Life as a pharmacist with heavy student loan debt

[BMBiology]

My point is this isn't necessarily true. You max out at 25 years. If you end up paying off the loan before those 25 years, even while making the minimum IBR payments, your obligations end.

I don't think you understand IBR. If you pay the amount required per month, your obligation will never end before 25 years. It will end exactly at 25 years.

Even if you pay more per month, that doesn't mean your payment will end before 25 years as long as amount owe including interest > amount paid.

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[diagonal]

405 k total payment is already based on an adjusted AGI for someone who makes 125 K a year. Even if she's able to significantly lower her AGI, her total amount will be much greater than the 220 K she borrowed. In addition, she will have to pay tax on any amount that is forgiven.

Using your same 6.8% figure, he'll be paying 300k on a 220k principle with his standard 10 yr repayment plan.

 

[diagonal]

I don't think you understand IBR. If you pay the amount required per month, your obligation will never end before 25 years. It will end exactly at 25 years.

Even if you pay more per month, that doesn't mean your payment will end before 25 years as long as amount owe including interest > amount paid.

If the principal + interest is paid before 25 years are up, you're done. You don't have to keep paying 15% of your income after you've met your original loan obligation. IE: you're not locked into that number of 25 years. 25 years is a maximum payment term.

 

[BMBiology]

Using your same 6.8% figure, he'll be paying 300k on a 220k principle with his standard 10 yr repayment plan.

405 k (25 year plan) >> 300 k (10 year plan). So, why drag it out?

 

[BMBiology]

If the principal + interest is paid before 25 years are up, you're done. You don't have to keep paying 15% of your income after you've met your original loan obligation. IE: you're not locked into that number of 25 years. 25 years is a maximum payment term.

This is true.

You can enroll in IBR and pay like you are in the 10 year repayment. This would reduce the interest.

 

[diagonal]

405 k (25 year plan) >> 300 k (10 year plan). So, why drag it out?

This guy only has 1800/mo after rent. He could double that and have some fun in the prime of his life.

 

[BMBiology]

This guy only has 1800/mo after rent. He could double that and have some fun in the prime of his life.

here's a better way to have fun in his prime years, don't go to pharmacy school and borrow 200 k in student loans

 

[diagonal]

here's a better way to have fun in his prime years, don't go to pharmacy school and borrow 200 k in student loans

We could cheers to that.

Although, what's really the alternative. Work sucks.

 

[SHC1984]

405 k total payment is already based on an adjusted AGI for someone who makes 125 K a year. Even if she's able to significantly lower her AGI, her total amount will be much greater than the 220 K she borrowed. In addition, she will have to pay tax on any amount that is forgiven.

Is AGI easy to BS? I can see plenty of people lying and making up BS to lower their AGI to lower their monthly payments if that's the case.

If the principal + interest is paid before 25 years are up, you're done. You don't have to keep paying 15% of your income after you've met your original loan obligation. IE: you're not locked into that number of 25 years. 25 years is a maximum payment term.

You are right and also wrong.

You are right in that a person can drag out their loans for 25 years and if they pay it off before that 25 years then they are free. For example, I owe about 87K right now in student loans....I can use IBR and drag it out to 25 year repayment...but if I felt like it I could pay 50K a year towards it and get it paid OFF in less than 2 years! Hell, If I had the money I can get it paid off in ONE day...Yes, you can set your loan up for 25 years repayment plan and you can PAY MORE and get it PAY OFF SOONER.,

However, you are wrong in that someone can make their minimium payments and get the loan paid off before 25 years. If you set your loan out to 25 years...You will have a set payment for that loan. That SET payment is the amount you will have to pay in order to get the loan paid off in 25 years. If you want to get it pay off SOONER? Well you will have to pay MORE than your set minimium payment.

Here is an even easier example to understand. I owe John $1200. My monthly payment is $100 a month. It will take me 1 year to pay it off (Assuming John is generous and won't charge me interest).

I can pay it off in 2 months if I pay $600 a month....but is there a way I can pay it off in LESS than ONE year if I make the standard $100 per month payment? NO. If you make standard payments ONLY...you get the loan pay off at the time you set it at.

 

[diagonal]

^yeah but income can fluctuate, which is what the payment is based off of. If you make more money, you can pay it off quicker while still paying only 15% of your AGI. In other words, you're making a payment that is going to be much less financially intrusive, by definition, than throwing all your free cash at the problem for 10 years. Will you pay more in the long run as a result of interest? Yes.

