Does debt matter that much?

[John Lannister]

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As a kid from an upper middle class family, going to a state school and working part time through the four years I came out of college with some consumer debt but no student loans (very thankful for that).

Once I had decided on med school I looked at the debt I would be accruing (~240,000 @ 6-8%) and talked to my dad (who has always had sound finances imo) - I just couldn't fathom being in that much debt. He thought about it for a while and then told me to consider it a cost of business - the cost over the next 15-25 years that I will have to repay to do what I want to do. He took his good friend as an example, who has to rent his work space, hire a couple workers, pay for overhead, etc and that comes to a a monthly sum, just as my repayment comes to some monthly payment x (yes, I have calculated exactly how much that will be in various repayment plans).

Sure, this can be considered financial shackles, but its a) not that uncommon in the business world and b) in return I get to do exactly what I want to do with my life and get paid a substantial surplus on top. I won't have to worry about feeding or clothing myself and maybe even be able to afford the same financial support to my kids without spoiling them, as my parents did. Even at the lowest 5% of the average pay for my target peds subspeciality, doing some gross calculations, I will live a very reasonable life.

Debt matters, because you have to be smart about it. If you don't care about 100k vs 200k in debt you are a fool. But even $300k wouldn't have kept me from pursuing this path. There are values in this job beyond $$$ - job security, job satisfaction, intellectual stimulation, and happiness all factored into my decision to shoulder the debt (or cost of business) and I've never regretted it.

Agreed.

Even though we argue, I hope everyone realizes I'm just trying to give you good advice that I hope will help you in the future. Minimizing your debt will make you better off. Trust me. And yeah, if you have to borrow some to get into this field - it's a good deal for many of us.

Good luck.👍

 

[Stellar Clouds]

Huh? So the main reason UCSF grads get into better residencies than U Oklahoma or Texas Tech grads is because they work harder in SF?

Those lazy Sooners. 🙄

You make a good point, but the purpose of my statement was to say that anyone, from any school can get into an outstanding residency program. I'm sure those Sooners and Red Raiders work just as hard as anyone else.

I think one of the big points people miss when looking at match lists is the students' preferences for location. For instance, in both Texas and Oklahoma, the medical students are composed of >90% in-state residents. I cannot speak for Okalahoma, but I can for Texas--for some strange reason, the people in Texas do not want to leave Texas. Either they fear they will flat out die in another state or are deathly afraid their guns will be taken away from them (which will also result in death). If you look at the match lists in Texas, the majority of people stay in Texas (or stay in a near by state...the distance you move from Texas is inversely proportional to the amount of time you can leave Texas before you die).

If you are going to assign one main factor that "UCSF grads get into better residency programs," it is not prestige of the school. It is probably not that they work harder. It is more likely to be personal preference of the individual students.

Edit: not sure why there is a thumbs down...lol

 

[mimelim]

Huh? So the main reason UCSF grads get into better residencies than U Oklahoma or Texas Tech grads is because they work harder in SF?

Those lazy Sooners. 🙄

No. It is because they are better students. If you start with better students, you will end with better products. It has little to do with the school.

 

[Dmr6186]

What are people doing that they put themselves into so much debt? Obviously you can't avoid things like the absurd tuition rates, housing, food, but what else are they doing to hurt themselves? I'm not in med school yet so I really have no clue, but it'd be helpful to know what to avoid.

 

[sazerac]

They aren't taking a gap year and moving to Texas.

 

[deleted307836]

What are people doing that they put themselves into so much debt? Obviously you can't avoid things like the absurd tuition rates, housing, food, but what else are they doing to hurt themselves? I'm not in med school yet so I really have no clue, but it'd be helpful to know what to avoid.

The three factors you mentioned really are enough to create surprisingly large debt loads. I don't think it's unreasonable for a single person to spend 20k/year in living expenses... add that to 45-50k in tuition (like the school in your signature charges, I believe?) and you easily approach 300k without interest accrual and without undergrad debt.

That said I'm sure that there are students who live irresponsibly by overspending or indulging in expensive habits. I think the best anyone can do is to keep their living expenses as cheap as reasonably possible, and adhering to a budget for things like entertainment and food/groceries, etc.

 

[Textbookversion]

No. It is because they are better students. If you start with better students, you will end with better products. It has little to do with the school.

Better students that can't break a 230 average on USMLE as a class? Okay.

The people that match as well as folks at UCSF are pulling 240-260's on step 1 or are mud phuds. The reality is prestige breeds prestige.

