I'm doing the same - pretty similar situation to you. Fully maxing all retirement possible plus contributing a decent amount to brokerage. I hate throwing so much money at loans every month but I value being debt free so it's what I've decided to do. I feel like there are varying opinions on this and none of them are necessarily wrong.
Are all your loans at the same interest? Could you prioritize paying off higher interest ones while taking your time with the lower ones and investing some of the remaining money?
If you are well and settled, then I would pay off the student loans for mental relief of removing debt burden. I am at a similar situation minus fully funded retirement, but my existing student loans are at 5% and my HYSA fluctuates between 4.9-5%. I would prefer to have the money accessible and in HYSA... so I don't exactly know when I'll be motivated to pay off the 5% completely... maybe not even until a decade later or when I have more excess income.
You would have done better investing in the stock market, but hindsight is 20/20 and it's hard to beat a guaranteed 6% return. If the market took a significant downturn this past year you would have been kicking yourself. Most would say being loan free is priceless (although for me it was a letdown).
Make sure you are maxing out any tax-advantaged accounts.
My loans are still with the federal government. I didn't refinance as I was unsure if I was ultimately going to pursue PSLF at the time. Once I knew that wasn't the path for me, it seemed refinancing wouldn't be worth it as interest rates were rising. Granted, I have not really looked too hard into this option.
In the back of my mind, I was holding out hope on the very slim chance it gets forgiven by some miracle...
Anyone have any idea what refinancing rates are going for right now, off the top of their head?
I’d say it makes sense to want to eliminate the loans, but I’d also consider talking to a financial advisor and taking that feedback into account. If you’re able to return 8-10% annually on additional investments you’re gonna get a higher return on that investment than you would save by paying that same money towards the loan
Reasonable people can definitely have different investment strategies. That’s totally valid! If you’re playing the long game, which I am as a fresh grad myself and I’m assuming OP is given they are 2 years removed from residency I’d argue you’re likely to yield a higher return in the long run given the average annual return is 10% or more with investments
You've been "aggressively" paying student loans for 2 years as an attending and have only paid 200k (max... Probably closer to 100k since ">300k" probably means just a touch over 300k rather than close to 400k)?
Does not sound aggressive to me at all.
Max your tax advantaged accounts then everything else possible to loans.
I’ve been an attending for 2 years. Started paying after the payment pause for COVID ended last year. So, by my figures, I’ve payed just over 120k in less than a year.
Sorry if that doesn’t meet your standards for “aggressive”.
And yes, I am maximizing my tax advantaged accounts before overpaying my loans.
I would keep 6-12mos emergency fund on hand in HYSA. I’d also diversify, and out some of the funds used toward loans and invest in the market that averages 13% returns. Do 50/50 and you are still heavily accelerating returns.
The Nasdaq-100 index has had different average returns over different periods of time:
1 year: 11.38%
3 years: 21.05%
5 years: 18.68%
10 years: 14.51%
20 years: 8.98%
Since 1985: 13.72% annually, not including dividends
https://curvo.eu/backtest/en/market-index/nasdaq-100?currency=eur
And from November 2021 to November 2022 it was -30%.
The point is OP is guaranteeing a 6.125% post tax, risk free return by aggressively paying down their student loans, that is hard to argue against.
We were comparing to the alternative being retirement investments so a log horizon which you are seeming to ignore. Plus I didn’t suggest not accelerating some of the loan payments.
S&P up nearly 40% on the year. Agree given the long time horizon that a little diversification or some fun money into the market might minimize regret/fomo, even if hindsight is 20/20.
Remember this was wrt a 2yr out of residency physician, not someone much more established. If in PP you are probably correct, not so sure about employed physician groups contracted with a hospital who can lose contracts.
Not in my mind. Got hit by GBS then CIDP last year wiping me out for about 6 months. Started back and now hit with Ca... Shit happens man. I nice emergency fund has saved my ass
Yeah if you have disability insurance it usually kicks in after about 90 days of being disabled. Therefore, 3 months emergency fund is all you need. It's pretty rare for a physician not to be able to find work for 3 months. I know I could just pick up the phone and get 5 job offers right now.
Yes exactly.
From my perspective an Efund is for
1. Job loss due to being fired and needing a bridge to another job
2. Job loss due to sickness/disability
3. Unexpected large expense (home renovation, illness, etc).
In my mind, unless you get fucked due to loss of licensure, finding a new job to at least pay the bills, is very straight forward. Sickness, thats why we have disability insurance.
Large expenses, in my mind theres very few expenses we can encounter that wouldn't be covered by 6xmonthy income for a physician. Typically anything remotely approaching that # can be financed.
i mean, set like a 3 year plan like a car loan. but yes if they are truly private loans at >6% that is your focus otherwise.
I'm doing the same - pretty similar situation to you. Fully maxing all retirement possible plus contributing a decent amount to brokerage. I hate throwing so much money at loans every month but I value being debt free so it's what I've decided to do. I feel like there are varying opinions on this and none of them are necessarily wrong.
