$359k in med school debt; advice for family member

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FrugalProfessor
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$359k in med school debt; advice for family member

Post by FrugalProfessor »

A family member just graduated podiatry school and residency with $359k in student loans. Here are the relevant parameters:

* All loans are Federal Direct
* Mix of Unsub Stafford + Student Plus
* Weighted avg interest rate is 6.1%
* Married with 4 kids (relevant for disposable income calcs)
* Expected near-term income in the neighborhood of $150k-$250k
* No access to 401k/HSA (relevant for disposable income calcs)
* Does not qualify for PSLF; employed by a normal non-public practice
* Currently renting modest home in LCOL area; would like to purchase home soon

It seems to me that the family member has three potential (and completely divergent) paths:
1.) Suck it up. Eat Ramen, Beans, and Rice for a decade. Throw every penny of free cash flow at paying down the debt. Look to refinance debt at private firm (Sofi, etc), though this option seems to limit future forbearance flexibility in case of financial hardship.

2.) Make minimum payments, defined as 10% of discretionary income (=(AGI-150% FPL)/12). Manipulate AGI to the extent possible (401k if ever becomes an option, HSA if ever becomes an option, etc). Let balance balloon because minimum payments will be insufficient to cover interest expense. Exploit 25Y loan forgiveness in the year 2045, which is considered to be a taxable event, meaning that the effective forgiveness is something like a 60-70% of the loan balance. Or wait for a Bernie-style politician to bail them out sooner. Admittedly this path has a lot of legislative risk; there is no guarantee that this policy will be in place in 25Y.

If they go down this path, my research seems to indicate that the REPAYE payment plan would be optimal because of reduced interest accrual vs other payment plans. If I'm wrong here, please let me know.

3.) Quit their new job and find a job at a non-profit, enjoying tax-free loan forgiveness in 10Y.

The family member has no interest in Option #3 above, so let's scratch that off the list.

A lot of forum members would make the case that #1 is the only ethical route. I don't disagree, but I'm also interested in understanding which path maximizes their expected lifetime wealth.

Since this is a non-trivial financial decision, I thought I'd bounce it off of the smartest group of people I've found on the internet. Thanks in advance for your input!!!!!!!!!!!

Detailed loan info below (sorted descending by balance):
5/13/2014 DIRECT UNSUB STAFFORD LOAN $59,201.49 5.41%
5/11/2015 DIRECT UNSUB STAFFORD LOAN $57,919.56 6.21%
5/2/2016 DIRECT UNSUB STAFFORD LOAN $54,366.89 5.84%
8/26/2013 DIRECT UNSUB STAFFORD LOAN $52,810.34 5.41%
5/2/2016 DIRECT STUDENT PLUS LOAN $41,586.43 6.84%
5/13/2014 DIRECT STUDENT PLUS LOAN $31,671.56 6.41%
5/11/2015 DIRECT STUDENT PLUS LOAN $30,917.29 7.21%
8/26/2013 DIRECT STUDENT PLUS LOAN $24,474.37 6.41%
2/16/2011 DIRECT SUB STAFFORD LOAN $5,712.30 4.50%

If they go Option #2, here's how I calculated their minimum payment amount:
* Healthcare Premiums: $16k
* Standard Deduction: $24.8k
* FPL with 4 kids: $35.16k
* 150% FPL: $52.74k

Discretionary Income = AGI - 150% FPL
Discretionary Income = (Gross - Standard Deduction - Healthcare Premiums) - 150% FPL

Minimum Payments (let me know if this looks wrong):
* $150k gross income => $471 monthly; $5,646 annual
* $200k gross income => $887 monthly; $10,646 annual
* $250k gross income => $1,304 monthly; $15,646 annual
* $500k gross income => $3,387 monthly; $40,646 annual (outside of expected income, but included for illustration purposes)

For reference:
* The monthly interest burden on $359k of debt at 6.1% is $1,825. Any payment less than this will lead to ballooning of balances.
* The monthly payment for a 10Y repayment schedule would be about $4k/month.
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Re: $359k in med school debt; advice for family member

Post by khram »

Is $150-250k really normal starting for that kind of med school debt? Does it rise very quickly?

I wouldn't eat Ramen, but no fancy vacations for a while, and no house until debt is paid off. Maybe take a small vacation every $100k s/he pays off, I dunno. Sometimes you need to live a little to keep your sanity, especially after the med school grind. But make sure a little doesn't become every year.

Married with 4 kids, how old is s/he? How long of a career does s/he expect to have?

The spouse needs to work, or s/he needs a big raise if closer to the $150k side.

Look for a new job. Is 401k not normal for doctor jobs?

Also relevant: what is a realistic minimal budget for a family of 6? How soon is college coming up for the first kid?

Get this family member to make their own post. There are a lot of decisions to make here. The first step is getting involved him/herself in the outreach.
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Re: $359k in med school debt; advice for family member

Post by potatopancake »

Debt:income ratio is >1. There is a significant difference between making $150k and $250k with >$350k debt.