But as was pointed out above, in the OPs case it would be 100k. And as I mentioned above, that 100k is a static figure. It is 100k in todays dollars and that dollar amount won't grow with inflation. 100k is a lot less money when you're looking at it 25 years from now.

 

[pasofinab]

Just got my first paycheck today. $3000 pre-tax. Only $2100 take home. What the flying ****? How do they calculate that they gotta withhold that much?

So your taking home $2100? and you have a 350k in debt? How do you plan on surviving?

As for the rest of the recent graduates. I wanted your advice. I am also concerned about the student loans. It looks like so far the two schools I have been accepted to I will owe atleast
$200K. Is pharmacy school still worth it? There is still the possibility of two other schools that are instate, but I have to wait and see.

Please provide some advice thank you.

 

[PumpkinSmasher]

IMO, 200k is too much for a pharmacist. You will be paying ~$2300/month for 10 years! That is how much my partner and I pay together for medical and pharmacy school debt, too much for one person on a pharmacists salary, especially if you located in a high cost of living city. Then again most high cost living places are competitive to find a job so you will most likely end up in a rural area. Not the most optimistic opinion but I believe it to be realistic.

 

[pasofinab]

IMO, 200k is too much for a pharmacist. You will be paying ~$2300/month for 10 years! That is how much my partner and I pay together for medical and pharmacy school debt, too much for one person on a pharmacists salary, especially if you located in a high cost of living city. Then again most high cost living places are competitive to find a job so you will most likely end up in a rural area. Not the most optimistic opinion but I believe it to be realistic.

The tuition for the institution is $130K, plus the cost of living in a big city, im predicting the entire costof school to be in the 200K ball park.

As for the avenue of pharmacy I am planning to pursue, retail-pharmacy is definitely not for me. Currently I am working in Managaged-Care and am planning to continue in this avenue of the industry.

The cost for schools has gone up, but I am hoping I get accepted to a school where my cost will be no more than 150K. My greatest concern is not beginning school this year and having to wait again until 2014.

 

[pasofinab]

IMO, 200k is too much for a pharmacist. You will be paying ~$2300/month for 10 years! That is how much my partner and I pay together for medical and pharmacy school debt, too much for one person on a pharmacists salary, especially if you located in a high cost of living city. Then again most high cost living places are competitive to find a job so you will most likely end up in a rural area. Not the most optimistic opinion but I believe it to be realistic.

What institution did you attend? What year did you graduate?

 

[diagonal]

IMO, 200k is too much for a pharmacist. You will be paying ~$2300/month for 10 years! That is how much my partner and I pay together for medical and pharmacy school debt, too much for one person on a pharmacists salary, especially if you located in a high cost of living city. Then again most high cost living places are competitive to find a job so you will most likely end up in a rural area. Not the most optimistic opinion but I believe it to be realistic.

Or you could pay 1000k/mo for 25 years.

12k a year for the privilege of making >100k doesn't sound half-bad.

 

[pezdispenser]

Based on her number: 210 k with 6.8% and assume she is making 125 k a year, she will be paying 1350 a month for 25 years = 405 k and amount forgiven will be taxed.

You missed that the payments will increase with raises (even if they are just COLA). I put in a starting AGI of 100k and 3% raises, and got:

monthly payments: starting at $1040, rising to $2115
total amount paid: $455k
amount forgiven: $47k (taxed at 33%? = $15.5k)

10 year plan: $2416/month
total amount paid: $290k

 

[pezdispenser]

However, you are wrong in that someone can make their minimium payments and get the loan paid off before 25 years. If you set your loan out to 25 years...You will have a set payment for that loan. That SET payment is the amount you will have to pay in order to get the loan paid off in 25 years. If you want to get it pay off SOONER? Well you will have to pay MORE than your set minimium payment.

Well IBR is not fixed at 25 yrs, but it is for a maximum of 25 yrs. In fact, the calculation for the IBR monthly payment does not take into account the loan duration (25 yrs) at all. It is only based on your income, with an adjustment for 150% of the poverty level.

So it is possible to pay off your loan on IBR in less than 25 yrs, making only the minimum payments, but only if the amount borrowed is in a certain window, say $120-150k or something, or you have fairly high income.

I believe the extended and graduated repayment plans up to 30 yrs are still available, and there may be cases where these plans have an even lower payment than IBR. But they do not have any forgiveness at the end.

 

[pezdispenser]

As for the rest of the recent graduates. I wanted your advice. I am also concerned about the student loans. It looks like so far the two schools I have been accepted to I will owe atleast
$200K. Is pharmacy school still worth it? There is still the possibility of two other schools that are instate, but I have to wait and see.

Please provide some advice thank you.

