Paying Off Student Debt With Locums

Are you interested in paying off student loan debt with locums?

There are many new attending physicians who make more from a locums position than they would a W-2 job while working fewer hours!

The weight of debt can make it very hard to keep working in a position you consider a grind, especially if you have a lot of student loan debt.

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It’s a great feeling knowing that you are paying off student debt with locums, make more money, and have more flexibility.

The average amount of student loan debt for most new physicians is approximately $283,000.

If having a career as a physician and freedom are your goals this is one career choice that will allow you both!

A Change In Direction

The amount of money you make depends on your needs and goals. If your goal is paying off your student debt with locums…you can do that by amping up the hours you work.

However, once you are finished paying off student debt with locums, you can decide if you want to use working locums as a bridge to another career or launch a side hustle…meaning you can go in a totally new direction.

Once you take the weight of student debt off your neck can change your entire financial situation.

There is a huge difference between going to work to pay debts or to pay for the future of your dreams.

It totally changes your perspective.

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I remember what it was like to be the spouse of someone who had a ton of debt.

My wife, Taylor finished with a student loan amount of $125,000. We were going for PSLF for a long time, and we had all the necessary paperwork to prove our payments.

We decided five years in that it wasn’t for us. We refinanced and paid some little payments.

It was tough seeing her go to work feeling like the payments are barely making a dent.

In the end, we decided to use real estate to pay off her student loan debt.

Like us, you don’t want any debt to blight your bright future.

When you are a new attending physician who is making so much more money, it’s easy to feel as if you deserve to splash out and spend. The problem is that it can delay paying off your debts (think massive student loans) and lead to lifestyle inflation.

If you haven’t read my blogs on the “B” word (budgeting) you might want to do after you finish this blog.

Keeping spending in check will save your finances from getting out of control. Once you start seeing the fruits of getting out of debt, you’ll want to pay off everything (cars, loans, credit cards), and never slide back into that pit again.

How does paying off student debt with locums work?

When you are working in a locums position you can make 50% more than you did in a traditional hospitalist job, and your taxes are lower.

It’s definitely worth the time to enlist an accountant to help you decide which things you can deduct. The list of deductible items can grow when you work for yourself full-time as 1099. You get a pay raise, but lower taxes. You can also set up a solid 401k.

As someone who is working in locums, you have a lot of options.

Are You a New Attending Physician?

Are you a new attending physician?

Are you free from attachments and commitments?

Do you want to go all out and work 20 shifts per month?

Let’s say you don’t have a wife or children. You are fancy-free, completely autonomous.

If you decide to work locums at 20 shifts per month for two years, you could save a lot of money or use the money for the best reason of all paying off student debt with locums.

You could also incorporate working full-time with travel in positions all over the US. Some states pay better than others. 

Quadruple Win

Are you the unfettered resident from above but also a resident of Nevada?

Although, Nevada is not a state that pays well if you are a resident you can avoid the sunshine tax.

That means if you are a Nevada resident making more money by working in other states, and also saving money because your home state of Nevada doesn’t have a state tax!

Win (locums)-win (travel)-win (larger income)-win (no state tax). 

Down With The Debt–Now What?

You’ve finished paying off student debt with locums, and wiped part (or all) of your debt load clean.

You have either transitioned to a hospitalist job and/or you are still working locums. The point is you have extra cash.

The question you are asking is: how do I make my extra cash grow?

Your next logical move is putting money toward investments. It’s also time to think about your future.

What do you really want out of life?

Are you interested in Financial Independence Retire Early (FIRE)? Do you want to semi-retire?

There are so many people who would rather work less so they can travel, explore other interests, build a side hustle, or spend time with their children.

Which person are you?

Did You Say Side Hustle?

Do you want to put your extra money is toward building a side hustle? Real estate could be your chosen hustle.

You might want to consider what type of real estate you would potentially invest in. There are several categories that you are able to choose from including single-family or multi-family.

Investing in single-family real estate is a good starting choice for a physician who is new to real estate. As a physician, you know how to self-educate and find resources. That will come in handy learning how to buy and manage real estate.

It’s important to ask the right questions and listen to your intuition. Reading books, watching videos, and taking courses around real estate will help your self-education. You can find mentors who are willing to answer all your questions.

To be good in real estate you have to be patient, adaptable and able to roll with the punches. 

This is a business of supply and demand. As markets appreciate it is harder to find good deals. The markets tend to move in cycles. We are currently in an upcycle. Eventually, it will downcycle. What goes around will come back around.

Here is an illustration of what I mean:

In the mid-2000s, Las Vegas was one of the fastest-growing cities in the US. There was a lack of housing. Homes were being built as fast as they could, but they couldn’t keep up with the demand.

