I received this question by email a few months back. I sent a very nice reply, some of which is included in the “answer” to this question. However, the more I got to thinking about this, the more I thought it was worthy of addressing as a blog post, because I want what I see to be obvious to any one whose situation is even remotely similar to that of this doc.

I am at a point where I feel I should commit to either starting to pay down my student loans or going the direction of IBR and planning for forgiveness in 23 years (I have been on it for 2 yrs already). For the last two years I have been paying my dues and making peanuts so I have been on IBR. I have recently bought into my practice with my partners and now am starting to see a bump in my income. I am now at a point where I have the money to put towards my loans OR to put towards investing and retirement. I am married with 5 kids and have $510,000 of student loans at an average of 6.8% interest (interest during school is what killed me- 140k accumulated in interest). I am fairly confident that I should make 325-350 this year after paying my practice loan.

I budgeted $4000/month for student loans. IBR sounds too good to be true and having to only pay $2000-2500/month on IBR would leave me $2000 to invest each month. If I pay 4000 a month to my loans I should be able to pay them off in about 19 years and then can direct the money to retirement. If I commit to pay them off I can work with SoFi and other places to get the interest down but if I go the route of IBR then I want to keep the loans with the government.

Do you have any words of wisdom that could help me with my decision? What would you do if you were in my shoes?

The question is a very reasonable one that many docs struggle with. It’s the classic “Go for forgiveness vs refinance and pay off” student loan question. When the forgiveness is via the PSLF program (10 years of payments, tax-free forgiveness, 501(c)3 employers only), and you’ve already made 36-84 (out of 120) qualifying payments during your training, the math will show that it is pretty much a no-brainer to go for forgiveness, which at that point is only 3-7 years away. As a general rule, if you are not going for forgiveness, you should refinance, live like a resident, and pay off the loans ASAP.
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In the event that you have a very large loan burden, especially when combined with a very low income, going for PAYE forgiveness (20 years of payments, fully taxable forgiveness, any employer) may be reasonable. However, there are two issues here that makes this a less attractive option for this doc:

He isn’t enrolled in PAYE. For some bizarre reason he’s enrolled in IBR. IBR not only requires you to make larger payments, but it also requires 25 years of payments instead of just 20. I can’t think of a reason to be enrolled in IBR when PAYE is available.
He wasn’t even enrolled in IBR during his training. (2 years out of training and he has only been making IBR payments for 2 years.) The real bang for your buck in the forgiveness programs is getting the amount you “should have paid” (had you been on a full repayment plan while in training) but didn’t because of the lower payments, forgiven. A doc with 5 kids would have made 3-7 years of $0 payments, all of which counted had he enrolled earlier. That’s water under the bridge now, but it cost this doc tens of thousands (maybe hundreds) of dollars. [Update prior to publication, he wasn’t able to enroll in IBR during training as an orthodontist as he was still considered a student.]

The Main Issue

So at this point the doc can look at his options. He can enroll in PAYE, make 18 more years of payments, and get the rest forgiven (I’d have to use a calculator to see how much would be left to be forgiven, probably not much) or he can refinance and pay them off. But that’s all ignoring what I see as the main issue-

Let’s look at the evidence.

Exhibit A: $510K in student loan debt

Don’t get me wrong, raising kids is expensive, especially 5 of them. But this is the classic situation of lots of kids, a stay at home partner, many years in the medical pipeline, and all of it paid with debt. By the time you get to the end of it, you have an expensive mortgage and no house to go with it. What no one tells medical and dental students is that everything you’re buying using those handy student loans really costs three times as much as you think it does. Choosing the cheapest school you can get into in the lowest cost of living area possible, delaying family a few years, living more frugally, not taking out the loans until you absolutely need them (rather than at the beginning of the year,) having a working spouse, getting a side job can all assist in keeping the total loan burden low.

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Exhibit B: Not enrolled in PAYE

If I owed a half million bucks in student loans, I’d be the world’s foremost expert in student loan programs. I would probably be working at a 501(c)3, but I would certainly know the difference between IBR and PAYE (and would have enrolled in PAYE the first month possible during intern year.)

