Well I guess the difference for those of us like me,
@Trilt and
@JaynaAli who have loan amounts low enough to pay off, and those who have loans big enough that aren’t worth paying off, is that the strategy/thought process is a bit different.
If your goal is to pay it off, then the stress is that the less you pay each month the more you pay overall. You’re wasting your money on interest if you’re not making payments big enough to put a dent in your principal. So I literally dumped as much of my paycheck as possible into my loans as we lived off of my husband’s meager postdoc salary as if we were poor grad students still. Most months I paid $4k into my loans. I put a $1000 budget on our “wedding,” had hubby throw $10k from his savings at the loans in lieu of wedding bands/engagement rings, and didn’t start a family until it was paid off. I bought a new car but only for $16k and I’m still driving it to the ground now after 8 years. It was a sad and hard 4 years but short enough I’m glad we did it this way. We essentially Dave Ramsey’d it, and it feels so good to be done. So I get what y’all are saying about how much the interest sucks and how hard it is to pay it off. But that’s kind of irrelevant for the super high debt load people. They don’t need to think like that. So maybe we should stop beating that dead horse. With how expensive vet schools are these days, a significant number of students will be in a situation where it makes no sense to try to pay their loans off even if they picked a “lower” cost option. And it can be okay. Still the message and point of this thread should be to pick the cheapest school you can. But I don’t think it’s true that just because it was hard for us lower loans people to pay off $60-140k in 4-10 years means people with $300k loans is necessarily screwed and should shrivel up in a hole and die or not consider vet med at all. Really a different scenario, and different mindset, but they can be ok. I would much rather be like me and be done with my loans, and highly recommend it for anyone who can swing that. But if you can’t, you can’t. And I don’t want every UPenn, Tufts, CSU OOS, etc… student to feel necessarily like a piece of **** either. Just like it’s not helpful only to hear the rose colored perspectives of those who haven’t started paying their loans, I don’t think it’s helpful only hearing from people with *minimal* loans especially when their situations are apples to oranges (scary to think $70k is *minimal* but there’s that).
It gets exponentially harder the higher loan balance you have if your intent is payoff, since monthly interest gets higher and less of your money goes to your principal, and the already bigger loan balance takes waaaaay longer to pay off. At some point it’s not worth it, and at that point the best thing to do pay the minimum possible, let the loan balance explode, and rely on loan forgiveness in 20 years and save for that tax bomb instead.
So for the above example of the person earning $100-140k and paying the $350k loan, they need to just pay the absolute minimum possible, which will be between $1000-1500 a month for 20 years. When also saving money for that tax at the end, the amount of money they need total for their loans per month becomes $1900-2500 of their net income per month… which equates to about $33k of the $100k gross income (Leaving you with $3800 ish per month to live on) or $43k of the $140k gross income (leaving you with $5600 ish per month to live on). $1900-2500 per month is A LOT. It’s not trivial, and most young’uns who have never lived an extended period of time independently as an adult, been home owners, or parents of children prob won’t get that. It truly is a second mortgage, and that actually sucks a lot. But let’s move on. You have $3800-5600 per month after your student loans and taxes (assuming an effective tax rate of 30%).
Now, that $3800 to $5600 per month net income doesn’t include anything including health insurance or retirement or anything that may be deducted from their paycheck so it’s not necessarily disposable income. But whatever, it’s not super doom and gloom. That is how much money you have after your loans and taxes. Certainly a heck of a lot more money on hand than if you are trying to pay down your loans for sure.
For those who have never lived on their own, $3800-$5600 per month is not destitute but actually not awesome especially in coastal areas with high cost of living. Trust me, I know it sounds like a lot of money for y’all young’uns but it really isn’t (though if you live in rural Kansas it might be ok). My mortgage on my ****ty house I bought for $390k is $2200 per month. My child’s daycare is $3000 per month (AHHHH!!!). These two expenses alone eats that income right up (and then some for the $100k income). I don’t even have student loan payments and I wouldn’t be able to do this without a second income. If you saw on my rants post, it cost $700 last month for me to heat my said ****ty home, and groceries cost me $1200/month. We do not eat out at all. Our contribution for health insurance is over $300/month I think for a really good plan. I don’t even have a car payment. But even my cheap $16k car with very low interest rate was $450 a month (average car is like double that). And I haven’t even included things like disability insurance, life insurance, utilities, pets, costs associated with being a vet that my employer doesn’t fully cover, etc… it’s so expensive to live! Especially for someone like me who lives in a high cost of living area.
But let’s also be real here. $3800-$5600 net income after your student loan money is set aside equates to a gross income of around $65-100k. You aren’t rich, but this is low middle to middle class income when you think about the US as a whole. It’s fine. You can be ok. Your loans are taken care of, you don’t really have to think about it other than that you are kind of stuck needing to maintain your vet salary (burnout is real, and a majority of my vet friends want OUT so this is important but a totally different discussion). But it doesn’t have to consume your life. You can live like a normal person, whatever that means, for whatever that’s worth. Getting a mortgage/lines of credit can be hard when your debt load is this high, but you can get around it. You’ll need to file separately from your spouse so their income isn’t included in your PAYE minimum payment calculations, and that has some implications. You should invest in a financial advisor who understands these loans so that they can make sure you’re saving/investing properly for that tax bomb at the end and retirement. I used a set of assumptions here with income and interest rates and tax rates etc… that aren’t going to be true for everyone and their situations may be a little better or worse. A vet earning $60-80k with $400k loans will be screwed even with this strategy so it’s not all honky dory. Internships and residencies will change a lot of this too. I just wanted to show how people might be able to live with that $350k debt and not be super screwed. But because of all of these assumptions that can change over time, and each can have such a profound impact on your lifetime wealth, it’s so important to actually get a financial advisor for yourself if you are one of these people that are in the save for tax bomb category.
If all of this isn’t making sense to you, get educated NOW. You can’t afford to not be good with money. All of this assumes you are doing the correct things with your loan payments. There are so many ways you can **** this up.
