Misery to Joyfulness… Life as PGY (1 is infinitely better than 0)

I started radiology residency full of hopes and dreams on July 1st, 2015. I thought radiologists are the happiest and nerdiest bunches of doctors in the whole hospital. Sipping coffee, listening to Pandora station in a precisely dimmed room (dark enough to optimally visualize the beautiful PACS images, yet just enough light to not stumble on everything in the reading room), enlightening the medical world with diagnostic acumen from the shadows and Brownian motions of another human being’s physical body…

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Mini’s new piece of empowerment from her summer at Toscana Art Studio.

The truth this, radiologists struggle with keeping up with the imaging study list that seems endless and self propagating.  We limit our bathroom breaks by Not drinking water or eating all day.  We politely answer the constant & relentless phone calls from the ED, the hospital wards, & the clinic, asking “Did you read that study yet?” “When can you read the study?”

I went from walking 6 miles daily seeing patients throughout the hospital as a preliminary intern, to barely walking a quarter mile during a 10 hour continuous work day as a PGY2 radiology resident. Sedentary life style is proven to be as bad as smoking tobacco as risks for developing peripheral artery disease. So the train rack CTA (vascular study) I’m reading now… could be me one day.

transform

 

The worst of it all is the constant feeling of inadequacy, the vast amount of knowledge a practicing radiologist is expected to master is unfathomable to my small little mind. I thought was high functioning student when I posted a high USMLE score with only studying 1 hour/day maximum during MS1/2 while working 2 jobs and raising Mini Wise Money. The level of confidence I had in my ability to learn and apply knowledge was annihilated just a few weeks into first year radiology residency.

Contrary what my ex-co-interns who are now PGY2 medicine residents (peeps I love) believe, I was pretty down in spite of the 7-5pm & most weekends off schedule of PGY2 radiology resident.

I was miserable.

beauty

 

 

However, my misery turned into joyfulness, without a discrete dark-vs.-light switch in time or space, a few weeks ago (I wrote this near the end of PGY2.)

When I realized that I do know a little bit about radiology. Just enough so that I could build my fund of knowledge up from. Having gone through the various sub-specialty rotations in radiology the first round (where every day I felt absolutely inadequate and idiotic), and now returning to some of them a 2nd round, I feel different! It’s as if my eyes are opened for the first time, and I’m starting to see…

Before starting radiology residency, I wonder why the training is so long, 6 years including internship and fellowship. Now, I have no doubt that I need the full 6 years to learn the basics of radiology and become an effective radiologist.

 

My professional transformation from misery to joyfulness may parallel
someone else’s financial transformation from defeat to success.

What I’m trying to say is, a little (of anything, especially knowledge) goes a long way. 

1 is infinitely larger than 0.

We all got to start somewhere.

Having gone through PGY1 rads and learning simply how to utter sounds, see things, communicate findings like a new born, I can relate to those who find finances unfamiliar and cold.

I’ve reached out and been sought out to assist my peers, my attendings even, and other outside of work in personal finance. However, I sense the powerlessness many people feel in financial matters. I am saddened and sometimes discouraged by their dismay and how overwhelmed they feel. Frequent comments I hear are:

  • “I never paid attention to money. I feel like a financial dummy.”
  • “I have no idea where to start.”
  • “My family told me I’m a total failure when it comes to money.”
  • “I don’t trust banks with loans/interest rate deals – reminds me of vampires asking for permission to come into your house at night. They have their own interests in mind, not yours.”
  • “I’ll just pay someone else to take care of my money for me.”
  • “I’ll just deal with this when I get my first attending paycheck.”
  • “I don’t worry about it. I’ll make so much money* in a few years, I can fix everything then.”

*Brand new radiologists in private practice on partnership track usually makes 250-275k to start… that’s not that much money if you have 400k of student loan, house payment, no retirement savings, no college funds, a few credit card with revolving balances… and you are in your late 30’s. Starting today to build your financial fitness is the best way to tackle even the worst financial disasters.

My dear esteemed colleagues:

I’ve come realized that doctors are the least cared for & barely-supported professionals.

It behooves us to band together and help one another out.

May my humble efforts in blogging financial literacy & effective monetary decisions

assist you to get on solid financial grounds.

Let’s ascend this ladder together in all aspects of our lives, be it

intellectual, professional, physical, psychological, spiritual or financial…

i can do this

 

  • Share your insights, ideas, & questions to help one another out.
  • What and how can I do better as a blogger and colleague to help?
  • Is there anything in particular you want to learn about?

