Helping offspring with huge student loans during medical residency?

[Ralph]

Up until now, for better or worse, I have sort of subscribed to the advice I have heard to save for retirement first, because the offspring can get student loans but you can't get a retirement loan. But during the loooong 4-5 year low pay residency period, I was sort of resigned to having to make the payments out of necessity, but on a huge amount of debt at 5-7%, that is going to be quite tough if not impossible. So the items under consideration are remortgage our paid off house and/or withdraw part of my retirement savings. They say it is bad to replaced unsecured with secured debt, but if the rate is about half and possibly deductible it sure seems tempting. I should be able to use retirement savings to pay off the mortgage if moderate disaster hit.

Any ideas? I am now in the phase of trying to identify alternatives. Thanks. This stinks!

[disneysteve]

You want to remortgage YOUR house to pay for your KID'S med school loans? I don't think so. Those loans are HIS/HER responsibility, not yours.

Can't the loans be deferred until after training? It's been a while but my loans didn't all kick in until I went into practice. Has that changed?

[Ralph]

You want to remortgage YOUR house to pay for your KID'S med school loans? I don't think so. Those loans are HIS/HER responsibility, not yours.

Can't the loans be deferred until after training? It's been a while but my loans didn't all kick in until I went into practice. Has that changed?

No, I certainly don't WANT to remortgage the house. Yes, that is the theory I have been using, that it is the offspring's responsibility, but to see how the interest is mounting is killing me. Plus of course my wife has always thought it was our responsibility.

I am pretty sure the loans have to start the repayment phase six months after graduation, and I have always wondered how anyone who has had to take loans to finance medical school can make it through the low paying residency years. I know some parents who have financed their kids undergraduate educations partly via a home mortgage. But of course, medical school is a whole 'nother level of financial pain.

It does seem like dangerous ground to intermingle our finances to such a degree. There would have to be some kind of quid pro pro (?) where it is more of a loan, that when the offspring becomes a rich doctor I get paid back. But of course that is fraught with peril.

There is income based repayment, but from what I have been reading over in the debt forum, not too many people think that is a good idea. Of course first we fruitlessly looked for opportunities for jobs that offer forgiveness, but those are few and far between in psychiatry. And I don't know how that works for the residency years.

[snafu]

Medical residency costs are not a surprise to the intern. I presume the existing student loans can go to deferment although interest keeps being added. How does resident student use income? Can changes there be helpful? Can you identify any leakage? What short term sacrifice for long term benefits?

As parent it's wonderful to help with finances but not to the point of risking your ability to cover expenses for 35 + years of retirement. Since you have been a participant here for awhile, you know you'd get a negative response to cashing out any part of retirement savings.


If you are willing to outline your budget [income & expense details] we may discover line items that could be reduced to free up sums to help with this issue. What changes in lifestyle/spending habits can be made to free up money to help? What is no longer used or needed that could be sold to free up even small sums? Perhaps this is an appropriate time to sell the paid off house and downsize to more modest housing anticipating future retirement to free up a major sum.

[Fishindude77]

Steve has it right.

Kids need to realize if they choose these high powered educations, they come at a considerable cost, and they shouldn't be burdening their parents with expenses that could jeopardize their financial security.

I can think of quite a few other options:

1. Quit school, realize you signed up for something you couldn't afford and get a job doing something else.
2. Quit school for a year or two, get a job and save money to pay for it.
3. Get student loans.
4. Work one or more jobs during school to pay the expenses.
5. Scholarships or grants.
6. Internship possibilities where employers pay the schooling.

[disneysteve]

If you want to and are able to help, I would just pay the interest payments on any loans that can't be deferred during residency. For everything else, definitely go on IBR. But still, if you have to mortgage your home to do that, then no.

Have him go talk to the financial aid office of his school. I'm quite sure he is not the only one dealing with these issues. They can advise him of the best way to handle it.

[rennigade]

There would have to be some kind of quid pro pro (?) where it is more of a loan, that when the offspring becomes a rich doctor I get paid back. But of course that is fraught with peril.

Sounds like you're one of those helicopter parents. Thats a whole separate issue. Your offspring can put on their big boy pants, act like an adult and live way below their means so they can make the payments...feel free to help pay if you choose but to take a mortgage against your house...nope.

Also...I know several doctors...not a single one I would consider rich, so dont count on your kid to have endless amounts of money...probably wont happen. I do know 1 surgeon who makes a lot of money...unfortunately hes divorced and up to his eyeballs in debt. I cant even consider him rich.

[Weird Tolkienish Figure]

I agree with the consensus here. I'm against parents paying for stuff over the age of 18. Yes, student loans can build character.

[disneysteve]

In the interest of full disclosure, my parents did help make interest payments on my loans when I was a resident, but they didn't have to borrow against their home to do so. They had the means to help me without negatively impacting their own financial well-being.

[Ralph]

I also know from being here a while that paying interest like that is not something that makes a lot of financial sense. And yes, I did expect a backlash. I myself am not too crazy about the idea! I'll keep exploring option, even though all of them suck!

And I think it is a little late to back out now that offspring is basically done with medical school and is looking forward to a career in medicine.

[Singuy]

Whoa you guys are doing this all wrong!

Apply for income based payment+10 year forgiveness asap! Chances are, your kids are in a residency program from a non-for profit hospital. If they start the income based payment, their monthly(or your monthly) payment will only be about 400 dollars. Every payment will count toward the 10 years forgiveness..so when the child is out of residency, he/she will have 40% of the payments paid off at a stupid low rate.

I know most kids end up deferring their loans but that's just wasting the ability to pay into the 10 year forgiveness at a very low monthly payment.

[docstudent]

The PSLFP is the way to go, and the IBP is a requirement of the program. The IBP will definitely lower the overall monthly payment.

[disneysteve]

I also know from being here a while that paying interest like that is not something that makes a lot of financial sense.

I think paying the interest makes a ton of sense and it will reduce the overall amount that needs to be paid back tremendously. The issue is whether or not you can afford to do that for your child.

[Ralph]

Whoa you guys are doing this all wrong!

Apply for income based payment+10 year forgiveness asap! Chances are, your kids are in a residency program from a non-for profit hospital. If they start the income based payment, their monthly(or your monthly) payment will only be about 400 dollars. Every payment will count toward the 10 years forgiveness..so when the child is out of residency, he/she will have 40% of the payments paid off at a stupid low rate.

I know most kids end up deferring their loans but that's just wasting the ability to pay into the 10 year forgiveness at a very low monthly payment.

Singuy, I am just a poor frozen caveman lawyer and your ways are strange to me. I'll have to study up on all that, because I have no idea what you are talking about!

OK, after a touch of research, it appears that about half the hospitals being considered for residency are non-profit, but sadly not the top choice. So that could get half way to the 10 years - what if she then gets a job at a for-profit?

[Ralph]

I think paying the interest makes a ton of sense and it will reduce the overall amount that needs to be paid back tremendously. The issue is whether or not you can afford to do that for your child.

What I was referring to was that paying the high interest RATE makes less sense than refinancing to a roughly half mortgage rate, but of course there is the increased risk to me.