For the family making $150k: net income ~$9,500/mo.

Option 1: Forgiveness in 25 years
Subtract $471 mo student debt payment. $9,000/mo for savings, college funds, healthcare, living expenses, and the dreaded tax bomb in 2045.

Option 2: "Aggressive" 10 year payment plan
Assuming refinancing loans with 4% interest on a 10 year plan, the monthly payment is $3,600. This leaves ~$6,000 for savings, college funds, healthcare and living expenses.
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Re: $359k in med school debt; advice for family member

Post by dziuniek »

Option 4: Make more $.
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Re: $359k in med school debt; advice for family member

Post by khram »

$9.5k feels like very generous net per month on $150k gross.
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Re: $359k in med school debt; advice for family member

Post by VoiceOfReason »

Just pay it back. In terms of lifetime earnings it’s still a small amount. Any other option will mentally destroy this person for years or prove getting an MD was a waste. These debts seem overwhelming now but in 30 years it will be just a bump. Wife needs to get a job as soon as able.

However, for someone that manages to take out $359k in debt and likely made some poor decisions during that time, LBYM and paying down debt will be a challenge.
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Re: $359k in med school debt; advice for family member

Post by fredflinstone »

potatopancake wrote: Mon Jul 20, 2020 2:52 am Debt:income ratio is >1. There is a significant difference between making $150k and $250k with >$350k debt.

For the family making $150k: net income ~$9,500/mo.

Option 1: Forgiveness in 25 years
Subtract $471 mo student debt payment. $9,000/mo for savings, college funds, healthcare, living expenses, and the dreaded tax bomb in 2045.

Option 2: "Aggressive" 10 year payment plan
Assuming refinancing loans with 4% interest on a 10 year plan, the monthly payment is $3,600. This leaves ~$6,000 for savings, college funds, healthcare and living expenses.
I'm going to assume these numbers are more or less correct. If so, I'd choose Option 2. But I wouldn't save for college until the loans are paid off; use that money to pay down the loans instead. Hopefully the podiatry practice will provide health insurance for free or close to free, freeing up more money to pay down the loans.

In a best case scenario (the podiatrist earns $200-250K per year plus health insurance and can live on less than $5,500 per month), he should be able to pay off his debt in just 5 years:

Assumptions:
Net income of $12,000 per month
Expenses of $5,400 per month
refinanced 5 year loan at 3.75% interest (monthly payment of $6,600)
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Re: $359k in med school debt; advice for family member

Post by student »

Be careful about option 4. Very few people actually were approved based on past data. https://www.cnbc.com/2018/12/21/1-perce ... eness.html
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Re: $359k in med school debt; advice for family member

Post by JonnyDVM »

Option one but no ramen required. Family member should live modestly as he did before the big checks start rolling in. This is doable In five years or so assuming income increases. With this plan the key is waiting to get the doctor home. Delayed gratification. It can be tough when colleagues are flinging money around everywhere from their suddenly heavy paychecks, but paying off the debt quickly makes life much easier later.
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Re: $359k in med school debt; advice for family member

Post by Grt2bOutdoors »

potatopancake wrote: Mon Jul 20, 2020 2:52 am Debt:income ratio is >1. There is a significant difference between making $150k and $250k with >$350k debt.

For the family making $150k: net income ~$9,500/mo.
Not really, probably closer to $9K, than $9.5k depending on what state they reside in.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

khram wrote: Mon Jul 20, 2020 2:14 am Is $150-250k really normal starting for that kind of med school debt? Does it rise very quickly?

I wouldn't eat Ramen, but no fancy vacations for a while, and no house until debt is paid off. Maybe take a small vacation every $100k s/he pays off, I dunno. Sometimes you need to live a little to keep your sanity, especially after the med school grind. But make sure a little doesn't become every year.

Married with 4 kids, how old is s/he? How long of a career does s/he expect to have?

The spouse needs to work, or s/he needs a big raise if closer to the $150k side.

Look for a new job. Is 401k not normal for doctor jobs?

Also relevant: what is a realistic minimal budget for a family of 6? How soon is college coming up for the first kid?

Get this family member to make their own post. There are a lot of decisions to make here. The first step is getting involved him/herself in the outreach.
Not sure about income trajectory. He's still trying to figure it out.

Ramen was more metaphorical. Early 30's. Hopefully a long career (30+ years).

Spouse is stay at home spouse so job prospects are limited. They are part of church which promotes 1950s stereotypes of men providing and women making lots of babies.

My family of 7 spends around $55-$60k/year. I'm more frugal than them.

Agreed he should take ownership of the situation and do his own research; I was just trying to crowdsource a little advice to someone who clearly needs it.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

potatopancake wrote: Mon Jul 20, 2020 2:52 am Debt:income ratio is >1. There is a significant difference between making $150k and $250k with >$350k debt.

