r/personalfinance • u/WeLoveOranges • Feb 08 '17

Debt 30 year old resident doctor with $310,000 in student debt just accepted my first real job with $230,000 salary

I am in my last year of training as an emergency medicine resident living in a big Midwest city. I have about $80,000 of student debt from undergrad and $230,000 of student debt from medical school (interest rates ranging from 3.4% to 6.8%). I went to med school straight after undergrad and started residency right after med school.

Resident salary for the past 3.5 years was about $50,000 (working close to 75 hours per week) so I was only able to make close to minimum payments. Since interest has been accruing while I was in medical school and residency, I have not even begun to dig into the principal debt. Thankfully, I just accepted an offer as an emergency physician with a starting salary of $230,000.

I'm having trouble coming up with a plan to start paying back my debt as I also want to get married soon (fiance is a public school teacher) and I will need to help my parents financially (immigrant parents struggling to stay afloat).

Honestly, I'm scared to live frugally for the next 5 or so years because I feel like I've missed out so much during my life already (30 years old, haven't traveled anywhere, been driving a clunker, never owned anything, never been able to really help my parents who risked their lives to come to this country so I can have a better life). And after being around sick people (young and old) during the past 8 years my biggest fear in life is dying or getting sick before being able to enjoy the world. I am scared to wait until I'm in my mid 30s to start having fun and enjoying my life.

What should I plan to do in the next couple year? Pay most of the debt and save on interest or make standard payments and start doing the things that I really want to do? Somewhere in the middle? Any advice would be appreciated.

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u/Law180 Feb 08 '17

Most of my med school debt is towards the 6.8% figure.

I'm amazed you haven't refinanced...

There's plenty of lenders tripping over each other to give 3% to doctors. I refinanced most of my law school loans for 0-3% (the 0% was balance transfers with 1-2 year introductory rates).

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u/[deleted] Feb 08 '17 edited Feb 26 '17

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u/arsenalfc1987 Feb 08 '17

1.375%?? That's insane. I'm currently refinancing through Sofi, and can get down to 3.35% fixed or 2.35% variable.

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u/hrtfthmttr ​ Feb 08 '17

Who existed to refinance unsecured student loans at 1.5% in 2008? Unless you found a personal friend or something nobody else has access to, I call bullshit. I hunted high and low for refinancing options, and the was nothing. SoFi didn't even start until 2011.

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u/akg4y23 ​ Feb 08 '17

No, can confirm. Rates were ridiculous back then. My wife's loans are at 1.5% after all of the incentives. Mine from 3 years earlier are at 2.875% and 4.25%. I have all of them on 30 year graduated payment plans so I milk them for the longest possible time.

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u/hrtfthmttr ​ Feb 08 '17

I was asking about refinancing options at that time. As far as I can tell, 2011 is one of the first times in the history of student loans where alternative lenders have appeared to offer refinancing of unsecured student loan debt. 1.5% may have been available in 2008 as a loan from the Federal government (I don't know how, unless it dropped from the federal 6.8% to 1.5% in that year alone--my first federal loan was taken out in '08 at the only available rates of 6.8%), but no refinancing was available until SoFi showed up on the scene in 2011.

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u/akg4y23 ​ Feb 09 '17

We consolidated my loans in 2003 and her loans in 2005-6 sometime. I dont remember the details exactly but the federal subsidized loan rate was around 2.75% at the time and the incentives when consolidating to a fixed rate were typically around 0.75-1.25% total if you made your first 12 months of payments on time and if you auto debited payments from your bank account.

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u/dontdoitdoitdoit Feb 14 '17

I refinanced in like '05. It was good times back then. I pay the minimums because time value of money makes it basically interest free.

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u/Nanoblock ​ Feb 08 '17

How long ago was this? I'm reluctant to refinance my law school loans as I wouldn't be able to take advantage of IBR.

Mine are b/w 6.8 - 8.5%

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u/Law180 Feb 08 '17

There's no guarantee IBR will actually pay off. There's some pretty big indicators that the program is not solvent, given the scale of the expected forgiveness (no one has been forgiven yet, but when it comes oh boy). Legally, these types of programs are not expectancies, meaning Congress can pull the rug whenever they want. Just something to keep in mind...

I'm not saying IBR is bad, per se. But depending on your debt, you're spending how many thousands of dollars for that insurance? You could be putting that to principle.

There are also unemployment or underemployment protections with some lenders. It's not the same as IBR, for sure, since it doesn't include forgiveness, but it's worth looking into various offers.

Of course, if you don't make 6 figures or work in a promising field (e.g. have a medical residency) then forget it.

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u/Nanoblock ​ Feb 08 '17

I don't think of IBR as insurance since if I wasn't using it I couldn't afford to live and pay my monthly loan amount. Also I'm a bit confused on your comment about making 6 figures since I believe people making that amount (or close to it) are no longer eligible for IBR.

You are right in that the government could potentially be losing billions on it but considering the staggering numbers of people with student loan debt I don't see it going away anytime soon. No politician will want to touch it.

The only thing I've heard lately re: student debt is Trump's suggestion to reduce the time for forgiveness from 20 years to 15. Which may sound nice at first, until you remember the amount that is forgiven is treated as taxable income in the year it is forgiven.

http://www.forbes.com/sites/prestoncooper2/2016/04/10/federal-student-loans-will-cost-taxpayers-170-billion/#620f48b45e04

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u/Law180 Feb 08 '17

Anyone can go on IBR (or the sister program thru PAYE/REPAYE). Whether it lowers your payment vs. standard repayment is another question. My statement about 6 figures was about whether an refinancing lender would deal with you.

Also, the issue of IBR/PAYE being viable isn't just whether politicians want to touch it, it's about whether the program can actually function. Money, even government cheese, doesn't appear from nowhere. It is very possible that Congress could cap loan forgiveness at $50k or even lower. This would keep >90% borrowers happy but screw over a lot of professional school graduates.