Big loans (with interest)

[Johnny Sunshine]

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One needs to have legitimate perspective. You can complain and talk about how "bad" things are, but you have to have a realistic comparison to whatever you are comparing things to.

I worked jobs of various types (service, retail, office, healthcare) for 15 years before entering medical school. No job made me feel this trapped, and I got more respect when I was flipping burgers.

"Things suck for everyone" might be a legitimate perspective, but not a very useful one.

 

[kandykorn007]

Don't forget about the Public Service Loan Forgiveness option. To benefit the most, you need to enroll as soon as you graduate medical school. Pretty much all academic hospitals count, so your 5-6 years in residency/felllowship qualify. Then you just stay in academics to complete your 10 years (as in 4-5 years after residency) and all your debt is forgiven. And all that money that's forgiven is NOT taxable. The nice thing is that since I'll file my taxes this year with my income as a 4th year medical student being 0, my first year of payments will be essentially 0 and yet count towards my 10 years under the income based repayment plan.

Also, because of all the changes in loans, if you started when I did (2009), you'll actually need to consolidate your first year's loans under the government's consolidation plan. Do this as soon as you graduate. Yes, you will lose your grace period, but remember that you had minimal income during 4th year, so your payments will still be very low.

Hope that helps! I feel like there's a lot of misinformation out there about this, but I think it's pretty much the only way to encourage people to go into academics.

 

[Neopath]

Don't forget about the Public Service Loan Forgiveness option. To benefit the most, you need to enroll as soon as you graduate medical school. Pretty much all academic hospitals count, so your 5-6 years in residency/felllowship qualify. Then you just stay in academics to complete your 10 years (as in 4-5 years after residency) and all your debt is forgiven. And all that money that's forgiven is NOT taxable. The nice thing is that since I'll file my taxes this year with my income as a 4th year medical student being 0, my first year of payments will be essentially 0 and yet count towards my 10 years under the income based repayment plan.

Also, because of all the changes in loans, if you started when I did (2009), you'll actually need to consolidate your first year's loans under the government's consolidation plan. Do this as soon as you graduate. Yes, you will lose your grace period, but remember that you had minimal income during 4th year, so your payments will still be very low.

Hope that helps! I feel like there's a lot of misinformation out there about this, but I think it's pretty much the only way to encourage people to go into academics.

Perhaps I'm missing smoething, but if you read the qualifications carefully then you'll see that, once you start making attending salary, your payments will go up so much that you'll end up paying off your loans before they are forgiven. At least, that's the situation with me.

My debt of 186k would end up with about 5k/month 10 year repayment plan, with about 4 years left.

Please expplain if I'm wrong.

 

[2121115]

Perhaps I'm missing smoething, but if you read the qualifications carefully then you'll see that, once you start making attending salary, your payments will go up so much that you'll end up paying off your loans before they are forgiven. At least, that's the situation with me.

My debt of 186k would end up with about 5k/month 10 year repayment plan, with about 4 years left.

Please expplain if I'm wrong.

You are correct. The government doesn't just give the money away. They aren't going to issue a payment plan where they lose millions of dollars (insert political joke here).

 

[kandykorn007]

Perhaps I'm missing smoething, but if you read the qualifications carefully then you'll see that, once you start making attending salary, your payments will go up so much that you'll end up paying off your loans before they are forgiven. At least, that's the situation with me.

My debt of 186k would end up with about 5k/month 10 year repayment plan, with about 4 years left.

Please expplain if I'm wrong.

So one thing to realize is that under the income based repayment plan, your payments never exceed what you would pay in the standard 10 year plan, i.e. once you reach attending level your payments will increase but there's a limit to it. For example, for my 240,000 debt, even if I use my highest interest rate of 7.9%, my standard 10 year repayment is still less than 3000/month. Therefore, it can never go above this amount under the IBR plan even at attending salary.

Then realize that during residency, under the IBR plan, that you'll be lucky to be even pay off more than the interest that's accruing. Just for a good rule of thumb, for every 100,000 of debt, you accrue $1000/month in interest. Thus, over 10 years on a 200,000 debt, you accrue app 240,000 in interest alone.

I have plugged my numbers into calculators online (I think the AAMC is the one I used), I will be forgiven over 200,000.