For the family making $150k: net income ~$9,500/mo.

Option 1: Forgiveness in 25 years
Subtract $471 mo student debt payment. $9,000/mo for savings, college funds, healthcare, living expenses, and the dreaded tax bomb in 2045.

Option 2: "Aggressive" 10 year payment plan
Assuming refinancing loans with 4% interest on a 10 year plan, the monthly payment is $3,600. This leaves ~$6,000 for savings, college funds, healthcare and living expenses.
You did a great job of synthesizing the problem at hand. Thanks for this.

Do you have intuition on which is the better path?
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Re: $359k in med school debt; advice for family member

Post by smitcat »

FrugalProfessor wrote: Mon Jul 20, 2020 7:08 am
khram wrote: Mon Jul 20, 2020 2:14 am Is $150-250k really normal starting for that kind of med school debt? Does it rise very quickly?

I wouldn't eat Ramen, but no fancy vacations for a while, and no house until debt is paid off. Maybe take a small vacation every $100k s/he pays off, I dunno. Sometimes you need to live a little to keep your sanity, especially after the med school grind. But make sure a little doesn't become every year.

Married with 4 kids, how old is s/he? How long of a career does s/he expect to have?

The spouse needs to work, or s/he needs a big raise if closer to the $150k side.

Look for a new job. Is 401k not normal for doctor jobs?

Also relevant: what is a realistic minimal budget for a family of 6? How soon is college coming up for the first kid?

Get this family member to make their own post. There are a lot of decisions to make here. The first step is getting involved him/herself in the outreach.
Not sure about income trajectory. He's still trying to figure it out.

Ramen was more metaphorical. Early 30's. Hopefully a long career (30+ years).

Spouse is stay at home spouse so job prospects are limited. They are part of church which promotes 1950s stereotypes of men providing and women making lots of babies.

My family of 7 spends around $55-$60k/year. I'm more frugal than them.

Agreed he should take ownership of the situation and do his own research; I was just trying to crowdsource a little advice to someone who clearly needs it.
"Spouse is stay at home spouse so job prospects are limited. They are part of church which promotes 1950s stereotypes of men providing and women making lots of babies."
Interesting - How does the Church feel about minimum payments , manipulating AGI, and the 25 year forgiveness rule?
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

dziuniek wrote: Mon Jul 20, 2020 3:24 am Option 4: Make more $.
Easier said than done.
khram wrote: Mon Jul 20, 2020 3:35 am $9.5k feels like very generous net per month on $150k gross.
They live in state with zero income tax, so that helps. They go to church requiring 10% tithe, so that hurts. Health insurance is crummy; expected annual expenses (premium + deductible) in the > $20k with no access to HSA.
Last edited by FrugalProfessor on Mon Jul 20, 2020 7:33 am, edited 1 time in total.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

fredflinstone wrote: Mon Jul 20, 2020 5:44 am
potatopancake wrote: Mon Jul 20, 2020 2:52 am Debt:income ratio is >1. There is a significant difference between making $150k and $250k with >$350k debt.

For the family making $150k: net income ~$9,500/mo.

Option 1: Forgiveness in 25 years
Subtract $471 mo student debt payment. $9,000/mo for savings, college funds, healthcare, living expenses, and the dreaded tax bomb in 2045.

Option 2: "Aggressive" 10 year payment plan
Assuming refinancing loans with 4% interest on a 10 year plan, the monthly payment is $3,600. This leaves ~$6,000 for savings, college funds, healthcare and living expenses.
I'm going to assume these numbers are more or less correct. If so, I'd choose Option 2. But I wouldn't save for college until the loans are paid off; use that money to pay down the loans instead. Hopefully the podiatry practice will provide health insurance for free or close to free, freeing up more money to pay down the loans.

In a best case scenario (the podiatrist earns $200-250K per year plus health insurance and can live on less than $5,500 per month), he should be able to pay off his debt in just 5 years:

Assumptions:
Net income of $12,000 per month
Expenses of $5,400 per month
refinanced 5 year loan at 3.75% interest (monthly payment of $6,600)
I agree with putting off saving for college; oldest is probably 7 or so. He needs to pay for his own college first.

Unfortunately health insurance is crummy. No access to HSA/FSA. $16k premiums (luckily pre-tax). However, $8k deductible and high expected health care utilization; it's not going to be pretty.

