$1 million dollar student loan

[VA Hopeful Dr]

This may be the case in the south or Midwest but this isn’t the case in most areas. Every private school in my area is >15k, with the majority being >25k. I am not exaggerating here, one local private school is close to 37k a year and it’s not a boarding school. My private all boys high school was known as the cheapest in the state when I went there, now it’s almost 20K.

Yeah most private schools in my state start at 15k ish for grade one and get up to just under 20k for grade 12.

Still significantly less than private colleges which are around 40k this coming year.

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[Robotic Wis-Hipple]

I myself don’t believe for one second the govt is ever paying off these loans. That’s a huge gamble where the payoff is a tax bomb/poison pill and the loss is 25yrs of compounded interest. I want the follow up story in 25yrs when he’s looking to retire and has no chance.

 

[NITRAS]

He will have paid $1.6 million out of $2.0 million balance at forgiveness, both mentioned in the article and quoted twice by Blade.

I think it’s fair, considering how usurious rates are for students post 2009.

$1500/month x 25 years is $450,000. Assuming 3% increase for inflation I get $656,266. No where does that equal 1.6M.

No where is this good for either the taxpayer or Dr Meru.

And to be frank, interest rates are not his problem. 7% rates on a 1M loan is $70k per year, he doesn’t have $70k problem, he has a $1M problem. Even with no interest, he would take 25 years to pay off.....

 

[pgg]

This may be the case in the south or Midwest but this isn’t the case in most areas. Every private school in my area is >15k, with the majority being >25k. I am not exaggerating here, one local private school is close to 37k a year and it’s not a boarding school. My private all boys high school was known as the cheapest in the state when I went there, now it’s almost 20K.

My youngest will be a senior this coming year and I'm looking forward to saving some money when I'm paying for her college instead of paying for her high school and gymnastics.

I'm holding out a little hope that the gymnastics will pay for her college expenses so I can blow her 529 on toys for myself.

 

[maxxor]

He still has to pay income tax on the entire forgiven balance, which will probably be around another 700k given the loan balance is estimated to be 2 mil when forgiven. That’s how you get a total expenditure of around 1.5-1.6 million.

Also, the interest rates absolutely are his (and all of our) problems, because now all medical students’ loans start accruing day 1 of MS1. Not on graduation. Not at end of residency. We are paying interest while 7+ years away from even hoping to pay any meaningful amount back. This was “ok” when rates were <3%, but at 7%, it’s absurd.

 

[leaverus]

Meru is such a great movie, so inspirational

 

[nimbus]

He still has to pay income tax on the entire forgiven balance, which will probably be around another 700k given the loan balance is estimated to be 2 mil when forgiven. That’s how you get a total expenditure of around 1.5-1.6 million.

Also, the interest rates absolutely are his (and all of our) problems, because now all medical students’ loans start accruing day 1 of MS1. Not on graduation. Not at end of residency. We are paying interest while 7+ years away from even hoping to pay any meaningful amount back. This was “ok” when rates were <3%, but at 7%, it’s absurd.

Of course interest starts accruing when the loan is funded, like every other loan. Why would student loans be any different?

 

[maxxor]

Of course interest starts accruing when the loan is funded, like every other loan. Why would student loans be any different?

Because prior to 2009 they were subsidized until graduation.

 

[chocomorsel]

Yeah most private schools in my state start at 15k ish for grade one and get up to just under 20k for grade 12.

Still significantly less than private colleges which are around 40k this coming year.

Except we are talking 12 years versus 4 years. Unless the kid is only going there for high school that is as I suspect private school kids go the entire 12 years. But I could be wrong.
Edited to add: Never mind. Guess we were talking high school alone.

 

[VA Hopeful Dr]

Except we are talking 12 years versus 4 years. Unless the kid is only going there for high school that is as I suspect private school kids go the entire 12 years. But I could be wrong.
Edited to add: Never mind. Guess we were talking high school alone.

Unless you're taking out loans, duration doesn't matter. A fair number of people can manage paying 18k-ish a year for school - that's only 1500/month after all. Significantly less can manage 40k/year. That's 3500/month which is an awful lot of money.

 

[NY172]

This guy should just do PSLF to avoid the tax bomb, especially if he started paying it back during residency. Not sure how many dental jobs are available at non-profit hospitals but coming from USC I would hope he could find something. Also, what bothers me the most is that he is making the rest of us who plan on using forgiveness problems look bad given his lifestyle. He doesn't seem to be struggling to make ends meet (i.e. driving a tesla) yet complains about the debt. If you are fortunate to qualify for forgiveness, don't publicize it. Popular opinion does not support loan forgiveness for physicians.

 

[deleted697127]

Because prior to 2009 they were subsidized until graduation.

I’m with you here. It really frustrates me when colleagues, attendings, and coresidents talk like 7% interest with average student loan debts around 200k aren’t a problem. We are not doing ourselves any favors ignoring it, sitting back, and taking it. I’m not in primary care but I’m not even sure going into primary care is an option these days. The student loan market will crash. Its just delayed because so many millenials are content living with their parents and getting dogs because they can’t afford kids.

