Dave Ramsey hates our collective student debt

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While I don't always agree with Dave Ramsey I feel his debt strategies for financial newbies are applicable. He eviscerates the wife of a recent dental school graduate but this can easily apply to to many of us contemporary medical school graduates. Is it wrong to feel that IBR, REPAYE, and PSLF will save those of us who went all in without family support? I plan to mob the weekend warrior moonlighting opportunities presented to me down the road. I for one am staring down the barrel of $300K at an aggregate 6.5%. Are you planning to nuke your student debt a la Ramsey style?

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Ramsey is great 101 advice. He helps the average couple making under 6 figures clean up CC debt and live within their means.

He's not the guy who understands the plight of the average medical grad. We don't need a plan to reinvent ourselves, we're already going to be working like mad and will eventually get out from the debt just by showing up and cranking it out.
 
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Totally agree about not buying a house right out of residency with high levels of debt.

His salary estimate for dentists is peculiar based on current BLS statistics (http://www.bls.gov/oes/current/oes291021.htm)

I feel like this rant might be directed at different education sectors that have high education costs but low real salaries following graduation.
 
I agree 100% with the principles Dave Ramsey promotes. There is, however, an exception to a few of his "guidelines". One is the credit card. I personally have a credit card and believe it is a great thing if treated like a debit. You do have to have self control, but the cash back and rewards are numerous if it's used and paid off immediately.

Second is medical school education. Yes, the debt is astronomical. But how many doctors do you see who are in their 40s still complaining about massive amounts of debt if they managed money wisely? Not many. It's about perspective. If you want an extravagant lifestyle...yeah, you might be having lots of debt. If you live modestly until you can afford to do otherwise, it won't take too long to pay things off.
 
The best way to deal with your loans is to refinance as soon as possible, take out a life insurance policy and extra disability insurance that covers the remainder and then some, and pay them off as soon as possible. This may involve living somewhat frugally for 5-7 years but the payoff is totally worth it. Hopefully you won't need the insurance but if something goes wrong you don't want you or your family to have to pay that off without a physician salary. I saved almost $100,000 doing this over the course of my loans.
 
He is simplifying. It's not just about total debt burden. It's about how much it costs to rent vs buy, how long you plan to hold the house for, what interest rates you can get, likely costs of ownership, location, prospects, etc. Renting is simpler to calculate, but that doesn't always make it right. Hell, if you could take a bigger mortgage you could use some of that money to pay down higher interest student loans if private refinancing doesn't get it down low enough. It's like buying or a leasing a new car (not that either is a good idea). Anyone who tells you one is *always* better is wrong. It depends on the terms of the sale and the terms of the lease.

That being said, for a short residency, owning probably not going to be in your favor. At that point you're basically hoping that real estate values increase enough to offset the transactional costs of selling real estate.

OP: It's not a crime to plan for PSLF, but it's best to hedge your bet by living within your means saving the difference. PSLF isn't an excuse to act like an attending as a resident, but ignoring it just because the government created it (and it's likely to change at some point) if it makes financial and career sense would be silly.

IBR/PAYE/REPAYE by themselves are not a panacea though.
 
Tenk said:
The best way to deal with your loans is to refinance as soon as possible, take out a life insurance policy and extra disability insurance that covers the remainder and then some, and pay them off as soon as possible. This may involve living somewhat frugally for 5-7 years but the payoff is totally worth it. Hopefully you won't need the insurance but if something goes wrong you don't want you or your family to have to pay that off without a physician salary. I saved almost $100,000 doing this over the course of my loans.
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Federal loans are forgiven on your death, they should not get passed onto your family
 
One good rule of thumb for buying vs renting is time frame. If you plan on being there for less than 5 years,you should lean towards renting as it takes about that time for equity to build to make your money worthwhile
 
DocWinter said:
One good rule of thumb for buying vs renting is time frame. If you plan on being there for less than 5 years,you should lean towards renting as it takes about that time for equity to build to make your money worthwhile
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That varies widely based on region/city.
 
Dentistry is the most expensive professional education in the country. It's absurdly expensive. I envy my brother's medical school debt.