Exhibit C: Debating between $2000 and $4000 per month payments

The interest alone on that debt is $35,000 per year, or nearly $3000 per month. Yet this doc is debating between making $2000 per month payments (which don’t even cover the interest) and $4000 per month payments (which barely does.) The discussion shouldn’t be $2K or $4K, it should be $12K or $15K. There is simply no sense of urgency here. No concept that his debt is an emergency. As Mr. Money Mustache correctly points out,

Your debt is not something you work on. It is a huge flaming emergency!

Nowadays I receive emails from people who are working on developing their own Money Mustaches. They often detail income, spending, and debt situations. Often, there is a category for credit card debt. Yet these budget sketches also include amounts for entertainment, cable TV, and multiple cars….

Do you see the glaring problems in these stories? If not, you have not yet developed the appropriate hatred for unnecessary debt. So let me spell it out for you.


If you borrow even one dollar for anything other than your primary house or a profitable investment, the very next dollar you can get your hands on should go to paying that back. You don’t space it out all nice and casual with “monthly payments”, and you don’t have a “budget”, “entertainment allowance”, or any other such nonsense. You don’t start a family or get yourself a dog, and you don’t go out for drinks and dinner with your friends. There will be plenty of time for these things later….

I mean, consider this situation. The doc makes $350K. How much can a family of 7 reasonably live on? Well, there are millions of these families in America living just fine on $50K a year. But you’re a doc, and you’ve deferred gratification for a long time. So let’s be super generous, and give you an extra 50% raise after residency! Now you’re up to $75K a year. Subtract out 25% for taxes (no Tax Nazi comments please, I know some of you pay more than 25% in taxes because you are a single employee in California at some job with a lousy retirement plan) and $75K for living expenses, and that leaves this family $187,500 with which to build wealth. The only question he should be struggling with is how much of that $187,500 should be going toward paying off the debt and how much should be going into retirement accounts. I think $37,500 into retirement accounts and $150K toward debt is about right, but reasonable people could have a different opinion. The question he should NOT be struggling with is whether to pay $24K or $48K a year toward the debt.
My 10 yo daughter Whitney rappelling off a climb at Red Rock- She says $500K in debt is “Crazy! Did he go to Harvard or something?”

My daughter Whitney rappelling off a climb at Red Rock- She says $500K in debt is “Crazy! Did he go to Harvard or something?” No, just dental school.

What I Would Do

My advice to this doc was to do the following:

Set a date to be out of debt, a maximum of 5 years from today. Eventually that day will come, but if you never set the goal, you’ll never reach it.
Boost income in any way possible. Now, I work 15 shifts a month and have a profitable website on the side. But if I owed a half million in student loans? I’d be working 20 shifts a month and you would be getting emails from me every week trying to sell you something so I could boost my income. My wife wouldn’t be spending all her time volunteering- she’d have a paid job. I wouldn’t need a new mountain bike because I wouldn’t have time to ride the old one. An extra $50K in net income goes straight toward the principle and gets you out of debt that much sooner.
Cut expenses like crazy. It’s not like this doc has a small shovel with which to fill in this hole. That’s a heck of a good income. We lived on much less than $350K last year and that figure included a lot of unnecessary spending. If I had a half million dollar debt emergency there wouldn’t be any vacations (other than driving to stay with family.) There would be no new mountain bike, table, boat etc. Gazelle intensity is a Dave Ramseyism that illustrates the power of focus. Until getting rid of that debt is the most important thing (at least financially) in your life, it isn’t going to go away. It might involve selling stuff you really like. It might involve moving into a smaller house. It might involve selling that Suburban and buying one ten years older with cash. It might turn date night into a trip to the dollar movie rather than the symphony with your partners. But look at the alternative (23 years of $500K hanging over your heard) How is that better?
Start saving for retirement. I think it’s insane to put off saving for retirement for 23 years. Heck, I want to BE retired (or certainly eligible to do so-i.e.financially independent) in less than 23 years.
Refinance the loans, and I’d do it into a variable rate. 18-23 years is obviously a long time to run interest rate risk, but 5 years isn’t. The difference between 3% loans and 7% loans on $500K is $20K a year that can go toward principle.

I’m not writing any of this to be critical of this doc, his family, his past choices, or his financial knowledge. His debt isn’t even my record for student loan debt for a single doc family. Only he and I know who he actually is. I just want to help. But most importantly, I want to help the tens of thousands of docs out there who are heading down this same pathway to avoid getting to this same place.

What do you think? What would you do if you had $510K in student loan debt? Would you stretch it out for 18-23 years to try to get some taxable forgiveness? Or would you follow my advice?

