Am I delusional?

[Low Flow]

I'll be starting medical school in the fall and would greatly appreciate some additional opinions on the state of my finances. I recently read The White Coat Investor, and it has made me optimistic about the future, but I just want to be sure that my novice understanding of finances is not misdirected. I see you frequenting these forums @The White Coat Investor and I would greatly appreciate your input.

I'm set to graduate in May having taken out roughly 80k in loans over 4 years. Being mostly the parent PLUS loans sitting at >7% interest, those are worth roughly 90k at the moment. The school I'm set to attend in the fall is private and tuition is roughly 50k/yr plus living expenses. Luckily, the school is in a very reasonable housing market, so the first two years should be very affordable. All 4 years of medical school included, I'm anticipating roughly 280k of loans for med school alone, plus the 80k from UG, meaning I'll have taken out ~360k in loans by the time I graduate medical school. Accounting for interest in the interim, that's likely >400k in outstanding debt at the time I enter residency.

Now I realize that I should not be in this much debt after undergraduate. A culmination of my parents' poor financial decisions and mine lead to this fiasco. My parents gross >100k/year together, but have a giant mortgage they don't need, car loans, other debt, and 3 more children (middle and high schoolers). This leaves no room for me to receive aid from them, or aid from the state in the form of grants because of their income. I received a few scholarships while in school and maintained a part-time job (10-20hrs) at all times during UG, but nothing substantial, obviously. I have been immature and managed my finances poorly over the past 4 years, and I'm actively attempting to turn over a new leaf.

I've done quite a bit of shadowing in both the ER and with an Anesthesiologist, and I am very interested in some sort of critical care (ER, IM/CC, Anesthesiology, etc.). I came out of UG with average competitive stats (3.8/30 MCAT), so I anticipate I'll be in a similar situation come time for residency. I say this just to acknowledge my realistic expectations going in that I will most likely not match derm, ortho, etc. I will likely enter a field that pays anywhere from 200-250k.

I've made a few spreadsheets on my own based on the information in The White Coat Investor. If I was able to pay ~20% of my gross income toward my student loans, it seems that I'd still have them paid off by the time I'm 40 (I'm 22 entering MS1), give or take a few years. Am I being delusional or is this a reasonable approximation? That's also not taking into account other repayment methods such as IBR/PAYE. I'm not very familiar with either of those options, so if anyone could shed some light on that, I would greatly appreciate it.

TL;DR - I'm entering medical school with 80k in UG debt, and likely will have >350k accounting for interest at the time of residency. Hoping to enter either EM or critical care, am I being delusional in thinking I'll be able to pay this off in a reasonable amount of time?

I'm mostly just looking for some consolation that I can pursue my education without the constant unease over my educational debt, as well as some discussion on my options. Thank you in advance for any comments this might receive.

Side note: I didn't want to include this in my own calculations, because the future is unpredictable, but I suppose it is worth mentioning. My girlfriend and I have been together for roughly 2.5 years now, and I don't anticipate our breaking up in the foreseeable future. She comes from a very affluent family (her college has been entirely paid for out of pocket), but she is entering a profession in corporate communications. It's unlikely that she will be making more than 30-40k while I'm in school or residency if we are together. I don't want to bank on the fact that a spouse or significant other will be around to foot the bill, but that is certainly an important consideration. Her parents are in their 60s and left her their vacation home (>600k) in their will, along with other belongings. So, as I said, if we were to remain together these are important considerations in my situation.

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[Jlaw]

Its a lot of debt for sure but its not an uncommon story unfortunately. You best course of action would be to complete residency and continue to live like a resident for a couple years and just plow all your earnings into paying down those loans. Remember you will also have the opportunity to moonlight as a resident or fellow. If you can make 100-200/hr and pickup a couple shifts a month it will go a long way. Look at it as an investment with a guaranteed 7% return. Unless there is a drastic shift in the current economy the 7% you save will be much higher than any interest rate you would earn saving or investing. You might make more in the stock market but you could make less or lose it all so you are better off paying the loans off before worrying about saving or investing for the future. Hopefully you and your lady stay together but don't ever count on inheritance helping you. As you will learn when you go out on 3rd and 4th yr rotations many folks spend their last years and last dollars footing the nursing home bill and end up dying with nothing.

