How I became the debt free terminator by age 31

An excerpt from The Young Physician’s Guide to Money and Life: The Financial Blueprint for the Medical Trainee.

Do you have student loans?

Won’t you love to destroy them and be debt-free?

What would you do with the cash flow you free up once your student loans are paid off?

I (Amanda) invite you to join me in a movement to terminate the deadly burden of student loans.

Under my cover as a mom, radiology resident, blogger, gourmet chef, & USMLE tutor, my true identity is a terminator, specifically programmed to terminate deadly student debts.

Below, I will share my weapons of termination in hopes of eliminating student debt on the scale of an entire generation.

Strategy #1: Intentionally using credit cards

Yes, I said it. You SHOULD intentionally use credit cards to help you pay off your student debt much sooner.

Essentially, borrow at 0% to even negative interest rates to pay down your student loan faster.

This is a bit complex. So, please bear with me for a minute here.

  • I charge all my expenses that are chargeable onto my credit cards and funnel my (limited) cash flow towards debts with interests. There are lots of variations in terms of what can be charged on a credit card.
  • Some people’s circumstances even allow them to pay for rent on credit card. At one point, I used to pay my landlord by charging her necessities such as gas and groceries on my credit cards. This takes a little more effort than just writing a check.

Now, I buy thousands of dollars’ worth of grocery gift cards (enough to last 6-12 months because once a year there’s a 10% discount on gift cards). I also pay my electricity one year in advance.

  • Funneling cash this way, often got me negative 1-5% interest, which gave me more cash to pay down student loans. But, unfortunately, there’s a limit to this.
  • This second method, balance transfer checks, usually allows for more aggressive paying down of a higher interest debt.

The cheapest balance transfer checks I got was with Travelocity American Express at 1% transaction fee for 0% APR for a year.

So by writing a check of $15,000 towards a debt such as student loan at @ 6.8% interest rate, I would save 5.8% for the next 12 months.

  • The balance transfer transaction fee is charged up front, so just be sure that if your limit is $15,000, that you write a check in the amount lower than the limit enough to pay for the fee.
  • This is to ensure that the check goes through, and you’re not charged an additional fee. (I have never gotten a fee before, as I always err on the safe side.)
  • There is one card that does not charge transaction fee for balance transfer if you use it within 60 days of account opening.
  • Some banks allow you to open a new checking account by funding it with a credit card. You need to be very cautious with this. You need to make sure that funding is equivalent to a purchase, and not considered a cash advance.
  • When your credit card company processes funding a new bank account as a purchase, that purchase will give you cash back (if your card offers cash back features). When your credit card company processes funding a new bank account as a cash advance, you will be charged an interest of 20-30% starting the day the transaction posts. So this method only works if your credit card company processes your act of funding a banking account as a purchase.

Strategy #2: refinance

As Dave mentioned in the last chapter, for a while residents and fellows had no refinancing options to lower their student loan interest. However, mid 2015, private banks began to offer student loan refinancing to residents and fellows, so no one needs to suffer the 3-7 years of debt snowballing at 6.8+% during training. The only drawback is that you forego loan forgiveness when you refinance.

My mentor Dr. James Dahle commented that “student loan refinancing isn’t new. It just went away for a few years. My class all refinanced at 1-2% back in 2003.”

Strategy #3: Borrow money from the IRS

Yes, you may be able to buy yourself some time by borrow from the IRS while being interest-free. If you do some locums and receive 1099s both during training and as an attending, there is likely a big jump between your 1099 incomes during the transitional year.

Since you pay taxes every quarter for your self-employment income (1099) based on prior year projections, you could seriously make a dent on your debt by delaying paying 1099 taxes for your first year out (higher 1099 income as attending) until the April tax filing deadline.

Effectively, you would have borrowed gobs of money from IRS interest-free, with the very first penny made at the beginning of the full year as an attending riding 0% interest loan from the IRS for 16 months.

Since the IRS loves borrowing money from taxpayers (including you) interest-free (every time you get a tax refund, you have lent the IRS interest-free money), you can return the favor.

Final thoughts

We terminators must unite. We ought to share ideas and weapons. I invite all you soon-to-be terminators out there to work towards collaboration: it behooves us to help one another.

Don’t we all wish we could be Jon Conner and send a debt terminator back in time?

Prevention is the best medicine. You want to destroy student loan Cyberdyne before Genesis.

Dave Denniston is a chartered financial analyst and hosts the Freedom Formula for Physicians Podcast. He is the author of 5 Steps to Get out of Debt for Physicians, The Insurance Guide for DoctorsThe Tax Prescription Workbook- 6 Secrets to Reducing Taxes for Doctors, The Freedom Formula for Physicians, and The Young Physician’s Guide to Money and Life. The late Amanda Liu is co-author of The Young Physician’s Guide to Money and Life.

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