This post is inspired by An Invitation to Contribute blog post from February, which, in summary, criticized WCI for not being very diverse or understanding of anyone who was different than his situation. I couldn’t disagree more: I’m not a white male ER doc living in Utah, yet his blog has inspired and encouraged me, as well as many others, to be much better owners of our financial present and future. What that book review, as well as Dr. Mom’s guest post, Not All Who Wander Are Lost, (part 2) illustrate is the fact that everyone will get what they need out of the blog and make it applicable to their specific situation. So, inspired by the constant readings of the WCI blog and the two guest posts above, I wanted to write a guest post related to becoming financially savvy and successful from a woman’s point of view (and not just physicians – but all along the STEM [Science, Technology, Engineering, Math] professions).

Although, I would like to remain anonymous, here are some general stats – I’m a woman, wife, mother, and a CPA (but not in financial planning or taxes – I work in audit). Also, this is not a post on feminism, gender pay inequality, or any other such politically charged topics. This is simply my thoughts on the facts that are our financial surroundings (or what I have observed specifically). I realize, everyone’s story is different, but hopefully this will resonate with a lot of successful women out there.

What Financial Advisors Think Of Women
Mrs. WCI on the summit of Mt. Hood shortly after dawn

Mrs. WCI on the summit of Mt. Hood shortly after dawn

As a CPA, I get a number of professional newsletters, one of which is specifically written by and for financial planners. In addition to ACA and tax extensions, one of the continuous themes I’m seeing is catering to female clients. The topics range from catering to widows and divorcees to women living longer. In November 2014, the newsletter linked me to the BMO Private Bank in Chicago national study based on 1,200 people, roughly half of which are women. Although the study did identify 85% of women manage or participate in family finances, it also found that 60-70% of women don’t have wills, living wills or powers of attorney. But the most alarming finding is 28% of women think they would be broke or homeless if they lost/divorced their husband. Sallie Krawcheck, Chairwoman of the Ellevate network for professional women, spoke at the Investment Managers Consultants Association in January 2015 about women representing an un-tapped gold mine for the financial advisors industry. Sallie based her talk on these stats:

“What if I told you there’s a potential client base that holds a majority of wealth in this country, represents 45% of U.S. millionaires, will inherit 70% of the $41 trillion that enters generational wealth transfer over the next 40 years? Ninety percent of them control their money on their own at some point in their lives; they represent today 60% of college students and a greater percent of graduate students and still growing. They start more businesses at twice the rate of the rest of the population. They’re first-time homebuyers at a greater rate than the rest of the population. They’re breadwinners or co-breadwinners in 60% of households, and they live longer than the rest of the population by 6 to 8 years and they’re healthier while doing so…”

So far, so good – I’m tracking and very proud of my gender. But then her message goes south, well, at least in my book. Her recommendation is for the financial advisors to attack this market of rich, successful women, but with a different approach. Krawcheck’s observations (or what I would call stereotypical observations) of women include women not understanding jargon terms like “Monte Carlo simulation”, not caring about differences in large cap vs. small cap, or what the market is doing. She summarizes that women look to advisors to provide a safe place. I think what bothers me the most is that fact that all this is coming from a woman that represents women – she is basically saying that women, unlike men, don’t understand or care about investing and the advisors need to talk to them without using actual terms and literally treat them like children (while enjoying commissions from their portfolio). I truly hope that I’m taking all this out of context and there is well-meaning behind her recommendations. But the fact is – fellow successful women – there is a push out there in the financial services industry to “service” us. And you know what that entails (read several WCI posts on financial advisors.)
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I truly hope the gender stereotyping (of women not being as much into investing as men) is not true. But deep down, I can’t help but notice (disclaimer – these are non-statistical personal observations):

Among my group of friends, the husbands take care of investing, the wives pay the bills.
Of countless financial blogs out there, the majority authored by men deal with investing, while the majority of the ones authored by women deal with coupon clipping, fashion, shopping, child rearing, and organic living.