Anyway keep your chin up, I've met plenty of middle aged docs who are very wealthy despite coming out of residency with monstrous debt loads and young families to support. You're already researching this stuff and seem to understand the risks so you're on the right track.

 

[Mad Jack]

I started with no UG debt but am going to a fairly expensive school and will have about as much debt when all is said and done (possibly more, depending on interest rates- by the end of residency I could be looking at upwards of 400k). It is perfectly reasonable to pay it off, especially with an EM or CC salary. The key is expense control. A CC or EM salary will net you about 13k (I ran these calculations in a tax-heavy state, so your results may vary), assuming you max your retirement and have $100 in other tax exempt expenses (such as health insurance or parking- you might have more or less, depending on your situation with kids and whether your gf or wife gets insurance through their employer or yours). Live on 6k (plus whatever your wife or gf is earning), and throw 7k at your debt each month and you can pay it down in short order. Or you could just live like a king and be in debt up to your eyeballs, your choice.

 

[Low Flow]

Its a lot of debt for sure but its not an uncommon story unfortunately. You best course of action would be to complete residency and continue to live like a resident for a couple years and just plow all your earnings into paying down those loans. Remember you will also have the opportunity to moonlight as a resident or fellow. If you can make 100-200/hr and pickup a couple shifts a month it will go a long way. Look at it as an investment with a guaranteed 7% return. Unless there is a drastic shift in the current economy the 7% you save will be much higher than any interest rate you would earn saving or investing. You might make more in the stock market but you could make less or lose it all so you are better off paying the loans off before worrying about saving or investing for the future. Hopefully you and your lady stay together but don't ever count on inheritance helping you. As you will learn when you go out on 3rd and 4th yr rotations many folks spend their last years and last dollars footing the nursing home bill and end up dying with nothing.

Anyway keep your chin up, I've met plenty of middle aged docs who are very wealthy despite coming out of residency with monstrous debt loads and young families to support. You're already researching this stuff and seem to understand the risks so you're on the right track.

Thanks for the input. Good to know it's been done before. I guess after seeing the statistic somewhere that the average debt amongst med school graduates was something like 180k, I was just wondering how the hell did mine get so astronomical.

I started with no UG debt but am going to a fairly expensive school and will have about as much debt when all is said and done (possibly more, depending on interest rates- by the end of residency I could be looking at upwards of 400k). It is perfectly reasonable to pay it off, especially with an EM or CC salary. The key is expense control. A CC or EM salary will net you about 13k (I ran these calculations in a tax-heavy state, so your results may vary), assuming you max your retirement and have $100 in other tax exempt expenses (such as health insurance or parking- you might have more or less, depending on your situation with kids and whether your gf or wife gets insurance through their employer or yours). Live on 6k (plus whatever your wife or gf is earning), and throw 7k at your debt each month and you can pay it down in short order. Or you could just live like a king and be in debt up to your eyeballs, your choice.

I had been doing some similar calculations and found that even with paying 4.5k/mo (~20% of gross income) you would be able to pay off >400k debt in less than 10 years while still maxing out retirement accounts and what not. In case you haven't seen this (http://forums.studentdoctor.net/threads/an-emergency-docs-budget.817037/). His case is a bit different, in that he doesn't have loans and he's working 90-120h/month, but still it seems like he has room in his budget (if he didn't have kids) to pay a hefty amount towards student debt while living decently. I always feel a bit skeptical when I make estimates of paying this much per month because it's hard to account for so many unforeseen expenses, especially at this young of an age. Do you really think 7k/mo is doable? If so, that makes me slightly more optimistic!