Feel free to comment below.

If you like this article, you might enjoy other DWM articles on Personal Finance, Investing, Retirement, Practice Management, & Lifestyle. All articles by DWM are for informational purposes only and not intended as a substitute for professional advice. Please consult a professional accountant, financial adviser or lawyer, before making financial decisions.

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Mini started dabbling in Manga from her YouTube learning sessions and self study.

 

 

Financial Heroes: Josh Mettle, Real Estate Guru/ Mortgage Loan Specialist

Since joining the FI (Financial Independence) community, every day I’m discovering more awesome blogs and individuals to learn from. So I decided to start a series of guest posts under the “Financial Hero Series.” I got the idea from PoF’s Christopher Guest Post. (PoF is full of great ideas; I like following his footsteps 🙂 You can check out my Christopher Guest post on PoF here.

This series features  amazing personal finance masters and financial professionals whom I admire and look up to. Each hero will answer a set of questions from me and sometimes add their own Q&A. I’ll publish this series of posts once every few weeks.
Today, I’m honored and excited to spotlight Josh Mettle who podcasts at Physician Financial Success. Josh was resolved to become the best mortgage officer after a horrific experience with a bad one when he was working on purchasing a rental property. And indeed, he turn out pretty awesome, very knowledgeable and personable. I’m sure you will find lots money and life pearls from his responses to my questions below.

What do you do for a living?
Author, podcast host, real estate owner/manager, and mortgage loan officer

Why do you blog?
As I began to serve dentists, physicians, and other medical professionals, I quickly realized they were among my most financially strapped clients. Sure they had decent income coming in each month, but they also had nearly as much money going out, year after year, I was seeing many clients make very little progress towards escaping the rat race.

[Wow, you are one of the few people who are not doctors and yet know the financial plight that medical professionals face.]

Why is your blog awesome?
Physician Financial Success is awesome because our guests are awesome! Our guests are incredibly diverse and have interesting perspectives on life, money, and financial success. The goal is to challenge conventional thinking, teach our listeners something new or blow up a sacred cow if humanly possible, all while having a little fun and a few laughs.

[You can listen to DWM’s podcast on Josh’s Physician Financial Success here.]

How many days left until you obtain financial independence?
Well that is a great question. If I were to answer that according to my goal of financial independence when I was 25 then that day is today. My mother and I currently own and operate about 100 positive cash flowing rental properties and if I wanted to, I could stop my day job today. But who wants to do that? If you do, it’s time to change what you are doing on a day to day basis. Maybe that doesn’t mean you stop practicing medicine all together, but rather practice with a less rigorous schedule, travel and practice where needed most, serve a mission, there’s a million ways to trade your medical education and willingness to serve for sustenance to survive. It’s up to each of us every day to figure out how we can best add value to the world while making progress towards the future vision of one’s self. That’s what fulfillment is, it’s making progress towards whom YOU want to be one day, never forget this journey is a game to be played, to win, to be enjoyed for all its ups and downs.

[I had to highlight and italicize this part “how we can best add value to the world while making progress towards the future vision of one’s self.” I can’t agree more!-DWM]

Any sage advice on money and marriage?
Marriage, kids, investing, health, your vocation, they all take work, they are all hard, and you will need to find your way around the obstacles before you find your ultimate success. Stay balanced, stay focused, stay the course, and don’t allow yourself to chase all that glitters.

What are the top 5 things you’d tell your younger self?
1. Be patient, investing is like an ultra-marathon and you don’t need to sprint to get started, just get started.
2. Invest automatically. Figure out how much you want to save and automatically have it debited from your checking to your investments every two weeks. This is my #1 regret for not starting sooner.
3. Never invest more than 5 to 10% of your capital in any one investment, no matter how much you’re in love with the idea.
4. Steer clear of areas you know nothing about, or at least start super slow with 1 to 3% of your savings until you have learned a few things about the industry.
5. Invest for cash flow as well as capital appreciation. For me, this was buying rental properties that I could fix up, raise the rents, and bank the cash flow forever. My strategy is not buy and hold, its buy, hold, die, and pass on to the next generation. Once you are clear about your strategy, it makes deciding on what you should buy very simple.

