economic feasibility of doing a PhD following graduation?

[uhohwhatever]

I'll try to keep this brief.

I'm looking at potentially pursuing a PhD following my PharmD. this is in large part because I'd like to go into research, the prospect of starting my own company/joining a startup is very enticing, and that I think it might be financially smarter than simply going into the job market (argument made below).

I've done some simple math and it suggests that pursuing a 4-year PhD following my PharmD (available due to my school's dual PharmD/PhD program), with some not-unreasonable assumptions, would result in equivalent (if not less) student loans following the 4 year PhD period. this is taking into account the high likelihood of getting an NIH grant (35k$ a year directed towards student loans), and the ability to pick up a once-a-week retail pharmacist position making ~65$/hr.

I was wondering if someone else might be able to jump in here and break down the numbers/call me out for missing something.

Some base assumptions:

1. this is taking place in the state of California
2. standard deductions for a single individual

Debt assumptions:

1. 200,000$ principal on graduation from PharmD
2. 30,000$ interest accumulated upon graduation from PharmD
3. 6.8% interest for all loans (this is higher than what the loans are actually at, but I figure it's better to be over-prepared)
4. capitalization occurs following 6 months of being out of school (starting the PhD would begin immediately after graduation from Pharmacy School)

PhD income assumptions:

1. 32,500$ stipend per year, subject to 2.5% increase per year
2. NIH grant for 35,000$ a year that directly goes towards student loans (NOT subject to increases) for all 4 years of the PhD program; this is paid out on a monthly basis
3. Supplemental income of an average of 8 hours a week working at a Pharmacy making 65.00$ an hour, not subject to increases (or maybe it would be... I'm not sure how per diem employees are valued)

Straight-into-workforce Income Assumptions:

1. Full-time job, 65.00$ an hour subject to 3-5% increase per year

Assume all take-home income more than 3000$ a month is directed towards student loans.
At the end of 4 years, what plan results in the lower amount of student loans left?

edit: I should add that, for all I know, getting a full-time job out of school at that rate might not even be feasible, and that a fellowship will be required (honestly I'm not sure how stiff the competition is in industry; I only ever really hear about retail/clinical), so it's possible that the straight-into-workforce calculations should be based on 2 years of having a fellowship pay

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[BMBiology]

$200 k x 6.8% = almost $14 k in interest for the first year.

Is your $35 k NIH grant considered as taxable income?

Is your planned once a week work in retail? Are you OK with traveling far just to work 8 hours (Extra gas money)? Are you going to be hired as a contractor (extra 6.2% social security and 1.45% medicare tax)?

What about living expenses?

Even if the $35 k is not considered as taxable income, I don't see you paying more than $14 k toward your loans (cost of first year interest).

Assuming you don't pay anything during those 4 years, expect:

$200 k + $14 k = $214 k
$214 k + $15 k = $229 k
$229 k + $16 k = $245 k
$245 k + $17 k = $262 k

You can get on PAYE during those 4 years but remember you would need to pay income taxes on whatever amount that is forgiven after 20 years. Expect 33% federal income tax plus 9% California state income tax.

I would have recommended PSLF but there is already talks about limiting the forgiven amount to just $57.5 k (non taxable income).

If my goal is to start a company, I would consider doing just the PhD. Forget about the PharmD. It is not as useful as some people may suggest. Why take on that much debt for a degree you are not really plan on using?