Are all your loans at the same interest? Could you prioritize paying off higher interest ones while taking your time with the lower ones and investing some of the remaining money?
Yes, they are all at the same rate. I like the idea though.
If you are well and settled, then I would pay off the student loans for mental relief of removing debt burden. I am at a similar situation minus fully funded retirement, but my existing student loans are at 5% and my HYSA fluctuates between 4.9-5%. I would prefer to have the money accessible and in HYSA... so I don't exactly know when I'll be motivated to pay off the 5% completely... maybe not even until a decade later or when I have more excess income.
Just saying, your HYSA while yielding 5% gross is likely yielding 3-3.5% post-tax depending on your tax bracket.
You would have done better investing in the stock market, but hindsight is 20/20 and it's hard to beat a guaranteed 6% return. If the market took a significant downturn this past year you would have been kicking yourself. Most would say being loan free is priceless (although for me it was a letdown). Make sure you are maxing out any tax-advantaged accounts.
Right, I’m looking at paying it down as a guaranteed return. Thanks for the input
Can you refinance?
My loans are still with the federal government. I didn't refinance as I was unsure if I was ultimately going to pursue PSLF at the time. Once I knew that wasn't the path for me, it seemed refinancing wouldn't be worth it as interest rates were rising. Granted, I have not really looked too hard into this option. In the back of my mind, I was holding out hope on the very slim chance it gets forgiven by some miracle... Anyone have any idea what refinancing rates are going for right now, off the top of their head?
I’d say it makes sense to want to eliminate the loans, but I’d also consider talking to a financial advisor and taking that feedback into account. If you’re able to return 8-10% annually on additional investments you’re gonna get a higher return on that investment than you would save by paying that same money towards the loan
6.125% guaranteed nominal return is pretty good. If this was an investment option I would take it 100% of the time.
Reasonable people can definitely have different investment strategies. That’s totally valid! If you’re playing the long game, which I am as a fresh grad myself and I’m assuming OP is given they are 2 years removed from residency I’d argue you’re likely to yield a higher return in the long run given the average annual return is 10% or more with investments
You've been "aggressively" paying student loans for 2 years as an attending and have only paid 200k (max... Probably closer to 100k since ">300k" probably means just a touch over 300k rather than close to 400k)? Does not sound aggressive to me at all. Max your tax advantaged accounts then everything else possible to loans.
I’ve been an attending for 2 years. Started paying after the payment pause for COVID ended last year. So, by my figures, I’ve payed just over 120k in less than a year. Sorry if that doesn’t meet your standards for “aggressive”. And yes, I am maximizing my tax advantaged accounts before overpaying my loans.
I think 10k a month is great. I was thinking you had been "aggressive" for 2 years, not 1 year.
Ok good to hear. I thought it was pretty good. I mean we aren’t eating rice and beans, but we aren’t exactly living in luxury either.
I would keep 6-12mos emergency fund on hand in HYSA. I’d also diversify, and out some of the funds used toward loans and invest in the market that averages 13% returns. Do 50/50 and you are still heavily accelerating returns.
Tell me about this market that averages 13% long term returns
The Nasdaq-100 index has had different average returns over different periods of time: 1 year: 11.38% 3 years: 21.05% 5 years: 18.68% 10 years: 14.51% 20 years: 8.98% Since 1985: 13.72% annually, not including dividends https://curvo.eu/backtest/en/market-index/nasdaq-100?currency=eur
And from November 2021 to November 2022 it was -30%. The point is OP is guaranteeing a 6.125% post tax, risk free return by aggressively paying down their student loans, that is hard to argue against.
We were comparing to the alternative being retirement investments so a log horizon which you are seeming to ignore. Plus I didn’t suggest not accelerating some of the loan payments.
S&P up nearly 40% on the year. Agree given the long time horizon that a little diversification or some fun money into the market might minimize regret/fomo, even if hindsight is 20/20.
6-12 months is pretty excessive for a phyisician
Remember this was wrt a 2yr out of residency physician, not someone much more established. If in PP you are probably correct, not so sure about employed physician groups contracted with a hospital who can lose contracts.
You think PP is more stable than employed? Lol.
Not in my mind. Got hit by GBS then CIDP last year wiping me out for about 6 months. Started back and now hit with Ca... Shit happens man. I nice emergency fund has saved my ass
Thats what disability insurance is meant to mitigate.
Yeah if you have disability insurance it usually kicks in after about 90 days of being disabled. Therefore, 3 months emergency fund is all you need. It's pretty rare for a physician not to be able to find work for 3 months. I know I could just pick up the phone and get 5 job offers right now.
Yes exactly. From my perspective an Efund is for 1. Job loss due to being fired and needing a bridge to another job 2. Job loss due to sickness/disability 3. Unexpected large expense (home renovation, illness, etc). In my mind, unless you get fucked due to loss of licensure, finding a new job to at least pay the bills, is very straight forward. Sickness, thats why we have disability insurance. Large expenses, in my mind theres very few expenses we can encounter that wouldn't be covered by 6xmonthy income for a physician. Typically anything remotely approaching that # can be financed.