#I #have #terrible #credit #and #need #a #loan
I have terrible credit and need a loan
What To Do If You Have Monster Debt
[Editor’s Note 1/15/2018: The long-awaited White Coat Investor Online Course is live and is available for purchase here. The course is entitled: Fire Your Financial Advisor. No more wading through dozens of books at the library, scrolling through hundreds of blog posts on dozens of blogs, or checking in daily with online forums trying to gain a financial education the way the hobbyists do. This course will take you from feeling anxious and having no plan to having a written financial plan you can follow the rest of your investing career as a professional and a retiree. This course is the material that should have been taught to you in college, medical school, or residency, but never was.]
I know you hear lots of people’s financial woes. I almost never read articles that include situations similar to ours, and am beginning to feel that we are way out of the norm.
My partner and I both went to one of the most expensive medical schools in California. With tuition and living expenses, our combined debts currently stand at 840K (about 420K each), with interest accruing at about 6.5% for half the amount, and 7.6% for the other half. We are both in residency, Psych and IM.
We’ve been trying to live as frugally as possible in California and our families are both here. We’ve started saving for retirement in Roth IRAs and have a $10K emergency fund and are also starting to save for a house. We are about to apply for disability insurance which looks like it will cost us about $500/month for both of us. I am worried about refinancing our loans into private loans because of the loss of the ability to
defer/forbearance in case of hardship and the damage it might have to our credit. At this point, our plan is to aggressively pay our loans after graduation. If I pay 5K/month on my loan, then it should be paid off in 10 years.
Right now, I want to make sure that we put the best plan into place for both saving and paying down the loans simultaneously. Now the cherry on top, is that my widowed mother is likely to need financial help from us pretty soon (1 year), thinking we may need to purchase a large enough house for her to live with us, and take care of her regular expenses.
What is your general advice for those of us who have exorbitant sums of loans? I doubt PSLF will help us if it is even still there 7 years from now, so ignoring the PSLF possibility, what is the least worst way to go about this?
Unfortunately, this situation is not only not rare, but it is becoming increasingly common, particularly among dentists as you can hear in this call to the Dave Ramsey show I shared a while back.
$840K is a lot of student loan debt, but it still isn’t my record ($950K for two docs, $635K for one, send me an email if you can beat it.)
[Update 4/17: Record has continually increased since writing this- $800K, $940K, and now $1.2M for one doc. OMFS and orthodontists seem to lead the pack.]
But there’s no doubt these two docs are in some serious financial hot water. Consider these four factors:
1) Huge debt
2) Relatively high interest rate debt
3) Low paying specialties
4) Living in a very high cost of living area
Why is this so bad? Well, the interest alone on that debt is about $60K a year. So it will cost them $5K in after-tax dollars a month just to stand still. That may be half of one of their after-tax monthly incomes!
The good news is that they realize that this is a problem. They realize they need to save and have already begun to do so. They’re developing a financial plan. They’re having a little trouble prioritizing their savings, but that’s a relatively minor issue. The major issue is the $840K elephant in the room. I’m not quite convinced they understood just how bad that was. Dealing with that mess requires a radical solution, and I didn’t hear a radical solution in the email. But they’re probably only at a peak income to student loan debt ratio of 2X. As I wrote about recently, that’s at least still doable. 3X, or even 4X (like the dentist in the Dave Ramsey call with a $480K debt and a $120K income) probably isn’t.
Here’s what this couple (and all of you out there like them) need to consider.
# 1 Mindset Change
It’s time to change your mindset. You’re not only broke, you’re far worse than broke. You’re over $800K away from broke. You’re in a worse financial position than 99.99% of other Americans. The dude living under the bridge is in better financial shape than you are. You’re in no position to buy a house. You’re in no position to help anyone else financially. You’re in no position to live in a high cost of living area, no matter how many family members you have there. You’re in some deep crap. Your debt to income ratio is radical, and a radical solution is required.