What is the #1 money mistakes you’ve made that want your readers to avoid?
Making large trades based on emotions, tips, or a whim. When the juices are boiling, like when the excitement you feel when you are test driving a new car, that’s when to practice extreme position sizing, put one foot in at a time, let the emotions settle, learn as you go, you can always add more to the investment idea as you go along.

What are the 3 most important money lessons you teach your kid(s)?
1. Invest automatically, start young building the habit regardless of the amount
2. Invest for the long game, you don’t need to hit home runs to win long-term
3. Always have cash available for the downturn, the next one is coming right around the corner!

What are the 5 smartest money move you’ve made in your life?
1. Buy and hold cash flow positive real estate, by time I retire I will own 100 + free and clear rental units, regardless how long I live, I will never outlive my savings and hopefully neither will my children.
2. Subscribe to multiple financial newsletters, find bulls, bears, gold bugs, and macro trend economists to help you shape your view of the world. Stay balances in your vision of the world and work to understand where each is coming from and find validity in their views.
3. Get used to holding cash and not being 100% invested. This is really hard, try doing nothing with your cash for 12 months, it’s insanely hard to resist doing something. I’ve watched 2 massive real estate and equities sell offs in my adult life, I now keep a portion of my investment funds liquid for that day when tech, real estate, high yield bonds, or any other asset class implodes.

[Totally interesting idea. I’m used to investing 100% of my cash in index funds, using credit card balance transfer checks with 0% interest free promotional periods ranging 15-21 months for those market dip, jump in and buy like crazy moments.-DWM]
4. Not getting divorced… This one might sound odd, but nothing derails financial success like divorce. Why not spend a couple thousand a year on the love of your life, spoil them, do something outrageous – borderline foolish, I promise it will cost less than divorce!
5. Spending freely on organic foods, vitamins, fitness memberships, and equipment. Against the grain I know, but ask yourself what is money? Money is freedom. Freedom to do what you want, when you want, and how you want. What good is that if you are diseased, dying or living less than optimally? Nada, it’s worthless, so I spend freely on anything I think can give me a physical edge or gain.

What are 3 things you’d do if money is no object?
1. Delta has this cool flight ticket called the Around The World Ticket, it allows you to fly anywhere around the world, unlimited stops for a month or two. I’m not sure on the details, but I’m sure I want to do it! How sick would that be, traveling the globe with 15 or 20 stops in between? Winning!
2. I would hire more coaches, I would really love a nutritionist, a relationship/love coach, a guitar coach, a surfing coach, I would work hard on getting better at more cool stuff.
3. Spend more time with my kids!

When did you first start contributing to your own Roth IRA?
19 and I’ve never missed a year since.

[That’s awesome, I didn’t start funding my Roth IRA until age 30. That’s why I’m starting Mini Wise Money’s Roth today at an age of 8.-DWM]

When did your child first contribute to his/her Roth IRA?
I’m currently not… Didn’t know I could start them one before they are 18, Google tells me I was wrong about that. I just penned an email to my CPA about the pros and cons.

[Let me know what you find out in terms of the pros and cons. I’ve researched and only found pros so far :)-DWM]

What does financial independence mean to you?
1. Never having to think about money
2. Being able to do WHATEVER I want, WHENEVER I want

Any questions you want to ask and answer to lend more insight to our readers?
I think this idea of starting an IRA for kids is an awesome idea, would love to know more. Thanks for bringing it to my attention 🙂

[You can certainly open Roth IRA for kids, as long as they can demonstrate earned income. Learn more here. -DWM]

If you are looking to purchase home, Josh is one of the best home mortgage officers. You can find out more about his services here.

physician-home-loans-at-fimc

Why Physician Home Loans Fail ebook  Read this eBook Josh generously made available to you.

16 Ways to Minimize Debt in Medical School

This post is inspired by a MS3 who wrote me, wondering how she could minimize debt while not having a job in medical school.

 

Hi! I just started reading your posts and they are very helpful. I am a student at Touro [tuition is about 45-50k/year-DWM] in my 3rd year and I have been trying to be smarter with my money for the last 10 years, but since I’ve always been in school or making minimum wage, I didn’t know how that was possible. When I became solely dependent on loans is when I learned the motto of paying yourself first. Since I do not have any income to pay myself first, do you have some advice on what I can do now while I still rely entirely on loans for money? I already accepted this year’s loan, but I know for next year to pay it on a credit card first. Do you have any other tips for what I can do or a link to a blog for people like me who are still in med school?  Thank you!