Perhaps the strongest advice I can give you is:

I would not let any of my relatives do pharmacy for $200k.

 

[SHC1984]

^yeah but income can fluctuate, which is what the payment is based off of. If you make more money, you can pay it off quicker while still paying only 15% of your AGI. In other words, you're making a payment that is going to be much less financially intrusive, by definition, than throwing all your free cash at the problem for 10 years. Will you pay more in the long run as a result of interest? Yes.

But as was pointed out above, in the OPs case it would be 100k. And as I mentioned above, that 100k is a static figure. It is 100k in todays dollars and that dollar amount won't grow with inflation. 100k is a lot less money when you're looking at it 25 years from now.

I'll do my loans under the calculator and see what they say....I owe 87K right now.

Source: http://www2.ed.gov/offices/OSFAP/DirectLoan/calc.html

Interest Rate: 6.8 %
Loan Amount: $ 87000

Standard 10 year plan: Monthly payment: $1001.20 Total paid: $120,144
Standard 25 year plan: Monthly payment: $603.84 Total paid: $181,152
Graduated 25 year plan: Monthly payment: $493.00 Total paid: $196,220.19

Hmm...I put in 87K with an Adjusted Income of 110K and it saids I am not qualified for IBR.

Anyways....I can pay my loan off in 10 years and pay a total of 120K OR I can drag it out to 25 years and pay a total of 181K (standard payments) or 196 (graduated payments)

In order for it to be WORTH it inflation has to really skyrocket. Meaning jump up to all time highs! lol....

Basically in 15 years (25 yr-10 yr= 15yr) so in 15 years...will 120K = 181K in buying power? If it does then I could wait 25 years to pay my loan off....but if 181K is still worth a lot MORE than 120K in buying power...then it's best that I get it pay off ASAP.

is 87K now = to 120K in 10 years? If 120K in ten years still has a higher buying power then I need to just pay the loan off ASAP.

I can't think of any good reason to drag it out UNLESS inflation went crazy high.

 

[diagonal]

I'll do my loans under the calculator and see what they say....I owe 87K right now.

Source: http://www2.ed.gov/offices/OSFAP/DirectLoan/calc.html

Hmm...I put in 87K with an Adjusted Income of 110K and it saids I am not qualified for IBR.

Anyways....I can pay my loan off in 10 years and pay a total of 120K OR I can drag it out to 25 years and pay a total of 181K (standard payments) or 196 (graduated payments)

In order for it to be WORTH it inflation has to really skyrocket. Meaning jump up to all time highs! lol....

Basically in 15 years (25 yr-10 yr= 15yr) so in 15 years...will 120K = 181K in buying power? If it does then I could wait 25 years to pay my loan off....but if 181K is still worth a lot MORE than 120K in buying power...then it's best that I get it pay off ASAP.

is 87K now = to 120K in 10 years? If 120K in ten years still has a higher buying power then I need to just pay the loan off ASAP.

I can't think of any good reason to drag it out UNLESS inflation went crazy high.

I never said it would be cheaper to drag out the loans. I said it would provide for a better, more comfortable lifestyle for a large portion of your best years. The reference to inflation is that the extra 100k you'd eventually pay is not as big of a deal as it sounds. It'd be like having to pay an extra 60k, when looked at from the perspective of when it matters, which is 25 years from now.

If someone can literally double their pretty meager disposable income for the next 10 years, the cost of doing that is not too great in light of the increased comfort they'll experience over the next 10 YEARS!

 

[SHC1984]

.

I never said it would be cheaper to drag out the loans. I said it would provide for a better, more comfortable lifestyle for a large portion of your best years. The reference to inflation is that the extra 100k you'd eventually pay is not as big of a deal as it sounds. It'd be like having to pay an extra 60k, when looked at from the perspective of when it matters, which is 25 years from now.

If someone can literally double their pretty meager disposable income for the next 10 years, the cost of doing that is not too great in light of the increased comfort they'll experience over the next 10 YEARS!

Hmm...let me think about this one....

I"ll let BMBiology answer this one! lol

 

[SHC1984]

So your taking home $2100? and you have a 350k in debt? How do you plan on surviving?

As for the rest of the recent graduates. I wanted your advice. I am also concerned about the student loans. It looks like so far the two schools I have been accepted to I will owe atleast
$200K. Is pharmacy school still worth it? There is still the possibility of two other schools that are instate, but I have to wait and see.

Please provide some advice thank you.

There are general "rules" for most things.

Whats the general rules for cars? Pay at or below Kelly Blue book value. IF a car is worth $20K Kelly Blue book...will you pay $80K for it? HELL NO! Unless you are stupid.

