k in risky assets ? The interest would then be deductible to a greater degree and presumably your marginal tax rate is higher than your daughters. The student debt with your daughter is only deductible to ?$2,500/year at her MRT.
I guess you could also put the asset and margin loan in your daughter’s name and that might still be cheaper in interest and more tax efficient than keeping the PLSF loan. if there is no loan needed after paying PLSF and investing the 300k, you could put it in her name and the tax rate could be lower. But then she might blow it. And you could attempt to put assets in her name for lower tax anyway, subject to gift tax limits, so it is an independent structuring issue to the PLSF.
But I don’t think it’s all that important compared to the main issue, which is that the psychological effect of pressuring her to take a PLSF job, even if you don’t intend to do this, could have an impact on her lifetime earnings to the tune of 10 – 30 times of what the loan amount is.pulmdocParticipantStatus: PhysicianPosts: 432Joined: 09/19/2016
There are many suppositions that go into a situation where loans/PSLF is economically advantageous: no significant changes like caps on payment, your daughter picking a field where a PSLF job pays substantially as much as a non-PSLF job, your daughter wanting to stay in the workforce long enough to get PSLF, money not spent on loans achieving enough extra return to compensate for risk (after all, not having loans is a guaranteed 6.8% return, getting 7% return on investment isn’t enough to compensate for risk). That’s a lot of “what if’s.” If any one of them breaks wrong, loans were a bad financial choice.
My advice is if you are thinking about paying for med school and you can pay for med school, do so. OP knows better than anyone whether his daughter will suffer emotionally from having her med school paid for. My suspicion is that the die is already cast; kids who would be financially prudent would do so even if their tuition was paid for.
FWIW, my parents took a hybrid approach; 100% of undergrad, all undergrad scholarship money paid forward to med school, I was on my own for med school. This led me to choose the cheaper state school, work through undergrad and med school to save for tuition, rent the cheapest apartment I could find, etc and I made it through medschool without debt. However, my mindset was already there; if I had to take out loans to pay for med school, I would have moonlighted my butt off in residency and fellowship to pay them off ASAP. Needing loans or not didn’t change my mindset, only my circumstances.TanglerParticipantStatus: PhysicianPosts: 345Joined: 08/23/2018June 9, 2019 at 4:46 pm MST #220514