 

– MS3 with 80-100k cost of attendance every year in med school.

 

Here are things that help me minimize debt  as MS1-4.

 

  1. Delay and minimize taking out student loans.

 

Think of student loan and the financial aid officers as your last resort. They should be, with the high interest rate and the ridiculous loan origination fee.

 

Use credit cards 0% interest rate promotional periods for all your purchases (including your 50k tuition) whenever you can.

 

Borrow personal loans at lower interest rate. Write up a contract and make it official. Business is business. No need to mix personal and business. But a personal loan at 3% interest rate is a lot better than a federal loan at 6-10%. And this could be totally win win as you know you will definitely pay the loan back and it offers the personal lender a much higher rate of return than a CD would.

 

  1. Use credit card rewards.

 

Use credit card rewards for travels, for food, for books. I like the cash back feature.  Find ways to maximize cash back. Check this out. You can totally stretch your dollar when you use credit cards mindfully and responsibly.

 

  1. Cook for yourself.

 

Don’t eat out. It’s expensive today, cost your health, and expensive for your future in medical bills. Cooking is relaxing and helps you care for your basic needs. Make time for it, it’s definitely worth it. You can even set up a rotation chef schedule with your friends and buddies in med school and cook for one another.

 

  1. Exercise in the free school (though sometimes maybe crappy) gym.

 

Don’t spend money on gym. Find ways to build your exercise into your daily routine. Before or after class, between classes, hop on the tread mill at your school (my school offered a small, though a bit dingy gym, hey its free!).

 

  1. If you have kids, build a childcare swap team/ support.

 

Build a community where you, your partner are in the rotating schedule to care for the collective children. It’s surprising how it seems to be easier to take of 5 kids instead of 1 at times. Kids socialize and entertain one another and you might even be able to study while they entertain one another, keeping one eye on supervising them.

 

 

Tutoring is one of the most amazing way to study, and you can make money too. If you are MS3, tutor USMLE1 or MCAT content/ test strategies. That way you are reviewing materials pertinent to you and making some money. I get a wonderful sense of fulfilment and tremendous help with my bills in med school tutoring.

 

  1. Start getting paid for what you already do anyways.

 

There are work study jobs. Don’t pass those up. You can work in the library and spend most of your time studying, while getting paid 15/hour. You can also find your favorite professor with whom you’d like to do research with, set up work study with him/her and start advancing science and medicine while getting paid! Alternatively, find a non-profit organizations where you love volunteering at and set up an off campus work study job. Get paid while doing what you love. While we pay to do what we love-learn about medicine and doctoring- in medical school, it doesn’t always have to be. Start finding ways to get paid for what you love to do.

 

  1. Make a budget and stick to it.

 

Budget is a means to an end. It’s not limiting, it’s goal-fulfilling. Make one and stick to it. Frequently, you find that you become more creative and can make smaller sequential budgets!

 

  1. Spend some time finding and applying for scholarship.

 

It’s usually worth your time to apply for a scholarship. I especially like those that ask you to write and reflect on sometimes. In the process, not only do you learn about yourself, start getting your residency application essay together, but also you have a chance of getting a couple hundreds to a couple thousands! Why not?

 

  1. Get in the habit of paying your own bills while dining/entertaining with a group.

 

Why hanging out with friends and eating/entertaining out, do not be shy to pay your own bills instead of quietly subsidizing someone else’s expensive habits. If everyone in your group ordered alcoholic beverages, but you didn’t, get your own bill rather than split the bill evenly.

 

  1. Socialize in activities which produce rather than consume.

 

Don’t ever do retail therapy with your friends. Know that if you feel unhappy, shopping will not solve it. Spend time to take care of yourself so that you don’t feel deprived and end up overcompensating with material goods.

 

Instead of hitting the mall or the movie theater, hit the library, go on a hike, or go to the Soup kitchen and serve the homeless. If you have time to shop, you have time to serve and you’d be better of for the latter.

 

  1. Surround yourself in like-minded people.

 

Some people would think that you are too stingy, too frugal, no fun, don’t know how to enjoy life. Distance yourself from those people. It’s hard to share your ideals with those who don’t want to listen or just want to tear you down.

 

I’m sure there are a few if not 50% of your classmates who have some financial awareness of how much that the student loans they live on today would cost them in the end. Join them, hold one another accountable, and encourage one another.