The general rule for tipping waiters and waitresses? 15% standard MORE for upscale restaurants or great service. Pretty common standard. Not out of the norm.

General rule for how much you spend on an enagement ring? 4 months salary = price of ring. If you make 7K a month. Your girlfriend can expect a 28K ring for enagement.

Now....general rule for borrowing for college. Do NOT borrow more than your first year of salary. If your expected 1 year of salary is 50K. DO NOT borrow more than 50K. If your salary is expected to be 100K do NOT borrow more than 100K. That's another standard rule that normal people follow.

Pharmacist make 110K a year. DO NOT borrow more than 110K. Doing so just breaks the norms and makes no damn sense to me.

Will you pay 80K for a 20K kelly blue book value car? Will you buy a 300K ring if you only make 2K a month? Will you tip your waiter $100 on a $5 lunch? NO! Of course not....

Then why would you spend 200K on a job that pays only 110K?

It just doesn't make any sense.

 

[SpiritsUp]

As a new grad this thread intrigued me as I was contemplating extending my pay plan.
Currently my take-home pay per month is ~6000 a month. I am on the standard 10-year plan with monthly installments of ~$2300. I'm single, live by myself, so I don't have any other big money drainers.

I was exploring my lender's website for options and it looked like even with the extended repayment plan, I still had to pay almost ~2000 a month for loans. Maybe I'm not getting it but it looks like it's not even worth it. Correct me if I'm wrong.

I have both FFELP and Direct Loans, which confuse the situation even more.

 

[awval999]

General rule for how much you spend on an enagement ring? 4 months salary = price of ring. If you make 7K a month. Your girlfriend can expect a 28K ring for enagement

I lol'd

 

[PumpkinSmasher]

Or you could pay 1000k/mo for 25 years.

12k a year for the privilege of making >100k doesn't sound half-bad.

Actually 6.8%, the payment works out to be 1388/month, which is another $116,400 you are paying over the course of the loan. Unless you look at one of the subsidized payment options, IBR etc.

If you are going to supply incorrect or incomplete information, do not bother posting little fellow.

 

[browneyes021]

There are general "rules" for most things.

General rule for how much you spend on an enagement ring? 4 months salary = price of ring. If you make 7K a month. Your girlfriend can expect a 28K ring for enagement.

I hate it when women say this. It's not about how much a man spends on a wedding ring. I prefer design rather than how big the diamond is since a bigger diamond is just tacky looking to me. If I have a son, I'll be sure to warn him about these types of women expecting a man to pay so many months salary for a ring. DON'T. BE. SO. MATERIALISTIC. God can give you things and take them away in a heartbeat.

 

[pasofinab]

There are general "rules" for most things.

Whats the general rules for cars? Pay at or below Kelly Blue book value. IF a car is worth $20K Kelly Blue book...will you pay $80K for it? HELL NO! Unless you are stupid.

The general rule for tipping waiters and waitresses? 15% standard MORE for upscale restaurants or great service. Pretty common standard. Not out of the norm.

General rule for how much you spend on an enagement ring? 4 months salary = price of ring. If you make 7K a month. Your girlfriend can expect a 28K ring for enagement.

Now....general rule for borrowing for college. Do NOT borrow more than your first year of salary. If your expected 1 year of salary is 50K. DO NOT borrow more than 50K. If your salary is expected to be 100K do NOT borrow more than 100K. That's another standard rule that normal people follow.

Pharmacist make 110K a year. DO NOT borrow more than 110K. Doing so just breaks the norms and makes no damn sense to me.

Will you pay 80K for a 20K kelly blue book value car? Will you buy a 300K ring if you only make 2K a month? Will you tip your waiter $100 on a $5 lunch? NO! Of course not....

Then why would you spend 200K on a job that pays only 110K?

It just doesn't make any sense.

I appreciate the advice and all the different scenarios you have provided me with. I am confused though with the amount of tuition being less than 110K.

There are only a select few of Universities that offer a Pharm. D program under 100K.

The 200K is shooting high, but it is calculating all four years with living expenses without working.

It looks like I might have to work the last two years and the summers. Avoiding to borrow money for living expenses.

 

[Corpseman]

DON'T. BE. SO. MATERIALISTIC.

Telling that to SHC is like trying to tell water not to be wet.

 

[Corpseman]

I appreciate the advice and all the different scenarios you have provided me with. I am confused though with the amount of tuition being less than 110K.

There are only a select few of Universities that offer a Pharm. D program under 100K.

