Pay it or save it?

[OrionGrad]

As long as your emergency fund has enough in it to get you through third year, I'd put the extra savings toward tuition rather than getting extra loans. You can always re-evaluate at the end of third year and ask for extra loans if necessary for fourth year (if you need them for interview expenses, etc.).

Keep in mind, we did the exact opposite of what I'm advising (took out extra loans because I wanted to have plenty in savings for what-ifs). We used the money for away rotations, interviews, moving expenses, and ultimately buying a house -- and I couldn't be happier with our decision. (We're here for five years, so buying made sense for us. Plus, I actually enjoy things like painting/renovating/DIY projects.) We've been able to handle all of life's transitions without scrambling for money, largely because of the savings I built up in med school.

One thing to keep in mind is that it doesn't have to be an all or nothing thing. You could pay half of tuition from savings and half from loans (or a third from savings, etc.) or whatever percentage makes sense to you. That way you'd still have some cushion in case of emergencies, and you'd still be helping to reduce loan costs down the line.

[Thirteen]

*hijack*
Heidi, would you consider PMing me the company you consolidated with? We are looking into that for DH... I would be so grateful.




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[SoonerTexan]

I don't remember what your husband is leaning towards for specialty

Strongly leaning towards radiology, but definitely not committed. It will take rotations for him to really be 100% sure.

As for the car...I think we are just going to keep it until it dies and set aside a chunk of cash for one when it comes to it. I hate to wait until then, but the most I could get is $2500 for it. I started looking up what we could get for about $10k and it really wouldn't put me in a much better situation than I am now. Basically I could get a newer sedan with a little less miles for that, but there's no guarantee it will be much better of a car than mine. I've put a lot of work into mine in the past four years and I know it has been well-maintained. It's also a car my dad can help with because he's owned 4 of them and knows them well maintenance wise...

[corn poffi]

Yeah, you're right, as long as you have something saved up, you can run that baby to the ground. I'm just very cautious. The car that died on me only had 90,000 miles on it and was in perfect condition. Then there was a freak problem that I spent like $200 to get fixed. Three months later, the car died in the middle of a busy intersection. After nearly getting t-boned several times, and being heckled by a homeless man, a police officer, and a minivan full of high school boys, I found out that the engine was fried and the car was basically worthless. I didn't have anything saved for a new one, since the car had no other problems! Had he car had a working engine, i could have gotten $6,000 for it. Instead i got $250. Moral of my hijack: prepare for the worst, hope for the best. Which I think you're doing.

[scarlett09]

I agree with SS's advice regarding the house - rads is 4 years right? Otherwise I don't have much more advice on this front.

And I think you should consider getting a new (to you) car. With a little one and perhaps another one in the next few years, having a reliable vehicle will be very important when your DH is unavailable. We both got new cars in med school - my lease ended on my car, so I bought a new car as I was working and had enough for a down payment (plus my dad gave me another $2K to help out). I'm financing and will own my car next February. Still in good shape - 66K miles, just replaced the battery for the first time. DH also bought a new car during med school, but his parents and grandma helped him out, as the car he had was dying a slow death with well over 250K miles on it. They basically bought the car for him, so he owns it free and clear, only paying to insure it. So basically, during our first year out of residency, we will own 2 cars free and clear that will last us several more years until we can afford to buy or finance something newer/bigger.

Federal student loans are currently capped at 6.8%. And how come subsidized loans are no longer available to your DH? I find that really weird - I know I was offered BOTH types last year, during my final semester of grad school.

Definitely look into IBR, it is a good option to get you through residency if you want to make payments during residency. Otherwise just defer/forebear. That is what DH did, as there was no other income in our household (I was a FT grad student) to help in making payments. I had to start making payments on my small chunk of undergrad ($15K) and grad school loans in November, the payments were going to balloon to $600 in December. I sent in the paperwork required for IBR (I believe it was last year's taxes and a copy of DH's paystub?) and it took them about 2 months to get back to me with the payment amounts. During those 2 months, they put my payments on hold, which was nice. So now my payments on all of my loans (they are all federal loans BTW) are down to $160/month, which is much more managable. It will get us through this last bit of residency and my unemployment, moving, and getting situated in our new location. I believe they re-evaulate each year, as the payment amount is only valid until this time next year. Based upon this year's taxes, I thought that I might be able to squeeze out another year of low IBR payments; however, once they see DH's attending paystub, there is no way the payments will be low anymore.

Good luck on making a decision with what to do with your little nest egg!