You can certainly match anywhere from a lower ranked school, but you have to walk on water.

 

[Textbookversion]

There are people in this thread talking about going to school in texas and paying 12k like that is typical.

OF COURSE if you are going to save that much money it's worth going to that school.

The realistic scenario for most people though is more like 25-30k on the state school vs 40-45k at the higher ranked private school, and in that scenario if you feel like you'll be happier at the private school I think it's worth it.

Debt really is not that big of a deal. There are a lot of residents in this thread crying about it. It really isn't hard to pay off when you are making >250k. Those that have money problems as a physician are those that make very expensive decisions like having 8 kids, or getting married and divorced to bimbos.

 

[jerseytrash]

No. It is because they are better students. If you start with better students, you will end with better products. It has little to do with the school.

Yeah no. Having high MCAT scores and high GPAs coming from an Ivy school where daddy went so they got grandfathered in does not necessarily mean they were good students. I know people from "top" med schools who did very average and were still given the benefit of the doubt b/c of "name prestige". It's a lot of nonsense and BS.

 

[jerseytrash]

There are people in this thread talking about going to school in texas and paying 12k like that is typical.

OF COURSE if you are going to save that much money it's worth going to that school.

The realistic scenario for most people though is more like 25-30k on the state school vs 40-45k at the higher ranked private school, and in that scenario if you feel like you'll be happier at the private school I think it's worth it.

Debt really is not that big of a deal. There are a lot of residents in this thread crying about it. It really isn't hard to pay off when you are making >250k. Those that have money problems as a physician are those that make very expensive decisions like having 8 kids, or getting married and divorced to bimbos.

There is a big difference between 250k and 350-450k of debt. I do agree about living within your means though, which a lot of students, residents, and doctors simply don't do.

 

[dwills]

I think it's a bit over blown.

My cousin payed off 200k of debt in her first year as an attending (she's doing EM). Just continue to live like a resident or have a spouse that works.

Even with 500k in loans and going into FM, with IBR and other loan forgiveness programs you should still take home >100k per year. Unless you're trying to be a balller, that's plenty of money. Hell that's even enough money to raise a family of four with a spouse that doesn't even work!

Wonder why no one is crying for physicians? Because even the bottom quartile of earners when factoring debt are in the the top quartile of everyone else.

Don't stress out.

 

[ChiDO]

Anyone who says debt doesn't matter is clueless....Debt matters a lot. The less you have it the more you can enjoy things and begin your life. Pick the cheaper school everytime. Full ride at state school > Harvard with 300k debt.

If you are going to get a 250 on the USMLE, you'll get it at Podunk MD or Hopkins. If you are going to get a 220, going to Harvard isn't going to get you a 250.

 

[notbobtrustme]

No. It is because they are better students. If you start with better students, you will end with better products. It has little to do with the school.

lol ok

Every medical school is full of students who were wait-listed at "better" schools. The nature of the admissions game ensures that.

 

[badasshairday]

Debt matters.

Especially while your a resident and early on after becoming an attending.

You want to buy a house? Want to qualify for a physician loan? Too bad, your debt to income ratio is too bad. IBR payments higher during residency hurts too. Want to buy a car? Oops, too much debt. Well hmm, 200K in debt vs 300K is huge... oh you say, just live like a resident for 2-5 more years. How about NO, i'm done with that, been doing it for more than a decade. By then will have a family with zero to my name. No investments, no retirement, no tax deductions from owning a home, nada, zip, zilch. Get out of here with this nonsense that debt doesn't matter. You must come from a well to do background if you are so naive about money and debt.

I can't imagine how much it sucks if both spouses have huge debts or one spouse has a very low paying job. Shoot, I have a sugar momma and have 45K in savings now as a resident. Should I throw that all into my never ending fire of educational debt or actually invest right now. Housing prices are low, we can get a tax deduction for next tax year, and actually have something tangible to show for. Rather do that than money at this ridiculous debt. But you know what, one day I have to pay it off so I am working on that too. It is just a freaking monkey on your back and you feel like you don't have true freedom. The worst feeling is that the interest itself is 950$ a month before you even hit principle. That stinks. Plus you just start earning in residency and it stinks more to use nearly your whole income at your debt if you are realistically trying to pay it off.

 

[45408]

JPP style:
Debt matters. A lot.

Having a several thousand dollar a month debt is a shackle. You are chained to your job. Hate your boss? Tough. Getting overworked? No one cares. Think you're undercompensated? Ha! Decide you want to change careers/specialties? Don't even bother.