There is no reason low risk individuals that historically do not default should be charged 7% interest.

 

[parcus]

I’m with you here. It really frustrates me when colleagues, attendings, and coresidents talk like 7% interest with average student loan debts around 200k aren’t a problem. We are not doing ourselves any favors ignoring it, sitting back, and taking it. I’m not in primary care but I’m not even sure going into primary care is an option these days. The student loan market will crash. Its just delayed because so many millenials are content living with their parents and getting dogs because they can’t afford kids.

There is no reason low risk individuals that historically do not default should be charged 7% interest.

Maybe this proves inflation is nowhere near the sub 2% advertised? Heck, trying to rent a house and rent prices seem to have gone up 15% over the last 2 years around here. More in line with the 7% interest Med students are getting.

 

[NITRAS]

I’m with you here. It really frustrates me when colleagues, attendings, and coresidents talk like 7% interest with average student loan debts around 200k aren’t a problem. We are not doing ourselves any favors ignoring it, sitting back, and taking it. I’m not in primary care but I’m not even sure going into primary care is an option these days. The student loan market will crash. Its just delayed because so many millenials are content living with their parents and getting dogs because they can’t afford kids.

There is no reason low risk individuals that historically do not default should be charged 7% interest.

You have no collateral and no job while in medical school. Mortgage rates are around 4ish%. That's on an asset that should cover the loan balance on people that have jobs and a down payment that can pay. You should also ask your parents what their mortgage rates were when they were young.

I'll also mention that the faster you pay off your loan, the less your interest rate matters, but I'm in the pay your loans off quickly group, not string it out for ten or twenty years.

 

[VA Hopeful Dr]

I’m with you here. It really frustrates me when colleagues, attendings, and coresidents talk like 7% interest with average student loan debts around 200k aren’t a problem. We are not doing ourselves any favors ignoring it, sitting back, and taking it. I’m not in primary care but I’m not even sure going into primary care is an option these days. The student loan market will crash. Its just delayed because so many millenials are content living with their parents and getting dogs because they can’t afford kids.

There is no reason low risk individuals that historically do not default should be charged 7% interest.

You'd be surprised. My wife and I together owe something like 350k in loans with an average rate of 7%. We could get by on my PCP salary easily if we hadn't found a house we fell in love with that was a tad pricey (but as she's also a PCP its not a huge deal). So even with lots of loans, had we gotten a more reasonable house we could be quite comfy on just my FM paycheck.

 

[The Physician Philosopher]

I’m with you here. It really frustrates me when colleagues, attendings, and coresidents talk like 7% interest with average student loan debts around 200k aren’t a problem. We are not doing ourselves any favors ignoring it, sitting back, and taking it. I’m not in primary care but I’m not even sure going into primary care is an option these days. The student loan market will crash. Its just delayed because so many millenials are content living with their parents and getting dogs because they can’t afford kids.

There is no reason low risk individuals that historically do not default should be charged 7% interest.

Many people view student loan debt as a necessary evil and while they are students and residents consider any additional debt as a "drop in the bucket."

I wrote a series on why it isn't a drop in the bucket and why it is so important to only expand your lifestyle slightly when finishing training so that you can attack your loans.

I personally will be paying off 200k in debt in 20 months after finishing, but I only took a 10% bump in lifestyle when I finished. In other words, I took the increase in my monthly paycheck and used 10% of that to simply enjoy and the other 90% to build wealth by destroying debt and investing.

This plan will get me to financial independence somewhere around or just before 42-45. 10-13 years after I finished training.

TPP

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[GravelRider]

I’m with you here. It really frustrates me when colleagues, attendings, and coresidents talk like 7% interest with average student loan debts around 200k aren’t a problem. We are not doing ourselves any favors ignoring it, sitting back, and taking it. I’m not in primary care but I’m not even sure going into primary care is an option these days. The student loan market will crash. Its just delayed because so many millenials are content living with their parents and getting dogs because they can’t afford kids.

There is no reason low risk individuals that historically do not default should be charged 7% interest.

Going into primary care is certainly an option...you just can’t expect to buy a yacht. Nobody cares about the doctor/dentist with debt, but still buying Teslas and going on fancy vacations. That’s not the story. The student debt story is the social worker with 150k debt making 35k a year. Most physicians can pay off their debt in 5 years or less with just a little delayed gratification while still living comfortably. In other professions the student debt becomes a form of indentured servitude, but that is just not the case in medicine...even primary care. If the student loan market crashes, it won’t be because of doctors.

If your loans are 7% then refinance. There’s a bunch of private banks will to give you sub 4% rates for your low risk doctor loans. There was even a bank giving out rates under 2% recently if you maintain a checking account. You have options, that social worker does not.

 

[PainDrain]

So a little hypothetical scenario here. Let’s say you owe 400k and half is subsidized government loans and the other half is private. The government backed loans are at 4-5 percent and the private loans are around 6-8%. Should the plan be to pay off the private 200K at 6-8% and then take the money that would have gone to the government backed loans and invest it, while paying only the minimum until the 25 year forgiveness period is reached? You will still be carrying around 200k of loans and paying only the bare minimum to qualify for forgiveness.