Don't get me wrong, I'll still pay close to what I owe for my education, but I won't have to pay the crazy amount of interest at least.

 

[Johnny Sunshine]

Yes, I'm aware of all the tactics you've mentioned. And from what I understand, you don't have to apply as soon as you can out of medical school. You can apply at any time, and all the time in public service institutions you served counts, retroactively.

However, you seem to be under the impression that you can be on IBR indefinitely. I don't believe this is the case. I seem to remember reading somewhere in the official documentation that it has to be renewed each year, and only for a maximum of 3 years.

 

[kandykorn007]

Yes, I'm aware of all the tactics you've mentioned. And from what I understand, you don't have to apply as soon as you can out of medical school. You can apply at any time, and all the time in public service institutions you served counts, retroactively.

However, you seem to be under the impression that you can be on IBR indefinitely. I don't believe this is the case. I seem to remember reading somewhere in the official documentation that it has to be renewed each year, and only for a maximum of 3 years.

No, you don't have to apply as soon as you graduate, and you don't even have to do the 10 years consecutively. However, there is an issue, at least with me, in that my first year's loans were FFEL loans, and so they need to be consolidated to direct loans prior to counting towards the 120 payments. But there's really no point in waiting to apply - this is not a binding agreement in any way, so if you don't want to go into academics later, then you don't have to. This is merely a way to be able to afford going into academics with a 200,000+ debt burden (which will easily become a $500,000+ debt burden with interest).

From all my research and talking with my school's finanical aid advisor, there's not a time limit. You might be thinking about qualifying for it - and from the officialy website:

http://studentaid.ed.gov/repay-loans/understand/plans/income-based

"10-year public service loan forgiveness—If, while you are employed full-time for a public service organization, you make 120 on-time, full monthly payments under IBR (or certain other repayment plans) you may be eligible to receive forgiveness of the remaining balance of your Direct Loans through the Public Service Loan Forgiveness Program."

and

"To qualify for IBR, you must have a partial financial hardship. You have a partial financial hardship if the monthly amount you would be required to pay on your IBR-eligible federal student loans under a 10-year Standard Repayment Plan is higher than the monthly amount you would be required to repay under IBR[this will most definitely be the case on a residen't salary]. Your payment amount may increase or decrease each year based on your income and family size. Once you've initially qualified for IBR, you may continue to make payments under the plan even if you later no longer have a partial financial hardship"

Hope that helps!!

 

[kandykorn007]

Alright for all you visual people:

Attached is my personal loan repayment breakdown that I've uploaded into the AAMC's Medloan's calculator. I plugged in an average residency salary of $50,000 and a very generous attending's salary of $200,000. I also plugged in a 4 year residency and 2 year fellowship (I'm considering neuropath). Of course, this isn't perfect, since I don't think it takes into account that your first year of payments will actually be close to $0, since it will be based off your fourth year of medical school's income (so this might cause it to underestimate the loan forgiveness), and I'm not sure that it accounts for income increases during residency and fellowship (which might overestimate the loan forgiveness). But this gives a good idea.

Sorry for the pic being blurry. But basically, I've taken out app. $235,000. After residency, even while doing IBR payments, I'll owe over $300,000. If there was no loan forgiveness and I kept with IBR, I would pay app. $550,000 over a 21 year period. With Public Service Loan Forgiveness (PSLF - top right corner), I will be forgiven close to $290,000. Granted, I still paid $260,000 during these 10 years.

A standard repayment plan for 10 years, would require that I pay $7, 447 per month (which is clearly impossible during residency), and I would still end up with a debt of $430,000.


Also - one other benefit to IBR I forgot to mention (and maybe this is where someone was confused about there being a limit of 3 years) is interest on subsidized loans (taken from same link as in previous post):

"Interest payment benefit—If your monthly IBR payment amount doesn't cover the interest that accrues (accumulates) on your loans each month, the government will pay your unpaid accrued interest on your Direct Subsidized Loans or Subsidized Federal Stafford Loans (and on the subsidized portion of your Direct or FFEL Consolidation Loans) for up to three consecutive years from the date you began repaying your loan under IBR"

 

[LADoc00]

7500/mo loan payments are INSANE.

