The week of Christmas, the NYTimes published a story about people who anticipated their loans being forgiven this year with PSLF and are now in the midst of a legal battle instead.

The suit, filed in United States District Court for the District of Columbia, says some borrowers received approval on their certification forms, then, years later, the entity servicing their loans reversed course, effectively ousting them from the program.

It did so retroactively, meaning that none of the previous loan payments counted toward the 120 payments needed to qualify for forgiveness. So if the borrowers took a job that qualified, they would have to start again with accumulating the payments.

The silver lining is that—though not 100% clear from the article—it appears these denials were all for jobs that were not 501(c)(3) non-profits. They were for other non-501(c)(3) non-profit jobs, which only count toward PSLF when they provide certain types of qualifying public services and are approved on a case by case basis. I have no doubt there are doctors who are planning on PSLF that will find themselves shocked and disappointed by technicalities, but so far there’s no evidence that the usual employment catchalls (government or 501(c)(3) organizations) for PSLF will be spontaneously denied.

These are eligibility criteria for PSLF-eligible employers:

• Government organizations at any level (federal, state, local, or tribal)
• Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
• Other types of not-for-profit organizations that provide certain types of qualifying public services and must not be a business organized for profit, a labor union, a partisan political organization, or an organization engaged in religious activities.

Qualifying public services include:

• Emergency management
• Military service
• Public safety
• Law enforcement
• Public interest law services
• Early childhood education (including licensed or regulated health care, Head Start, and State-funded pre-kindergarten)
• Public service for individuals with disabilities and the elderly
• Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations, as such terms are defined by the Bureau of Labor Statistics)
• Public education
• Public library services
• School library or other school-based services

So, it is the private nonprofits offering “qualifying” services that are the category at greatest risk for being denied. If your job isn’t a 501(c)(3) but “should” qualify, submit your employment verification forms annually to prevent wasting your time and money planning for forgiveness that may forever remain out of reach.

Should I buy a house as a resident?

Probably not.

The American tendency to prioritize owning your house or car can be a bit misguided. When you buy a house with a mortgage, the title may be in your name, but it’s really the bank that owns it. You’re slowly buying it from the bank, paying interest all the while. It’s not that buying a home is a bad idea; it’s that owning a home is not intrinsically good financially. Owning something instead of renting isn’t always better.

Before we discuss the pro/cons, a disclosure: we bought a house when we graduated medical school, and we bought (and sold) a house during medical school as well.

Downsides

It takes on average 4 years to break even on the transactional costs of buying and selling a home. You can’t just compare the monthly mortgage payment on a potential house and the monthly rent for an apartment or house rental and see which is lower. The mortgage will typically be lower, but this masks several things:

1. Upkeep costs. You’ll need to pay for repairs and maintenance on your house that you wouldn’t be responsible for as a renter
2. You’ll need to pay taxes and home insurance, which may not have been in your original mortgage projection. This is deductible if you itemize deductions, but note that the “extra” savings on these are related to your marginal tax rate on the difference between these amounts and the standard deduction. An inexpensive house or townhome isn’t going to make a big dent in your tax burden.
3. You’ll almost certainly lose money to realtors when it comes time to sell. 6% is common (3% to each agent [who then share that with their broker]). With the rest of the closing costs, earmarking 10% is considered a good estimate.

Bottom line: Even if the monthly mortgage payment + the upkeep etc comes out to a better deal than a rental, you’ll still have to take #3 into account. Whether or not the closing costs will make or break the +/- versus renting will depend on how much you sell the house for when the time comes and how long you held the house for (i.e. how much total money you’ve saved vs renting over time). In most cases, selling the house for exactly what you bought it for will actually result in a loss.

Buying a house and planning to sell it after a three-year residency, for example, is essentially investing on margin unless rental prices in your area are super high. You’re just hoping that real estate prices rise fast enough to counteract the costs of a real estate transaction.

