student loans

How PSLF Does (or Doesn't!) Impact Your Career Choices

This is the guest post by Travis Hornsby of Student Loan Planner. He's an expert in student loans and is married to a physician. Today, he's stopping by to discuss how PSLF might impact your career choices as a physician. Check out Travis’ ultimate (and free) student loan calculator here. If you’d like to learn more, check out how you can get student loan help here. Many new physicians are planning their lives around the PSLF program. They’re terrified if anything happens to this program, and they’re afraid of working part-time or switching jobs to a private practice. You know the old saying “don’t let the tail wag the dog”? Physicians can and should be choosing their career paths and their employers based on their passions, not their finances or PSLF. To see why, it helps to take a look at the math.

Why Physicians Should Leave Training with Lots of Credit Towards Loan Forgiveness

Unless you are positive you want to go to private practice, you should not refinance your student loans as a resident. The reason is because REPAYE will give you subsidies and cover part of your interest while you’re still in training. That’s why I see REPAYE being a good in-between option if you’re unsure if you want to work private practice or at a not-for-profit hospital once you’re an attending. My wife is a urogynecologist. She had a lot of issues with our loan servicer FedLoan Servicing, so we weren’t able to go for loan forgiveness. That’s one of the main reasons I started Student Loan Planner. That said, the physician graduating today should be leaving training with between three and seven years of credit towards Public Service Loan Forgiveness on average. That’s because most residencies and fellowships take place at qualifying employers.

How Much is PSLF Actually Worth to an Attending Physician?

If you get a great job in private practice like Miss Bonnie MD, then pay off your debt quickly and refinance. However, pretend you are a rising OBGYN attending looking for a job. You have two options, one is a private practice paying $250,000 and the other is a giant university health care system paying $220,000. Let’s say you have $300,000 of med school loans. How much is the value of PSLF in this case? You’d spread the PSLF value over six years, since you’d be leaving training with four years of credit. Table Hence, the difference in payments is a bit over $213,000. Divide that by 6 (you need 6 more years as an attending to get PSLF), and you’d have an after-tax PSLF value of $35,500. You would need to adjust this for pretax salary value to see how much this benefit is worth. To pick a round number, let’s say after adjusting for taxes, $35,500 a year in take-home pay benefit for PSLF is worth $50,000 in salary. Hence, a $220,000 salary in the not-for-profit world would be equivalent to a $270,000 salary in private practice. Since the private practice salary was $250,000 in this example, the extra value you get from PSLF is only about 20k a year. Would you take a job that paid an additional 20k per year if there was something about it you didn’t like that much? Probably not.

Working Part-Time vs Full-Time as a Physician

Another thing to keep in mind is as a PSLF eligible physician, you don’t lose your credit if you decide to reduce your hours temporarily. You can even gain credit while on maternity leave for example (3 months per calendar year). Additionally, you could even go for the 20-25 year version of loan forgiveness if you were in a lower paying specialty and desired part-time hours for an extended period of time. If you decided to be full time again, you could pick up from where you left off on the PSLF clock. Don’t feel like if you don’t rush and get PSLF that it’s going away. It’s way too enshrined in loan promissory notes to be going anywhere in the near future.

Get a Plan for Your Med School Student Debt

Miss Bonnie MD has paid off her student debt, and if you want to be like her, you’re going to need a plan. You could refinance it or go for forgiveness, but you better hope you’re making the right choice. Too many physicians are making decisions casually about the biggest financial decision they’ll make besides retirement and buying a home. Once you’ve got a solid plan in place, you can relax and focus on making your career all you want it to be. If you prefer not to spend time reading books on med school debt, then we’d certainly love to help you make a custom student loan plan. Regardless of whether you choose the Do It Yourself option or get a professional to help you, please pursue the path in medicine that you truly want. You shouldn’t feel pressure to work at a not for profit hospital just to get loan forgiveness anymore than you should work at a private practice just because it pays more money.

Final Thoughts on PSLF and Med School Career Choices

Medicine is too rife with burnout and stress not to be in an employment situation where you can be happy with the results you’re getting for your patients. If that’s not the case, just make sure you know what you’re doing with your student loans and switch employers. Some huge percent of the physician workforce changes jobs in the first few years of practice. Take charge of your life and career and don’t let student debt or the promise of PSLF hold you back.]]>

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The Best Push Present Ever!

push presents are a thing. And it turns out that I got the best push present ever!

About a year ago, M asked me to marry him and promised to keep our net worth positive. At that time, I was dragging us down with my student loans.

