$300K+ Of Debt - How Do Will I Survive As A Resident?

[that_meds]

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[MSWschnoodle]

Since you are still a year and a half away from completing your MD, it may be worth meeting with a financial counsellor to go over your expenses and really come up with a solid plan for the coming years. Some schools will have financial counsellors available through the student wellness office. At the very least your student wellness office should have some potential resources in terms of financial counsellors that understand the ins and outs of financing medical education.

 

Going over budgets and financial information with others isn't a fun way to spend your afternoon, but even just having an objective third party to talk to regarding budgeting might be helpful, as they can sometimes see ways to create room in your budget that you may not see while you are trying to balance the various aspects of your life. They could also help you develop a realistic budget for residency that factors in things like your licensing exams. They can also take the time to develop a much more in-depth and comprehensive understanding of your financial situation whereas those of us on a message board likely can't give you much advice beyond "reduce your living expenses" which probably isn't very helpful.

[rmorelan]

Ok,  I would be lying if I was to say it will be easy but it is possible. 

 

Cash flow is a the primary problem in residency with all of the loans etc. it doesn't matter what you will make if you cannot pay your rent RIGHT NOW. That stress is  an added factor to be avoid if possible. The broader concern is what will happen if interest rates rise, which pretty much frames the problem. It is a solvable problem. 

 

You will need a good plan for all the expenses that will appear. Starting with what they actually are and when. They can sneak up on you. 

 

First off don't forget that you will be earning a lot more than PGY 1 salary as you go along. I am a 4th year and my biweekly pay is 2000 dollars + call for instance. That makes a big difference. My boost in salary for instance would cover all the interest payments you are mentioning. 

 

Second you will be getting, and have to be very careful with, your tax refunds - you will be getting back roughly 9K on your SECOND tax return in your residency and about 5K on the first. You will also get some more back in your 3rd year (although under the new rules it will be less than in the past). If you are careful that alone will pay for all the extra expense that come up with residency. 

 

Even though it will cost in interest you probably shouldn't use your LOC to pay for your OSAP. You need the extra 25K as breathing room (hopefully that will even increase to 300K at some point in the next 5 years - some already have jumped in a few places temporarily).  

 

I know people that are in a very similar debit range. They have found a way - just not the most glamorous lifestyle.

 

Getting counselling is a good idea. You need a plan.  Doing what ever you can to reduce expenses starting now ha of course will be thrown out but as MSWschnoodle points out you already know that. 

 

May I ask what 5 year program? Only because that adds another factor - many of those require fellowships, and it takes a bit of traction before you are earning income as well. Just something that also has to be planned for. 

[ralk]

Before even thinking about residency, consider what you can do to keep that debt down now. You've still got a year and a half before graduation - if you can find ways to reduce your costs of living, there's time to see the effects of that in your final balance when you graduate. Without knowing what life circumstances caused you to be on track for that much debt, if there's any possibility of reducing the impact of those life circumstances on your debt levels, now's the time to explore those options. Developing that reasonably austere lifestyle now will also help once you get into residency, helping you to life comfortably enough on what money you'll have after paying interest on your loans.

 

The bottom line is that you do have more debt than the typical Canadian medical student, which will restrict some of your financial flexibility moving forward. However, banks don't tend to give more credit than they expect you'll be able to pay off - you will be debt-free eventually, even if there are some challenges and sacrifices along the way. I fully agree with the suggestion to get some professional help in this regard - this situation undoubtedly has some factors unique to your situation and are best put to an expert in a private setting, not to (relative) non-experts on a public forum.

[that_meds]

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[fastrunningfish]

I'm sure you already have looked into this, but many schools have a wide array of bursaries that you can apply to especially if you are in financial need. Even if you think your chances of getting these bursaries is low, it's still worth a shot because free money.  I would agree with the above comments about meeting with an adviser at school. They will definitely have a financial counselor at your university, it may not be within med but they should have one on campus somewhere. Also, for some government loans you can apply to put off repayment and interest for 6 months or 1 year. You should look into that as well. I believe you would have to apply for that as well. Good luck!

[rmorelan]

Thanks guys - do you guys know 

 

 

Yeah I don't expect easy - I recognize that it will be an austere life for the next few years, although this isn't much different than what I am used to.

 

I've budgeted so far on the proposed PGY1 salary - so all those increases will be really advantageous. I think the first year will be the toughest in terms of handling the debt vs income ratio, but the following years should get easier and easier. I recognize there are no luxuries for the next few years - it's a fact I've accepted. My main concern is making rent and basic costs of residency (licensing, conferences, etc). As you say, I need to cover my costs of living no matter what! 

 

I currently am living on a strict budget to reduce future costs. I know that my 4th year is going to cost me quite a bit with travel and living expenses and this is what is most worrying me. I'm trying to decide what to do with my current apartment for 4th year, as I'll be travelling but I'll also need a home base. I could use my parents home, although it is quite out of the way and I would really like to stay in my current city and current apartment for residency, as my rent is really low and its a great location. It's a huge trade off in long term versus short term gain: lose my great and very very well priced apartment (for reference I live in a city with high cost of living and I pay about 1/2 the rent I should be for my place based on location and size and amenities - my landlord is wonderful) or pay rent despite not living here for months on end? 

