A neurosurgeon’s final message

Paul Kalinithi, writing to his infant daughter in his last op-ed before succumbing to lung cancer:

That message is simple: When you come to one of the many moments in life when you must give an account of yourself, provide a ledger of what you have been, and done, and meant to the world, do not, I pray, discount that you filled a dying man’s days with a sated joy, a joy unknown to me in all my prior years, a joy that does not hunger for more and more, but rests, satisfied. In this time, right now, that is an enormous thing.

It’s a rare thing for us to write to the ones we love before we go, let alone to share such poignancy in order to touch others as well. We don’t write meaningfully to each other very much anymore, especially when it counts most. We could do better.

You can now refinance your student loans during residency

If you’re a resident with a big load of student loans from the feds at a 6.8% interest rate (or worse), your choice has generally been IBR or forbearance. The mountain of debt compared with your relatively paltry resident salary has put conventional student loan refinancing—which requires a reasonable debt/income ratio—out of reach. If you have an average loan burden (say, $180k) or higher, your IBR payments also only cover around half of the monthly interest accrued (so your loans are still growing). If you forbear, they’re growing even faster.

So basically, your loans have been growing at a crappy interest rate, and you’ve been unable to bail to greener pastures.1 Until now.

DRB, one of the handful of big players in the growing medical student loan refinancing industry, is now the first to put forth a refinancing program for physicians still in residency. The new loan program is so new that it’s still in the soft rollout phase; there is no special webpage for it, no marketing copy, no big advertising push. It’s something they’ve quietly started doing right now, and the only evidence it even exists is an item on their FAQ. This is how it works:

  • You apply for student loan refinancing/consolidation, even as a resident, even as an intern. There is no special application, just the normal one.
  • No maximum loan amount.
  • They will use a multifactorial process to look at your application, including your FICO scores, your debt and total loan amount, and your medical specialty. They use your specialty to determine the median future income for you and use that instead of a strict current debt/income ratio.
  • If you meet the requirements, you get to trade your old loans for a new one. Spouses can even potentially consolidate their loans into one.
  • No origination fees.
  • While in residency, your monthly payment is $100.
  • 6 months after you finish training and begin making real money, you will enter standard repayment (they offer 5, 10, 15, 20, and CYOA-year terms).
  • In some ways, the program is like IBR in the sense that your payments are low in residency and then ramp up once you finish. It’s not like IBR in the sense that it stays $100/month regardless of your fluctuating income as resident and the new private loan loses any chance of achieving federal loan forgiveness.
  • No penalty for prepayment. Prepayment can also directly goes to your balance and not to uncapitalized interest. If you are already doing IBR, this means that you can put that extra $300 or $400 you’re already used to paying every month toward your loans anyway, only now this money will go further. For example: $500 a month for IBR means you spend $6000 a year on your loans. Depending on your loan amount and your new interest rate, this amount may be enough to completely stop the growth of your loans (instead of merely slowing them down).
  • Grace periods are honored (which would apply to interns), as well as a six-month grace period before entering full repayment after residency/fellowship ends, giving you a few cushion months at your new salary.
  • No interest capitalization until 6 months after residency. Interest compounds daily during repayment (so the effective APY is slightly higher than the quoted APR).
  • Loans are discharged in the event of death and permanent disability (like federal loans).
  • Up to 1 year of economic hardship deferment is available (in three month chunks) if things get tough
  • If you don’t qualify for refinancing (e.g. low credit score), it’s possible to reapply with a cosigner (and still be a part of the resident program).

It seems like all student loan refinancing companies have referral programs to drum up business, whereby you get some cash if you send a friend their way.  Most don’t have anything for the referee, but after giving me the details of this new program, they also agreed to give anyone who joins through this page $300 for signing up. So if you apply and get your loan funded, you’ll get the equivalent of the first three months of payments for free.

What I find clever about DRB’s plan is that they not only stand to profit from the extra years of interest accumulation if a new borrower pays the minimum amount during residency, but that they’ve found a way to get at physicians early and compete against SoFi et al. on something other than who has the lowest offered rate on a given day. It wouldn’t surprise me if the other players eventually offer up similar programs in the future.