Bru said:
Totally agree about not buying a house right out of residency with high levels of debt.

His salary estimate for dentists is peculiar based on current BLS statistics (http://www.bls.gov/oes/current/oes291021.htm)

I feel like this rant might be directed at different education sectors that have high education costs but low real salaries following graduation.
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Low salaries after graduation, but the salary of a dentist climbs as he/she becomes more surgically skilled and takes on more challenging cases. That's why there are discrepancies between the figures and the entry-level salary of the fresh dentist.
 
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Ramsey would advise not taking on 300k in debt to increase one's lifetime earnings by $4.5 million. His advice is great for ordinary people, but doesn't hold up when it comes to graduate school education. That being said, I think the general principles post-graduation still hold up- pay down your debt as quickly as reasonably possible, because being debt free (and ultimately saving enough money that you're working because you want to, not because you have to) is true freedom.
 
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I love Dave Ramsey, and I definitely like his attitude to tell people to live within their means, but I agree with those above who say that he doesn't always seem to consider enough variables in the equation. He is overly obsessed with being debt free, without consideration of long term results. I think about the many times people post on here and say that they have a job where they make $80,000 or something similar, and they want to work a few years before med school so that they can take less debt, which is long term a bad idea since they are trading years making 80k for years making 200k+ just to avoid another 100k in debt.
 
username456789 said:
Unless you refinance.
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Please tell me what type of debt gets passed on to family. I realize that your estate which you may have planned on being handed over in a will can get ceased to pay off debts, but debt collectors do not have any legal action to pursue family members for debts of deceased that I'm aware of.
 
Donald Juan said:
I love Dave Ramsey, and I definitely like his attitude to tell people to live within their means, but I agree with those above who say that he doesn't always seem to consider enough variables in the equation. He is overly obsessed with being debt free, without consideration of long term results. I think about the many times people post on here and say that they have a job where they make $80,000 or something similar, and they want to work a few years before med school so that they can take less debt, which is long term a bad idea since they are trading years making 80k for years making 200k+ just to avoid another 100k in debt.
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I was sort of in that situation- I could save 10-20k a year, but seriously, it would take me 20 years to have saved enough to pay for my education, at a total cost of over two million dollars in lost opportunity.
 
I think the White Coat Investor has uncovered quite a few things that Dave Ramsey gets wrong when it comes to med students and physicians. Still, WCI has sound advice as well, particularly about switching houses, spouses and practices.
 
Mad Jack said:
Ramsey would advise not taking on 300k in debt to increase one's lifetime earnings by $4.5 million. His advice is great for ordinary people, but doesn't hold up when it comes to graduate school education. That being said, I think the general principles post-graduation still hold up- pay down your debt as quickly as reasonably possible, because being debt free (and ultimately saving enough money that you're working because you want to, not because you have to) is true freedom.
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+1
 
cbrons said:
$480,000 is not worth it for any degree
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If you can guarantee a 1 mil return in 4 years (which would be about average for a physician in a decent setting), that's not too big of a deal.
 
Prilozack said:
If you can guarantee a 1 mil return in 4 years (which would be about average for a physician in a decent setting), that's not too big of a deal.
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After taxes on that income and with accruing interest on that debt load of about 35k a year, you'll probably halve that debt living on 50k a year. You're looking at 8 years living on 50k a year to make that go away.
 
I'm going to take a stab at what @The White Coat Investor investor would say: Ramsey is right that that debt is ridiculous and strictly from a financial standpoint it likely would have been wiser for this individual to not go to dental school. Despite this he can still be financially successful if he lives frugally for the next ~8+ years and pays off his debt aggressively.

I ran the numbers myself below, and it looks pretty bad. By my rough calculations he'd have to live off of 35k/yr for 11+ years to pay off the debt.

80k salary (120k pretax)
Live off of 35k and spend 45k on debt.
At this rate it would take almost 11 years to pay off this debt. I didn't take into consideration any salary increases he would get but I also didn't take into consideration the interest on the debt.
 