[scrub-jay]

Federal student loans are currently capped at 6.8%. And how come subsidized loans are no longer available to your DH? I find that really weird - I know I was offered BOTH types last year, during my final semester of grad school.

Check out the Budget Control Act of 2011. The Federal government is no longer allowing any graduate students take out subsidized loans, effective July 1, 2012. You graduated right in the nick of time, but after the 2011-2012 academic year, no new subsidized loans for grad students.

[Pollyanna]

Do what works best for your growing family and be okay to change that plan midstream. I would hold onto the car for now as well, I think your plan makes sense (I should note that we have a '93 and a '99 Suburban that we intend to drive until they can't drive any longer. Each have close to 200K miles on them). You and your hubby's plan may look different because like us you plan to continue to build your family during school and training. We certainly took on more debt because of this and because as soon as dh started residency I stayed home full time. Not the best financial decision but for sure the best personal decision. Continue to pray and reevaluate each year, the right decision will become clear.

[Thirteen]

Check out the Budget Control Act of 2011. The Federal government is no longer allowing any graduate students take out subsidized loans, effective July 1, 2012. You graduated right in the nick of time, but after the 2011-2012 academic year, no new subsidized loans for grad students.

It's pretty evil, actually. I'm also lucky, because I graduated in 2010, and escaped with the subs-only.


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[Laker]

We didn't buy during residency and thank God. We would have finished residency upside down at least $150k. We are still renting since we want to buy once and stay in the house for a long time, but more importantly, because we are waiting on partnership. Once that gets solidified, we will be in the market. I wouldn't buy before a rads residency. Correct me if I'm wrong, but don't almost all rads have to do a fellowship? All of the rads docs we know all did a 1 year fellowship after residency, and most were in different cities. I would be very careful making a commitment to an area with so many variables. Good luck.

[Finding Equanimity]

We didn't buy a house and I'm so glad we didn't. If you're going to be somewhere for 4 years, it seems risky to get a return on your money. I know too many people who have bought during residency and then either can't sell and end up with 2 houses to pay for, or they lose money. In this market, I'd rent.

[peggyfromwastate]

Don't buy a house during residency unless you really have to. We had to, because it would have been much more expensive to rent the same space in that geographic area. It worked out fine for us, but I know--literally--no other residents who were happy they bought. There are a lot of hidden costs in homeowning.

Agree with this SO MUCH!!!

We also needed a house. There were no rentals that would work. And we ended up living off of our home equity line of credit---- we went through the peak of the market and are back down to a bit above what we bought, but about 120K less than the peak. There are SO MANY STRESSES that go along with home ownership. I wouldn't recommend buying unless you really need to.

[ladymoreta]

Since we're talking rent vs. buy... We are in a great market. Our house is just a little down from when we bought, according to Zillow, but it looks like it's factoring in some foreclosure sales. The thing that's surprised us/killed our budget was repairs. We had to redo our whole heating/cooling system, which was $10,000, with no warning. (It had to be done quickly because we'd just had DS, and it was a huge risk for developing black mold.) You don't think about budgeting for that kind of maintenance. And after the drought/earthquakes last year, I'm afraid we might have some foundation damage that we need to fix prior to selling. I've loved our home, and I don't really regret buying (yet... Ask me again if it doesn't sell as quickly as most in its price range!) But I agree that homeowning really sucks sometimes. If we end up moving after residency, we're definitely renting for awhile!

[peggyfromwastate]

For us I just have always felt on pins and needles. There is so little play in our budget. Any major house stuff needed to be financed. I put off getting an electrician to fix my bathroom outlet for 18 months bc we never had an extra 300$ in our budget. We have spent more than 60K on our house in projects-- and I think we might break even at the end of the day.

I guess I feel like unless you can reasonably dedicate at least 500$ to home maintenance a month, and if you have a comfort level with financing big stuff (like HVAC) or using savings to pay for the big stuff then it will put stress on a residents budget that you just can't see unless you've BTDT.

For us, we will come out even or slightly ahead. The "income" from the HELOC helped cover all the major home repairs and projects PLUS fund some other stuff, but I have never been comfortable with the financial obligation and our monthly bills from the mortgage plus HEL are big. They are just a but bigger than rent for a real house would've been.

I don't know. You will find your way. But when you say you want a big family... And sooner rather than later... There's just so much home maintenance stuff. It kills weekends constantly!!! And kids don't get cheaper as they get older. I still chuckle when I hear ppl feeling like their budgets just got a big boost after potty training bc they don't need to buy diapers anymore! $40 more a month in my pocket!! Yay!! Lol.