Well, not anymore! M paid them off!

Yup, I no longer have student loans. Happy dance in order:

U.S. Army Happy Dance GIF by US National Archives - Find & Share on GIPHY

And, we are now officially DEBT FREE !!!!!!!!!!!! 

The Case to Wait to Pay Off Debt

I hear people say all the time that you don't “need” to pay off low interest debt quickly. I see their point and I wasn't planning on paying off these loans for another 3 years. Right out of residency, I favored maxing out my tax advantaged retirement accounts over making extra payments towards my student loans.

Why No Debt Is the Best Push Present Ever

Despite this argument, having no debt really feels fantastic. And it comes with some really significant perks too.

Being debt free means:

  • No extra monthly payments
  • A lower monthly operating budget
  • Any extra money we get goes to us, not debt

Final Thoughts on Being Debt Free

Existing loans and taking on new ones (mortgage, car loans, etc) give you the illusion that you can afford something you actually can't.

Like 0% interest car loans – trust me, they aren't doing that to be nice to you. They know you will buy a more expensive car on credit even if you aren't paying interest. After all, it's just another monthly payment, right?

Couples who pay off debt together stay together. Of course, not every couple might have the means or the desire to pay off debt in one fell swoop like this. The most important thing is to make sure that you're on the same page financially, or at least taking steps to get there. Having solid financial footing before bringing a baby into the world truly feels like the best push present.

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How Female Physicians with Student Loans Can Get a Fair Shake

Dealing with student loans is difficult. Being a doctor with student loan debt can be particularly challenging. 76% of doctors graduate with debt, and the median is $192,000. This is a guest post by Travis Hornsby, creator of Student Loan Planner, where he offers one-on-one student loan advice. As female physicians with student loans, if you need help navigating them, contact him. I got into helping people understand their student loans thanks to my beautiful and brilliant fiancée Christine. She’s a urogynecologist, and like most physicians, she was more focused on learning and caring for her patients than understanding arcane federal student loan rules. Unfortunately, female physicians earn less than their male counterparts. To help tip the scales back in favor of people like Christine, here’s how to maximize student loan strategy as a female physician.

Tips for Female Physicians with Student Loans

First things first. Women doctors are more likely to be employees. That's a big advantage when it comes to student loans.  About three-quarters of all women in medicine work as employees instead of in private practices. That means women are more likely working at not for profit hospitals than men. That’s why female physicians need to know about Public Service Loan Forgiveness (PSLF) like the back of their hand. Under PSLF, A doctor must work for 10 years in a not for profit setting. Most hospitals qualify. You must receive your actual paycheck from a not for profit entity too. Occasionally I’ve seen some hospitals that pay their physicians out of a private sector entity. That would cause you to lose your PSLF eligibility. Make sure that doesn’t happen to you when you become an attending. Your residency counts towards this 10-year period until PSLF forgiveness. If you play your cards right, you could pay $300-$500 a month on your loans during this period, which all counts towards the 10 years required under PSLF. Virtually all physicians who manage their loans the optimal way will graduate residency with 3-7 years of credit towards the 10 years they need. What happens when you become an attending?

Keep Your Payments Low to Maximize Forgiveness

Under current rules, you can use either PAYE or IBR to cap what you must pay on your student debt. That means if you owe $150,000 in med school loans but start out at $200,000 as an attending, you can keep your payments at no higher than the standard 10-year monthly amount you had to pay when you left med school. Using this cap to your advantage, you could conceivably train for several years to become a surgeon, then cap your payments on 10-year standard repayment plan. That would allow you to pay a fraction of what you originally borrowed for medical school. A lot of my clients make payments based on the Income Based Repayment plan (IBR). If that describes you, you’re probably paying too much on your student debt. You should look into switching to Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE). The reason? You get to pay 10% of your income instead of 15% as with IBR.

Make Sure Your Loans Qualify

Only Direct Federal student loans qualify for this forgiveness benefit. That covers most loans issued after 2010. If you happen to have loans from before this that are on the older FFEL loan program, you can consolidate them into a Direct loan. That consolidation makes them eligible for PSLF, but it also resets the repayment clock to zero. Make sure your loans don’t qualify for PSLF before submitting a consolidation request. Call your loan servicer and ask them what loans qualify for PSLF. They should be able to tell you.

How Would This Work in Real Life?