Dave Ramsey hates all debt. While he's right about hating credit card debt, and often about car debt, it's not that easy for most of us to never get out a loan for anything. It's unreasonable for most of the population to pay for a house or a medial school education in cash.
 
Prilozack said:
I agree 100% with the principles Dave Ramsey promotes. There is, however, an exception to a few of his "guidelines". One is the credit card. I personally have a credit card and believe it is a great thing if treated like a debit. You do have to have self control, but the cash back and rewards are numerous if it's used and paid off immediately.

Second is medical school education. Yes, the debt is astronomical. But how many doctors do you see who are in their 40s still complaining about massive amounts of debt if they managed money wisely? Not many. It's about perspective. If you want an extravagant lifestyle...yeah, you might be having lots of debt. If you live modestly until you can afford to do otherwise, it won't take too long to pay things off.
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Do you think you're going to hear your superiors complain about their loans? "managing money wisely" is not a very common thing in the medical world. Tons of docs with sizable loans in their 40s. They're just not broadcasting it to the world.
 
Flashfan said:
I think the White Coat Investor has uncovered quite a few things that Dave Ramsey gets wrong when it comes to med students and physicians. Still, WCI has sound advice as well, particularly about switching houses, spouses and practices.
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I tried to switch my spouse but she wasn't having it 😉
 
PL198 said:
Do you think you're going to hear your superiors complain about their loans? "managing money wisely" is not a very common thing in the medical world. Tons of docs with sizable loans in their 40s. They're just not broadcasting it to the world.
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Plus, physicians currently in their 40s had significantly lower debt burden, and generally with much lower interest rates.

Apples and oranges.
 
DocWinter said:
After taxes on that income and with accruing interest on that debt load of about 35k a year, you'll probably halve that debt living on 50k a year. You're looking at 8 years living on 50k a year to make that go away.
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I'd still take that if I were single or wasn't planning on having kids, but I've also lived on far less than that for a while and had a life before med school. Guaranteed six figures after that still sounds like a pretty sweet deal to me.
 
Worked in finance for a long time, managed money for many physicians; Dave Ramsey preaches good guidelines for the general population, but he assumes his listeners are bad with money (that's the basis for his show). For somebody that understands investing, cash flow, interest, etc. -- the $480k debt vs $120k income is actually not a bad situation. I suspect even the majority of the interns at my previous job would erase that debt in ~8 years without sacrificing much of anything in the way of living standards.

That's without even considering any of the IBR programs available for these circumstances, which is what Dave Ramsey should have been recommending to his caller.
 
Azete said:
Worked in finance for a long time, managed money for many physicians; Dave Ramsey preaches good guidelines for the general population, but he assumes his listeners are bad with money (that's the basis for his show). For somebody that understands investing, cash flow, interest, etc. -- the $480k debt vs $120k income is actually not a bad situation. I suspect even the majority of the interns at my previous job would erase that debt in ~8 years without sacrificing much of anything in the way of living standards.

That's without even considering any of the IBR programs available for these circumstances, which is what Dave Ramsey should have been recommending to his caller.
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Didn't IBR pass in 07 so shouldn't we be hearing about some people paying out this coming year?
 
Azete said:
Worked in finance for a long time, managed money for many physicians; Dave Ramsey preaches good guidelines for the general population, but he assumes his listeners are bad with money (that's the basis for his show). For somebody that understands investing, cash flow, interest, etc. -- the $480k debt vs $120k income is actually not a bad situation. I suspect even the majority of the interns at my previous job would erase that debt in ~8 years without sacrificing much of anything in the way of living standards.

That's without even considering any of the IBR programs available for these circumstances, which is what Dave Ramsey should have been recommending to his caller.
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Lol wut?

Erasing it in 8 years means:

480/8 = pay 60k/yr.

He takes home 80k of that 120. That means he lives off of 20k/yr for 8 years...And that's without adding in the interest.

How do you live off of ~15k/yr for 8 years "without sacrificing much of anything in the way of living standards"?
 