I knew it was bad for some people but seeing it for myself is still a shocker. This is a real crisis.

The crazy hypocrisy surrounding medical "education" has become surreal.

Here we have the Dean of the notorious (yes notorious) UC Davis Medical School:
http://www.sacbee.com/2012/11/20/4998856/amid-controversy-claire-pomeroy.html

She makes over $734,000 at a school that can be best described as a mill for future Kaiser docs and poverty clinic workers. AND she actually had the audacity to ask for a RAISE for her pension, which is likely around 400-500K a year!

THEN, she has the uber balls to claim in closing although she presided over one of the biggest scandals in medical academics in history: that medicine is costing too much!

Yah beeotch, look in the f'ing mirror!!!

 

[Silent Cool]

7500/mo loan payments are INSANE.

I knew it was bad for some people but seeing it for myself is still a shocker. This is a real crisis.

The crazy hypocrisy surrounding medical "education" has become surreal.

Here we have the Dean of the notorious (yes notorious) UC Davis Medical School:
http://www.sacbee.com/2012/11/20/4998856/amid-controversy-claire-pomeroy.html

She makes over $734,000 at a school that can be best described as a mill for future Kaiser docs and poverty clinic workers. AND she actually had the audacity to ask for a RAISE for her pension, which is likely around 400-500K a year!

THEN, she has the uber balls to claim in closing although she presided over one of the biggest scandals in medical academics in history: that medicine is costing too much!

Yah beeotch, look in the f'ing mirror!!!

Yup. And the loans mentioned above aren't even that bad. My classmates are all expecting to have 400K at graduation. (at least the ones who are paying for it with loans).

 

[Silent Cool]

Just out of curiosity,
How many of you are counting on massive inflation to bail you out of loans?

 

[pathstudent]

7500/month?

THat's over double my mortgage.

 

[LADoc00]

Just out of curiosity,
How many of you are counting on massive inflation to bail you out of loans?

that is a very bad idea for multiple reasons:

1.) many loans are now not fixed but float on benchmarks such as the LIBOR etc. inflation at one point pushed some medical loans to 22%+ in 1980, meaning that 7500 you owe could blossom to over 10K per month!
2.) even consolidating to fixed loans, inflation would be bad because pathologist pay has not tracked inflation for THIRTY YEARS+. meaning that as the dollar value falls, you arent paid any more and your loans are still X amount.

Inflation only bails out government debt not individual debtors....that my economic lesson for today.

 

[Silent Cool]

that is a very bad idea for multiple reasons:

1.) many loans are now not fixed but float on benchmarks such as the LIBOR etc. inflation at one point pushed some medical loans to 22%+ in 1980, meaning that 7500 you owe could blossom to over 10K per month!
2.) even consolidating to fixed loans, inflation would be bad because pathologist pay has not tracked inflation for THIRTY YEARS+. meaning that as the dollar value falls, you arent paid any more and your loans are still X amount.

Inflation only bails out government debt not individual debtors....that my economic lesson for today.

LADoc,

Do yo know if current staffords and grad plus track LIBOR as well? I thought the current federal loans are fixed. I've been thinking that, over time, the only way these loans are palatable is through some significant inflation, but it sounds like that might not help at all. I can't believe how quickly these loans have soured the prospects of what were once good careers.

thanx

 

[LADoc00]

LADoc,

Do yo know if current staffords and grad plus track LIBOR as well? I thought the current federal loans are fixed. I've been thinking that, over time, the only way these loans are palatable is through some significant inflation, but it sounds like that might not help at all. I can't believe how quickly these loans have soured the prospects of what were once good careers.

thanx

I havent looked at this for 10+ years but I think that most Sallie Mae loans do float on a US Rate the Fed Interbank Borrowing Rate (also called the "U.S. overnight") and most private corp loans float on the LIBOR but I could be wrong now.

Inflation would only help the US govt IF a large portion of borrowers defaulted and threatened Sallie Mae itself...which is almost guaranteed to happen.

There is a period in the next 10 years where the US and EU government go on rampant, open proinflationary rampages to destroy the value of the debt they hold. When that happens, physicians are as good as dead.

 

[Silent Cool]

I havent looked at this for 10+ years but I think that most Sallie Mae loans do float on a US Rate the Fed Interbank Borrowing Rate (also called the "U.S. overnight") and most private corp loans float on the LIBOR but I could be wrong now.