10% tithe will hurt ability to pay off debt in 5 years. So will very poor health insurance. It's going to be tough.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

student wrote: Mon Jul 20, 2020 6:02 am Be careful about option 4. Very few people actually were approved based on past data. https://www.cnbc.com/2018/12/21/1-perce ... eness.html
Thanks for the warning. I'd heard about PSLF uncertainty before; the 25Y more broad (taxable) forgiveness plan is even more uncertain....
JonnyDVM wrote: Mon Jul 20, 2020 6:22 am Option one but no ramen required. Family member should live modestly as he did before the big checks start rolling in. This is doable In five years or so assuming income increases. With this plan the key is waiting to get the doctor home. Delayed gratification. It can be tough when colleagues are flinging money around everywhere from their suddenly heavy paychecks, but paying off the debt quickly makes life much easier later.
I agree entirely with this that the payoff is doable, conditional on continuing to live like a med student / resident. I think the wife is unwilling to do that though....
Last edited by FrugalProfessor on Mon Jul 20, 2020 7:33 am, edited 1 time in total.
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Re: $359k in med school debt; advice for family member

Post by perikleez »

FrugalProfessor wrote: Mon Jul 20, 2020 12:36 am
3.) Quit their new job and find a job at a non-profit, enjoying tax-free loan forgiveness in 10Y.

The family member has no interest in Option #3 above, so let's scratch that off the list.
government employment (VA, military, etc.) could be good option to knock that out in under PSLF in 10yrs. not interested? remind him/her they are a podiatrist, not a neurosurgeon so they need to compare annual income of different practice settings. plus after 10yrs they still have a lot of years left to go into private practice.
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Re: $359k in med school debt; advice for family member

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smitcat wrote: Mon Jul 20, 2020 7:13 am "Spouse is stay at home spouse so job prospects are limited. They are part of church which promotes 1950s stereotypes of men providing and women making lots of babies."
Interesting - How does the Church feel about minimum payments , manipulating AGI, and the 25 year forgiveness rule?
Not sure how the church feels about those things, but the church believes those unwilling to pay 10% of income to church will not go to heaven. For the believer, this creates a pretty strong incentive to pay tithing.

Not surprisingly, the church has amassed a $100B investment portfolio, dwarfing the endowment of Harvard's $40B endowment and the Gates foundation's $46B endowment.
Last edited by FrugalProfessor on Mon Jul 20, 2020 7:39 am, edited 1 time in total.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

perikleez wrote: Mon Jul 20, 2020 7:24 am
FrugalProfessor wrote: Mon Jul 20, 2020 12:36 am
3.) Quit their new job and find a job at a non-profit, enjoying tax-free loan forgiveness in 10Y.

The family member has no interest in Option #3 above, so let's scratch that off the list.
government employment (VA, military, etc.) could be good option to knock that out in under PSLF in 10yrs. not interested? remind him/her they are a podiatrist, not a neurosurgeon so they need to compare annual income of different practice settings. plus after 10yrs they still have a lot of years left to go into private practice.
My thoughts are very much along yours. PSLF would have been an option route.

I just read this excellent post suggesting how the 3 years in residency could count towards the 10Y forgiveness period under PSLF: https://www.whitecoatinvestor.com/how-t ... aye-early/. Pretty incredible opportunity that the family member didn't exploit.
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Re: $359k in med school debt; advice for family member

Post by smitcat »

FrugalProfessor wrote: Mon Jul 20, 2020 7:28 am
smitcat wrote: Mon Jul 20, 2020 7:13 am "Spouse is stay at home spouse so job prospects are limited. They are part of church which promotes 1950s stereotypes of men providing and women making lots of babies."
Interesting - How does the Church feel about minimum payments , manipulating AGI, and the 25 year forgiveness rule?
Not sure how the church feels about those things, but the church believes those unwilling to pay 10% of income to church will not go to heaven. For the believer, this creates a pretty strong incentive to pay tithing.

Not surprisingly, the church has amassed a $100B investment portfolio, dwarfing the endowment of Harvard's $40B endowment and the Gate's foundation's $46B endowment.
"Not sure how the church feels about those things"
I guess if they are following all promotions by the Church this would be the first thing to find out.
All the rest of this may be a moot point.
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Re: $359k in med school debt; advice for family member

Post by flyninjasquirrel »

Ugh why take on $359k in med school debt and do podiatry? :oops: DW and I had $450k of combined med school debt but at least I went into a high paying specialty and will have it paid off in <5 years. Also, $150k still seems on the low side for podiatry.

He needs to try to increase his income. Best way to do this for him would probably be to get into the OR and do as many procedures as possible.

Refinance to a lower interest rate ASAP.

Keep expenses low. Don't buy a house.

I wouldn't trust the government for anything. Best to not rely on any type of forgiveness.

Totally feasible to have it paid off in <10 years if he manages things right.
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Re: $359k in med school debt; advice for family member

Post by anon_investor »

FrugalProfessor wrote: Mon Jul 20, 2020 7:28 am
smitcat wrote: Mon Jul 20, 2020 7:13 am "Spouse is stay at home spouse so job prospects are limited. They are part of church which promotes 1950s stereotypes of men providing and women making lots of babies."
Interesting - How does the Church feel about minimum payments , manipulating AGI, and the 25 year forgiveness rule?
Not sure how the church feels about those things, but the church believes those unwilling to pay 10% of income to church will not go to heaven. For the believer, this creates a pretty strong incentive to pay tithing.