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Prilozack said:
Yes, the debt is astronomical. But how many doctors do you see who are in their 40s still complaining about massive amounts of debt if they managed money wisely? Not many. It's about perspective. If you want an extravagant lifestyle...yeah, you might be having lots of debt. If you live modestly until you can afford to do otherwise, it won't take too long to pay things off.
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As mentioned above, most docs in their 40's had half or less of the average student loan debt now. Yes, I know attendings who are still paying off their loans after graduating 15-20 years ago, and I think it's a bit ridiculous, but the difference in my loan burden from someone who graduated the year I started is quite high, on the order of 50-100K less. Just in 4 years.

Donald Juan said:
I think about the many times people post on here and say that they have a job where they make $80,000 or something similar, and they want to work a few years before med school so that they can take less debt, which is long term a bad idea since they are trading years making 80k for years making 200k+ just to avoid another 100k in debt.
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Many physicians won't make 200k+. I probably won't ever. I'm anticipating breaking 150k in about 10 years. My first job out of residency will probably get me somewhere around 100-120K. So depending on the length of time they're looking to save up, the 100K that you take out for med school will ultimately become more like 200K, so it might be worth it for some. Not all, not most, but some, depending on their career aspirations.

PL198 said:
Didn't IBR pass in 07 so shouldn't we be hearing about some people paying out this coming year?
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In theory, next fall (Novemberish), the first people will be eligible, assuming that they worked for 10 straight years at a not-for-profit institution and didn't miss any payments.
 
Yadster101 said:
Lol wut?

Erasing it in 8 years means:

480/8 = pay 60k/yr.

He takes home 80k of that 120. That means he lives off of 20k/yr for 8 years...And that's without adding in the interest.

How do you live off of ~15k/yr for 8 years "without sacrificing much of anything in the way of living standards"?
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This is the audience Dave Ramsey is targeting.
 
mvenus929 said:
As mentioned above, most docs in their 40's had half or less of the average student loan debt now. Yes, I know attendings who are still paying off their loans after graduating 15-20 years ago, and I think it's a bit ridiculous, but the difference in my loan burden from someone who graduated the year I started is quite high, on the order of 50-100K less. Just in 4 years.



Many physicians won't make 200k+. I probably won't ever. I'm anticipating breaking 150k in about 10 years. My first job out of residency will probably get me somewhere around 100-120K. So depending on the length of time they're looking to save up, the 100K that you take out for med school will ultimately become more like 200K, so it might be worth it for some. Not all, not most, but some, depending on their career aspirations.



In theory, next fall (Novemberish), the first people will be eligible, assuming that they worked for 10 straight years at a not-for-profit institution and didn't miss any payments.
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Why do you expect that range of a salary? Is that not the higher range for PAs? Just from my knowledge, and searches using indeed and monster, I can't seem to see many cases where a physician gets paid less than 200k...Where should I look for accurate salaries?
 
Speaking as a current college graduate stuck in a dead end job, Id take out 480K/year if it means Id be able to make a guaranteed 120K/year income.
 
GypsyHummus said:
Speaking as a current college graduate stuck in a dead end job, Id take out 480K/year if it means Id be able to make a guaranteed 120K/year income.
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Thats 120k job + 480k debt after dental school so you'd be ~30yrs old. If you pay it off over 20 years you'd be paying ~41k for 20 years (6% interest). So from age 30 to age 50 your take home would be 80k - 41k = $39,000. You'd literally be WAY better off never going to college and slowly working your way up to $18/hr.
 
Yadster101 said:
Thats 120k job + 480k debt after dental school so you'd be ~30yrs old. If you pay it off over 20 years you'd be paying ~41k for 20 years (6% interest). So from age 30 to age 50 your take home would be 80k - 41k = $39,000. You'd literally be WAY better off never going to college and slowly working your way up to $18/hr.
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Assuming this fellow is a general dentist, there are plenty of underserved/load repayment programs. Also, this assumes that rate of pay stays stagnant, which is very unlikely. Honestly, the dude needs to find an offer in the rural middle of nowhere and start making real money. But I imagine his pampered wife wants to live in the city 😉

Edit: Pampered based solely on the fact that it sounds like she is NOT working. Their choice, but obviously two incomes are better than one.
 