Gender Pay Gap

According to 2014 data issued by the Bureau of Labor Statistics, women earn 82.1% of what men earn with the gap widening as women enter later stages of their career (25 to 54 years). Fortune examined the gap by occupation and identified the top 20 occupations with the largest gaps, 10 of which ended up being white collar occupations. Here are a few highlights:
Occupation Pay Gap Women’s median weekly earnings Men’s median weekly earnings
Personal Financial Advisors 61.3% $1,004 $1,637
Physicians and surgeons 62.2% $1,246 $2,002
Securities, commodities, and financial service sales agents 65.1% $883 $1,356
Sales and related workers 70% $664 $949
Marketing and sales managers 70.8% $1,150 $1,624
Human resource managers 71.2% $1,300 $1,827

The debate of “why” will rage on forever, with the most common explanation related to women making deliberate choices to enhance work-life-balance at the expense of higher compensation. [Although even when controlling for obvious variables like these, the pay gap, although a much smaller one, persists in many professions. Unfortunately, most studies of this phenomenon, such as this one of docs, don’t put those controls into place.-ed]

Gender Savings Gap

Now let’s examine savings behavior differences between men and women. Vanguard issued their “How America Saves 2014” report in September 2014 focusing on “The gendernomics of retirement saving”. According to their report, women have a higher participation than men in their employer retirement savings plan at all income levels. Not only do they participate more frequently, they contribute a larger percentage of their pay than men. Yet, probably due to the same factors as the gender pay differences, the average account balance of a woman is 64% that of a man.

Career Pay Progression

One of the writers for the accounting/auditing site GoingConcern.com put together this nifty analysis of average compensation over the course of 15 years at a big 4 public accounting firm. Make adjustments for geographical differences, and you get a general idea.

In this graph, the bottom line is the number of years since career onset, and the line just above it is age. So as the career progresses and promotions occur, pay goes up significantly for those first couple of decades.

For physicians the graph, (on average) would be close to zero until the late twenties and would stagnate at around 40-50K for a few years of residency and then would shoot up to 300K plus in early thirties, and for the most part would increase marginally from there.

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This is where I’m going to tread very carefully, as a CPA talking to a bunch of physicians about the biology of women. Women have babies. That is a fact of life and there is no changing that. As everyone knows, the older the woman gets, the more difficult it may become. So essentially, take that salary graph and overlay it with your optimal child bearing years. It takes a good 10 years to invest in your career with marginal increases in salaries (or none at all if you are in medical school). The big career payoff (as a general rule) doesn’t come until after 10-15 years. Coincidentally, that’s about the time the clock starts ticking. So that’s when a large portion of amazing female brains leave the workforce, or cut it down to part time. Which means they have to do most of the savings when their compensation is the lowest.

What’s my point?

I’m not promoting working mothers, stay at home mothers, women equality, etc. in this post. (Not saying these topics are not important by any means, but they are topics for another discussion, not this one). What I’m laying out are the facts that we, successful women, have to deal with because they are very real and they exist and we have to figure out a way to continue being successful financially, professionally, and personally. Again, without placing blame or choosing sides, the fact is that women have to deal with these factors that most men don’t have to (although men probably also have gender-specific factors to deal with [like an overwhelming urge to buy expensive toys-ed.]) These factors include:

Having children (and breastfeeding, as more and more women choose to do)
Making a decision to sacrifice or scale down career (or making a sacrifice of spending less time with family and children in order to promote career)
Societal pressures (cooking, laundry, school activities, etc. are traditionally women’s jobs – there are exceptions of course, but I’m talking generally here)

And the thing is – most women – don’t mind. I love scheduling my kids’ extracurricular activities, taking them to the doctor, music, etc. I prefer to shop for their clothes and cook and feed them. I am also one of the few female leaders at my organization with a very successful career.

Michael Relvas

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So then it comes down to time – how do women have time to do it all? Some make the choice to let the husband do the investing, but that by far is not the right answer. Your husband is your partner – and both partners should carry not 50%, but 100% and work with each other. I’m still trying to figure it all out, while prioritizing and not getting it all done. But at least, with the help of WCI, from savings and investing perspective – we have pretty much automated everything, or come up with life and financial hacks, to make it work.

I, for one, greatly appreciated WCI’s advice ever since discovering his blog. What impressed me the most was his editorial comment in Dr. Mom’s post regarding child care arrangements. Not only did he pay attention to something that most men wouldn’t even notice, he called it out. I would love to hear more from successful women out there on how they make it work.

Are you a highly paid female? What trials or gender-specific factors have you struggled with? What have you done to find that ever-elusive life-work balance? Comment below!