Not surprisingly, the church has amassed a $100B investment portfolio, dwarfing the endowment of Harvard's $40B endowment and the Gate's foundation's $46B endowment.
I always wondered if the 10% was of gross or take home.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

flyninjasquirrel wrote: Mon Jul 20, 2020 7:37 am Ugh why take on $359k in med school debt and do podiatry? :oops: DW and I had $450k of combined med school debt but at least I went into a high paying specialty and will have it paid off in <5 years. Also, $150k still seems on the low side for podiatry.

He needs to try to increase his income. Best way to do this for him would probably be to get into the OR and do as many procedures as possible.

Refinance to a lower interest rate ASAP.

Keep expenses low. Don't buy a house.

I wouldn't trust the government for anything. Best to not rely on any type of forgiveness.

Totally feasible to have it paid off in <10 years if he manages things right.
Great advice! He's fortunately going to be in the OR. $150k is definitely conservative. $200k is probably more realistic. But it's hard because he's brand new to this. He's trying really hard to make money; I trust he's doing his best here.

I agree with your recommendation to not buy house and keep expenses low. His spouse is the problem there; not sure she'll stick around if they continue to live cheap.

I agree with your assessment to not trust the gov't for forgiveness; particularly for something promised 25Y in the future.

Thanks again for the thoughts!
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

anon_investor wrote: Mon Jul 20, 2020 7:39 am
FrugalProfessor wrote: Mon Jul 20, 2020 7:28 am
smitcat wrote: Mon Jul 20, 2020 7:13 am "Spouse is stay at home spouse so job prospects are limited. They are part of church which promotes 1950s stereotypes of men providing and women making lots of babies."
Interesting - How does the Church feel about minimum payments , manipulating AGI, and the 25 year forgiveness rule?
Not sure how the church feels about those things, but the church believes those unwilling to pay 10% of income to church will not go to heaven. For the believer, this creates a pretty strong incentive to pay tithing.

Not surprisingly, the church has amassed a $100B investment portfolio, dwarfing the endowment of Harvard's $40B endowment and the Gates foundation's $46B endowment.
I always wondered if the 10% was of gross or take home.
I was taught that those who pay gross are more honorable than those who pay out of net. "Do you want gross blessings or net blessings?" But there is very little official guidance; more like do what your heart tells you is right.
Last edited by FrugalProfessor on Mon Jul 20, 2020 7:48 am, edited 1 time in total.
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Re: $359k in med school debt; advice for family member

Post by midareff »

What was the thinking and planning along the way to take on that much debt with a family and four children? Did this person have some sort of plan on how they were going to deal with this situation?
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Re: $359k in med school debt; advice for family member

Post by JAZZISCOOL »

You might suggest your family member check out the White Coat Investor site. The founder, an MD, is also a BH member and posts here often. He has a lot of great advice and articles for medical professionals on paying off school loans, etc.

https://www.whitecoatinvestor.com/new-t ... tart-here/
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Re: $359k in med school debt; advice for family member

Post by ModifiedDuration »

JAZZISCOOL wrote: Mon Jul 20, 2020 7:49 am You might suggest your family member check out the White Coat Investor site. The founder, an MD, is also a BH member and posts here often. He has a lot of great advice and articles for medical professionals on paying off school loans, etc.

https://www.whitecoatinvestor.com/new-t ... tart-here/
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Re: $359k in med school debt; advice for family member

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midareff wrote: Mon Jul 20, 2020 7:48 am What was the thinking and planning along the way to take on that much debt with a family and four children? Did this person have some sort of plan on how they were going to deal with this situation?
The plan was:
* Doctors/podiatrists make good money; I'd like to become one.
* Let's have lots of babies.

He has no plan for getting out of $360k in debt.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

ModifiedDuration wrote: Mon Jul 20, 2020 7:53 am
JAZZISCOOL wrote: Mon Jul 20, 2020 7:49 am You might suggest your family member check out the White Coat Investor site. The founder, an MD, is also a BH member and posts here often. He has a lot of great advice and articles for medical professionals on paying off school loans, etc.

https://www.whitecoatinvestor.com/new-t ... tart-here/
+1
Thank you both for this recommendation. I'm quite familiar with WCI and I'm not sure why I didn't go to that resource before Bogleheads.
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Re: $359k in med school debt; advice for family member

Post by smitcat »

FrugalProfessor wrote: Mon Jul 20, 2020 7:54 am
midareff wrote: Mon Jul 20, 2020 7:48 am What was the thinking and planning along the way to take on that much debt with a family and four children? Did this person have some sort of plan on how they were going to deal with this situation?
The plan was:
* Doctors/podiatrists make good money; I'd like to become one.
* Let's have lots of babies.

He has no plan for getting out of $360k in debt.