Yadster101 said:
Thats 120k job + 480k debt after dental school so you'd be ~30yrs old. If you pay it off over 20 years you'd be paying ~41k for 20 years (6% interest). So from age 30 to age 50 your take home would be 80k - 41k = $39,000. You'd literally be WAY better off never going to college and slowly working your way up to $18/hr.
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Meh, I can live off of 20k/year

So let's say I do. Take home is prolly like 80k with a 120k gross. So I pay 60k/year to debt. So like 15 years, 10 if more aggressive
 
If we do things for money alone, we will be unhappy. If we do things for passion alone, we will starve. There has to be a balance I suppose...
 
moy505 said:
You were just proven to be completely wrong with pure objective numbers. What are you talking about?
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I know we're on a forum for medical professionals, but is supplemental income really that foreign of a concept here?
 
@PL198
Dude I used to have a hat that said back to back world war champs! I wore it to school one day and some pre-pharmacy kid in my chemistry lab told me it was messed up. I basically told him to go shove it. Pardon the interruption 🙂
 
TheaterOfTheme said:
Why do you expect that range of a salary? Is that not the higher range for PAs? Just from my knowledge, and searches using indeed and monster, I can't seem to see many cases where a physician gets paid less than 200k...Where should I look for accurate salaries?
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That's what I was thinking- could be doing academic peds in the big city or something, but there is no field in medicine that you do not at least have the opportunity to make 200k+ if you are willing to relocate or put in extra hours. Making less is a choice, basically.
 
mvenus929 said:
As mentioned above, most docs in their 40's had half or less of the average student loan debt now. Yes, I know attendings who are still paying off their loans after graduating 15-20 years ago, and I think it's a bit ridiculous, but the difference in my loan burden from someone who graduated the year I started is quite high, on the order of 50-100K less. Just in 4 years.
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It's actually worse than that. Docs in their 40s not only had half the principal we do today, but their debt didn't compound in residency. What they actually owed at the ens if residency was closer to a fourth of what docs today will pay. Of course, that also meant shorter repayment plans, so most of them will actually pay a fifth or a sixth of what the average doctor graduating residency today will.

Compound interest is terrifying
 
Someone reposted these videos in the dental forum. It's a sad sight; bad times for all entering into that profession with their very high tuition costs and lower floor salaries. When the blanket response to financing dental school is "join the military" you know things are heading south.
 
Perrotfish said:
It's actually worse than that. Docs in their 40s not only had half the principal we do today, but their debt didn't compound in residency. What they actually owed at the ens if residency was closer to a fourth of what docs today will pay. Of course, that also meant shorter repayment plans, so most of them will actually pay a fifth or a sixth of what the average doctor graduating residency today will.

Compound interest is terrifying
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Lots of them from that generation (i.e. in their 40s now) were also able to consolidate their loans in the early '00s at less than 3.0% aggregate, too. They have little reason to prioritize their student loans compared to investing in the market, especially during the rally of the market from 2009 to present.
 
Perrotfish said:
It's actually worse than that. Docs in their 40s not only had half the principal we do today, but their debt didn't compound in residency. What they actually owed at the ens if residency was closer to a fourth of what docs today will pay. Of course, that also meant shorter repayment plans, so most of them will actually pay a fifth or a sixth of what the average doctor graduating residency today will.

Compound interest is terrifying
Click to expand...

 
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OutRun said:
Someone reposted these videos in the dental forum. It's a sad sight; bad times for all entering into that profession with their very high tuition costs and lower floor salaries. When the blanket response to financing dental school is "join the military" you know things are heading south.
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my favorite part is when dental graduates act like the US armed forces is handing out these repayment programs like candy. Apparently they are not aware that the military is suffering from budget cuts as well. F-35 fighter jet anyone?
 
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jeffk805dent said:
my favorite part is when dental graduates act like the US armed forces is handing out these repayment programs like candy. Apparently they are not aware that the military is suffering from budget cuts as well. F-35 fighter jet anyone?
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And let's just say being in Afghanistan doesn't prevent your teeth from cracking.
 
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