The 200K is shooting high, but it is calculating all four years with living expenses without working.

It looks like I might have to work the last two years and the summers. Avoiding to borrow money for living expenses.

i agree, her principal is good, but execution may be off.

less than 110k for 4 years of undergrad + 4 years of pharmacy school? hmmm.

(obviously give or take a few years depending on the path they choose to take.)

 

[pezdispenser]

I'll do my loans under the calculator and see what they say....I owe 87K right now.

Source: http://www2.ed.gov/offices/OSFAP/DirectLoan/calc.html

Interest Rate: 6.8 %
Loan Amount: $ 87000

Standard 10 year plan: Monthly payment: $1001.20 Total paid: $120,144
Standard 25 year plan: Monthly payment: $603.84 Total paid: $181,152
Graduated 25 year plan: Monthly payment: $493.00 Total paid: $196,220.19

Hmm...I put in 87K with an Adjusted Income of 110K and it saids I am not qualified for IBR.

Anyways....I can pay my loan off in 10 years and pay a total of 120K OR I can drag it out to 25 years and pay a total of 181K (standard payments) or 196 (graduated payments)

In order for it to be WORTH it inflation has to really skyrocket. Meaning jump up to all time highs! lol....

Basically in 15 years (25 yr-10 yr= 15yr) so in 15 years...will 120K = 181K in buying power? If it does then I could wait 25 years to pay my loan off....but if 181K is still worth a lot MORE than 120K in buying power...then it's best that I get it pay off ASAP.

is 87K now = to 120K in 10 years? If 120K in ten years still has a higher buying power then I need to just pay the loan off ASAP.

I can't think of any good reason to drag it out UNLESS inflation went crazy high.

You are not qualified for IBR because the criterion is, the payment on the 10 year plan has to be more than 15% of your discretionary income.

To work out whether a loan is worth paying off quickly or stretching it out, you really just have to look at the interest rate. I consider 6.8% to be a very high rate, so in most cases I recommend paying it off quickly. Otherwise, you would have to be a fairly good investor to beat that by putting your money in something else, which has its own risks.

Or, if you are not investing the money, then you should only count inflation, which averages about 3% over the longterm, so it would be better to pay off the loan. I think this applies to the majority of people, because lets face it, your budget is already going to be fairly tight on a pharmacist's salary just paying for a house and family. I don't think you will have much leftover to invest, even if you minimize your student loan payment as much as possible on IBR.

 

[streetpreacher]

I'll do my loans under the calculator and see what they say....I owe 87K right now.

Source: http://www2.ed.gov/offices/OSFAP/DirectLoan/calc.html

Interest Rate: 6.8 %
Loan Amount: $ 87000

Standard 10 year plan: Monthly payment: $1001.20 Total paid: $120,144
Standard 25 year plan: Monthly payment: $603.84 Total paid: $181,152
Graduated 25 year plan: Monthly payment: $493.00 Total paid: $196,220.19

Hmm...I put in 87K with an Adjusted Income of 110K and it saids I am not qualified for IBR.

Anyways....I can pay my loan off in 10 years and pay a total of 120K OR I can drag it out to 25 years and pay a total of 181K (standard payments) or 196 (graduated payments)

In order for it to be WORTH it inflation has to really skyrocket. Meaning jump up to all time highs! lol....

Basically in 15 years (25 yr-10 yr= 15yr) so in 15 years...will 120K = 181K in buying power? If it does then I could wait 25 years to pay my loan off....but if 181K is still worth a lot MORE than 120K in buying power...then it's best that I get it pay off ASAP.

is 87K now = to 120K in 10 years? If 120K in ten years still has a higher buying power then I need to just pay the loan off ASAP.

I can't think of any good reason to drag it out UNLESS inflation went crazy high.

I'm glad some people are so simple minded. It makes it so much easier for people who know what they are doing.

 

[BMBiology]

^^you have to admit that she is good with money. Her math makes sense unlike some people who throw out wild numbers and plan on using some magic to reduce their AGI.

 

[Billy Madison]

Telling that to SHC is like trying to tell water not to be wet.

 

[SHC1984]

I lol'd

I hate it when women say this. It's not about how much a man spends on a wedding ring. I prefer design rather than how big the diamond is since a bigger diamond is just tacky looking to me. If I have a son, I'll be sure to warn him about these types of women expecting a man to pay so many months salary for a ring. DON'T. BE. SO. MATERIALISTIC. God can give you things and take them away in a heartbeat.

I thought I was actually being very generous with just 4 months of salary. My best friend said 6 months. LOL...

