Could someone please help me with math?

[Electrophys]

Currently a 4th year med student...and as graduation nears, its finally beginning to dawn on me that I've PAYED tons of money for my education these past couple years...to be honest, I always just took the federal loans my financial aid office offered, rejected the optional loans, and payed back whatever little I had left over each year. Never really payed much more attention to the debt I was incurring...

About to graduate with 160K...and planning on getting hitched with another med student who has 200K in loans.

So thats 360K of debt and with interest rates at about 6.8%, that means that my wife and I will have to pay 24,480 a year in interest before we even begin to pay off the principal. Thats INSANE considering how as residents we'll only be making 35-40K/year (hopefully after taxes??). It seems almost impossible to be on a 10 year loan repayment track.

I knew things were bad...but this is very discouraging. I just keep telling myself that there are many generations of medical professionals above me who went through the same thing and turned out ok...but its getting harder and harder to believe.

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[yadayadadude]

I knew things were bad ... but this is very discouraging. I just keep telling myself that there are many generations of medical professionals above me who went through the same thing and turned out OK ... but it's getting harder and harder to believe.

It's harder and harder to believe because it's not true. They didn't go through the same thing, not at all. The current generation of medical students is graduating with debt that is much higher relative to average physician salaries than prior generations, and often the debt comes with higher interest rates.

FYI, as a resident you are unlikely to clear $40K after taxes. Check out the calculators at paycheckcity.com for a more realistic picture. $30K-$35K is more realistic, so you guys will probably have $65K to work with, combined. Depending on your other expenses, you might be able to pay the interest on your student loans during residency, which would be to your advantage; otherwise the unpaid interest will capitalize when you enter repayment.

 

[babel]

I'm just starting my second year and I'm already freaking out about this whole "having to repay my loans" thing.

The only thing I can figure is you really have to live on a very limited budget if you want to pay things back quickly. I agree that you guys will have $60K-$65K after taxes during residency - after the $25K for interest, that's $40K (we'll be optimistic). So, that leaves you with $3,333 per month. From here, it all depends on what your bills are like - car payments? credit cards? If not, this should be an okay amount to live on (assuming you weren't planning on having kids during residency). Then, once residency is done, you can really start thinking about paying off those loans.

$360,000 at 6.8% in 5 years: $7094.51 per month
$360,000 at 6.8% in 7 years: $5398.24 per month
$360,000 at 6.8% in 10 years: $4142.89 per month
$360,000 at 6.8% in 25 years: $2748.02 per month

Assuming after residency that you guys pull in $12,500 per month together after taxes ($150K each, 50% in taxes), that leaves you with $5000-$8000/mo to live on (on a 5-10 yr plan). Of course, life is more complicated than these calculators, and you guys will probably want to buy a house, start a family - that's what the 20+ year repayment plans are for.

The other thing I don't know anything about is loan consolidation - are people able to get interest rates lower than 6.8% these days? I know the lucky people who consolidated a few years ago (2004? 2005?) were able to get rates locked in at 2-3% - is there anything like that these days?

Good luck OP - it sucks, but you'll make it work.

 

[yadayadadude]

The other thing I don't know anything about is loan consolidation - are people able to get interest rates lower than 6.8% these days? I know the lucky people who consolidated a few years ago (2004? 2005?) were able to get rates locked in at 2-3% - is there anything like that these days?

Short answer: no. Student loans disbursed after July 1, 2006 have fixed interest rates, 6.8% for Staffords and 8.5% for GradPlus -- prior to that, interest rates were variable and reset each year. You can still consolidate, but the consolidation interest rate is just a weighted average of the interest rates for the individual loans. Consolidating at a low rate is pretty much a thing of the past. Making things worse, in the current credit climate, most lenders have abandoned special offers like interest rate reductions, etc.

Blech.

 

[EM2BE]

Just think...it could be worse. I'm looking at $250-300,000 for myself and dating a fellow med student with similar loans. That's a grand total of somewhere around 500 for us. We both decided to live as cheaply as possible until our loans are paid off. Good luck with paying it off, I know we are all facing that problem!