Salaries....
https://www.salary.com/research/salary/ ... try-salary
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Re: $359k in med school debt; advice for family member

Post by hoffse »

I suggest he get them on the 25 year repayment plan to keep minimums as low as possible. Then pay extra when he can during good years or as his income increases.

Husband and I started out with more than $250k combined debt for law school. Our starting combined income was under $200k, but it rose quickly. We put our loans on a 25 year repayment plan but will be done with them in about 9 years. We have not delayed retirement contributions, having a family or vacations, or buying a house (we actually bought 2, including our “forever house” if you want to call it that). We watched our budget all these years, but we never ate ramen. In fact, our approach toward the loans oscillated between paying lots extra and then paying minimums in fits and spurts, depending on what else was going on at the time. We will still be done in under 10 years, having not made them the top financial priority for us, really ever.

It’s doable, as long as he has some sense about it and doesn’t overextend himself in housing. That’s really going to be the critical thing.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

hoffse wrote: Mon Jul 20, 2020 8:13 am I suggest he get them on the 25 year repayment plan to keep minimums as low as possible. Then pay extra when he can during good years or as his income increases.

Husband and I started out with more than $250k combined debt for law school. Our starting combined income was under $200k, but it rose quickly. We put our loans on a 25 year repayment plan but will be done with them in about 9 years. We have not delayed retirement contributions, having a family or vacations, or buying a house (we actually bought 2, including our “forever house” if you want to call it that). We watched our budget all these years, but we never ate ramen. In fact, our approach toward the loans oscillated between paying lots extra and then paying minimums in fits and spurts, depending on what else was going on at the time. We will still be done in under 10 years, having not made them the top financial priority for us, really ever.

It’s doable, as long as he has some sense about it and doesn’t overextend himself in housing. That’s really going to be the critical thing.
Thanks for the feedback! Definitely the contrarian on this thread. I appreciate the unique insights and see how your strategy could work well for the family member.
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Re: $359k in med school debt; advice for family member

Post by Dottie57 »

A podiatrist doesn’t go to normal medical school. The costs are significantly less. Is op sure the degree is podiatry?
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Re: $359k in med school debt; advice for family member

Post by ohboy! »

At least there is no payment required this month or next!

I was just thinking how the federal government can round up more money by teasing forgiveness. I think this causes less people to refinance. At least my GF isn’t going to do so quite yet. There is a huge petition for student loans to be forgiven. Not saying that will work but there has likely never been more movement to do so than there is now. Still the prevailing consensus is to refi. A shame the fed loans dont just refi themselves to the fed rate.

$2k a month interest. Yeaks. Making more money seems like the best option. If that seems unlikely then I think we are dealing with some stuck mentality that is also unlikely to handle this situation better than they did to get into it. They can eat and have a roof, and go to church. Sometimes people don’t strive for much more than that. Debt drives me insane, some people it’s a way of life.
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Re: $359k in med school debt; advice for family member

Post by Maverick3320 »

I guess I'll be the jerk to say it straight: the biggest problem here is poor decision making. Four kids, an outmoded view on family roles, 360K debt for a podiatry degree. PLSF might be a possibility, but does the government have an overwhelming need for podiatrists right now?

OP, you can spend hours of your life trying to help someone with this issue but the true issue is their perspective on finances. I'm guessing your financial advice may not go over well.
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Re: $359k in med school debt; advice for family member

Post by student »

FrugalProfessor wrote: Mon Jul 20, 2020 7:28 am
smitcat wrote: Mon Jul 20, 2020 7:13 am "Spouse is stay at home spouse so job prospects are limited. They are part of church which promotes 1950s stereotypes of men providing and women making lots of babies."
Interesting - How does the Church feel about minimum payments , manipulating AGI, and the 25 year forgiveness rule?
Not sure how the church feels about those things, but the church believes those unwilling to pay 10% of income to church will not go to heaven. For the believer, this creates a pretty strong incentive to pay tithing.

Not surprisingly, the church has amassed a $100B investment portfolio, dwarfing the endowment of Harvard's $40B endowment and the Gates foundation's $46B endowment.
I guess they are mormons.
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Re: $359k in med school debt; advice for family member

Post by dziuniek »

FrugalProfessor wrote: Mon Jul 20, 2020 7:15 am
dziuniek wrote: Mon Jul 20, 2020 3:24 am Option 4: Make more $.
Easier said than done.
khram wrote: Mon Jul 20, 2020 3:35 am $9.5k feels like very generous net per month on $150k gross.
They live in state with zero income tax, so that helps. They go to church requiring 10% tithe, so that hurts. Health insurance is crummy; expected annual expenses (premium + deductible) in the > $20k with no access to HSA.
Yes, but not impossible and I wouldn't rule it out. If they opt for paying it off in 10 years, I would try to find a better paying job anywhere in the country. The income listed in the post is more than double mine, so I am aware it's not bad already. That being said, 150k seems low for a doc, although that depends heavily on location and specialty, right?
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Re: $359k in med school debt; advice for family member

Post by smitcat »

Dottie57 wrote: Mon Jul 20, 2020 8:31 am A podiatrist doesn’t go to normal medical school. The costs are significantly less. Is op sure the degree is podiatry?
"A podiatrist doesn’t go to normal medical school"
Huh? Looks like 4 / 4 / and then 2-4 residency all while having a family of 6.

https://learn.org/articles/Podiatrist_E ... tions.html
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Re: $359k in med school debt; advice for family member

Post by KingRiggs »

If he's an employed podiatrist, income will probably be around that $200k/year.