I appreciate the advice and all the different scenarios you have provided me with. I am confused though with the amount of tuition being less than 110K.

There are only a select few of Universities that offer a Pharm. D program under 100K.

The 200K is shooting high, but it is calculating all four years with living expenses without working.

It looks like I might have to work the last two years and the summers. Avoiding to borrow money for living expenses.

OR you can just look into another career and MAKE more money and take out less loans. I know it's hard to believe but there are millions of other careers that make MUCH more than pharmacist. I don't see why you must do pharmacy since there are so many other much better options out there. Tons of people much richer than pharmacists exist you know?

i agree, her principal is good, but execution may be off.

less than 110k for 4 years of undergrad + 4 years of pharmacy school? hmmm.

(obviously give or take a few years depending on the path they choose to take.)

I don't recommend taking out any money for undergrad. My parents paid for mine. The parents should cover undergrad. Unless you have deadbeat parents...in that case, I am sorry.

You are not qualified for IBR because the criterion is, the payment on the 10 year plan has to be more than 15% of your discretionary income.

To work out whether a loan is worth paying off quickly or stretching it out, you really just have to look at the interest rate. I consider 6.8% to be a very high rate, so in most cases I recommend paying it off quickly. Otherwise, you would have to be a fairly good investor to beat that by putting your money in something else, which has its own risks.

Or, if you are not investing the money, then you should only count inflation, which averages about 3% over the longterm, so it would be better to pay off the loan. I think this applies to the majority of people, because lets face it, your budget is already going to be fairly tight on a pharmacist's salary just paying for a house and family. I don't think you will have much leftover to invest, even if you minimize your student loan payment as much as possible on IBR.

I think if the interest rate is lower than 5% you can take your time but if it's over 5% you want to pay it off ASAP. That's what Momus said and that user has tons of money so I would follow his advice.

I'm glad some people are so simple minded. It makes it so much easier for people who know what they are doing.

Lets see your math. My math came from the direct loans calculator, so it doesn't get more accurate than that.

^^you have to admit that she is good with money. Her math makes sense unlike some people who throw out wild numbers and plan on using some magic to reduce their AGI.

I am good with money b/c my loans are under 100K. I am not stupid enough to take out more than that.

If I had to I would go into another career and make even more money. LOL... I know how to weight my pros and cons.

 

[SHC1984]

^^you have to admit that she is good with money. Her math makes sense unlike some people who throw out wild numbers and plan on using some magic to reduce their AGI.

This is the CRAZIEST thing I have ever heard. If you make 120K a year...then you make 120K a year PERIOD.

How are you going to reduce that? I am still waiting on someone to explain that to me.

I know it's going to be lies and some illegal BS...but I still want to hear it.

So they are going to lie and say that they own a business and spent 30K last year taking clients out to dinner? so they need to reduce their salary by 30K? Is that how it works now?

People will do anything to cheat on their taxes.

 

[type b pharmD]

This is the CRAZIEST thing I have ever heard. If you make 120K a year...then you make 120K a year PERIOD.

How are you going to reduce that? I am still waiting on someone to explain that to me.

I know it's going to be lies and some illegal BS...but I still want to hear it.

So they are going to lie and say that they own a business and spent 30K last year taking clients out to dinner? so they need to reduce their salary by 30K? Is that how it works now?

People will do anything to cheat on their taxes.

AGI is always lower than gross income, by definition. In fact, by DEFAULT, the IRS reduces your AGI automatically depending on family size, marriage status, filing status, etc. (the so called standard deduction). Also, for the vast majority of employees, your retirement and health savings contributions from your paycheck contribute to reducing your AGI as well. It is not rocket science, lies, or illegal BS. The items mentioned above generally reduce your AGI by maybe 5-15%. Reducing it more involves accounting wizardry more or less, although its generally possible to do in a legal way. For example, I own and operate a small business at the moment. If i made any investments into my business, or took a loss, this would reduce my AGI. The slippery part comes when you delve into the nitty gritty of those types of details. If I bought my business a car and a new flat screen TV, and used them exclusively for personal purposes, that would be tax fraud. Shades of gray exist in this zone and it is where people need to make careful choices. However, as a business owner, it is not farfetched at all to think that in the future decades, I will either be exposed to losses or I will be investing in the business (or a new business) in order to grow my financial future down the line. The AGI benefit of these situations is meant to allow individuals flexibility in their resource allocation so they are not taxed twice in the end. I am just trying to say that in the process of doing this, you can receive a dual benefit by having reduced IBR payments in addition to paying less taxes.