# 2 Public Service Loan Forgiveness
This type of situation is ideal for a method of paying for school that doesn’t involve paying the loans back yourself. If you saw this coming before med school (expensive school and a low paying specialty) the military HPSP scholarship is a great option for someone with a desire to serve. That’s obviously not an option now. But Public Service Loan Forgiveness (PSLF) is. PSLF, assuming they are grandfathered in, eliminates this problem in just a few more years. The internist will already have 3 years of payments by residency graduation, and might even consider a fellowship. The psychiatrist has 4 years of payments already. 4-7 more years and they both could qualify for tax-free forgiveness, probably of an amount approaching a million dollars (after-tax mind you), but certainly at least half a million. That’s like an extra 3-5 years of gross income! It’s a huge benefit. What do they have to do to get it? Not much. Stick around as faculty at their programs. Go over to the VA and work (easy to get a job there as an internist and a psychiatrist I would think.) Maybe they can even find a non-profit, non-academic employer in California. But to just write this option off when you owe upwards of $800K seems foolish to me.
The kids wondered why we didn’t get a llama to carry their stuff
# 3 California Is Part of the Problem
Here’s another consideration- living in California is probably a significant part of the problem. A doctor leaving California for a less balmy climate typically gets heavily rewarded for suffering through it. Lower state taxes, a lower cost of living, and probably even higher salaries. After-tax, it wouldn’t be unusual to make 50% more and spend half as much. That 2X ratio could easily be knocked down to 1.5X.
# 4 Boosting Income
Too many financial blogs focus on reusing paper towels to save money. That isn’t going to go very far against a debt that accumulates $5K in interest a month. Physicians have a high ability to earn, and when you get out of residency it’s time to take advantage of that fact to improve your financial fortune. Extra shifts, a better paying job, a side gig, you name it. Plus, when you’re working you’re not spending. “Live like a resident” can refer not only to your spending habits, but also your working habits.
# 5 Don’t Fear Refinancing
Refinancing your student loans with a private lender does come at a price, but this couple seem to be afraid of the wrong price. They’re worried about not being able to make the payments. They should be worried about not being able to go for PSLF. At any rate, cutting that interest rate in half if possible would go a long way to paying these loans off quickly. Upon residency graduation if they’re sure they’re going to pay them off and not try to get them forgiven, it’s time to refinance. What are they really worried about? If something terrible happens to their income and they can’t make their payments SoFi or CommonBond isn’t going to come over and repossess their brains. Remember what a student loan is- an unsecured debt. If you stop paying, all they can do is report you to a credit bureau and call you every now and then. All the Credit Bureau folks do is lower your credit score. Well, if your income has dropped so much you can’t make your student loan payments, you don’t need credit anyway. It doesn’t take that long to repair credit. By the time you’re in a position to buy a house (hopefully the only thing you need credit for in the future), your credit will be ready too. Paying an extra $25K a year in interest so you can go back to IBR payments “just in case” seems pretty foolish to me. IBR/PAYE/REPAYE forgiveness, which is taxable, isn’t an attractive option either for this couple. That means they’ll be dragging their debt out for 20-25 years. No, thank you.
# 6 Get Intense!
Even dragging loans out for 10 years would be depressing to me. I’m about ten years out of residency as I write this. Not only have my “student loans” been gone for years, I’m basically done saving for college, done saving for retirement, have the mortgage paid off, and am “living the good life.” Correct me if I’m wrong, but isn’t THIS what you want a decade out of residency? Or would you prefer to still be screwing around with student loan payments? Do yourself a favor and get rid of those loans in 5 years or less. Will it mean hard work? Absolutely. Will it require serious lifestyle sacrifice compared to your income and peers? For sure. Will it be worth it? I think so. Here’s what it looks like:
Debt repayment: $200K
Living expenses: $100K
$100K goes pretty far in California, and it goes a long way outside of California. You can probably even save a little for retirement out of that. But the key is figuring out a way to be throwing $200K a year at the loans. That means that you’re not making $5K a month payments. It means you’re making $15-20K a month payments. You can do it! Think of how nice it will be to have an extra $200K in income! It’s like marrying a doctor! That can be yours in less than 5 years, but you’ve got to choose now.
What do you think? What advice do you have for a doctor with “extreme debt?” What is the best choice now for their limited disposable dollars? Comment below!
As Dave Ramsey would say: “rice and beans, beans and rice”. Fortunately, with a double physician income, this type of extreme frugality is not necessary, even with this type of debt burden. Since they are still residents, I would think that it might be beneficial for the IM resident to do fellowship to boost their future income potential, especially if they are planning PSLF.
Are you sure that a 400K income in California would only pay 100K in taxes? According to https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/, they would pay over 100K in federal income taxes alone, and this is before California state, Social Security, and Medicare taxes. I would estimate that they would pay approximately 150K in taxes. The plan still works, but they might need an extra few years to pay down the debt, or tighten the spending belt an extra notch or two.