Exactly. If you take on any kind of debt in the range of $200,000+ then you are bound to this job. You will be stuck. My plan is to achieve financial freedom (see Mr. Money Mustache) as soon as possible, so that I am working as a surgeon because I enjoy it, not because I have to service some monstrous debt, alimony and two mortgages.

They say death and taxes are the only certainties in life, but you can add your med school loans to that list too. As soon as I can get rid of them, I will.

Understand I agree with almost all of what you are saying. Even people with large salaries have to live within their means, and debt is tough for anybody. But, realize that people with average salaries can't just quit their jobs at the drop of a dime because they are tired or hate their boss. Many of them have families they are providing for, and even people that make $10/hr at low skill positions have stress. Yes, people can find new jobs, but so can physicians. You seem to think that a physician who doesn't like the hospital/practice they work at can't look for a new job at a different hospital or practice.

Sure, but you still have to be a physician, and it's pretty hard to change specialties too. Most professions aren't as tightly bound to their careers as a physician with several hundred thousand in loans.

 

[45408]

Shoot, I have a sugar momma and have 45K in savings now as a resident. Should I throw that all into my never ending fire of educational debt or actually invest right now. Housing prices are low, we can get a tax deduction for next tax year, and actually have something tangible to show for. Rather do that than money at this ridiculous debt.

If you don't have children or won't be having them in the near future, then don't buy a house. Put $30,000+ of that toward your loans. Definitely keep some money in savings, but I can all but guarantee that buying a house in your situation is not the best idea. You're probably not going to be at the same place for nearly long enough to make it worthwhile.

I did buy a house, but it was because I was going for a 5 year residency, had a child (and then had another), got an $8000 tax credit, bought a pretty cheap house, had fairly low property taxes, and my wife really wanted a house. My closing costs were around $6000, much of which is just "thrown away." I've spent at least $8000 (per Mint) and quite a few hours of my time on small fix-it items and big things, like the roof leak and resulting drywall damage.

 

[badasshairday]

If you don't have children or won't be having them in the near future, then don't buy a house. Put $30,000+ of that toward your loans. Definitely keep some money in savings, but I can all but guarantee that buying a house in your situation is not the best idea. You're probably not going to be at the same place for nearly long enough to make it worthwhile.

I did buy a house, but it was because I was going for a 5 year residency, had a child (and then had another), got an $8000 tax credit, bought a pretty cheap house, had fairly low property taxes, and my wife really wanted a house. My closing costs were around $6000, much of which is just "thrown away." I've spent at least $8000 (per Mint) and quite a few hours of my time on small fix-it items and big things, like the roof leak and resulting drywall damage.

Yeah, I've been weighing my options. Finishing up intern year and moving onto my advanced position in a different city (4 years minimum, potentially 5 if I stay there for fellowhsip.. not sure though). Not planning on kids for at least another 2 years, but not much longer than that.

Looking to purchase something sub-250K, preferably a condo sub-200K. Physician loan available from one of the banks. I applied to it and am waiting to see if we get approved. It is 5% down only, interest rate is a hair higher than market but should be 3ish% still. I just don't like the idea of throwing down rent money which can be the same as the mortgage. The rent gives me no deductions but the house will give my a benefit.

But you are definitely right about dealing with ownership things. Hoping to buy a house <20 years old, pref <10 years old but we will see... Things are still up in the air. Appreciate the input.

 

[John Lannister]

Debt matters.

Especially while your a resident and early on after becoming an attending.

You want to buy a house? Want to qualify for a physician loan? Too bad, your debt to income ratio is too bad. IBR payments higher during residency hurts too. Want to buy a car? Oops, too much debt. Well hmm, 200K in debt vs 300K is huge... oh you say, just live like a resident for 2-5 more years. How about NO, i'm done with that, been doing it for more than a decade. By then will have a family with zero to my name. No investments, no retirement, no tax deductions from owning a home, nada, zip, zilch. Get out of here with this nonsense that debt doesn't matter. You must come from a well to do background if you are so naive about money and debt.

I can't imagine how much it sucks if both spouses have huge debts or one spouse has a very low paying job. Shoot, I have a sugar momma and have 45K in savings now as a resident. Should I throw that all into my never ending fire of educational debt or actually invest right now. Housing prices are low, we can get a tax deduction for next tax year, and actually have something tangible to show for. Rather do that than money at this ridiculous debt. But you know what, one day I have to pay it off so I am working on that too. It is just a freaking monkey on your back and you feel like you don't have true freedom. The worst feeling is that the interest itself is 950$ a month before you even hit principle. That stinks. Plus you just start earning in residency and it stinks more to use nearly your whole income at your debt if you are realistically trying to pay it off.