Inflation would only help the US govt IF a large portion of borrowers defaulted and threatened Sallie Mae itself...which is almost guaranteed to happen.

There is a period in the next 10 years where the US and EU government go on rampant, open proinflationary rampages to destroy the value of the debt they hold. When that happens, physicians are as good as dead.

LOL, F**K. These loans are completely out of hand. thanx again

 

[yaah]

Gov't is probably going to have to do something about the growing student loan problem.

1) Tuition keeps increasing
2) Reimbursement keeps going down
3) Government's plan is to shunt more people in primary care by paying them ~10-20% more a year, in other words not nearly enough to cover exploding loans.

Government is going to have to start forgiving loans (especially for primary care docs) or do something about tuition, because tuition can't stay this high if reimbursement and salary are not going to cover loan payback for most physicians.

 

[deleted314957]

The ONLY sane way to do this whole MD trip now-a-day is to have the gov't pay for all of it and then train you and then pay you quite competitively in a cushy job ( and it will be more competitive), get your boards on their dime, get a boat load of experience on their dime, bail after 20 years active duty at age 45 and get 1/2 your base pay till you die ( and personal/family medical) and embark on a private sector career if you are fed up or just stay. by then the income diff will not be so much because we are all headed south. who in their right mind accumulates $400k debt to enter this zoo only to exit at age 32 to start today? believe me, the salad days are gone.

 

[notbobtrustme]

this thread demonstrates one of the beauties of the military. med school of your choice paid for. superior salary in residency/fellowship, a couple years post boards "attending" experience, then you get out and you are not competing with all the fresh-out-of-training folks for a job. and you have investments with no debt. however, that was a long time ago---things may have changed.

The military is a net loss in terms of long-term income potential. You trade comfort today for lowered earnings in the future due to lost wages as an attending while in the military system.

 

[Johnny Sunshine]

Once you've initially qualified for IBR, you may continue to make payments under the plan even if you later no longer have a partial financial hardship"

I agree and was aware of everything you said, but I wanted to point out the above quote. This means that once you're approved for IBR, you are forever in the repayment program plan (120 months, etc.). However, this says nothing about being forever in IBR, which I still believe is limited to 3 years max. You eventually leave IBR, and go up to bigger payments, but they still count towards the 120 months of repayment because at one time you were approved for IBR.

I could be wrong, but this is how the financial adviser at my med school explained it to us, and how I read the documentation at the time. I'd be pleased to learn that I'm mistaken, but I've not seen anything to prove that yet.

 

[KCShaw]

The military is a net loss in terms of long-term income potential. You trade comfort today for lowered earnings in the future due to lost wages as an attending while in the military system.

I'd like to see that math.

 

[2121115]

The military is a net loss in terms of long-term income potential. You trade comfort today for lowered earnings in the future due to lost wages as an attending while in the military system.

In previous times, this is true. Maybe not in the coming times ahead though.

 

[kandykorn007]

I agree and was aware of everything you said, but I wanted to point out the above quote. This means that once you're approved for IBR, you are forever in the repayment program plan (120 months, etc.). However, this says nothing about being forever in IBR, which I still believe is limited to 3 years max. You eventually leave IBR, and go up to bigger payments, but they still count towards the 120 months of repayment because at one time you were approved for IBR.

I could be wrong, but this is how the financial adviser at my med school explained it to us, and how I read the documentation at the time. I'd be pleased to learn that I'm mistaken, but I've not seen anything to prove that yet.

This quote was actually taken from the IBR section of the website, not the PSLF section, so when it references 'plan' it means the IBR plan, not PSLF. I have searched the web for any reference of a max amount of time you can be in IBR and I have yet to find it. What plan exactly would you 'leave' to? The standard plan where I would pay $7000/month? That makes no sense. Yes, your payments are going to increase under IBR, since it is income-based, but once you've qualified, you can stay in that plan unless you just don't want to pay anything, in which case you can go into forebearance during residency.

 

[Johnny Sunshine]

This makes sense to me, kandykorn. I can only assume that my medical school's hired financial adviser was mistaken, and I need to look into the details of this again. Thank you!