I don’t have all the details of their tax situation. If you prefer to use a different number in your writing, feel free. It’s quite possible their effective tax rate will be higher than the number I pulled out of thin air.
But most people who complain I’m using too low of a number aren’t accounting for the typical deductions I would expect in a situation like this. Same reason people are appalled that my effective tax rate is so low. “But mine isn’t that low,” they say. I reply, “Did you put nearly $200K into tax-deferred accounts and give $50K to charity?” “Oh, I see,” they reply.
How about that disability insurance? Is 500/month for one of you or both of you? Even if it is 250/month/person that seems exorbitant to me, especially for IM and Psych. This is just a drop in your bucket but you need to shop around more.
700$ per month here for ‘own occ.’ It sucks until you are disabled I guess.
That doesn’t seem that exorbitant to me. I pay $400 a month just for me and I have pretty inexpensive policies. It just depends on how much benefit they’ve purchased.
May I ask, why still hold disability? Are you not self insured at this point?
Do you also still hold life insurance?
Yes you may ask.
No, I’m not financially independent (we spend too much relative to our assets dedicated to retirement.)
Yes. My portfolio + my life insurance does get us over our “number.”
Now, should I drop LI/DI because I have another income besides my physician income? I suppose it could be argued, but thus far I have decided that no, I shouldn’t. DI is about $400 a month and LI is about $100 a month. It would be nice not to have that expense, but it wouldn’t be lifechanging. Becoming disabled or dying without that insurance in place would be life changing.
But you (WCI) are insuring (i’m assuming) your full or a large portion of your income, which is >4x what a resident would make. This does seem pretty high for a resident salary since they are probably capped at 5k/month each. I got offered that coverage from Guardian (one of the more expensive providers) for $105/month graded policy or $165/month flat rate for 5k/month coverage, with a 10k rider. My health is excellent, but that was only about 3 years ago. One option to explore would be a graded policy (rates slowly increase over time). The maximum savings on this type of policy is usually 10 years (i.e. you’ll save the maximum amount of money with this type of policy for the first 10 years, and which time you’ll begin to give back some of those savings over the next few years, and only pay more if you hold it more than 15). But in their situation, it makes more sense to use the initial lower costs to pay down aggressively on their student loans. My personal savings over 10 years was going to be 6k over the first 10 years, with more of that coming at on the front end. Like PoF, I expect financial independence by that time, and plan to cancel the policy after maximal savings (but even if I haven’t reached my goals, there is a period of several more years before the decision will actually cost me more money). In their situation the interest savings and faster debt repayment from this type of plan make more sense, even though they will likely not be in a situation to be financially independent by the time it starts costing them more money. However, they could still consider getting rid of the policy at that time considering that they can insure each other (they will be making similar amounts, so would both have to become disabled, the odds of which are low), and be aware that their jobs will often offer some disability insurance coverage (although usually not as good, e.g. with more limited own occupation coverage).
IMHO, you are going to have to take some calculated risks in order to get ahead of a debt burden of that magnitude.
I’m not sure if we’re talking about me, you, the person in the post, or a hypothetical doc with a big debt as your comment is bouncing around so much.
No, I don’t have anywhere near my entire income protected with DI. About 20% of last year’s income actually. I buy disability insurance based on expenses, not income and recommend you do the same.
I agree that graded premiums make sense for someone who expects early financial independence.
Sorry for the lack of clarity. I think a graded policy makes sense for this couple as well, as it will allow them to reduce expenses initially and use that money to pay down debt that is at a high interest rate (of course refinancing that debt would slightly change how beneficial this approach would be, but the benefit is still there). The main point is that besides the thousands in premiums they would save over the first 10 years, they are also going to save thousands in interest because they can apply that money to high interest student loans.
Summary: Getting a graded policy will save >10k for monster debt couple over the first 10 years, and will likely save a similar amount in interest saved if you apply that to student loans (>7%, rule of 72). This will likely generate >20k in student loan savings over the first 10 years. Savings of this magnitude are important for a couple starting this far behind.
This level of debt is just shocking. Society cannot afford this. Higher education and professional schools simply have to tighten their belts. How many young people read stuff like this and decide to do something else? The problem with this couple is that they did not seek advice prior to incurring the $840k debt and maybe even residency choices.