Here’s an Example. Meet Jane. She’s a pediatric cardiologist. Her total length of training between residency and fellowship is six years. During that period, she’ll start out at $55,000 and end up at $70,000 in salary. When she becomes an attending, she’ll start at $225,000 and get inflation level raises after that. Jane has $300,000 in student loans. She doesn’t know what to do with such a large burden, but she’s passionate about medicine. In a perfect world, here’s how she would manage her student loans.

Start paying on REPAYE as soon as possible

While in residency and fellowship, Jane can pay only a few hundred a month but receive interest subsidies of thousands of dollars a year. The reason is that REPAYE covers half of the leftover interest she doesn’t pay each month. Since she’s going for tax free loan forgiveness but also wants to keep the loan balance low just in case, REPAYE is probably a great option. A possible exception to that rule of thumb is if her spouse makes a lot more money than she does and then it’s worth talking to an expert.

File the PSLF Certification form

After her first payment on REPAYE during training, Jane can submit the PSLF employment certification form. She should receive a response in a couple months showing her progress towards loan forgiveness. Once she’s being tracked for the program, she should resubmit this free form every year at least to create a well-documented paper trail.

Minimize Taxable Income

Loan servicers calculate what Jane owes every month based on her taxable income. If she will receive forgiveness on her student loans then she wants to minimize what she pays wherever possible. The best way to do that is to save in pre-tax retirement accounts. She can use a pre-tax 403b plan to put away up to $18,000 per year, which will directly reduce what she has to pay towards her student loans.

Here’s What the Numbers Look Like

A few things might complicate this picture, particularly if Jane had a spouse who also earned an income. If a spouse has student debt then it doesn’t matter as much. However, if a spouse has no loans but a substantial income then it would be worthwhile to rerun these numbers using my calculator. So to review, Jane makes $55,000 at the beginning and $70,000 at the end of training. We’ll say she puts away $5,000 in her 403b during training and $18,000 as an attending. Her interest rate is 7%. Jane borrowed $300,000, and she’s going to be able to pay just over $100,000 on her student loans and save a lot of money for retirement along the way. Student loan interest is generally not tax deductible except for a small amount at low incomes. That means over that 10 years, Jane receives a benefit worth about $20,000 annually after tax for optimizing her student loans. On a before tax basis, that benefit is more like $30,000 in salary value. That’s a great benefit considering many people enjoy working at academic hospitals over private practices.

What if Jane Wanted to Start a Family?

One cool feature of the PSLF program is that payments made while on maternity leave count towards the 10 years of payments needed for forgiveness. If Jane worked at an academic hospital, she could take off up to three months per birth and if she makes payments on REPAYE, PAYE, or IBR, she gets credit towards tax free loan forgiveness. As I mentioned, if Jane had a spouse, then that could make things a bit more complex. Keep in mind you’re married for the entire year for tax purposes once you submit your marriage certificate. I’ve met many couples who have three to four years of credit towards PSLF while they’re planning their wedding. If Jane had fallen into this category, she could probably count on at least a year for the student loan servicers to incorporate her spouse’s income into the payment calculation. If she uses PAYE once she gets married if that’s in her life plan, she can cap the required payment at no more than what’s required under the 10-year Standard plan. That capping feature allows most physicians to qualify for substantial loan forgiveness even if they’re a high-income surgeon like my fiancée.

Plan for PSLF, but Prepare for an Alternative Plan Just in Case

If you’re in training right now, there’s no harm in tracking progress towards loan forgiveness on the PSLF program. If you decide to go private practice, you can refinance and get a lower interest rate with a private lender. If you decide to stay with a hospital, it will probably be a not for profit employer. You might as well set yourself up for this benefit as it’s worth tens of thousands if not hundreds of thousands of dollars. In case PSLF gets repealed, which is probably not going to happen for folks who already have loans, you’ll owe less by using an intentional strategy for loan repayment. Female physicians with student loans like my fiancée Christine deserve a fair shake. Hopefully, you’ll take advantage of free content on Miss Bonnie MD’s blog and my site Student Loan Planner to save every dollar you deserve. If you wanted help coming up with a loan repayment strategy, I’d love to help.]]>

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Save or invest?