 

My 5 year program does unfortunately require at least 1 fellowship. Its a moderately employable specialty if I'm willing to locum extensively and go rural - which I definitely am to pay back debt! I'm realistic about this - while I'd love to think I have the world at my doorstep, I recognize I'm starting at a huge debt load and this will be quite detrimental.

 

Who would I contact for professional help? I know MD management has quite a bit of resources and this was my first step. Anyone have good experiences?

 

Is being upgraded to $300k an option for the LOC? I would most likely want to at least have the room on the LOC - just in case of emergency! I know the $275k is generally seen as the max, but I imagine once I'm in residency and have the ability to pay at least some down, maybe banks will negotiate to more?

 

Lastly, what is the realistic amount of principle to expect to pay down? I'm thinking the first year will be about OSAP and keeping up with interest on the LOC. I know there are several assistance programs with OSAP and I will be applying for them to try and give me some time to conquer at least the LOC before having to cough up OSAP. If I can at least get through PGY1 without having to pay forward my OSAP, that will be a big break to allow me to put through some cash on my LOC. I'm hoping to pay back at least $50k of the principle on my LOC over the 5 years of residency - is this at all realistic? I know unexpected expenses always come up so its really hard to plan exactly what you can and can't do - but am I being totally unrealistic with that expectation?

 

Lastly - anyone that has first hand experience with this much debt - hearing from you that you're ok despite all this money you owe would be great!

 

well I artificially put myself in a similar position since I bought an investment property with the LOC in part (a property with no net income currently ). I am about 3.5 years in and have saved around 40K - although to be fair I live a pretty frugal life for now, ha. I do expect to save more than 50K by the end of things if I continue like this.

 

Now I didn't save much at all in year 1 - and the tax refund in year 1 although in a large part went to the LMCC part 2 exam. After second year started things picked up with the larger tax refunds (saving both 3rd and 2nd year tax returns was about 16K just there alone). Saving the extra pay cheque you get twice a year (it is bi-weekly so you get 26 cheques in 12 months) was another 3.5K a year. Plus I saved all of my call stipends because I am so boring to pay for both my final licence exam and interviews for fellowships (150 call shifts so far with about 70 dollars after tax for each so another roughly 10K there) so there is that covered as well. Basically all the extra money you get I immediately hid from myself.

 

This is all a bit extreme and completely not needed - it is more of a personality thing than making good sense. It probably actually is a stilly thing to do.  I would never promote that approach as the proper one really - personal finance is personal and you have to tailor it to your goals/outlook/comfort level. I don't like non-business related debit. Most people, and I think this is fair, think you are doing quite well if you just don't go into debit any further in residency. That way you smooth out the transition a bit from resident to staff pay.

 

it also depends on your city. I mean I am in Ottawa where there are some more reasonably priced housing options. Toronto probably would not be so kind, ha.

[ploughboy]

Saving the extra pay cheque you get twice a year (it is bi-weekly so you get 26 cheques in 12 months) was another 3.5K a year.

 

Some schools pay on the 15th and 30th.

[rmorelan]

Some schools pay on the 15th and 30th.

 

true - the OP is just using PARO's bi-weekly amounts in his calculations so I followed suit. If you do happen to have that I find it can be used as a form of a savings plan.

[ploughboy]

I'm trying to decide what to do with my current apartment for 4th year, as I'll be travelling but I'll also need a home base. I could use my parents home, although it is quite out of the way and I would really like to stay in my current city and current apartment for residency, as my rent is really low and its a great location. It's a huge trade off in long term versus short term gain: lose my great and very very well priced apartment (for reference I live in a city with high cost of living and I pay about 1/2 the rent I should be for my place based on location and size and amenities - my landlord is wonderful) or pay rent despite not living here for months on end?

 

If there's even an outside chance that you'll wind up matching in the city you're currently living in, you'll want to hang on to that apartment.

[rmorelan]

out of curiousity - how does your school handle the 4th year bursary?

[carolynH]

When you're going away on some elective rotations for a month, consider renting out your apartment as a furnished unit (at market price), with your landlord's permission, to some other medical students doing elective rotations in your city.  Also, you can try to get a room-mate to pay for your rent. You do lose the privacy but that will help relieve you from dipping further into your loc.

[MEDSHOUSING]

You can put your place on MedsHousing.com when you are away. It is a great way (If your landlord allows) to recoup some rent while staying elsewhere. 

[leviathan]

A couple things that haven't been mentioned.

 

Be careful about consolidating loans. Speak to your accountant and MD management adviser as you can write off all your interest payments from your student loans, but NOT from your bank line of credit. Plus you may be eligible for a lot of loan forgiveness and deferment of interest payments. 

 

Don't discount your call stipend. It does add an additional 5000-10000 per year depending on which province you're in. Lastly many provinces allow you to moonlight which can add up to a lot of additional income. 

[The Journey Man]

It will be tough in a sense. Debt for me was in a similar range. You're lucky that interest rates are fairly low so your interest payments will likely not destroy you.

 

Its important that you keep your lifestyle expenses down and have enough discretionary income to pay for things that come up (yearly registration fees, licensing fees etc..). Live with roommates, live close to work so you can bike/walk. Bring your lunch. Basic things and you'll be OK.

 

Another thing that can be helpful depending on what specialty you're in and what school and what your program director allows, you can register in PGY-3 and beyond to pick up shifts in the ICU to be a resident. This can easily add a good amount of income if you're able to do an average 1-2/shifts a month.