JPP style:
Debt matters. A lot.


Exactly. If you take on any kind of debt in the range of $200,000+ then you are bound to this job. You will be stuck. My plan is to achieve financial freedom (see Mr. Money Mustache) as soon as possible, so that I am working as a surgeon because I enjoy it, not because I have to service some monstrous debt, alimony and two mortgages.

They say death and taxes are the only certainties in life, but you can add your med school loans to that list too. As soon as I can get rid of them, I will.


Sure, but you still have to be a physician, and it's pretty hard to change specialties too. Most professions aren't as tightly bound to their careers as a physician with several hundred thousand in loans.

👍

Listen to people who have started to pay or have debt. DON'T listen to bright-eyed medical students who have yet to make a single payment.

 

[Stellar Clouds]

Yeah, I've been weighing my options. Finishing up intern year and moving onto my advanced position in a different city (4 years minimum, potentially 5 if I stay there for fellowhsip.. not sure though). Not planning on kids for at least another 2 years, but not much longer than that.

Looking to purchase something sub-250K, preferably a condo sub-200K. Physician loan available from one of the banks. I applied to it and am waiting to see if we get approved. It is 5% down only, interest rate is a hair higher than market but should be 3ish% still. I just don't like the idea of throwing down rent money which can be the same as the mortgage. The rent gives me no deductions but the house will give my a benefit.

But you are definitely right about dealing with ownership things. Hoping to buy a house <20 years old, pref <10 years old but we will see... Things are still up in the air. Appreciate the input.

I agree with you about not throwing money away on rent, but don't forget that the amortization schedule has you paying significantly more towards your interest than principle for the first several years of the loan. Additionally, don't forget about property taxes, home owner's insurance, and flood insurance (if you are in a flood plain)--these can add up to a significant amount of money.

 

[mimelim]

lol ok

Every medical school is full of students who were wait-listed at "better" schools. The nature of the admissions game ensures that.

I never understood people quoting someone and then talking about something different. The 'prestige' of the school you go to means very little. HMS puts out a great match list because they have great students. Not because somehow having the tag "HMS" makes them a stronger applicant for residency.

 

[ucladoc2b]

I agree with you about not throwing money away on rent, but don't forget that the amortization schedule has you paying significantly more towards your interest than principle for the first several years of the loan. Additionally, don't forget about property taxes, home owner's insurance, and flood insurance (if you are in a flood plain)--these can add up to a significant amount of money.

Well put. In reality, there really isn't much of a difference between homeownership and renting. You are either renting the home or renting the money.

 

[notbobtrustme]

I never understood people quoting someone and then talking about something different. The 'prestige' of the school you go to means very little. HMS puts out a great match list because they have great students. Not because somehow having the tag "HMS" makes them a stronger applicant for residency.

Harvard could teach it's graduates in Arabic and still have a stellar match list because it's H-****ing-MS.

 

[badasshairday]

Well put. In reality, there really isn't much of a difference between homeownership and renting. You are either renting the home or renting the money.

Tax deduction and potential to make money when homes increase in value.

 

[Textbookversion]

👍

Listen to people who have started to pay or have debt. DON'T listen to bright-eyed medical students who have yet to make a single payment.

Residents are about the worst people to listen to. They have started repayment, work all the time but make fast food salary on an hourly basis. Many start to have real responsibilities like children and spouses to support, or those responsibilities increase (wife can't work anymore, kids getting older and more expensive etc) and bills hanging over their heads.

I've been through this process before with my relatives. All through medical school it was kind of on the back of their minds. They hit residency and it was stressing them out all the time. Then you get that first paycheck as an attending, and suddenly the debt is a joke.

Check out the salary averages on medscape. Now add 50%. Because that's what you'll make working full time in BFE. The averages include academics (pays less), part-time workers and people working in areas with high saturation of providers.

It is not unusual to be making 350-500k as a specialist in private practice in a high demand area a couple of years out. It's just not. And the debt is a joke. I know it's hard to conceptualize getting a check for 40k every month but there you go.

I'm not saying this as like some sort of strange hypothetical. The people I know make on the high end of that. Check out the data. Ask around. Don't ask your academic general IM attending who is one year out of residency in the highest physician saturated area in the country, because he's probably making 90k.

