Debt In Residency

[rmorelan]

missed this somehow - and yeah I here it occasionally.

 

It isn't just maxing it out - it is the stress of possibly maxing it out, not realizing all the somewhat hidden expenses, watching your bank balance drop continuously for year after year even as your salary rises - no one likes seeing that.

 

people forget about things like the exams (which will cost me about 8K in total), the fees to interview for fellowships (someone in our group spent 8K on interviews last year in travel costs alone), the costs of moving to very likely an expensive city for fellowships which may in some cases don't pay all that well. Surprises do of course happen as well - cars break down, family issues arise....

 

 

Rmorelan - When you say you've seen people get into trouble, what are you referring to exactly? Just maxing out the LOC and not having anything left over for those surprise expenses in residency? In general, have you heard any stories of people running into trouble with their debt?

[Thunderbirds]

Is paying off $50k during a 5 year residency reasonable expectation? That's $10k per year. Let's say net income is $45k in PGY-1 after taxes and tuition. I suppose it leaves $35k for living expenses and any vacation. I am assuming it would get easier each year except PGY-5 where you're paying for those big exams. 

 

Also, just to make sure, can you pay off federal or provincial loans in a lump sum amount, or is there a max amount you can pay per year? 

[ellorie]

I imagine it depends where you do residency and what the cost of living is.  And what you have stacked up in tuition tax credits.  If you're paying taxes, take home is probably closer to 40k as a PGY1.

 

I've paid off about $5k this year towards my principal (not counting monthly interest payments) as a PGY1 living in downtown Toronto and I think that's pretty decent.  I won't pay much tax this year because of my tuition tax credits, so my take home salary was about 50k.  I'm hoping to pay off a bit more next year when I get that salary bump in July.

 

Even if you do have tax credits, they'll run out around PGY3, so you have to be careful of that sudden salary drop.  There are also various other expenses that come up, such as the LMCC2, licensing fees, etc.  You have to factor in interest payments.  On the bright side, call stipends will pump up your salary a bit.  The way I did it was I made my budget, then I looked at what was left and fiddled the numbers around until it looked good to me.  I pay 400 dollars towards my line of credit every month, and all my call stipends go into a savings account for unexpected expenses.

 

But yes, you can pay off a lump sum amount.  I paid off the entire federal portion of my loan with my line of credit in one go when I graduated.

[rmorelan]

Is paying off $50k during a 5 year residency reasonable expectation? That's $10k per year. Let's say net income is $45k in PGY-1 after taxes and tuition. I suppose it leaves $35k for living expenses and any vacation. I am assuming it would get easier each year except PGY-5 where you're paying for those big exams. 

 

Also, just to make sure, can you pay off federal or provincial loans in a lump sum amount, or is there a max amount you can pay per year? 

 

Does depend on how much of a focus you put on it

 

For instance many of my colleagues barely keep up with the interest. Don't forget in your calculations above to include the interest on the existing LOC which for many people is a drag on things (say 4+K a year).

 

It also doesn't get easier actually as you get later for many - your salary rises but the exam costs, interview costs for fellowships and most importantly you run out of tuition tax credits by year 3. This coming year effectively my income will fall as those are now completely exhausted.

 

The base rate with union dues etc taken off your salary is about 30% as a resident - You aren't in a low tax bracket anymore, ha! Although those credits again do help a lot while they last.

 

Personally I did make it a focus and do save quite a bit more than 10K a year actually. I want my income now to be relatively low and be quite comfortable with that so I don't have to raise it as much later on to feel like I "made it big". Plus it doesn't hurt to be seeing a bank balance bump up as I move along.

 

Others take a quite reasonable approach many would say and just not worry about the loan until all done to enjoy what time they do have as much as possible.

[rmorelan]

I imagine it depends where you do residency and what the cost of living is.  And what you have stacked up in tuition tax credits.  If you're paying taxes, take home is probably closer to 40k as a PGY1.

 

I've paid off about $5k this year towards my principal (not counting monthly interest payments) as a PGY1 living in downtown Toronto and I think that's pretty decent.  I won't pay much tax this year because of my tuition tax credits, so my take home salary was about 50k.  I'm hoping to pay off a bit more next year when I get that salary bump in July.

 

Even if you do have tax credits, they'll run out around PGY3, so you have to be careful of that sudden salary drop.  There are also various other expenses that come up, such as the LMCC2, licensing fees, etc.  You have to factor in interest payments.  On the bright side, call stipends will pump up your salary a bit.  The way I did it was I made my budget, then I looked at what was left and fiddled the numbers around until it looked good to me.  I pay 400 dollars towards my line of credit every month, and all my call stipends go into a savings account for unexpected expenses.

 

But yes, you can pay off a lump sum amount.  I paid off the entire federal portion of my loan with my line of credit in one go when I graduated.

 

ahh a fellow saver ha!

[ellorie]

ahh a fellow saver ha!

 

 

Paying for the LMCC2 felt HORRIBLE, but it felt AMAZING that I didn't have to take it out of my line of credit or knock a crater into my monthly paycheck.  Love having a nest egg

[Doc_911_doc]

I'll finish ~$200K LOC and the fully $33K OSAP. I had zero support from family and live in an expensive city. I'm hoping to pay $10k/year with residency, so I can at least get under the $200k afterwards. 

 

If you do enough junior call, I've heard it's not too bad. The exam fees, etc can really kill - but at the same time by your last couple years of residency when you are hitting $70k it becomes more and more reasonable!