 

  1. Spend 1-2 hours/month to take care of your finances.

 

Set it up correctly in one giant excel sheets so all your bills are paid on time and you know when your 0% promotional APR ends and have plans to pay them off (way in advance) in place.

 

This will pay great dividend for the rest of your life.

 

  1. Increase your financial intelligence by reading and asking questions.

 

Bookmark these resources. When you have a few minutes like waiting for a bus or on the toilet, read up!

https://www.drwisemoney.com/ (my blog, i focus a lot on MS and PGY’s)

http://whitecoatinvestor.com/ (he gives information for docs at all ranges of training, though a bit heavier for after med school grads)

http://www.physicianonfire.com/ (he gives information for docs at all ranges of training, though a bit heavier for after med school grads/attending)

 

Bottom line is financial literacy is universal for everyone. Read today and learn; you’ll never regret it.

 

  1. File your own taxes and use the opportunity to learn.

 

Play with software like turbotax. Saving a penny is frequently better than making 2 more, because in exchange you get more time and time is in the end the most precious resource you have.

 

  1. Apply widely but interview wisely when it comes to Match/ERAS.

 

Last but not least, if you do have some income during med school, which can be great other than financially (it pulls you away from medicine and gives you time to refresh and get a perspective), try to fund your Roth IRA. Assuming you don’t make much as a medical student, the taxes required of you to fund Roth IRA maybe literally zero! You get to put “post-tax” dollars into your Roth IRA, which then can grow tax-free and be withdrawn tax-free in retirement (the principle and earnings.)

This is definitely one thing I regret not doing during my MS years, especially given 2010-2014 enjoyed some of the best stock market return in the last 2 decades.

If you like this article, you might enjoy other DWM articles on Personal Finance, Investing, Retirement, Practice Management, & Lifestyle.

All articles by DWM are for informational purposes only and not intended as a substitute for professional advice. Please consult a professional accountant, financial adviser or lawyer, before making financial decisions.

 

PETE Q&A PT 3

Q17. I tried to reapply online but I couldn’t b/c I was already rejected with $0 income input on my previous application.

 

A17. Definitely call DRB tomorrow and have them manually change your income so that your application will reflect your PGY 1 rather than your MS4 income. One of the big benefit DRB advertises is the fact that they go one step further than refinancing PGY’s, that they will refinance MS4 with contract in hand after match day.

 

Q18. Is there an adviser or person you would recommend me to talk to in DRB?

A18. I was rejected by DRB when I applied for student loan refinancing as an intern. That was before they started offering student loan refinancing for residents and fellows. I worked with Jason, who really knew his stuff, but I felt so frustrated because their rules back then was that you had to have $3,500/mo. after paying all your bills to be even considered, even though I had 800+ credit score. But I’m really glad to see that many of my friends are able to take advantage of student loan refinancing as PGY’s now after DRB started offering PGY refinancing in mid-2015.

 

Q19. Is it better to stay on fixed or variable interest rate when refinancing?

A19. Since you are at the beginning of your training, I’d recommend staying with fixed rate. However, you can always re-refinance again if you selected variable interest rate right now and the rate went up. You can refinance your loans with DRB with DRB again or with LinkCapital (hopefully they are able raise capital and start refinancing PGY’s again.)

 

For example, if you refinance with DRB right now and got a much lower variable rate than you would if you select fixed interest rate under the same 10 year long term, and in 2 years, the rate went up by 1%, and you really don’t like the new rate. Then you can apply to LinkCapital for either a fixed or variable rate interest loan. If LinkCapital offers you good deal, then you can bring the deal back to DRB, ask DRB if they want to beat the deal from LC, then they can keep your business.

 

The only downside to selecting variable rate & re-refinancing if rate increases and starts cutting into your savings are:

  1. No one can really predict how rates will go. Yes federal government is increasing the prime interest rate where banks can borrow money gradually, already by 0.25% this year. But if economy sucks, like it sort of does now, the interest rate of refinancing student loans and mortgage, etc. will stay low.
  2. There are only 2 banks offering PGY refinancing right now, and one of them LC is out of money to lend/currently in the process of trying to raise more money. So DRB pretty much has total monopoly of the PGY student loan refinancing market right now! Great position for DRB to be in, not the best for the PGY’s who need these refinanced student loans to save money. So if your variable interest rate increases with DRB, and there’s only LC (assuming they get enough money and start lending to PGY’s again), then you may not get a great deal when you re-refinance.