Who did seek advice? Did you? Did I? Heck no. We just had a dream to be a doctor, signed up for school, and figured “doctors make lots of money so the money should take care of itself.”
No I did not seek advice prior to starting med school. My total debt was only $29k however. The tuition inflation is astounding. I am just saying I don’t think these young people understand how the debt accumulates and the effect on the rest of their life. I don’t know the answer but I think the costs are out of control. The general public will have little sympathy for the rich doctor to be so we as doctors have to solve this problem some how.
Last I checked the deans of every medical school in the country are all physicians. It’s doctors raising the price. In state tuition is up 350% at my med school in 13 years. They have fancy new classrooms and fancy new dorms and fancy places to eat but at the end of the day, it’s the same drill. They charge more because people will pay it and people can pay it because the government will loan them the money to do so. The truth is it still works out just fine for 75% of them. But the percentage of docs in financial trouble is growing. Perhaps from 5% 20 years ago to 25% today. That’s a lot of docs. The data shows that the average indebted student last year left school with a little over $200K in debt. But there are three factors there that are not being considered.
# 1 – That’s an average. Someone who goes to an expensive school in a high cost of living area and borrows the whole thing (especially with a family) is going to be way above average.
# 2 – The debt grows in residency. $200K at graduation is $300K after a 5 year residency.
# 3 – The lag time is significant. A pre-med looks at the stats and says “it’s only $200K, I can do that.” But that was for those who started in 2011 and finished in 2015. He’s going to start in 2017 and finish in 2021. That’s 6 years different. His “$200K” is going to be $300K, and that’s before residency.
Excellent points. Especially lag time, and how residency, inflation, and rates can all really change your projected doable number to a monster. I had a poor rate regime and a 7 year training period, (and no finance sense, heavy denial), and my totally fine 300ishK turned into 490k.
This selling of yesterdays costs has to be intentional by the industry.
Another thing that you don’t think about when you go to medical school is taking a year off for research or for time between college and medical school with college debt compounding.
I had huge undergraduate debt from a private college that I somehow did not realize was compounding during the 2 years prior to going to an expensive Ivy medical my parents did not help with. THEN, I took a year off for research between 3rd and 4th year. Then I deferred the debt through 4 years of residency. Not smart.
I actually did crunch the salary numbers, debt, and opportunity cost before applying to medical school. And my lowest acceptable income was 200,000 gross a year. Of course I’m a type A robot doctor. Beep, beep!
We did look at it…I actually chose my degree/career because I knew it would give me the earning power to support my husband/then fiance through medical school right off the bat. That and the Texas medical school system served us very well. Tuition was about $18k a year. The only reason we have the debt we do is because we bought a house and had children during medical school. I actually know a couple that paid off his tuition as he was in school–they lived frugally and she had a good job. I wasn’t willing to do what they did, but I am impressed.
Unfortunately, not everyone has a spouse to support them through medical school. And not everyone has access to Texas medical schools.
Its about time applicants need to know their debt burden and the payment schedule prior to acceptance to professional schools. The govt needs to step up to the plate and rectify the costs of education. Private dental schools cost 500k/4yrs and continues to rise. What is the breaking point? 840k in loans is beyond serious. Loans as such affect quality of care as well as we see in dentistry(gross over treatment and worse)
“The gov’t needs to step up to the plate and rectify the costs of education.”
I’d love to hear what you think that might mean. You realize this is a problem due in no small part to ‘borrow all the student loans you want’ enacted by the government. And, the government doesn’t exactly have a great track record at reigning in ludicrous spending or running things in a fiscally prudent manner.
No! The government made the cost of education what it is by taking over the student loan market. Can you imagine going to a bank and asking for a $500,000 unsecured loan at 8.9% so you can become a PCP making $165,000/year? The bank would at least be self-interested enough to deny you the noose for your own hanging, forcing the medical school to keep costs in a range that could be covered by a reasonable loan. But, the government will gladly give someone a $300,000 noose so he can become a social worker making $30,000/year, ensuring both his own misery and that of his taxpaying neighbor.
Actually for doctors the bank probably would be happy with those terms. For other educational debt, probably not so much.
Exactly. The government should get out of the business of giving educational loans and the problem will be fixed. Going to college these days is like a country club and many students don’t reach that QOL again for decades. What happened to going there to learn?
The government won’t rectify what it caused on purpose. By creating a generation of overly indebted physicians, this generation may have to accept even worse future changes to how we practice than we have already endured. The debt also keeps the physician working longer to repay it, giving the government taxes for longer. Evil genius, really.