Interest Capitalization

One thing that happens if you switch from IBR to private consolidation/refinancing is that your accrued interest will capitalize. This means that if you had loans of $180k with $40k of uncapitalized accrued interest, your new loan amount (that will now be gaining interest) is $220k after refinancing. That sounds bad, but think of it this way:

$180k at 6.8% APR/APY accrues $12240 every year in interest.
$220k at 3.5% APR accrues $7835 the first year in interest.

Over time, if you don’t make significant payments, compounding interest eats away at the savings over IBR (but it takes a while). In this example, it takes 14 years (longer than even neurosurgery!) to reach the same annual interest growth as IBR and will basically never break even.

So you are likely to still come out on top, with your loans growing more slowly than they otherwise would be with the federal government. In this example, over a ten year equivalent repayment, you save over $30k in interest. You’ll have to do the math with the rates you are offered versus the amount of unpaid interest you have sitting around to see how it works out. Online calculators (like this one) make it pretty straightforward. If you’ve been forbearing, then your interest already has and continues to capitalize, so that downside doesn’t apply.

Part of what makes refinancing so desirable right now is the fact that interest rates are at historical lows. It’s what makes this a good time to buy a house too. It’s also what makes the federal student loan interest rate particularly galling.  There’s no guarantee the gap will always be so large. In fact, last year’s offered rates weren’t anywhere near so exciting, and at some point, like all cycles, interest rates will eventually go up.

So should I try to refinance?

  • If you have private loans at high rates, this is a no brainer.
  • If you have federal loans and have been forbearing, then this is also a no brainer. $100 a month to slow down the relentless climb of accruing interest will save a lot of money in the long run. (Plus with a sign-up bonus, the first three months would be free).
  • If you have federal loans and are doing IBR to be financially responsible but have no interest/faith in PSLF, then refinancing is also definitely worth considering. As there is no prepayment penalty, you are free to still make your old IBR-sized payments ($100 is the required payment, not the maximum payment). Those payments will go a lot further at a lower interest rate. So if you know you want to do private practice, then there’s really no big reason to stick with IBR.
  • Other than losing PSLF, the main downside to switching from IBR is interest capitalization (as above). Because of interest capitalization, you’ll have to do some math based on what rate you’re offered, how much you owe, and how much you plan on paying monthly to figure out if refinancing is worth it for you.
  • If you’re doing IBR temporarily but think you’ll need to start forbearing (having kids soon, etc), then it only makes sense to refinance if you can handle the $1200 a year (you probably can).
  • If you are nearing the end of residency, keep in mind that depending on your loan amount and your projeced salary, your interest may soon capitalize anyway, IBR or not.

Other options?

For residents with average loan burdens, options are limited. The only other player that is potentially viable is cuStudentLoans from LendKey. The maximum loan amount is $175k, which means that many residents are ineligible (unless they only want to partially refinance). Additionally, on an average resident salary of $55k, the maximum loan amount without a cosigner would be approximately $75k. To hit the maximum $175k, you’d need an income of $85k. While there is no special resident program, they do offer interest-only payments, which if your loans are a small enough may be entirely reasonable. The interest only payment on $100k at 5% is around $400/month, for example. But for an average resident with average debt, LendKey’s current offering probably won’t cut it. SoFi ($100 for signing up) and CommonBond, the other big players, don’t offer anything at all for residents yet (but are solid options for those in practice).

So if you’re an attending, apply to all four and see who gives you the best rate. When you apply to several student loan companies within a short time frame once, it’s considered a single hit (soft pull, not hard) on your credit report, so the more the merrier.

What about PSLF?

See this post. Keep in mind, PSLF can only take place after 10 years of monthy payments. If you have a smaller loan burden or a short residency, the amount of loans you can theoretically have forgiven will be low (assuming the program continues; it’s new enough that no one has actually had their loans forgiven yet). PSLF is the best deal for those with long residencies/fellowships (low monthly payments for longer under IBR) and with a lot of loans (private school = more forgiven).

In fact, the desire to do PSLF is (I believe) the only real reason to continue holding federal loans if you otherwise qualify for private refinancing. At least, the current PSLF is: the new 2015 budget proposal includes a PSLF cap of $57,500, which—if passed—should only affect loans disbursed after July 1, 2015. So current residents would theoretically be grandfathered into PSLF without a cap and potentially get solid loan forgiveness. Current medical students and future borrowers, however, would have the real benefits of this program essentially washed away. Now that giving “rich” doctors and lawyers big wads of cash is a legislative issue with bipartisan support,  PSLF looks like it’s going to be a short lived panacea for physician debt.