Sure, people will scam and cheat when they can (if you assume everyone is acting with a selfish or personal benefit motivation). That doesnt mean AGI or reducing AGI itself is immoral. It is simply an important fact to realize that IBR is tied to your AGI , which means your benefit/risk from using IBR is intimately related to how you plan to allocate your resources between things like retirement plans, health insurance, and business investments/losses.

 

[confettiflyer]

This is the CRAZIEST thing I have ever heard. If you make 120K a year...then you make 120K a year PERIOD.

Only if you have an idiot accountant. Hahaha.

I'll let type b take over the business explanations of this thread, I'll stick to the other finance threads. Carry on.

PS Section 179 depreciation ftw.

 

[type b pharmD]

Only if you have an idiot accountant. Hahaha.

I'll let type b take over the business explanations of this thread, I'll stick to the other finance threads. Carry on.

PS Section 179 depreciation ftw.

Lol. If your AGI is greater than or equal to your gross income, you probably need to contemplate suing your accountant.

 

[pasofinab]

I thought I was actually being very generous with just 4 months of salary. My best friend said 6 months. LOL...



OR you can just look into another career and MAKE more money and take out less loans. I know it's hard to believe but there are millions of other careers that make MUCH more than pharmacist. I don't see why you must do pharmacy since there are so many other much better options out there. Tons of people much richer than pharmacists exist you know?



I don't recommend taking out any money for undergrad. My parents paid for mine. The parents should cover undergrad. Unless you have deadbeat parents...in that case, I am sorry.



I think if the interest rate is lower than 5% you can take your time but if it's over 5% you want to pay it off ASAP. That's what Momus said and that user has tons of money so I would follow his advice.



Lets see your math. My math came from the direct loans calculator, so it doesn't get more accurate than that.



I am good with money b/c my loans are under 100K. I am not stupid enough to take out more than that.

If I had to I would go into another career and make even more money. LOL... I know how to weight my pros and cons.

hmmmm it seems like you have your parents financial assistance. So i would understand why you have the debt you do.

I on the other hand am not as fortunate as you. Thankyou for your advice

 

[Corpseman]

I want to know the millions of other careers that make MUCH more than a pharmacist.

http://www.bls.gov/soc/2010/soc_alph.htm#0_9

There goes SHC pulling numbers out of thin air again.

 

[pezdispenser]

In fact, by DEFAULT, the IRS reduces your AGI automatically depending on family size, marriage status, filing status, etc. (the so called standard deduction).

The standard deduction does not reduce your AGI. Your AGI is already set on the last line on page 1 of your 1040. Everything else is taken away afterwards on page 2, including:

- $3,800 personal exemptions

standard deduction or itemized deductions on Schedule A such as:
- medical expenses >7.5% of AGI
- state income taxes
- property taxes
- mortgage interest
- charity donations
- employee expenses >2% of AGI (not self-employed business expenses)

 

[awval999]

Best way to reduce AGI is to max out 401k/403b ($17,500 for 2013)

 

[diagonal]

Actually 6.8%, the payment works out to be 1388/month, which is another $116,400 you are paying over the course of the loan. Unless you look at one of the subsidized payment options, IBR etc.

If you are going to supply incorrect or incomplete information, do not bother posting little fellow.

IBR is based on discretionary income, not total salary, *****.

 

[pezdispenser]

As a new grad this thread intrigued me as I was contemplating extending my pay plan.
Currently my take-home pay per month is ~6000 a month. I am on the standard 10-year plan with monthly installments of ~$2300. I'm single, live by myself, so I don't have any other big money drainers.

I was exploring my lender's website for options and it looked like even with the extended repayment plan, I still had to pay almost ~2000 a month for loans. Maybe I'm not getting it but it looks like it's not even worth it. Correct me if I'm wrong.

I have both FFELP and Direct Loans, which confuse the situation even more.

That doesn't sound right. I think you need to consolidate all your loans first, or at least run a hypothetical scenario where you consolidate, because the duration of the extended repayment plan varies up to 25 years depending on the balance amount.

Assuming you have 200k at 6.8%,
extended should be $1388 x 25 yrs
extended and graduated can be $1150 increasing to $1934 over 25 yrs

 

[BMBiology]

Sure, people will scam and cheat when they can (if you assume everyone is acting with a selfish or personal benefit motivation). That doesnt mean AGI or reducing AGI itself is immoral. It is simply an important fact to realize that IBR is tied to your AGI , which means your benefit/risk from using IBR is intimately related to how you plan to allocate your resources between things like retirement plans, health insurance, and business investments/losses.

That's fair enough. If you own a business, then you can write off some of your expenses. If your business is successful, then your IBR will go up. If your business is a failure, then you just loss some money.

