Fall is upon us, and that means final year resident physicians and fellows are busy on the interview trail. Hands will be shaken, dinners will be eaten, and contracts will be presented.Today’s guest post is from Rebecca Safier. She writes for Student Loan Hero about education, careers, and other personal finance topics.
I was given a few topics to choose from, and I thought today’s topic of signing bonuses was timely. I once took a job with a $100,000 signing bonus. It’s true, but there were strings attached. I would have been better off negotiating an extra $20,000 a year into the salary and taken no signing bonus.
Let’s see what Rebecca has to say about signing bonuses and what to do with them.
How to Negotiate an Increased Physician Signing Bonus — And What To Do With It
After spending most of your 20s in college, medical school, and residency, you’re probably eager to start working as a doctor and making a doctor’s salary. After all, medical school didn’t come cheap, and you have the student loans to prove it.
But before you start work, you must agree on a contract with your new employer. As with your salary and benefits, your signing bonus is up for negotiation. According to The Medicus Firm, the average signing bonus for physicians in 2017 was $30,000 — but the largest was $200,000.
So how can you negotiate for an increased signing bonus without risking your chances of getting hired? Here are some tips on the process, as well as advice on what to do with this cash windfall once you get it.
Do research so you know what’s a reasonable request
According to a report by HealthLeaders Media, The Medicus Firm helped 9 out of 10 physicians hired by the firm get a signing bonus in 2016. Of those doctors, 34.2% received a bonus between $25,000 and $75,000, and 4.2% received bonuses of $100,000 or more.
As you can tell, signing bonuses vary greatly. The amount depends on several factors, including your field of medicine and prospective place of employment. For instance, surgeons can typically expect to receive a larger signing bonus than doctors who practice family medicine.
So when considering what’s an appropriate signing bonus, don’t pick an arbitrary number such as the amount you’d need to pay off your student loans, as wonderful as that would be. Instead, try to dig up data on your prospective place of employment, as well as the signing bonuses that have been received by others in your field with a similar level of experience.
If you can back up your request with data, you’ll have a better sense of what’s a reasonable signing bonus for which to ask — and what’s not.
Determine what you’ll accept and what you won’t
Once you have a figure in mind, clarify your priorities before going into negotiations. Of course, not everyone’s finances will allow them to be selective. But if you have some wiggle room, make sure you know what you’ll accept — and what number will make you walk away.
And don’t forget to take every form of compensation into account, including base salary, annual bonuses, and benefits such as health insurance, malpractice insurance, or student loan repayment assistance. Even if the signing bonus isn’t much, all the other parts of your compensation might make up for it.
Consider bringing in an attorney or professional negotiator
Doctors’ contracts can involve complex agreements and large sums of money, and you spent years studying to be a physician, not a lawyer. If you don’t know your value or you’re not confident going through the process on your own, it could be in your best interest to bring in an attorney or professional negotiator.
According to Physicians’ Advocates, bringing in a professional is more likely to impress the employer than alienate them. Hiring an attorney or negotiator could send a message that you’re careful about the business aspect of your contract.
Of course, context is everything, so use your best judgment on whether having an advocate negotiate on your behalf would be helpful.
Find out if any strings are attached to the signing bonus
Besides figuring out your bottom line, you should also be cautious about accepting a signing bonus if you’re ambivalent about the workplace. Even if you have a short contract, accepting a large signing bonus could send an underlying message that you intend to stay at the practice for a long time.
Some employers even require doctors to return signing bonuses if they leave before a certain period. Whether your bonus has this stipulation, it’s probably best to make sure you’re committed to a workplace for the foreseeable future before accepting a big bonus check.
Use this windfall to make a dent in your student loan debt
Once you’ve agreed on a signing bonus, your next step is figuring out what to do with it. Although not the most fun option, putting it toward your student loan debt could be the most financially responsible in the long run.
According to the Association of American Medical Colleges, the average doctor graduated with nearly $190,000 in student loans in 2016. Although that’s a crushing amount of debt, you can likely pay it back, maybe even ahead of schedule, on your doctor’s salary.
Or if you went into a lower-paying role, you might qualify for student loan repayment assistance or Public Service Loan Forgiveness. Whatever approach you take, consider putting some or all of your signing bonus toward your student loans.
With an extra payment, you can save money on interest and get out of debt more quickly. Check out this Student Loan Hero calculator to see how much interest you can avoid by making a lump-sum payment.
Consider refinancing student loans to snag a lower interest rate
Along with extra payments, refinancing your student loans could be another useful strategy for managing your medical school debt. When you refinance, you could qualify for a lower interest rate.
You can also restructure your debt by choosing new repayment terms. A shorter term might increase your monthly payment, but it would get you out of debt faster. Alternatively, you could go with a longer term to lower monthly bills and take some of the pressure off your budget.SoFi, work with medical residents and doctors to refinance their debt.
That said, refinancing federal student loans turns them into a private one. As a result, you lose eligibility for federal programs, such as income-driven repayment plans and Public Service Loan Forgiveness. If you’re relying on either, refinancing could be a mistake.
But if you have no issues turning your debt private, refinancing your student loans might help you meet your repayment goals.
Learn about personal finance so you can make the best decisions for your life
The medical profession is well-known for offering a variety of high-income careers. But before making a high salary as a doctor, you’ve probably spent years living on little and racking up debt in medical school.
As a result, you likely have (or will have) some hefty financial obligations as you finish med school and residency. And you might not have much experience managing your personal finances or know how to deal with your new, higher salary.
If you’re not sure where to start when you get your first paycheck, take some time to learn the basic concepts of personal finance. For instance, one of your priorities should be setting aside some of your income to create a three- to six-month emergency fund.
Another should be to have a certain percentage of your salary automatically deposited into a tax-advantaged retirement savings account. And all the while, you also should work on paying off student loans and tackling high-interest debt.
Once you’ve gotten those priorities squared away, you can start focusing on other savings goals. Even though it might involve some sacrifice for a few more years, your finances will be much healthier when you’ve finally cured yourself of your severe case of student debt.
[PoF: Back when I got my $100,000 signing bonus, I used it to pay off the last of my student loan debt. Even though I left after two years and had to write a check nearly two thirds the size of the one I received, it was no hardship, partially because I was no longer making student loan payments and had been banking a little bit more each month.
It’s rare to receive a signing bonus that exceeds a student loan balance, so refinancing may be a viable option if you’re not pursuing PSLF. If you do so, look for cash back bonus offers. Some sites (like mine) offer them, and some don’t. I believe in sharing the referral bonus with my readers and donating half the profits from the portion that I receive. That’s just how I roll.]