Very good points. You have to work even if you hate your job because of the debt. No more FIRE.
During a particularly rough week in residency, when I was quite literally up to my elbows in feces, I considered quitting. The debt kept me going more than any pep talk could, and, for that, I am thankful. Now I just need to finish paying it off! Fortunately, I graduated in an era of very low interest.
That’s interesting that you’re actually grateful for the debt because it kept your nose to the grindstone. I wonder if we as a society should be thankful doctors have huge debts so there are actually doctors practicing when we need them.
This is probably true for the majority of physicians and soon to be physicians, but on the flip side, there may be a few who see this as painting themselves into a corner with no way out. And then they possibly do something drastic, like taking their own life. Physician suicide is up right now. I wonder if the increasing cost of medical education and insurmountable debt is a factor? Has anyone looked at this? What do you think?
I don’t know, but I’ve got a similar post on the subject running in an hour!
The level of debt here is almost unfathomable for someone like me. That being said at this point id be looking to be extremely frugal. Sublease a room together in someone elses rental, drive my car to the wheels fall off, ect frugal. Your right that saving paper towels won’t cut it so go after the top expenses Home, car, food and live like a unemployed college student until you get things turn around.
While my student loan to income ratio was only about 1.1X when I finished residency, I’m still a big advocate for #4. I started with a 40 hour/week job with benefits right off the bat. Within a few months I added a side job for several hours per week which paid an extra 3-5k per month. About a year later I added a monthly weekend coverage at a local hospital that pays 2k per month. Then nearly a year ago I added another gig for 5+ hours per week that pays 5k or so per month. All in I’m making an extra 10-12k per month from my side jobs for an average of 10 hours per week and one light weekend of work per month. People think I’m crazy when I tell them technically I have 4 jobs, but it feels nice to be sending in thousands of dollars per month extra to pay off my student loans hopefully by the end of this year.
Do you mind sharing what these extra side jobs are? My dream is to do a similar thing after graduating residency in a few months. Thanks!
Drug and alcohol rehab facilities, plus covering weekends for a hospitalist.
I have seen those jobs as well as internists working in walk-in clinics like CVS or city MD. There are also lots of private practices that want a doctor to cover Saturday mornings. I just had to call a BabyDoc (peds) that comes to your apartment and does housecalls 24/7. I worked at a Botox clinic on Saturdays that really added up.
Consider adding in telemedicine when board certified.
Do you have any links for those jobs. Just curious.
Look at which of the big three are active in the states you practice: Teladoc, AmWell, and MDLive.
I am in NY. Thank you for the recommendations!
Go to their websites. Read about which style you like best. Contact info is there. Nothing stops you from doing more than one if you have the time. Good luck!
The other thing to consider is when to have children. If you ask your mentors about having children, the politically correct thing to say is, “Have children, you will make it work”. Rarely will someone tell you to “delay children” to your face in an academic setting, so I can say it on the internet. Everyone thinks they can “have it all”. Well to “have it all” you need to pay for childcare, which can be very expensive especially in California. In addition to all of WCI recs, if it is possible to delay having children even a few years then you should do it. Definitely try to avoid it during residency with that debt load. If you are thinking about caring for an ailing mother as well, all the more reason to delay children (or more children if you have them) if possible.
Remember that with PSLF you have to be working full time. So any time on maternity leave does not count towards your payments. I am not sure how strict they are with the auditing so it may not be an issue but it is something to consider. If you go to 0.6 or 0.8 time to be around your child more then it may not count towards PSLF, again it depends on how your contract is worded for how many hours per week.
That’s a tough one though bc of the limited biologic clock. If I delayed until I was completely educational debt free (I served active duty to pay a good chunk) I would have been 38.
I definitely understand the biological clock, that’s why I said, “If you can delay, then do so”. If you are 30 and can wait even two years, that is alot of debt you can knock out. Even just delaying until out of residency is going to help alot. I cannot imagine trying to pay for childcare as a resident. I know people do it, but I would not want to have to figure out childcare for a resident schedule (60+hours) only making combined $100,000.
Well a lot of people do it on less
The only way to do it on less and not lead to child neglect would be to have family around. We are two working physicians who require full time child care in HCOL area. Our childcare costs MORE than out mortgage (we both take call). I think it is ABSOLUTELY something to at least consider. All kinds of people do all kinds of things on less but either it’s not ideal situations or they have plenty of family helping. This is coming from a gyn by the way.