Monet's lilies @ Musée de l'Orangerie, Paris, France[/caption] This is a very frequent question and topic on the finance blogs. I like how the White Coat Investor made a nice and easy to follow order of things. Basically pay off any consumer debt and other high interest loans first. Then he prioritizes saving for retirement over lower interest loans. Then in this post he says most docs should have their loans paid off within 5 years of graduating. I've struggled with how fast I should be paying off my student loans. If I really wanted to, I could wipe them out in 3 years (possibly less with bonuses) but would require more than a decent amount of sacrifice. How awesome would it be to be student loan free in < 3 years? I've changed my mind countless times about this. At least I was maxing out all of my available tax-advantaged accounts while flip-flopping. Currently, I fully fund my job's 403(b) (+ generous employer contribution), 457(b), and a backdoor Roth IRA.  This amounts to $62,300 this year. I don't have a taxable account yet. I think for the average physician (although even this definition is quickly changing) who becomes an attending physician around age 30 (and funded a Roth IRA during residency) the WCI's general plan is a good one to follow. For folks like me however, who became an attending much later in life (38)- I've lost valuable time. Remember, time is a huge part of how compound interest works. If you have less time, then you need more money (saved) to make up for it. The same could be said for folks who have children and other priorities that require money. This late in the game, brute savings is what will get me to financial independence. Instead of the suggested 20% saved for docs, I need to save at least 30%. I recently took advantage of First Republic Bank's amazingly low interest rates for student loan refinancing. This forced me into a 5 year maximum pay off period with a fixed interest rate of 2.25%. I'm ok with that. I also have another $80K loan with my mom and will pay this off in < 5 years. What am I doing with my “extra” cashflow? Saving. We hope to start a family soon and will need to pay for childcare and the kid him/herself. NYC daycare can be between $2,000-$3,000 a month easily! We also need to beef up our emergency fund with more at stake. M and I have picked $5 million as our FI number. We probably don't need that much. I prefer to save more, just in case, to be prepared for medical costs, possible long term care etc. Picking $5 million puts us in the position to help our children and our parents too if need arises and still remain secure. We want to get there in 20 years (2037) or less. Not a small feat. The first milestone – the first million – is set for June 1, 2023. I'll let you know how that's going year to year. What do you think? How fast are you paying off your loans? Have you picked your FI number? Comment below.]]>

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Refinance with First Republic Bank for Better Rates

44 million borrowers owe over $1.5 trillion as of 2019. And we know medical school loans are especially high. So how do you take off some of the pressure? Look for better interest rates! If you live near First Republic Bank, you can use them to refinance for a better student loan rate. Here's how I took advantage of what First Republic Bank offers and how you can do the same, plus snag $200!

How to Refinance with First Republic Bank

First things first. Check your location. Do you live in one of the cities marked above?
  • New York City
  • Greenwich, CT
  • Portland, OR
  • Palm Beach, FL
  • Various cities in Northern and Southern Calfornia
If you live in one of the locations from the map above AND you have high-interest student loans, keep reading. You may be eligible for the lowest rates in student loan refinancing. First Republic Bank offers fixed-rate student loan refinancing in 5, 7, 10, and 15-year terms. I snagged 2.25% in early 2017. These are currently the lowest rates you will find for student loan refinancing. Last year, they offered 1.95% for the 5-year term! Plus, as my readers, you can snag a $200 bonus once you're approved.

OK, so what's the catch?

You must:
  • Live near a physical branch.
  • Meet their salary requirements and may need a certain % of your debt liquid in your main checking account.
  • Open a checking account with them and use it as your main checking. That means your main source of income must be direct deposited there.
  • Maintain a minimum balance of $3,500 a month and you must auto-debit the loan payment from this account.
  • Pass a credit check.
Also, remember that this becomes a private loan and will not be forgiven at death or total disability like federal loans. Of course, this is not a concern. Or it shouldn't be. I mean, are you really planning on dying before your loans are paid off? If this truly worries you, make sure you have enough term life insurance to cover this. I do.

More Considerations When You Refinance with First Republic Bank

  • The minimum loan is $40,000 and the maximum is $300,000.
  • Their checking account refunds ATM fees!
  • They will refund you up to 2% of paid interest if you pay back the loan in 2 years!
  • If you get approved for this loan but move away from a physical branch, this does not affect the loan as long as you keep your primary checking account with them.

How Do I Get Started?

This is an amazing deal if you meet their requirements. If you're ready to take the plunge, contact Kerry Berchtold at kberchtold at firstrepublic dot com or 339-235-0419. Don’t forget to mention Miss Bonnie MD to get your $200 once you’re approved!

Final Thoughts on Refinancing with First Republic Bank

In March 2017, First Republic Bank approved my refinance! I chose the 5-year term at 2.25% fixed for $88,000 of my loans. My strategy was to”force” myself into a 5-year repayment, since I do my best financially when things are automated. If you're ready to tackle your student loans and you want to refinance to lower your interest rates, reach out to First Republic Bank today.]]>

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