Upsides

Conversely, there are some benefits. Your mortgage interest and real estate taxes are deductible, so if your house will cost enough to make your tax deductions bigger than the standard ($9300 head of household or $12600 for couples in 2016), then you can itemize deductions and get some of that money back (essentially reducing your monthly payment). Note that deductions don’t give you a dollar back for every dollar deducted, they merely reduce the income you’re paying taxes on and so save you a fraction of that dollar at your marginal tax rate. But because the standard is always an option, it takes a fair amount of tax to make it all worthwhile. If your itemized deductions add up to 13,000, for example, then you’ll only really save yourself the tax paid on the extra $400: $100 if in the 25% tax bracket that many married residents are likely to find themselves in.

You get to own a house. While upkeep could be a big headache, owning a house and having your own space could be awesome. While owning a home isn’t “priceless,” this part of the value is at least partially a personal calculus. Additionally, sometimes owning is the only healthy option. Some places, particularly small towns, don’t have much of a renter’s market. There may be no houses for rent in the areas convenient to the hospital nor decent apartments. In some unusual cases, you may feel like you don’t have a choice but to buy depending on where you match.

Real estate can also be an investment. Most houses a resident (or graduating medical student, really) can afford probably aren’t your forever home. That said, depending on what your finances will look like when it’s time to upgrade, you could conceivably keep your first house as a rental property (though again this may impair your ability to qualify for another mortgage etc when holding the additional debt). It also assumes you want to deal with being a rental owner/real estate investor, which comes with its pro/cons, costs, and headaches. But buying a home now with a low-interest rate in a good area for rentals may be a viable long-term plan; it depends a lot on the local market.

You can also consider buying and finding a renter for a spare bedroom to help defray your costs. This essentially allows you to be a real estate investor and homeowner all in one with someone else paying part of your mortgage while you still get to enjoy (part of) your home. It’s a good way to hedge your bets.

So if you need to buy a house or simply “need” to buy a house

• Try to limit your mortgage to 2x your annual income, even if a bank will give you more. Consider 3x to be an absolute limit.
• 20% down payment is normally considered “good” and will give prevent you from having to pay private mortgage insurance (PMI). Most residents who buy houses do not achieve this.
• If you have medical school debt (and by odds, you probably do), you may need some variety of physician loan. There are 100% financing varieties as well as ones that require some money (usually 5%) down. Physician loans will allow you to use your match letter as proof of future income so that you can close on a house before you actually earn a paycheck and tend to ignore your student debt in making their approval calculations. LeverageRx is a neat totally free platform I recommend that will let you rapidly comparison shop multiple physician loan lenders (yes that’s a referral link, but check it out).
• If you aren’t planning on a public service career and loan forgiveness via PSLF, you’d want to see how private refinancing stacks against REPAYE, but you’d definitely want to wait to do any refinancing until after your mortgage clears.
• Whether an ARM is worth it will depend on how likely it is that you’d keep the house past the fixed-rate limit, how much lower the rate is compared with a conventional 30-year fixed, how much the per-year increase is capped, and if there’s a maximum cap. Any lender can run the options for you so you can see what it means for the specific house you make an offer on. A 5/1 ARM (fixed for 5 years, variable for 25 years) is the most common variety. It’s possible, for example, that a 5-year ARM rate could be 1% less than the 30-year fixed with a 0.5% per-year maximum increase after 5 years (and thus would take a minimum of 7 years before it would overtake the conventional loan’s rate). If you know you’ll hold a house for less than 7 years, then you’re taking on minimal risk in choosing the ARM.1Note, if you plan on keeping a house as an investment with an ARM, you better be ready to pay that mortgage down fast if the rate rises, so this is best done when the house is cheap relative to your future income. 7-year ARMs also exist if you want a smaller benefit with less risk. In this scenario, I also assume a 15-year is out of the question (because a 15-year fixed loan is more expensive per month but usually has better rates and by far lowest amount of money lost to interest). An ARM is best when you know you’ll only be holding on to a house for the fixed period of time before moving/selling and are confident you’ll be able to sell when the time comes.