Discretionary Income and Cancelling Student Loans

[wanabdoc]

This may have been discussed, but does anyone know anything about being able to limit paying off stafford loans to 20% of "discretionary" income?

What is this discretionary income and how do I calculate it?

Also, it says that any unpaid stafford loans after 25 years will be forgiven. Does this mean it is bad to consolidate?


Article I read
Another Article

---

Members don't see this ad.

 

[yadayadadude]

This may have been discussed

Yep. Right here: http://forums.studentdoctor.net/showthread.php?t=448795.

Does anyone know anything about being able to limit paying off Stafford loans to 20% of "discretionary" income? What is this discretionary income and how do I calculate it?

I assume you're talking about the new income-based repayment provisions.The idea is that payments are limited to 15% of income above 150% of the poverty line. There's a really cool calculator here: http://www.finaid.org/calculators/icr.phtml.

Also, it says that any unpaid Stafford loans after 25 years will be forgiven. Does this mean it is bad to consolidate?

So far as I know, consolidation doesn't make you ineligible for IBR. However, it seems unlikely to me that many docs will see the loan forgiveness benefit. I was just playing around with the calculator, and using what I thought were reasonable assumptions about physician debt and income ($200K in debt at 7.5%, average training income of $50K, post training income of $200K), the debt was paid back in around 15 years under the ICR scheme. Remember, when your income goes up, your payments go up dramatically as well. On the other hand, if you borrowed $350K, have a bunch of kids, and make $100K ... I guess you might see some of that loan forgiven.

 

[wanabdoc]

I assume you're talking about the new income-based repayment provisions.The idea is that payments are limited to 15% of income above 150% of the poverty line. There's a really cool calculator here: http://www.finaid.org/calculators/icr.phtml.

Awesome calculator, but do I enter my pre-tax income or post-tax income? I would think post tax right since IBR is discretionary income.

So far as I know, consolidation doesn't make you ineligible for IBR. However, it seems unlikely to me that many docs will see the loan forgiveness benefit. I was just playing around with the calculator, and using what I thought were reasonable assumptions about physician debt and income ($200K in debt at 7.5%, average training income of $50K, post training income of $200K), the debt was paid back in around 15 years under the ICR scheme. Remember, when your income goes up, your payments go up dramatically as well. On the other hand, if you borrowed $350K, have a bunch of kids, and make $100K ... I guess you might see some of that loan forgiven.

I used the calculator to calculate for a family doctor with 250k of total debt (about what I will have) and it said my monthly payments would be $1800.


So this means that I will be earning 120k - 24k taxes - 21k loan repayment = netting 75k a year or 6250/month? That sounds a little low.

 

[yadayadadude]

Do I enter my pre-tax income or post-tax income?

I think pre-tax ... IBR is based on AGI.

I used the calculator to calculate for a family doctor with 250K of total debt and it said my monthly payments would be $1800. So this means that I will be earning 120K - 24K taxes - 21K loan repayment = netting 75k a year or 6250/month? That sounds a little low.

Welcome to it. I actually think your estimates are on the generous side ... paying just 20% in taxes is probably optimistic. 30% is likely to be closer, depending on where you live. And if you use pre-tax income to calculate your payments, you'll have even less left over. It's painful, no doubt.

 

[tapir]

My calculations are similar - ICR is unlikely to have any real world benefit for anyone with reasonable salaries and lower than biblical numbers of offspring, particularly for two-income families.

 

[wanabdoc]

Welcome to it. I actually think your estimates are on the generous side ... paying just 20% in taxes is probably optimistic. 30% is likely to be closer, depending on where you live. And if you use pre-tax income to calculate your payments, you'll have even less left over. It's painful, no doubt.

So I guess I shouldn't be a doctor for the money right?

Now that I see this, I don't know why any FM/IM or even ER doctor (120k, 140k, 200k average salaries I think) wouldn't want universal healthcare and free education (like the british/canadian system). The big argument I always hear is reimbursment, but in both England and Canada, after loans and taxes, they still earn more than us. The highest tax bracket in england is 40% and 100k pounds = 200k USD * .4 = take home pay of 120k USD vs 75k USD for us (being generous)

 

[wanabdoc]

Specialty - Salary - After Taxes - After Loan/monthly
Emergency Medicine - 178,000 - 151,778 - 117,146/9,762
Internal Medicine - 135,000 - 105,539 - 100,360/8,364
General Surgery - 220,000 - 179,918 -145,286/12,107
OB/GYN - 200,000 - 166,518 - 131,886/10,990

Here is what my spreadsheet spit out. These were based on the AMGA 1st year salaries, so I guess since the are AMGA they might be too high, but since they are 1st year, they are lower than average. Loans really are killer.

 

[yadayadadude]

wanabdoc -- your tax assumptions look crazy optimistic to me. Looks like you took 15-20% off gross salary for taxes. That's just not even remotely realistic.

But we agree about the loans. They're killer.

 

[wanabdoc]

wanabdoc -- your tax assumptions look crazy optimistic to me. Looks like you took 15-20% off gross salary for taxes. That's just not even remotely realistic.

Actually, I made a mistake, the taxes are about 40% higher than I posted.

Of course that is federal, but I'm from the midwest where it is illegal for states to tax very much.