 

[Mad Jack]

Thanks for the input. Good to know it's been done before. I guess after seeing the statistic somewhere that the average debt amongst med school graduates was something like 180k, I was just wondering how the hell did mine get so astronomical.

I had been doing some similar calculations and found that even with paying 4.5k/mo (~20% of gross income) you would be able to pay off >400k debt in less than 10 years while still maxing out retirement accounts and what not. In case you haven't seen this (http://forums.studentdoctor.net/threads/an-emergency-docs-budget.817037/). His case is a bit different, in that he doesn't have loans and he's working 90-120h/month, but still it seems like he has room in his budget (if he didn't have kids) to pay a hefty amount towards student debt while living decently. I always feel a bit skeptical when I make estimates of paying this much per month because it's hard to account for so many unforeseen expenses, especially at this young of an age. Do you really think 7k/mo is doable? If so, that makes me slightly more optimistic!

Depends on what you want in life. 7k a month is way more than I ever lived off of in my 11 years of working prior to medical school- my monthly budget was roughly 3k a month, so it is totally doable. I mean, 7k a month is 84k a year, more than. Person making 100k a year brings home after taxes. If you can't live off of that, you have a spending problem.

 

[Low Flow]

Depends on what you want in life. 7k a month is way more than I ever lived off of in my 11 years of working prior to medical school- my monthly budget was roughly 3k a month, so it is totally doable. I mean, 7k a month is 84k a year, more than. Person making 100k a year brings home after taxes. If you can't live off of that, you have a spending problem.

That's a good point. Thanks for the responses. On a side note, I'm still having this internal struggle of what to do with my summer before school starts. I could probably find some medically-unrelated, ****ty jobs to work and make 4-5k (live in an agriculture valley). Or, I could enjoy my time, go hiking, biking, travel a bit without spending too much money and enjoy my last two free months. It's tempting to make a little bit of money to offset living costs, but what's another 5k when you're looking at 400k in debt, right?

 

[Mad Jack]

That's a good point. Thanks for the responses. On a side note, I'm still having this internal struggle of what to do with my summer before school starts. I could probably find some medically-unrelated, ****ty jobs to work and make 4-5k (live in an agriculture valley). Or, I could enjoy my time, go hiking, biking, travel a bit without spending too much money and enjoy my last two free months. It's tempting to make a little bit of money to offset living costs, but what's another 5k when you're looking at 400k in debt, right?

Enjoy your time. This is the last of it you'll get, aside from the summer between MS1 and MS2. A few thousand dollars from a summer job is just a drop in the bucket at this point, but the memories you might make could last you a lifetime.

 

[DrDreams]

This thread is fantastic and exactly what I have been fretting over for the past week. I read that blog by brown "the deceptive income of physicians" and apparently over 20 years you will end up paying a 300k loan back with a total cost of 788k. I definitely didnt want to do that. Considering all this, I spoke to a DO once who told me that doctors earn 50% on the dollar. Is that fairly accurate? because in that case in order to monster plow through your debt, it would only be possible in a high end specialty.

What specialties would paying off loans in 3 years after residency is it not possible to do?

Also i just want to add. living off of 6k is totally doable if its ~50% of your income, but what if your take home pay is roughly 8k? or am i way off on my numbers?

 

[HuskyBabe]

This sounds like a very smart route to go. It's absolutely doable for a doctor out of residency to pay 6-7k a month and live off of 5-6k. Plus most people will probably have the help of a spouse at some point. Keep in mind people support entire families off of less than 60k/year. You finish residency and then live in a nice little apartment for 3 or 4 years and pay off all of your debt. Then you can go buy a house and live a little more nice without 300k plus interest chasing you around for the rest of your life! I think it's the smartest thing to do but a lot of people probably want the "lifestyle" as soon as they finish residency