Can someone confirm my gigantic debt calculation?

[stephentyler20]

I'm boggled by this...

School is approximately $66k/year.

Best case scenario:
$35k/yr Stafford un-Subsizied @ 6.8% compounding
$8.5K/year "" Subsidized
$22.5k/year GRAD Plus @ 8.5% compounding

Busting out the compounding interest calculator, I'm coming up with
$211,xxx in Stafford un-s
$34,000 in Stafford S
$142,000 in GRAD plus
= $387,000

Am I seriously going to be almost $400,00 in debt in the best case scenario? And this is the *Cheapest* school I got into!

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[beebee0]

i feel really depressed seeing this. I have a similar situation and almost wanted to quit grad school... PLz let me know when u figure out whether your calculation is correct... and after borrowing this debt, we'll prob. be poorer than a high school graduate.

 

[stephentyler20]

i feel really depressed seeing this. I have a similar situation and almost wanted to quit grad school... PLz let me know when u figure out whether your calculation is correct... and after borrowing this debt, we'll prob. be poorer than a high school graduate.

No worries - gotta spend it to make it right! Apply to cheap State schools if you can... i'm still on the waitlist at my State School, and will be seriously considering that option based on how differently the #'s work.

Don't get too discouraged though... There's creative ways to work around this. What I'm leaving out is that my parents will probably be able to help me with some of the costs, and if your parents don't have the means, the school has institutional grants that will help out (based on need INCLUDING parental information).

I'm still in this for the long haul, just trying to figure out how bad it's gonna get and what provisions I need to make!

 

[TMP-SMX]

Your loans won't compound interest during in school deferment. They start when you enter repayment after your six month grace period (postgraduation). However, the interest is sitting in a separate column ready to capitalize in repayment. You sub staffords have no interest during school.

 

[EvilNewbie]

Don't forget... costs go up every year... its getting way out of hand... If I have kids, I tell go become a CEO... at least if you fail, you will get bailouts...

 

[nontrdgsbuiucmd]

Yes I was told to assume that costs will go up 7% per year; at some point school tuition is going to go the way of the housing market, which truly could not keep going up 10% per year when average salaries & inflation were going up 3% or so per year; not mathematically possible over very long.

Good luck with that CEO job thing..there's a bit of a feeder queue to this job, as there is a pretty large number of people at every firm interested in the salary, responsibility, and perks associated with C level positions -- kind of like setting a goal to win the lottery.

To OP -- yes the debt will be staggering, in my opinion the answer will come to more programs like ICR/IBR; under IBR you agree to pay 15% of "disposable" income (gross less taxes & mandatory contributions) for up to 25 years depending on when the debt is paid off; anything not paid off after 25 yrs is "forgiven". If your physician salary is 200K, less 40% taxes would get you to 120K; pay 15% of this to student loans & you've still got around 103K left, net, which is far more than the average household earns gross.. it's still a high paying profession relative to others, if you're OK putting in the training years and long hours..

 

[yadayadadude]

I think this may be too pessimistic. As noted above, the interest accrues during school but does not compound. However, also as noted above, you can expect your tuition and livings costs to increase each year. In my little spreadsheet model, pluggin in $66K for MS1 with a 5% annual rise in tuition and living, I come up with $331K at graduation.

 

[stephentyler20]

I think this may be too pessimistic. As noted above, the interest accrues during school but does not compound. However, also as noted above, you can expect your tuition and livings costs to increase each year. In my little spreadsheet model, pluggin in $66K for MS1 with a 5% annual rise in tuition and living, I come up with $331K at graduation.

Thanks for the words all... I had my FA run the numbers and he came up with much more reasonable amounts (closer to your $331K). Still a TON of dough, but much less intimidating!

 

[plauto]

Your loans won't compound interest during in school deferment. They start when you enter repayment after your six month grace period (postgraduation). However, the interest is sitting in a separate column ready to capitalize in repayment. You sub staffords have no interest during school.

TMP, as always thanks for your advice. As a follow-up to this...I have a question related to unsub Stafford. Does it make sense to pay back the interest year by year while you're in school or is it better to pay the interest in one lump sum just before entering repayment (in order to avoid a bigger principal) ? some people seem to think that paying year by year saves you money because you're not accruing interest on the interest itself for 4 years, but that conflicts with what you just said.

 

[TMP-SMX]

The best thing to do if you have some extra money to throw around is to not take out the loan in the first place. The only time I would recommend making a payment to your loans is if you have a spouse that works (take the $2500 interest payment deduction).

The thing about making payments assuming it reduces your principal is that you have to request to make a payment toward the principal because by default it goes to interest. Making a payment toward your interest won't make any difference until the very end just prior to repayment when the interest capitalizes and becomes part of the principal. Unless you have a working spouse I would just recommend not taking out the money you would potentially use to pay off your loans as it is a losing proposition. (It probably still is even if you make that payment but at least you'll have a bit of cushion room to not worry about having enough money during the year. I highly recommend you don't make a payment for the sake of making a payment then run out of money when the end of the year or summer come around.