If he can build his own practice, it can get much higher than that. Podiatrists around here who do lots of operative cases can get over $400k/year easily. Problem is that the typical podiatric patient is on Medicare/Medicaid. Not the best payer mix.

This family member has painted himself into a corner based on his life choices to this point, and it may not be easy to get out of it...
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Re: $359k in med school debt; advice for family member

Post by student »

smitcat wrote: Mon Jul 20, 2020 9:29 am
Dottie57 wrote: Mon Jul 20, 2020 8:31 am A podiatrist doesn’t go to normal medical school. The costs are significantly less. Is op sure the degree is podiatry?
"A podiatrist doesn’t go to normal medical school"
Huh? Looks like 4 / 4 / and then 2-4 residency all while having a family of 6.

https://learn.org/articles/Podiatrist_E ... tions.html
I am guessing Dottie57's point is that a podiatrist is neither an MD or DO, a credential that most associated with a "normal medical school." But you are right that podiatrists have extensive training.
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Re: $359k in med school debt; advice for family member

Post by sd323232 »

The math says pay off loan asap so he doesnt waste money on interest. Also, it is not 100% garanteed that loan will be forgiven after 25 years.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

Maverick3320 wrote: Mon Jul 20, 2020 8:38 am I guess I'll be the jerk to say it straight: the biggest problem here is poor decision making. Four kids, an outmoded view on family roles, 360K debt for a podiatry degree. PLSF might be a possibility, but does the government have an overwhelming need for podiatrists right now?

OP, you can spend hours of your life trying to help someone with this issue but the true issue is their perspective on finances. I'm guessing your financial advice may not go over well.
I appreciate the straight talk and the advice to stay out. Probably the best advice yet, but I'm trying to do him a favor by helping him with this life altering decision!
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Re: $359k in med school debt; advice for family member

Post by deltaneutral83 »

Borrowing $369k at 6% to start out at $150k (certain posts indicating up to $200k? so that should help) in any COL, while deciding to have 4 children earlier with a stay at home spouse and taking 10% of the top for personal reasons is a display of financial illiteracy IMO. Many BH struggle because we don't acknowledge that financial literacy is more gut/emotional than intellect. Sometimes being a college punk and racking up $8k in credit card debt over spring break and summer vacation is the best thing that can happen to someone because if they see the light about debt from a few thousand in interest then it was worth it to avoid the OP's friend's situation.

The most important thing currently in this equation IMO is the guy's current state of mind, is he brushing this off, thinking about it twice a week, or biting his nails every hour. He needs to be more toward biting his nails. Then the mathematics can take over. If he's still in la la land about this, then nothing else matters. The wolf is now in the neighborhood and probably at the driveway. Another two or three years of no progress and the wolf will be approaching the doorstep. He's also a slave to the profession and his choices the next 10-15 years are non existent.

Can you even BK federal loans?
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Re: $359k in med school debt; advice for family member

Post by NotWhoYouThink »

Option #1, with a focus in increasing income to pay off the loans faster. Not because it's more "ethical", but because it leads to a better result. More deferred gratification, but better outcome in the long run.

Sounds like this family is not making decisions based on financial literacy, though. And you can't make them care or learn about that, they have to want to learn and decide on their own how to behave. You get at most one chance to state your opinion, then after that it's up to them.

Sometimes you just have to sit back and watch the show, even though you know the actors are making bad decisions. Not everyone was cut out to be a boglehead.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

student wrote: Mon Jul 20, 2020 9:38 am
smitcat wrote: Mon Jul 20, 2020 9:29 am
Dottie57 wrote: Mon Jul 20, 2020 8:31 am A podiatrist doesn’t go to normal medical school. The costs are significantly less. Is op sure the degree is podiatry?
"A podiatrist doesn’t go to normal medical school"
Huh? Looks like 4 / 4 / and then 2-4 residency all while having a family of 6.

https://learn.org/articles/Podiatrist_E ... tions.html
I am guessing Dottie57's point is that a podiatrist is neither an MD or DO, a credential that most associated with a "normal medical school." But you are right that podiatrists have extensive training.
I'm 100000% sure that he went to podiatry school in a VCOL area. I get that non-podiatrists be offended that I called it "med school" in the subject line. My apologies for the poor word choice.

