At what student loan interest rate is borrowing substantial amounts for grad school not make sense?

[LADoc00]

For the terms of the argument define "substantial" as >$500,000.00

What interest rate level makes this proposition completely untenable?

I would argue we are there now today with a Federal PLUS loan rate now over 7.54%.

The amortization schedule on that amount at that interest level is truly mind boggling.

And this seems to be only the beginning.

---

Members don't see this ad.

 

[My_life_is_a_joke]

If I really wanted/needed it bad enough I’d take a federal loan for anything up to 15%. Because you can try and maneuver out of a federal loan. (Loan forgiveness, Military Loan Repayment, Presidential student loan easing)

But it really depends on situation to situation IMO

 

[voxveritatisetlucis]

We are probably there now but what are people who already are well into medical school supposed to do? Drop out because the interest rates are too high.

For 500k, I honestly don’t think med school is worth it. I couldn’t imagine the anxiety regarding that much debt. Really is an albatross.

Btw futures markets are already pricing in a decline in rates for 2023Q1

 

[RangerBob]

$500k already sounds excessive.

I borrowed $350k and that grew a ton of interest during med school/residency at an average of 7% or so (I borrowed just before they switched to variable rates, though I did at least get a few subsidized loans).

I think $300-350k is already a significant amount to borrow. Thankfully I make a decent amount each year. Unfortunately I live in CA... (I tried to convince my family to move to the Midwestern city we did residency in and bought a home for $110k, but no one was interested.)

 

[Mad Jack]

We are probably there now but what are people who already are well into medical school supposed to do? Drop out because the interest rates are too high.

For 500k, I honestly don’t think med school is worth it. I couldn’t imagine the anxiety regarding that much debt. Really is an albatross.

Btw futures markets are already pricing in a decline in rates for 2023Q1

If a decline in rates comes it'll probably be like 0.25%. We're going to have normal interest rates for years, and the low interest of recent years will be looked at as a dangerous anomaly. At interest rates of near zero banks lose money to inflation by not borrowing, which causes excessive exuberance and investment that leads to bubbles and runaway inflation. Those bubbles need to pop and we need a period of pain to restore the financial system to sanity

 

[Vidyut Senior]

Biden has recently introduced a three part plan student loan forgiveness program, although the relief amount is only upto $20,000 but still one can apply if eligible.
Biden Student Loan Forgiveness

 

[SigmaFS]

I think the more appropriate analysis is a student debt to income analysis. If your SDTI is 2:1 as an attending, manageable. SDTI of 3:1 or greater, might consider another profession.

 

[WildWing]

We have been working on a tool to help you see what loan payback looks like based on average debt levels and salaries for different health professions. The current iteration is designed just for estimation purposes, but we will be adding additional functionality so you can enter your own information to get a more realistic picture: Home - Estimate Your Loan Repayment

 

[vm26]

Rule of thumb that I've heard is that ones debt should not exceed ones expected income year one as a new attending

 

[cincincyreds]

Let's see? $600,000 at 10% over 30 years. So that first year 50k interest and lets say 20k paid in principle. That is a yearly payment of 70k , but remember to double that since there is no tax deduction. so you would need around 140k pre tax to pay that. I would say that is about the max if the mean physician salary is 200k, Give you 60k pre tax to live on which isn't very much. So I think 10% is the breaking point between the doctor journey and Walmart Greeter.