 

So it is personal decision whether to refinance to variable or fixed but in general, variable rate is fantastic when interest rate drifts down from the time when you sign up rather than drift up. But no one can count on a borrower-favoring downward trend just as banks can’t count on a lender-favoring upward trend. What you need to do is to consider the worst case scenario: If your variable interest rate goes up, and you cannot get out that high interest rate by re-refinancing, what can you do? If you are an attending, you can probably pay off your student loans rapidly, within a year or two by just tightening your belt a bit or re-refinance, but if you are PGY, you may be stuck with the high inter rate until it adjusts down (economy down turn, federal government decreases prime rate, etc.) or when you get to refinance again as an attending.
Q20. If you were me with $206,400 principle from all med school only ($21,386 interest, currently) with avg. 6.08%, which option would you go with personally?

 

A20. I would refinance because I don’t like debt. I will choose a 7 year or 10 year fixed interest rate loan. I’d imagine that my rate will be around 4.5% or so. Even if it is 5%, I’d still refinance because I will be very aggressive with paying down my student loan throughout training (since our training is so long, 6 years.)

 

Q21. From your voice, it sounds like you will definitely go with refi and use the cash flow into retirement savings account. If I go with this refi route, is it more beneficial for me to use the cash flow to pay more monthly for student loans or making minimum monthly/putting cash flow into retirement savings/emergency funds?

 

A21. I will

  1. Make a budget and see how much money I can allocate to building my net worth by decreasing debts and increasing assets.
  2. As an intern, I was targeting $2000/mo. towards increasing my net worth. I focused on attacking my student loans first because my interest rate was 6.8%. I was very happy to throw $2000/mo. towards my student loans and every extra penny I had towards them because I knew I was making 6.8% return on every dollar I used to pay down my loans.
  3. As soon as I killed my student loans, I started to max out my retirement funds, which means to max out both Roth IRA and 403b Roth at BUMC, a total of 23.5k/year.

 

 

Q22. OR, maybe I can pursue both which is doable during my 6 yrs training?

A22. Yes, you can definitely do both. Whether you decrease your debts or increase your assets (saving more in retirement accounts), you are increase your net worth.

Q23. Can you briefly explain when and how I can start investing into Roth IRA and company match?

 

A23. Read these posts.

https://www.drwisemoney.com/?s=bitter+sweet

https://www.drwisemoney.com/2016/01/27/where-to-put-limited-pgy-dollars/

https://www.drwisemoney.com/?s=company+match

https://www.drwisemoney.com/2015/12/12/christmas-a-gift-that-keeps-on-giving/

For company match, contact your hospital HR/benefits department to find out if they offer residents/fellows a match. If they do, definitely open a 401k or 403b account to take advantage of the match. UA did not use to offer company match for retirement savings, but thankfully Banner bought UA and starts offering 4% company match on 7/1/2016 for PGYs. So yay, that’s another 2-4k/year of money one can get by putting away 2-4k themselves into their 401k.

 

Q24. Do you recommend to start opening account starting at PGY1?

A24. Yes, definitely start Roth IRA ASAP. You can read this post and learned from my biggest mistake J I would have started Roth IRA in medical school if I knew how wonderful Roth IRA savings are.

Hitting a Net Worth of $0 As An Intern

Q25. With your big help so far, I narrowed down to two choices as below with my goal for the loan repayment option (have the option that provides me the most minimum monthly repayment so I can have more flexibility or room to pay more if I choose to with less interest rate; pay off completely within 2-3 yrs of post-residency training):

1) Refi with DRB now (if approved) for 6 yrs and then re-Refi when becoming attending
Is it worth a lot if I refi now from 6.08% to 4.5% using DRB?

 

A25. So rough math is 228k x (6.08% – 4.5%) x 6 years of training = $20,520 guaranteed post tax savings even if you choose to pay nothing like in the case of $0 monthly requirement by LC.

That’s about half a year of post-tax income as a PGY1. I think it’s a big deal, but others may think differently.

 

Q25a. Is 4.5% under 10 yrs plan guaranteed most of time when I apply, recently?

No, not guaranteed. Could be higher or lower. Apply for free and find out.
A25a. Under this plan, you mentioned I can keep re-refinance. Is there a penalty from DRB (assumed I refi with them), when I refi again after 6 yrs (when I get a job) to different bank?