Actually they don’t. The only people that do it on less have family. The others have to take out those insane physician scam loans. It just can’t be done as the cost of child care is exorbitant. Daycares don’t cover the hours and flexibility of a doctor. They are open 8-6 and what residency is 9-5 with no call. A babysitter is 12/hour at the very least and that is time and 1/2 over 40 hours. Then you are supposed to pay employer taxes and W2 them or you can get sued for unpaid overtime/disability/unemployment. Even a live in au pair legally can only work 40 hours so you need a second babysitter. Daycares cost several thousand a month and only give partial coverage.
Living in California is not the problem.
Yes, the rate at their income ( 400k) is around $31,177 without extra deductions. That’s at a marginal rate of 9.3%. Most states have a rate of about half of that, so state tax is costing them an extra $15,000 or less.
The most expensive part of California is the Bay area, where a decent home will cost at least 1.5 to 2 million. Something in a better neighborhood will cost 3 million or more ( NOTE: not the most expensive neighborhoods. Those are 5- 10 million). But if you live 1.5 to 2 hours away, you can buy a nice house for 500k, maybe less. And they will probably earn at least as much, if not more, in those less desirable communities.
So they can stay in California and drive a little to visit their families. It will be too far for grandma to babysit, but they can hire a nanny with the money they save. Of course, they shouldn’t be considering buying a house until the debt is paid off and they have maxed out their retirement accounts, and then saved a down payment.
Since their family is in California, they can live with their parents to save money.
I do primary care and live with my parents. Housing’s really expensive in California! But my “rent” is only $200/month. Living with parents makes a HUGE difference.
Yes, but how sad is it that a 30 year old two physician family HAS to live with parents to make ends meet and get out of debt in a reasonable time period.
Wait wait wait.
You say “HAS to” to an easy solution that will bring long-term benefits.
They could be out of debt in 2-3 years that way.
Why “HAS to”?
Why not, “Too bad more people don’t have this option”?
I disagree with only paying $200 rent, though.
I suppose I’m just reflecting my own culture and relationship with my parents. In my case, it would definitely be “has to.” It would have been a terrible lifestyle downgrade for my pregnant wife, my 2 year old, and myself to move back in with my parents upon residency completion.
I wonder what kind of people think their parents are a burden, or living with them is a “downgrade” in lifestyle.
My parents gave me life, love me with all their heart, they are my best friends and the people that will love me the most and unconditionally until their last breath. Not even a wife/husband will do it. It can only be matched for your kids (if any) yet for many wealthy people that’s a burden. They love their parents…but far from them.
No wonder they all end up in homes. Living your last years of life in a home, no matter how luxurious is, no matter how often your relatives visit you, is a disgrace, is a fail as a parent and a fail as a son/daughter.
I would LOVE to live with my parents their last years, and being there for them.
The current state of society values are shaped by individualism which is an ANTI-VALUE only benefits the housing market, the consumption vicious cycle, etc. and the fact that people do not see this, and even justify it, is even worse than having an 850 K in debt.
I think you need to meet some demented, medically complex, belligerent, incontinent, broke, previously abusive seniors before passing judgment on those who use nursing homes. I think it is a very individual decision.
I’m also moving in with my parents after residency. Also helping with utilities to the tune of $200 a month or so. Do we have to? No, not at all. 2 physician couple, salary about 450k combined to start, likely 600k in a few years. We could easily afford a 600-900k house or even substantially more but I actually enjoy the idea of spending more time with the family and love the area where I grew up. Built in childcare saves 30-40k a year, good public schools another 30-50k a year. We can build out the house with an addition etc as needed for far less than the purchase price of a new home, and have the ability to retire in 5 years or so vs have huge savings not long after that. Plus I think it will be good for the kids to have so much family support. All while being in California. To each their own though. Multi generation households are the norm around the world, just not as common in the USA.
I actually think our nation would be much better off if we lived more like the Walton’s. It really makes smart financial sense and that kind of family communal living is good for the soul and the psyche! My kids moved home, paid off their student loans, paid their own bills and saved a pile of cash for a home of their own….and I loved every minute they were here and would have not objected if they had stayed on! More power to you and yours!
People pay strangers to take care of their children when for grandparents is a joy to have them. Is good for the family bond, is good for the children, is good for the grandparents, is a win-win.