But, don't think you should start a business just so you can lower your AGI. You may end up losing more money.

For example, lets say you owe $250,000 at 6.8% interest and make $120,000 a year. You will pay $1,290 a month in IBR. If you invest $30,000 in your business, your new AGI is $90,000 (assuming your business is not profitable) and you will pay $920 per month. So you will be paying $4,440 less in IBR in that particular year. However, this does not mean you are "saving" $4,440. It just means you will pay less in that particular year. The amount owed is still the same. It would actually go up since higher principle means you will paying more interest.

I actually think it is a bad idea to do IBR if you really want to start a business. What bank is going to lend you money when you are 40 year old but still owe $250,000 in student loans?

 

[BMBiology]

You have to really ask yourself: is it worth spending $30,000 in investment so you can defer paying (not save) $4,400 in IBR in that particular year? By paying less now, your balance will be higher and after 25 years, when you should be thinking about retirement, you will be stuck with a tax bill since any amount that is forgiven will be taxed.

 

[confettiflyer]

Well the key is to open a business for less investment ($5k will do it, unless you're opening a physical store front or doing something intensive), and shoveling over expenses you might normally buy into business use that is generally "unauditable."

Like my accountant friend in Vegas, I'm technically his client and vice versa w/ my business, so we just write off our meals together. We were gonna eat anyway, so it's not like we "spent extra" for that. Same when I fly out to visit friends, I stick in a business purpose and deduct the cost of the trip. It's defensible on paper.

Just don't do what my other friend did and buy a boat and try to write it off. He was a real estate agent. Stupid.

But computers, home office furniture, etc etc... yes, technically it's for business use, but the odds of an auditor coming over to your house to poke around your computer's browsing history is practically zero. I agree income drop is nominal, but the savings can be substantial if you do a lot of capital business purchases in a year your income goes up.


tl;dr version: Start a business w/ a low investment, shovel over expenses you'd normally make that you can argue are business expenses, perform at a loss and watch your AGI drop, occasionally be profitable on your tax returns to not be so suspicious, and done.

If you really have a really profitable business, your student loans are probably the least of your worries.

Post does not constitute legal or financial advice, consult a tax professional

 

[All4MyDaughter]

Well the key is to open a business for less investment ($5k will do it, unless you're opening a physical store front or doing something intensive), and shoveling over expenses you might normally buy into business use that is generally "unauditable."

Like my accountant friend in Vegas, I'm technically his client and vice versa w/ my business, so we just write off our meals together. We were gonna eat anyway, so it's not like we "spent extra" for that. Same when I fly out to visit friends, I stick in a business purpose and deduct the cost of the trip. It's defensible on paper.

Just don't do what my other friend did and buy a boat and try to write it off. He was a real estate agent. Stupid.

But computers, home office furniture, etc etc... yes, technically it's for business use, but the odds of an auditor coming over to your house to poke around your computer's browsing history is practically zero. I agree income drop is nominal, but the savings can be substantial if you do a lot of capital business purchases in a year your income goes up.


tl;dr version: Start a business w/ a low investment, shovel over expenses you'd normally make that you can argue are business expenses, perform at a loss and watch your AGI drop, occasionally be profitable on your tax returns to not be so suspicious, and done.

If you really have a really profitable business, your student loans are probably the least of your worries.

Post does not constitute legal or financial advice, consult a tax professional

It cost me less than $500 to start my MTM business... and I can write off things that I would be paying for anyway if I didn't have a business, like cell phone, professional organization dues, Pharmacist Letter subscription, fees for CE, conference attendance including mileage, a portion of home office expenses, etc. I have a really good accountant who specializes in small businesses. BUT... I also made a lot of money this year, so it's not like the business will show a loss. That's OK because it was my main source of income after residency. I'm thinking I will probably get a full time job for next year, but I'll still have the business, it just won't be as profitable, so it will help with the tax situation. Having a good accountant is really important!

 

[confettiflyer]

Having a good accountant is really important!

My accountant is crafty and my attorney is a ruthless jerk, together I've got good muscle in my corner, hahaha.

I decided long ago if large corporations play games to minimize tax payments, I'm going to try to do the exact same thing.

 

[All4MyDaughter]

My accountant is crafty and my attorney is a ruthless jerk, together I've got good muscle in my corner, hahaha.

I decided long ago if large corporations play games to minimize tax payments, I'm going to try to do the exact same thing.

You are an unethical, lying criminal who can't manage your money! You will never own a home, no one will ever lend you money and you will be a debt slave 4 life!