That meant a starter home in a decent area was upwards of $340k (three bedrooms, two baths, 1,500 square feet). You had people in California thinking that was a good thing. The people in the Midwest thought it was too high.

Then in 2008-2009, the whole economy crashed and the real estate market tumbled. It was just a really bad year for everybody in real estate. The houses that were $350k, dropped to $120k.

It took the town almost eight years to recover.

My whole family is from Las Vegas. My parents have been doing real estate in Vegas for over 40+ years, and they’ve been through these nerve-wracking crashes. It takes planning to recover.

There is a lot to learn when you get into real estate, so you’ll need to use your resources wisely (learning resources mentioned above). For instance, finding prime locations to buy real estate. California is a hard place to buy properties with cash flow. There are people who like to invest for appreciation. That is a huge gamble and a horrible idea.

Suffice it to say real estate is not for everyone. I’ve written before about getting involved in real estate. You can check those blogs out here.

If it’s for you, you could start paying off student debt with locums and then use locums income and buy real estate. Your real estate, in turn, eventually creates monthly cash flows.

Patience is the key to investing in single-family real estate.

The best philosophy is to only buy properties that cash flow. The important thing to understand is that money is made when you buy the property. The purchase price is a key factor to a great real estate deal. The purchase price affects your taxes and your rate of return.

Wait for the price points to come to you. There is no need to force anything! If the property appreciates it’s a bonus!

If you’ve chosen to return to hospitalist work, you can still work a few locum shifts and buy real estate. The more real estate you invest in, the more monthly income you have.

There are real estate opportunities that are ready to go (rent), and there are the fixer-uppers. Word of advice, whatever you do don’t live in a place you are renovating! That’s a horrible, stressful idea!

You might also become interested in multifamily housing.

The real estate side hustle may just take on a life of its own!

Mortgage Lenders

How do you compare and shop for mortgage lenders? 

Let’s say you start looking for a new home in the next six months.

Physician Mortgage How Much Can I AffordThere’s no harm in talking to multiple lenders in the initial phase because they aren’t checking on your credit, but they will ask you to provide some basic information (your name, your phone number, basic data), and they’re not pulling your credit.

To complete the formal mortgage qualification process you’ll probably check with several different banks. When the banks pull your credit don’t worry about it leaving a ding on your credit. The credit agencies will think of these checks as one inquiry since they were done in a short period of time.

It’s when multiple credit checks are done over a long period of time that your credit score will show a ding.

Shopping around for a mortgage lender can get you the best rate and structure. Keep in mind the interest rates probably won’t vary that much. The points that they want from you will vary and the fees can potentially be fairly large.

They are usually willing to give you their fee structure (which at this point is only going to be an estimate). You’ll find out the exact fees later in the game.

Which fees am I talking about?

They are the title fees, closing fees, and the attorney’s fees.

Some lenders will verbally pre-qualify you. They’ll also provide an itemized list of everything involved in the process such as principal interest, taxes, insurance, escrow fees, and home inspection or appraisal.

The itemized list is very important, but keep in mind because the prequalification is an estimate

(based on the hypothetical purchase price, etc. ). The list doesn’t change between lenders.

When you’re comparing lenders look at their interest rates, and the points required (essentially prepaid interest).

There is also a lender fee or origination fee. That is a fee the mortgage broker is paid. You will end up paying anything from $750 to $1,200 for that fee. It pays to be careful when you look at different rates.

Warning: The lowest rates are not always the best deal.

Let’s say someone wants to give you a note, at 4%. Another one is at 4.125. In your eyes, the lower one will be the best deal. That is not necessarily true, because there might be points that you have to pay. It’s a percentage of your loan that you’re trying to take out upfront (in order to get teaser rates).

Some lenders will tell you that you don’t have to come up with any more cash, that they’ll roll it into your loan. That’s a game intended to trick you into taking on debt to cover the points that you were supposed to pay.

That is not in your best interest because now you are paying interest on the points!

It’s exciting when you are offered a low rate. However, if you have to pay points upfront (meaning thousands of dollars in the beginning). That’s not worth it.

How long are you planning to live in the home?

Physician Wealth ServicesIf you are not going to live in the house for very long, you don’t really benefit from lower rates. If you are young, it’s probably a starter home that you’ll end up moving away from in the end. I’d be surprised if you lived in the first house you buy more than five years.

On the other hand, if you plan on living in the house for a long time, then the points might be worth it.

I’ve written about buying a primary residence before. Instead of being the American dream, it becomes a liability. Your best bet is to start with a modest starter home.

Don’t jump into the perfect ideal of a new physician home!

Start slow and research….

Do you have any experience with paying off student debt with locums? Are you interested in using real estate to expand your future?

Find the Physician Finance Community on FB to share your thoughts!