Your response to this question could have been answered with only this: “You’re in some deep crap. Your debt to income ratio is radical, and a radical solution is required.”
The rest of the blog points out the radical options, but the mindset change is easily the most important thing. Going to have to bust balls to pay down that kind of a mess even with a 2 doctor income. (All of this assumes the wife doesn’t want to have a kid or 3 and stop working…get a nanny, daycare etc!)
Sometimes the husband quits. My husband was the one to quit and leave me to pay the debt. The assumption that the man is the earner in the family is a frequent one on this blog, unfortunately, and one of its few faults. You are perpetuating a stereotype that does many women a dissservice.
Absolutely there are many stay at home husbands. One of my partners has a stay at home husband. However, I don’t think that is yet anywhere near as common as a stay at home wife. My own family enjoys having a stay at home parent who happens to be female, so I’m sure I often reference that when I talk about my own situation. I feel like I’m far more often to use the word spouse than any gender specific word in most of my writing, but even so, I don’t think using the more common situation in an assumption is a terrible sin nor doing anyone a disservice and certainly should not be interpreted by a reader as some sort of put-down of their gender or life choices.
There is a difference between saying someone has a stay at home husband or wife, and saying that, in a two-physician family, the wife might decide to stay home. Perhaps you aren’t aware of how often women are told they are just taking a place in a medical school class that should go to a man, because women just quit to stay home with the kids. That is the disservice to women in medicine that is being done here. I love my job and enjoy working, yet I was the one who was seen at risk for quitting when I wanted kids. No one asks men about this in job interviews. No one suggests that a man who is about to have a child will be less committed to his job. I think it is worth pointing out when someone makes this sort of assumption, as the commenter above did.
I’m not quite sure which comment you’re referring to. Maybe a name or number would help me figure it out.
I agree with you that it is inappropriate to not give a med school spot or a job to a woman out of concern she is more likely to go part-time or take parental leave due to societal expectations and biological facts. That said, I think it is true that she (the generic “she,”) is, statistically, more likely to do so (even if you and many other women are not necessarily more likely to do so.) And thus I think a lot of people do what is inappropriate either subconsciously, consciously, or even out loud. And I agree that isn’t fair.
Their solution will rely heavily on what they value most, which is why personal finance is so personal. My best advice is that they must both work until all loans are paid off, which is what my husband and I did. I wouldn’t delay kids if that is a top priority. We did start a family in residency, both worked, and kept our lifestyle in check until the loans were paid off. I hope they will consider keeping us updated with their plan and progress.
I think the WCI gives a fair plan. I might add probably looking for a place that gets federal loan repayment as well (NHSC) so you can pair that with the PSLF. Someone advised delaying kids, but I think this would be where your choice to stay in Cali should work for you in terms of being near family. I would advocate ask family for all the childcare help you can get…perhaps the mother who needs financial help can help in that regard. I just know it’s hard to delay kids so throwing that idea out there.
Reading this gave me palpitations. I feel like I need to go meditate or something. I would be curious to know if they had other options for medical school that would have been better from a financial standpoint. I’m lucky that I had options and chose a low cost school that resulted in very low relative debt load compared to my peers. I’ve known others that only got accepted into very expensive schools in HCOL areas. Some of the medical school tuitions these days are nothing short of shocking. Educational debt is starting to have the same feel the housing bubble did. What cannot be paid back will be defaulted on eventually.
I wouldn’t count on getting more information from the couple. I wrote this a long time ago and changed enough details that they may or may not even recognize themselves in the post but not so much that the post didn’t address the important issues.
I know (2) two-physician couples with total student loan debt into 7-figures. There is an approximately zero percent chance either are reading WCI, so I don’t think they will get to set your new record.
In fairness, both couples will have combined annual earnings >$1mil when training is completed, so they’ll be ok.