If you’ve heard about getting your loans discharged after 20-25 years (IBR or PAYE), forget about it. Unless you quit medicine and never make a good attending salary, you will never have your loans forgiven this way. Once you make good money, the calculated PAYE or IBR payment is capped at the equivalent of the standard 10 year repayment. If you make little enough (e.g. academic primary care) to stretch out your loans for 20 years but couldn’t do PSLF, then you might have some small amount forgiven, but then you would have spent a ton of extra money over the years on interest. The best reason to keep your federal loans around at 6.8% or worse is for PSLF or because you can’t yet qualify for something better.2

  1. If you’re doing IBR in order to qualify for PSLF, then that’s a separate issue. See below. 

  2. The information contained on this website does not constitute legal or tax advice, etc etc. 

When USMLEWorld spying on you is the harbinger of our future despair

From Cory Doctorow’s How Laws Restricting Tech Actually Expose Us to Greater Harm:

Because while we’ve spent the past 70 years perfecting the art of building computers that can run every single program, we have no idea how to build a computer that can run every program except the one that infringes copyright or prints out guns or lets a software-based radio be used to confound air-traffic control signals or cranks up the air-conditioning even when the power company sends a peak-load message to it.

Why? Because for such a system to work, remote parties must have more privileges on it than the owner. And such a security model must hide its operation from the computer’s normal processes. When you ask your computer to do something reasonable, you expect it to say, “Yes, master” (or possibly “Are you sure?”), not “I CAN’T LET YOU DO THAT, DAVE.”

Which, though actually quite different, reminded me of one reason I always disliked USMLEWorld’s zealous efforts to prevent intellectual property theft. From the official Terms and Conditions:

The UWorld software is designed to access your computer system’s clipboard during use of the UWorld software. While a test is in progress, the UWorld software shall disable all clipboard functions of your computer system (including, but not limited to, copy-paste-print and save-to-disk functions). Furthermore, the UWorld software shall monitor all processes on your computer to determine if there exists any applications that could be used (intentionally or unintentionally) to copy contents. Simultaneous use of such applications (hereafter referred to as “dubious applications”) with the UWorld software constitutes a violation of this agreement.

That’s an amazing amount of system privelige we give to a small software package out of Irving, TX. In the future, how much control will we be willing to give up to companies and governements in order to use the products we want?

Oliver Sacks learns he has terminal cancer

Oliver Sacks, in his moving NYTimes op-ed about learning that his ocular melanoma has metastasized to his liver:

I have to live in the richest, deepest, most productive way I can.

This will involve audacity, clarity and plain speaking; trying to straighten my accounts with the world. But there will be time, too, for some fun (and even some silliness, as well).

I feel a sudden clear focus and perspective. There is no time for anything inessential. I must focus on myself, my work and my friends. I shall no longer look at “NewsHour” every night.

Sacks’ version of “live like you were dying” is exactly what you’d hope/expect, showing his depth and ability to turn his careful consideration and clinical acumen internally, just as he did in his New Yorker essay about prosopagnosia (face blindness). Read the whole op-ed (and the essay too).

“Sudden clear focus and perspective” seem harder and harder to come by in the contemporary era, but I’m adding tacking it on late to the resolution list this year. I still remember first reading and being inspired by Sacks’ An Anthropologist on Mars and The Man Who Mistook His Wife for a Hat in high school, probably the two books which most shaped my early interest in neuroscience and medicine. He’ll leave a tremendous legacy.


Preliminary Medicine vs Transitional Year Internships

I’ve noticed a trend when I talk to applicants on the trail: a significant number of faculty advisors are giving some questionable advice, such as recommending that their students applying to advanced specialties (e.g. derm, ophtho, rads) only apply to preliminary medicine programs because transitional year (TY) programs are too competitive. That, combined with a lot of mystery about internship programs and the fact that most TYs are not at recognizable university based hospitals, means that applicants are at a disadvantage when it comes to making an informed decision about where to fulfill their internship requirement. I talk with applicants at dinners and lunches who already regret treating their internships like an afterthought and wish they had put more time into researching their options. I’ll address some myths below: Continue reading