 

[uhohwhatever]

hey BMBiology --

thanks for the response. I'm a little confused as to where you're getting your numbers from, though.

per the NIH website, the NIH grant is described as following:

"Since loan repayments are considered as income for tax purposes, NIH will also make payments (credited to your Internal Revenue Service tax account) to cover the increased federal taxes you will incur as a result of receiving LRP benefits."

my calculations were as follows:

despite that, my calculations for 'yearly income' were as follows:

32,500$ (stipend) + 52*8*65.00$/hr (= 27,040$/yr) == 59,540$/yr

this was then entered into an ADP.com income calculator to get an idea of what my 'earnings' would be after taxes (http://www.adp.com/tools-and-resour...l-calculators/salary-paycheck-calculator.aspx).

with a single deduction, this came out to be $42,305.03/hr (or, ~3,500/month). as such, approximately 500$ a month would be going towards my student loans from my income (this amount would be variable depending... I'm sure some months I could pay more/work more, depending on PhD workload, and vice versa). this totals 6000$ a year from my income *plus* the 35,000$ from the NIH grant. in total, 41,000$ a year going towards student loan payments.

additionally, the interest on my loans would not be capitalizing because I'm still in school (I believe this is extremely important to the repayment calculations).

does this give you a better idea of where I'm coming from and why I might view it as a preferable option?

 

[sunshao]

very interesting. I am currently a pre-pharm that will be applying this upcoming cycle and was also interested in doing research, but doing it through a dual-degree program that would offer a PHD or MPH. Most schools require at least 7 years to get the dual degree

 

[BMBiology]

I am not exactly sure what you are asking. If it is not compounded, just take 8 k off from my calculation so 262 k to 254 k.

 

[y0ssarian87]

I'll try to keep this brief.

I'm looking at potentially pursuing a PhD following my PharmD. this is in large part because I'd like to go into research, the prospect of starting my own company/joining a startup is very enticing, and that I think it might be financially smarter than simply going into the job market (argument made below).

I've done some simple math and it suggests that pursuing a 4-year PhD following my PharmD (available due to my school's dual PharmD/PhD program), with some not-unreasonable assumptions, would result in equivalent (if not less) student loans following the 4 year PhD period. this is taking into account the high likelihood of getting an NIH grant (35k$ a year directed towards student loans), and the ability to pick up a once-a-week retail pharmacist position making ~65$/hr.

I was wondering if someone else might be able to jump in here and break down the numbers/call me out for missing something.

Some base assumptions:

1. this is taking place in the state of California
2. standard deductions for a single individual

Debt assumptions:

1. 200,000$ principal on graduation from PharmD
2. 30,000$ interest accumulated upon graduation from PharmD
3. 6.8% interest for all loans (this is higher than what the loans are actually at, but I figure it's better to be over-prepared)
4. capitalization occurs following 6 months of being out of school (starting the PhD would begin immediately after graduation from Pharmacy School)

PhD income assumptions:

1. 32,500$ stipend per year, subject to 2.5% increase per year
2. NIH grant for 35,000$ a year that directly goes towards student loans (NOT subject to increases) for all 4 years of the PhD program; this is paid out on a monthly basis
3. Supplemental income of an average of 8 hours a week working at a Pharmacy making 65.00$ an hour, not subject to increases (or maybe it would be... I'm not sure how per diem employees are valued)

Straight-into-workforce Income Assumptions:

1. Full-time job, 65.00$ an hour subject to 3-5% increase per year

Assume all take-home income more than 3000$ a month is directed towards student loans.
At the end of 4 years, what plan results in the lower amount of student loans left?

edit: I should add that, for all I know, getting a full-time job out of school at that rate might not even be feasible, and that a fellowship will be required (honestly I'm not sure how stiff the competition is in industry; I only ever really hear about retail/clinical), so it's possible that the straight-into-workforce calculations should be based on 2 years of having a fellowship pay

The $35,000 LRP award is not guaranteed. I think the success rates to acquire the award are < 50%, IIRC. Also, renewal of award is not guaranteed. Please also ensure your research is in one of the categories of research that qualifies (peds, clinical research, fertility/reproduction medicine).

You may also look into ROI on a PhD post-PharmD. An article by Hagemeier (sp?) comes to mind. Though, if you're passionate about the academic field, the decreased ROI may not be as much of a concern.

 

[homeslice]

Having some experience with this, I can tell you that you are most likely significantly overestimating your income (stipend + grant) during your PhD years.