DRB currently has NO pre-pay penalty; you can refinance with anyone that wants your business.
Q25b. From your comments above, you mentioned that someone was approved for 4.5%, but fed interest rate of 7% is still alive?

 

A25b. My colleague signed the paper agreeing to have DRB buy his loans from the federal government, who’s charging him 7% currently. However, DRB has been really slow at moving forward. They are probably getting too much business. That’s why I recommend that anyone who is even considering refinancing to apply ASAP, because the borrower can get the DRB deal in hand first and still have time to think about the best course of action, After learning what rates/terms DRB will offer the specific borrower.

 

Q25c. This didn’t make sense to me. If refi worked, fed interest rate should go away and that person will be locked in with 4.5% right after he was approved as a fixed rate, no?

 

A25c. You are totally right. As soon as DRB go ahead and buy the student loans from the federal government, my friend is set on his fixed 4.5% interest rate until the end of his selected term (I believe he selected 7 year term because he is a pgy3.)

Q26. 2) PAYE(or RePAYE) with PSLF for 6 yrs and then re-Refi when becoming attending
A26. I totally agree with you that PSLF is not going to help us (higher paying specialties) much. But, based on your wisdom, I might as well apply to PSLF (if I have to choose one of IDRs) since it won’t do me any harm even if I will get my 1st job at the profit organization which most rads people get.

Yes staying with IDR/PSLF combination only hurts you if your interest rate on IDR is higher than that of refinancing with private banks.
Q27. Out of other IDRs options, if you were to choose one of IDR with my mentality and will to make extra monthly payment, would you still go with RePAYE over PAYE due to interest subsidy?

 

A27. If I plan to pay minimum, I’d stick with RePAYE so I can get maximum interest subsidy.

 

Q28. If I can make extra monthly, I think being on either of these PAYE vs. RePAYE won’t be matter, right?

 

A28. If I plan to pay anywhere close to the monthly accrued interest, causing nearly $0/mo. interest subsidy on RePAYE, then I’d go with PAYE. I am saying this because RePAYE beats other plan like DRB/PAYE by interest subsidy. On the other than IBR/PAYE beats RePAYE by 2 things that may become relevant to you in the future:

  1. IBR/PAYE will not count spousal income as long as you file taxes separately. (RePAYE counts spousal income always no matter how you file taxes.)
  2. IBR/PAYE lifetime maximum payment requirement is capped by the monthly payment you get under standard 10 year repayment plan at the time you enroll with IBR/PAYE. (RePAYE has no payment cap, so you can potentially make enough money as an attending that your monthly RePAYE requirement gets higher than monthly IBR/PAYE requirement.

However, these 2 issues make no difference to someone who’s paying down their student loans aggressively rather than paying the monthly IDR plan requirement waiting for PSLF. But since you don’t know for sure that you won’t get PSLF, IBR/PAYE are better than RePAYE.

 

I mean it will be ideal if I pay the most minimum under RePAYE to get the most benefit, but now I feel like being on RePAYE won’t hurt me neither if I choose to pay more monthly (close to interest accrued) ~$1100/month.

RePAYE won’t hurt you as long as

  1. You can switch back to IBR/PAYE, when you the above mentioned 2 points are relevant to you and that you’d rather pay less on IBR/PAYE so that you get More forgiven under PSLF.
  2. If you don’t get a PSLF-eligible job and you are going to pay off your debt yourself ASAP anyways, you can just refinance from RePAYE to a private bank and destroy your debt within 2-4 years after training.

 

Q29. When I switch from PAYE (or RePAYE) to refi after 6 yrs, unpaid interests during these 6 yrs will be capitalized and these total amount will be refinanced, correct?

 

A29. Yes. When you finish training, you will no longer qualify for PAYE because you no longer demonstrate partial financial hardship. When you leave PAYE either voluntarily or due to non-qualification, your interest will capitalize too. Interest will capitalize whether you get automatically switched from PAYE to standard 10 year repayment or you refinance.
Q30. If I go with either of PAYE vs RePAYE, will Direct consolidation provide me lower rate than current average rate of 6.08%?

 

A30. No, Direct consolidation loan is usually 1/8% higher than your current weighted interest rate, so your rate will likely be 6.125% instead of 6.08%. You can confirm this with your servicer. The only reason people consolidate is to make sure that All of their federal government loans become PSLF-eligible. But if all your current individual loans are Direct; they are all PSLF-eligible already. Federal loans like Grad Plus loans are not PSLF-eligible, so a borrower with Grad Plus loans should probably consolidate.