If that's really your life goal, go for it. But understand 1 year of doing that, being an academic in a high physician saturation city, vs living in a high physician demand area wipes away years of lower tuition.

By all means save money, it's no skin off my back, I just think in certain cases it's worth the debt.

 

[John Lannister]

Residents are about the worst people to listen to.

Worse than med students?

Btw, I don't think there are any disagreements. Most of the statements are:

- Don't acquire a lot of debt
- You can pay back your debt
- Debt matters
- You can earn a high income

None of these contradict each other.

I know a lot about finance - and I'm just sharing real world advice to be conscious of the money you borrow. I personally saved over 100k principal off of my school choice, and I would have rather attended the more expensive school. Glad I didn't think debt isn't really important and I listened to those ahead of me. MD = MD (only exception is top 10 MD).

 

[Dr Dazzle]

How much debt is too much debt for a potential career in primary care? At what point are the returns not good? Seems you can easily rack up 200k to 300k. My IS school average is 170K.

 

[yehhhboiii]

How much debt is too much debt for a potential career in primary care? At what point are the returns not good? Seems you can easily rack up 200k to 300k. My IS school average is 170K.

that's before interest rates went from 3.4 to 6.8.
yours will be higher

 

[notbobtrustme]

Worse than med students?

I think just about every pre-med, med student, resident and attending are terrible about financial advice. The trope, which is not without considerable evidence, is that doctors are terrible with their money. The only person that anyone should trust is either a financial planner or themselves after doing considerable research.

Most of us didn't enter a career in medicine expecting to work with numbers much and outside of a few ratios and easy calculations, there isn't much math in medicine. And no one does math by themselves anymore, especially on the wards; they just plug it into their smartphone.

Residents are feeling the pinch, sure, but everyone making 50-60k today is feeling the pinch.

 

[FSU2013]

I think just about every pre-med, med student, resident and attending are terrible about financial advice. The trope, which is not without considerable evidence, is that doctors are terrible with their money. The only person that anyone should trust is either a financial planner or themselves after doing considerable research.

Most of us didn't enter a career in medicine expecting to work with numbers much and outside of a few ratios and easy calculations, there isn't much math in medicine. And no one does math by themselves anymore, especially on the wards; they just plug it into their smartphone.

Residents are feeling the pinch, sure, but everyone making 50-60k today is feeling the pinch.

no, a lot of financial advisors are out to take your money. They don't lose sleep talking about other people's money and debt - you will.

 

[45408]

Yeah, I've been weighing my options. Finishing up intern year and moving onto my advanced position in a different city (4 years minimum, potentially 5 if I stay there for fellowhsip.. not sure though). Not planning on kids for at least another 2 years, but not much longer than that.

Looking to purchase something sub-250K, preferably a condo sub-200K. Physician loan available from one of the banks. I applied to it and am waiting to see if we get approved. It is 5% down only, interest rate is a hair higher than market but should be 3ish% still. I just don't like the idea of throwing down rent money which can be the same as the mortgage. The rent gives me no deductions but the house will give my a benefit.

But you are definitely right about dealing with ownership things. Hoping to buy a house <20 years old, pref <10 years old but we will see... Things are still up in the air. Appreciate the input.

It can work, but you should calculate how much you're "throwing away" with mortgage interest, property taxes, PMI, closing costs, realtor fees (when you sell), maintenance costs, re-decorating, etc.

As of earlier this year, only $160 of my monthly payment was going toward my principal. Everything else was being thrown away. My rental options would have been less than what I'm "throwing away," but they weren't without their downsides, so we bought a house.

I agree with you about not throwing money away on rent, but don't forget that the amortization schedule has you paying significantly more towards your interest than principle for the first several years of the loan. Additionally, don't forget about property taxes, home owner's insurance, and flood insurance (if you are in a flood plain)--these can add up to a significant amount of money.

Absolutely.

 

[45408]

I think just about every pre-med, med student, resident and attending are terrible about financial advice. The trope, which is not without considerable evidence, is that doctors are terrible with their money. The only person that anyone should trust is either a financial planner or themselves after doing considerable research.

Most financial planners are actually trying to sell you a product. Like whole life insurance. Unless you have someone who you are paying a flat fee (which would be a significant hourly rate) or has their income tied to yours (like a hedge fund manager), then your best bet is to educate yourself and plan accordingly.

I disagree that "just about everyone" is terrible with financial advice. You just have to actively educate yourself.