I don't really understand the huge negativity in the thread. Podiatrists can make good incomes to the point that repaying $360k of debt is trivial in a few years. I'm not convinced he's made a poor financial decision to go to school. None of us, including him, have any idea on what his alternative career path would have been; he almost certainly would have chosen one that pays around 50% less. On a net-present-value basis over a 30 year working career, it's surely positive NPV relative to many (but not all) career options he could have chosen.
Last edited by FrugalProfessor on Mon Jul 20, 2020 10:13 am, edited 1 time in total.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

deltaneutral83 wrote: Mon Jul 20, 2020 9:59 am
The most important thing currently in this equation IMO is the guy's current state of mind, is he brushing this off, thinking about it twice a week, or biting his nails every hour. He needs to be more toward biting his nails. Then the mathematics can take over. If he's still in la la land about this, then nothing else matters. The wolf is now in the neighborhood and probably at the driveway. Another two or three years of no progress and the wolf will be approaching the doorstep. He's also a slave to the profession and his choices the next 10-15 years are non existent.

Can you even BK federal loans?
I agree with your second paragraph; it's all about mentality and the implications of a lax mentality.

You usually can't discharge SL in bankruptcy.
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Re: $359k in med school debt; advice for family member

Post by FrugalProfessor »

NotWhoYouThink wrote: Mon Jul 20, 2020 10:00 am Option #1, with a focus in increasing income to pay off the loans faster. Not because it's more "ethical", but because it leads to a better result. More deferred gratification, but better outcome in the long run.

Sounds like this family is not making decisions based on financial literacy, though. And you can't make them care or learn about that, they have to want to learn and decide on their own how to behave. You get at most one chance to state your opinion, then after that it's up to them.

Sometimes you just have to sit back and watch the show, even though you know the actors are making bad decisions. Not everyone was cut out to be a boglehead.
Appreciate the feedback; like many BH posts, this one probably should be filed in the "stay-out-of-it-you-idiot" camp.
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Re: $359k in med school debt; advice for family member

Post by RocketShipTech »

Dottie57 wrote: Mon Jul 20, 2020 8:31 am A podiatrist doesn’t go to normal medical school. The costs are significantly less. Is op sure the degree is podiatry?
I agree with Dottie, something is off here.

Podiatry school is four years at $40k per year.

Did OP really rack up $200k in living expense debt over those four years?
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Re: $359k in med school debt; advice for family member

Post by smitcat »

FrugalProfessor wrote: Mon Jul 20, 2020 10:00 am
student wrote: Mon Jul 20, 2020 9:38 am
smitcat wrote: Mon Jul 20, 2020 9:29 am
Dottie57 wrote: Mon Jul 20, 2020 8:31 am A podiatrist doesn’t go to normal medical school. The costs are significantly less. Is op sure the degree is podiatry?
"A podiatrist doesn’t go to normal medical school"
Huh? Looks like 4 / 4 / and then 2-4 residency all while having a family of 6.

https://learn.org/articles/Podiatrist_E ... tions.html
I am guessing Dottie57's point is that a podiatrist is neither an MD or DO, a credential that most associated with a "normal medical school." But you are right that podiatrists have extensive training.
I'm 100000% sure that he went to podiatry school in a VCOL area. I get that non-podiatrists be offended that I called it "med school" in the subject line. My apologies for the poor word choice.

I don't really understand the huge negativity in the thread. Podiatrists can make good incomes to the point that repaying $360k of debt is trivial in a few years. I'm not convinced he's made a poor financial decisions. None of us, including him, have any idea on what his alternative career path would have been; he almost certainly would have chosen one that pays around 50% less. On a net-present-value basis over a 30 year working career, it's surely positive NPV relative to many (but not all) career options he could have chosen.
"Podiatrists can make good incomes to the point that repaying $360k of debt is trivial in a few years."
Paying back $360K on an income of $15K is not trivial at all - and if you have 4 kids its a huge mountain.

"he almost certainly would have chosen one that pays around 50% less."
Many nurses and other medical specialties (OT, SLP, NP, PA) make near $100K within a couple of years and if they are go getters can be near that $150K in very short time.

"I appreciate the straight talk and the advice to stay out. Probably the best advice yet, but I'm trying to do him a favor by helping him with this life altering decision!"
I believe the life altering decision(s) were made years back and you are very late to the party. Your role now appears to focus on limiting damages.
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Re: $359k in med school debt; advice for family member

Post by smitcat »

RocketShipTech wrote: Mon Jul 20, 2020 10:08 am
Dottie57 wrote: Mon Jul 20, 2020 8:31 am A podiatrist doesn’t go to normal medical school. The costs are significantly less. Is op sure the degree is podiatry?
I agree with Dottie, something is off here.

Podiatry school is four years at $40k per year.

Did OP really rack up $200k in living expense debt over those four years?
"Did OP really rack up $200k in living expense debt over those four years?"
8 years of school and 3 of residency accruing 4 kids and a spouse that does not work along the way.
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