Affording Medical School

[HuskyPride149]

Hey Everyone,

This is just a general question I was thinking about when thinking about my future after medical school and the big issue of money and being able to pay off your loans. I am currently just trying to understand everything and the different type of programs out there in place to help people like medical students to be able to survive.

There are programs out there like PAYE, pay as you earn, which is helpful because it only takes a percentage of your income right? So in residency you will have to pay less than if you have a 100k+ salary as a physician. Do these only apply to federal loans ie. Subsidized and Unsubsidized?

I also hear that there is a program where if you pay the amount owed every month for 10 years, and if you work in a private sector than the rest of your loans are forgiven? Does this also only apply to federal loans as well?

Lastly, if that is the case wouldn't it be smarter to take out as many loans, federally, as possible so you pay less out of pocket right now, and hope for 10 years down the road the rest will be forgiven? I hope that my understanding is correct.

Sorry if there might be a post similar to this, but I haven't found one recent enough to kind of answer these questions and be exactly like this thread. Any input would be grateful of how current med students or even practicing physicians have paid off their loans or plans to do it.

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[TankTuck]

Pay as you earn (PAYE) and income based repayment (IBR) take a percentage of your paycheck every month for 20 years. The remainder of the loan is forgiven after 20 years but you have to pay taxes on the amount. There is no forgiveness plan for the private sector. You are most likely thinking of public service loan forgiveness (PSLF). Like the other two plans you pay a percentage of your paycheck each month, but instead of 20 years it's 10 and you have to work for a qualifying public hospital. All these plans only cover federal loans, not private. It is kind of a gamble if you take out as much loan as possible now, as the repayment plans may no longer exist or change by the time you fulfill the requirements to get the loans forgiven. You could be stuck with a s*** ton of loans if you no careful. I would try to take as little loan out as possible, paying off intrest. Don't get stuck up s***s creek!

 

[HuskyPride149]

Pay as you earn (PAYE) and income based repayment (IBR) take a percentage of your paycheck every month for 20 years. The remainder of the loan is forgiven after 20 years but you have to pay taxes on the amount. There is no forgiveness plan for the private sector. You are most likely thinking of public service loan forgiveness (PSLF). Like the other two plans you pay a percentage of your paycheck each month, but instead of 20 years it's 10 and you have to work for a qualifying public hospital. All these plans only cover federal loans, not private. It is kind of a gamble if you take out as much loan as possible now, as the repayment plans may no longer exist or change by the time you fulfill the requirements to get the loans forgiven. You could be stuck with a s*** ton of loans if you no careful. I would try to take as little loan out as possible, paying off intrest. Don't get stuck up s***s creek!

Thank you for replying to my thread! Yes I meant public sector, not private my bad. Is the "repayment plan" and the actual "taking out federal loans" separate ? As in when you take out the federal loans, in the contract of the loans, it doesn't say what you'll repayment plan will be. Therefore it doesn't guarantee that you will be enrolled in the repayment plan?

My original understanding was if you take out federal loans, say at the beginning of the year, then you will automatically have that repayment plan in your contract therefore it has to be there for when you graduate in that amount. I don't think this is the case and that they are two separate things.

 

[TankTuck]

Thank you for replying to my thread! Yes I meant public sector, not private my bad. Is the "repayment plan" and the actual "taking out federal loans" separate ? As in when you take out the federal loans, in the contract of the loans, it doesn't say what you'll repayment plan will be. Therefore it doesn't guarantee that you will be enrolled in the repayment plan?

My original understanding was if you take out federal loans, say at the beginning of the year, then you will automatically have that repayment plan in your contract therefore it has to be there for when you graduate in that amount. I don't think this is the case and that they are two separate things.

I am not a financial adviser and I probably know little more than you, but I was interested in these plans. I figured, hey if I need to make a payment based on my income and not my actual loan amount, why not go to the most expensive school, take out as much and live as comfortable as possible? If you think about the saying, "if it is too good to be true, it probably is." To me this applies big time here. I don't think there is any enrollment written into your loan guaranteeing the repayment plan. This sketches me out. What is the plan gets revoked and you are stuck with $500k in loans? I would rather just be responsible, pay of the interest, try to pay towards my loans principle and have as little loan as possible when leaving medical school. If I happen to have burdensome loans at that point and the repayment plan is a good option, then hey why not.

 

[TankTuck]

Also, I don't know where I will be post residency, but I don't want to have to be tied to a public hospital, narrowing my options just for the 10 year plan. Also, I would like to pay my loans back before I am 50, so the IBR and PAYE aren't extremely tempting. To much uncertainty at this point to put all your eggs in the repayment option, at least that's how I see it.

 

[HuskyPride149]

Yes I completely agree with you now. Definitely too good to be true like you said, and I would hate to be stuck with 500k plus loans. Thanks again for answering my questions, and I would definitely talk to a financial adviser to confirm. Much thanks.

 

[TankTuck]

Absolutely! If you find anything out, let me know. I will do the same.

 

[TankTuck]

Just read this thread, has some good info relevant to what we were talking about.

http://forums.studentdoctor.net/threads/long-term-viability-of-pslf-for-current-borrowers.1122739/

They are speculating that any new barrowers (taking out loans starting after July 2016) will not be grandfathered into the current system based on new legislation. The new PSLF will have a cap forgiveness of $57k, or barely over a years tuition. I sure as hell am not working public service for ten years making monthly payments, for one year of tuition. It is uncertain, but students who have taken out some loans for school, all loans for school or have begun the repayment plan (I am not sure which) by July 2015, will be grandfathered into the existing system. Once again, so much uncertainty... I am not banking on it.

 

[Waggles]

From my understanding, there are a few strategies to get out of debt without using loan forgiveness (as it might not be around in 15 years)

1) Refinance loans to a lower interest rate (3% beats 8%)

2) Live beneath your means for several years (and beyond!) after residency and pay off loans as fast as possible

I would check out the book by thewhitecoatinvestor as it gives out a lot of good information on the subject.

 

[Wolverines83]

Didn't really read the whole thread but I would never count in the government being there for your. In other words, do not under any circumstances, increase your borrowing with the assumption that the government will forgive them. Just look at how the gibill changed a few years ago.

 

[deleted390966]

Definitely too good to be true like you said, and I would hate to be stuck with 500k plus loans..

Even if IBR and PAYE will still be around for the next 50 years, know that you'll have to pay "income tax" on the remaining amount + interests that have accumulated over 20-30 years! Imagine paying taxes on $900k that is left - hardly "forgiveness"!

 

[Awesome Sauceome]

Yea read up on some of Cabinbuilder's stuff, she is paying down a monster debt in just a couple years.

 

[Yoda DO]

Yea read up on some of Cabinbuilder's stuff, she is paying down a monster debt in just a couple years.

This. @cabinbuilder is pretty much my hero.