@NCperson wrote:
@AsifN before you do ANYTHING, please be sure you understand the Repayment plans available and the PSLF (Public Service Loan Foregiveness Program) from government loans. I appreciate you stated you don't want him to take the loan.
This is a good idea but also a very tricky issue. It might be worth finding a financial analyst who specializes in medical student financial aid programs who can explain the pros and cons. There are also some career programs that will pay the doctor's loan payments if they work in a qualifying position. And some hospitals may include loan repayment as a recruitment tool, if your child chooses an in-demand specialty.
There are several programs that will forgive student loans for medical students. Some may require the graduated doctor to practice in an under-served area, like a rural community or minority community with a shortage of doctors. Others may require the graduated doctor to perform "public service", which might mean they work for a university or government, but may not be eligible if they work for a for-profit hospital. (The loan forgiveness you qualify for by working in a rural community with a shortage of primary care physicians might not be available for a Hollywood dermatologist who provides retinol and botox to celebrities, for example.). You need to match the expectations of the loan forgiveness program to the career aspirations of the doctor.
Then of course, the doctor has to work a qualifying position for 10 years. If they change their mind, they won't qualify any longer. And of course, the graduated doctor must make 10 years of loan payments with interest, before qualifying.
We could consider a scenario where your child takes loans, and you offer to make the payments from your IRA funds. That spreads the IRA withdrawals over 10 years instead of 4 years. The portion of your IRA balance that stays in the IRA continues to grow--if the loan interest rate is 8% and your IRA can grow at 6%, you only lose 2% per year. If you can get 8% or better in your IRA, you come out ahead. Then at 10 years, if your child doesn't qualify for loan forgiveness for whatever reason, you can pay off the remaining loan balance then.
It's something that a medical school financial aid specialist could help you figure out.