1. Get out of California, stay out of HCOL areas, my BIGGEST financial regret is moving to New Jersey for residency (for ex-husband’s residency program choice) and staying thereafter (bc of an additional long-term training program for him). Aside from being in a HCOL area, consider doctor saturation–NJ is teeming with PCPs, there is a lot of downward pressure on salaries b/c of this (and plenty of NPs and PAs who are happy to work for half of what you get paid!). I am 46 years old, have been out of residency for 16 years and I just hit 200K salary a few years ago. The assumption that PCPs “start at 200” is just wrong. I know plenty who languish in the 100s for years. I also know of a surgeon/dermatologist couple who took a hospital package just out of residency for 750K yearly–the downside…it’s in North Dakota! But think of how fast you could pay off that debt with a little geographic arbitrage. And HCOL does not just mean taxes and housing prices, it effects everything, your grocery bill, car and homeowner’s insurance, your electric bill, any services you may use from dry cleaning to home maintenance (bc the dry cleaners and electricians and plumbers live in the same HCOL area and they have to pay their mortgages too!). My brother, a high school teacher, lives in western North Carolina and it astounds me how much cheaper it is to live where he is. As soon as my 12 year old graduates high school, I am fleeing from NJ. Put some time into researching where you can move to that will pay you the best, that is the bottom line and should be the most important part of your post-residency decision. One option if you absolutely must stay in California is Corrections, Board-cert prison docs start at 268K, you will not find a higher salary for a PCP anywhere I am sure. They always need Psych docs too. Don’t be fussy, your first job will likely not be your last and paying down the debt will give you the freedom to find the ideal job later on.
2. You cannot afford to buy a house right now. Period. You have what Mr Money Mustache calls “a huge, flaming debt emergency.” Not so sure you can afford to take in mom, either. Even if you have to, you do not need to buy a large house to do this. My Italian immigrant great-grandparents raised 13 kids in Brooklyn in the early 1900s and I am pretty sure they didn’t have a large house to do it in. In fact, family lore is that dinner was often eggs (from the chickens they kept) cooked in tomato sauce (made from the tomatoes they grew). The kids did not like it but they were not allowed to complain, of course!
3. Delay having kids. Having had our first kid as MS4s, during residency an entire monthly salary went toward day care (there’s the HCOL thing again). After residency, half of a monthly salary went toward daycare. I breathed a big sigh of relief when he started public kindergarten and then the second one came along and we were paying for daycare all over again.
4. Do extra work on the side. I made an extra 20K last year working two hours here and there for a former employer who needed an extra body around. I filled in during staff summer vacations and also picked up extra hours whenever they were busy. Since it was only an extra two hours at the end of my work day, it didn’t feel too burdensome and I kept my weekends free. Find an urgent care that needs to fill some hours, a residency program that needs someone to precept one evening a week, do local locums to cover for docs on vaca or medical leave. I get calls from a couple of locums companies about once a month and while I have never been able to fill any hours for them, I always thank them for keeping me on their list and encourage them to call me whenever they have a local need. An IM doc I know (who is in his 50s) has started picking up hospitalist shifts at the local hospital on weekends in order to cover his two kids who are now both in college. You are highly skilled, monetize yourself!
5. Please give us an update in the future, we are all here to cheer you on! Wishing you much success!
I would advocate for both of your to do PSLF. Better yet, both of you work in the VA (currently there is $120k/loan repayment over 5yrs). Psych and primary care is quite easy to find a job that is PSLF eligible.
Don’t delay having children until debt is paid off. Enjoy being young and this time when having children is healthiest. We had 3 kids (through med/school and residency), childcare is expensive, but what can you do. We have an AuPair which is actually cheaper than other options. But we are a dual-physician couple.
Main point is not to put life on hold (meaning delay buying houses/cars/big vacations, but have kids and enjoy them).
We also used an AuPair years ago in residency. The program has improved, and the AuPair can stay longer than when we used the program. The times I have seen this program work best is when the family can accept the AuPair as a member of the family, and not as just an employee.
An au pair is a tough option when you are trying to live cheaply. A small house or apartment simply doesn’t accommodate an extra person living there. We looked into this when we were in training, but would have had to move to a larger home, defeating the entire point.
Perhaps not the cheapest option, but for the flexibility of childcare offered when we didn’t have family help, the AuPair program was our most cost effective option.
I just got an email from a current resident whose debt burden is $662K and growing. Luckily he’s got a great plan to get it taken care of. (His ortho residency and working spouse will help a lot.)
Make that $800K from a dentist who then went to med school!
If you have monster debt, you are not alone.
Make that $970K from another OMFS doc.
WHAT ON EARTH. HOLY CRAP. STOP IT, EVERYONE, JUST STOP THE MADNESS.
Yea a few hours ago my record was $635K for one doc and $950K for two. Now it’s $970K for one.
Just got another email. Apparently someone on the Female MD Facebook group claims to owe $1.2 Million.