How I Pay My Student Loans Using Passive Income by Passive Income M.D.

15081722 - mini graduation cap on rolled up cash

[Passive Income M.D. has great insights to add to the physician blogger scene. Enjoy his guest post below! We have no financial relationship.]

As physicians, we’ve all felt the crushing weight of the almighty student loan. Some have felt it more than others, perhaps, but a vast majority of medical school graduates wonder if they’ll ever pay their loans off. In fact, according to the AAMC, the average medical student leaves school with $183,000 in student loan debt. That can be a very intimidating number.

 

Looking back at my own post-med school debt, I can safely say that I was very fortunate. Why?

 

  • I left medical school with just under $95,000 in student loans that are now less than $85,000.
  • I went to state school where my first year tuition was only $13,000. Of course, it nearly doubled by the time I finished school, but overall I feel it was quite affordable.
  • I graduated at a time when I could consolidate the loan for under 3% for 25 years [DWM: student loan interest rate <3% sounds amazing, but that’s what educational loans should be at in terms of interest rate. none of this nonsense 6.8+% interest rate with 4% origination fees!]

After a few years out in the real world, and after buying my house, I found myself in a pretty comfortable situation. I had saved enough money to actually pay my student loans off completely. But did I do that?

 

Nope. [DWM: I wouldn’t either if my student loans cost me less than 3% and the rate is fixed for 25 years!!! wow. Hallelujah!]

Not All Debt is Bad

 

See, in my mind, all debt isn’t necessarily all bad. Debt for an education is usually good debt. Taking out a loan for a fancy car and struggling to make payments each month is bad debt. Debt that you can use to make money (cash flow in excess of the interest you’re paying on the debt)… well, that’s very good debt.

 

So, instead of paying off my student loans all at once, I decided to take that money and buy a rental property. In a future post I’ll go deeper into the buying process, but for the purpose of this article, I’ll cut to the chase: I ended up paying a little less than $35,000 to buy a single-family home at a purchase price of $105,000. I rent this property out and receive a cash flow of $475 per month.

 

Can you guess what my current loan payment is? $460.46.

[DWM: that’s simply beautiful! compared to the giant payments my generation of doctors’ are facing. imagine 300k at 6.8% interest rate, some of my friends told me their monthly interest alone is 2k-3k. mortgage payment of a mansion, only without the mansion.]

So as a result, the cash flow from my rental is covering my entire student loan payment every single month. [DWM: talk about having someone else pay our liabilities. Love it. Classic Rich Dad approach to building wealth.] My initial $35,000 is secured to the property as equity, the tenant is paying off the rest of the loan on the home, and I’m gaining further equity in the home. The average appreciation rate in that area is 2.37%, so I’m actually gaining value in the home as we speak.

 

The rest of the 19 years on this loan could be paid off by my tenants, while the property appreciates in value and gains in equity. Additionally, when that home is fully paid off, there will likely be a jump in cash flow, and the value of the property should be decently higher.

So, what is the end result?

 

My $85,000 loan will be paid entirely by a $35,000 investment in a home. Eventually, that $35,000 will be worth at the very least $105,000 (the purchase price of the home), plus any appreciation that will have taken place and minus any large repair expenses. What happened to the $50,000 I didn’t use? That went into a down payment for an apartment building I bought with a partner, but that’s a post for another day.

 

With all that said, I certainly can’t fault anyone for choosing to pay off their debt all at once. There is value to the peace of mind that comes from knowing you are debt-free. [DWM: not to mention the guaranteed 6.8% post tax return… I wish we were in your shoes, Passive Income M.D. I would have bought a few houses rather than pay off my student loans if it were at <3% 25 years term.]

 

However, I place a much larger value on building my path to retirement. I can stomach the debt as long as I know it’s being paid off by my tenants. When it comes right down to it, I can rest easy, because my student loans are being paid off completely by passive income.

Why couldn’t you do the same? [Yes I would I would! I would totally invest, rather than pay off my student loans if I were in your shoes.]

 

 

Think this is smart, dumb, or both? Feel free to comment below or reach out anytime here.

 

 

Passive Income M.D. is an anesthesiologist and family man who is obsessed with the idea of achieving financial freedom through multiple streams of passive income. He shares his personal journey and tips he learns along the way on his website, Passive Income MD. His ultimate goal is to be a better husband, father, physician, and golfer.