 

[anbuitachi]

So a little hypothetical scenario here. Let’s say you owe 400k and half is subsidized government loans and the other half is private. The government backed loans are at 4-5 percent and the private loans are around 6-8%. Should the plan be to pay off the private 200K at 6-8% and then take the money that would have gone to the government backed loans and invest it, while paying only the minimum until the 25 year forgiveness period is reached? You will still be carrying around 200k of loans and paying only the bare minimum to qualify for forgiveness.

they talk about it in whitecoatinvestor and other money blogs. it depends on a few things . some people just want to get rid of the debt cause it bothers them. they want to be debt free. other people care less and usually you can make more money investing it. of course it also depends on the market. the debt is guaranteed 4-5% interest, while your investment can go up/down. It's a gamble. I think that's why a lot of people just pay off debt first and play the investing game later.

 

[The Physician Philosopher]

So a little hypothetical scenario here. Let’s say you owe 400k and half is subsidized government loans and the other half is private. The government backed loans are at 4-5 percent and the private loans are around 6-8%. Should the plan be to pay off the private 200K at 6-8% and then take the money that would have gone to the government backed loans and invest it, while paying only the minimum until the 25 year forgiveness period is reached? You will still be carrying around 200k of loans and paying only the bare minimum to qualify for forgiveness.

Don't forget that "forgiveness" in your scenario is taxed. So you will be paying taxes on 300-400 k if making minimum payments and letting it grow. That's probably 80k-100k in taxes. I personally don't see that as forgiveness.

It all depends on how much money you make and how quickly you want the loans gone. Keeping them around for 25 years is a bad plan unless you don't have a choice.

I make my recommendations for most situations at the end of this post:

Paying Off Your Debt Or Investing: The Next Move - The Physician Philosopher

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[PainDrain]

Don't forget that "forgiveness" in your scenario is taxed. So you will be paying taxes on 300-400 k if making minimum payments and letting it grow. That's probably 80k-100k in taxes. I personally don't see that as forgiveness.

It all depends on how much money you make and how quickly you want the loans gone. Keeping them around for 25 years is a bad plan unless you don't have a choice.

I make my recommendations for most situations at the end of this post:

Paying Off Your Debt Or Investing: The Next Move - The Physician Philosopher

Sent from my XT1710-02 using Tapatalk

My thought is keeping this debt around is a terrible idea because it relies on several assumptions. First it relies on the belief that the government and student loan industry will forgive your loans. The student loan industry is lobbying heavily to get rid of forgiveness programs and they may be successful. Second, it relies on the belief that the market will make you more money over that 25 years than it would over the 15-20 years assuming you paid off your loans and put the remainder into investments. Lastly, the debt will be held against you when taking out future loans and applying for future financial aide/educational loans, likely resulting in higher interest rates for new borrowed money.

 

[The Physician Philosopher]

My thought is keeping this debt around is a terrible idea because it relies on several assumptions. First it relies on the belief that the government and student loan industry will forgive your loans. The student loan industry is lobbying heavily to get rid of forgiveness programs and they may be successful. Second, it relies on the belief that the market will make you more money over that 25 years than it would over the 15-20 years assuming you paid off your loans and put the remainder into investments. Lastly, the debt will be held against you when taking out future loans and applying for future financial aide/educational loans, likely resulting in higher interest rates for new borrowed money.

I agree with 100% of what you said.

Personally, I detest, loathe, and abhor debt. I recognize that everyone is not that way, though.

In this particular poster's situation (assuming an adequate income), the answer is clear. You and I are on the same page.

TPP

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[flightnurse2MD]

Panda Express is eating good?

I thought Mormons couldn’t eat at Panda Express....

 

[flightnurse2MD]

The real story here is the government repayment plan. This dude is driving a Tesla, has a 400k house with a view of mountains, is taking vacations to Havana, and eats Panda Express for lunch. He is also an orthodontist, so probably works 36-38 hours a week, tops. The real question is who or what are we subsidizing as taxpayers?

Used Tesla actually the article pointed out.... Like it makes a freakin’ difference.

 

[flightnurse2MD]

Many people view student loan debt as a necessary evil and while they are students and residents consider any additional debt as a "drop in the bucket."

I wrote a series on why it isn't a drop in the bucket and why it is so important to only expand your lifestyle slightly when finishing training so that you can attack your loans.

I personally will be paying off 200k in debt in 20 months after finishing, but I only took a 10% bump in lifestyle when I finished. In other words, I took the increase in my monthly paycheck and used 10% of that to simply enjoy and the other 90% to build wealth by destroying debt and investing.

This plan will get me to financial independence somewhere around or just before 42-45. 10-13 years after I finished training.

TPP

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What?! And deprive yourself of the $400k house, Tesla, and vacay in Havana??? Absurd!

 

[abolt18]

I thought Mormons couldn’t eat at Panda Express....

Joking I presume?

 

[nimbus]

Joking I presume?

It’s not explicitly forbidden but you take your chances....

U Student Dies While Waiting In Panda Express Line – Daily Utah Chronicle