Effective way to pay back loans?

[jhanago]

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So im trying to figure out a way to pay back loans as fast as I can and this is what I've come up with. Feedback?



Live with parents for 2-3 out of dental school (NYU) with wife. Work in underserved area (commute) under IHS and have them pay 25-30k a year towards student loans via repayment program. Pay my ENTIRE ~100k salary to student loans every year while living off my wife's 40k teacher salary... rent and utilities paid for while in my parents house, and use her salary for food and other personal bills. Have loan paid off in 2-3 years and then pay parents back for back-rent after I finish off the loans. Am I missing anything or am I being too optimistic?

Year 1 - 125k towards principal
Year 2 - 125k towards principal
Year 3 - Remaining balance paid

 

[UCF FINatic]

Living with your parents and paying it off in 3 years would be the best answer to your question in my opinion. Those 3 years will be rough, but after that you will have your freedom to go and practice where you choose; not to mention the financial freedom.

Also based on the interest rates and the price of NYU it might take longer than 3 years, possibly 4 years.

 

[jhanago]

Yeah I mean i will have my car paid off by then and rent and all that paid for.. me and my wife will have 40k for insurance, food, entertainment etc which when you factor out rent comes to a lot of money. 3k a month is plenty to live happily with minor bills.

 

[Msmouth]

More folks should think like you! Our country wouldn't be in the shape it's in if more were like you!
Good luck!

 

[AndrewNJ]

What is your backup plan when, 6 months into the first year after graduation, your wife decides she no longer wants to live with your parents? Never underestimate the strain that not having your own space can put on a marriage. Especially if its a new marriage, I highly recommend you guys have your own space, even if its just a small 1-bedroom apartment.

Also, your payment plan seems to rest on you getting a $140-150k/year job directly out of school and that may be unrealistic. Lastly, what is your plan in the event that you cannot get a decent associate position within commuting distance from your folks?

Oh and lastly, does IHS pay you the loan repayment portion at the end of each year? I know NHSC went to a 2-year commitment and you get paid at the end of those 2 years rather than half the sum at the end of each year. If that were the case for IHS, you would not pay $125k on loans the first year, meaning a greater portion of your payment gets eaten by interest.

Anyways, your head is in the right place, but you may be a bit too optimistic in paying off NYU in 2-3 years. Good luck though!

 

[A6project]

lol

 

[letsdoitbama]

This is essentially my plan as well. Have significant other support living expenses while paying off literally as much as possible until the loan is gone (or else VERY significantly reduced). Obviously you can't plan for every little thing, but the way I see it, giving away literally as much as possible of my income as I can is still better than being a medical resident for 3+ years!

side note: not worth living with parents in my opinion, could be an option for a little while but not something you want to bank on for 3 years.

 

[jhanago]

good thoughs but things to consider

- federal and state income tax, that is about ~38%.
- you are not guranteed for the loan repayment program, what if clinics near your parents house score too high to be qualified?
- your wife being unhappy with the situ (did you discuss about your plan with her yet)
- assuming NYU is ~400k, on 3rd yr, you still owe more than 125k.
- with 7.9% interests, first yr and 2nd yr just interests will be a lot
- your wife wanting to have a kid
- u need some saving for emegerency
- what if you don't get a job rightaway? Graduate Plus loan does not have a grace period.
- wife's 40k won't be 40k after taxes.

I say 5 yrs will be more financially feasible but then you are looking into a disaster either way. Rough relationship with your wife and parents, no money to spend, eat, or buy.
Live below your means but don't make your life miserable.

My parents live near an area that has a very rural underserved area so its only a 30 min commute to a bunch of clinics and one has to work out.. I talked to my wife and she likes the idea and she also likes the idea of having my parents around to help out with the kid.

40k won't be after taxes but its enough to get by without a mortgage or car payment.

I dont mind living with them and neither does she. It just seems like a good way to get the monkey off my back so I can live life without that deathly interest adding up constantly.

 

[Heligrin]

My parents live near an area that has a very rural underserved area so its only a 30 min commute to a bunch of clinics and one has to work out.. I talked to my wife and she likes the idea and she also likes the idea of having my parents around to help out with the kid.

40k won't be after taxes but its enough to get by without a mortgage or car payment.

I dont mind living with them and neither does she. It just seems like a good way to get the monkey off my back so I can live life without that deathly interest adding up constantly.

You wont be making 140K after taxes.

 

[A6project]

My parents live near an area that has a very rural underserved area so its only a 30 min commute to a bunch of clinics and one has to work out.. I talked to my wife and she likes the idea and she also likes the idea of having my parents around to help out with the kid.

40k won't be after taxes but its enough to get by without a mortgage or car payment.

I dont mind living with them and neither does she. It just seems like a good way to get the monkey off my back so I can live life without that deathly interest adding up constantly.

good for you! your wife is wonderful.

 

[iralex801]

Just a heads up. Recently, I've been reading about income-based repayment and I think it's going to change a lot of people's views on cost of D-school. I don't know all the details yet, but it seems interesting and a viable choice.

 

[jhanago]

You wont be making 140K after taxes.

I planned on making about 120k ish after dental school and having that go to about 125k when taxes are taken out and the loan repayment is added since it varies from 20-35. I'll call it 110k even after income taxes and + loan repayment.

The 40k is my wife's salary before tax.. 43-44 ish actually but, yeah.

 

[AwesomeTeeth]

Just a heads up. Recently, I've been reading about income-based repayment and I think it's going to change a lot of people's views on cost of D-school. I don't know all the details yet, but it seems interesting and a viable choice.

Income-based repayment? You won't be debt free until you're about 46 years old. Have fun lugging around a million dollars in debt 🙄

 

[AwesomeTeeth]

I planned on making about 120k ish after dental school and having that go to about 125k when taxes are taken out and the loan repayment is added since it varies from 20-35. I'll call it 110k even after income taxes and + loan repayment.

The 40k is my wife's salary before tax.. 43-44 ish actually but, yeah.

How much are you going to owe by going to NYU? You've only accounted for ~375K of debt so far. Are you living at home while going to NYU? If you aren't, living and tuition is going to be more then 375K with interest....

 

[jhanago]

How much are you going to owe by going to NYU? You've only accounted for ~375K of debt so far. Are you living at home while going to NYU? If you aren't, living and tuition is going to be more then 375K with interest....

Well I imagine if I live subtly while at NYU I should be able to lower the estimated cost. It's 100 a year for 4 years with living included. I imagine I can save about 2-400 bucks a month in various ways and have my wife work to pay the rent so we dont take out loans while im there. That should cut the living expenses on loans to about 7k a year and that cuts the living expenses down by about 100k over the 4 year period. Ish.

 

[Bis-GMA111]

yvan eht nioj

 

[jhanago]

yvan eht nioj

Lol. Loved that episode. The Navy is a no-go because I am having a kid while in dental school and no amount of money is good enough for me to miss my child's upbringing. If I didn't have to get deployed or could bring my wife and child on EVERY tour and deployment and all that, then that would be great. But i'm not willing to miss my kid growing up and his first words/walk etc et

 

[Bis-GMA111]

Lol. Loved that episode. The Navy is a no-go because I am having a kid while in dental school and no amount of money is good enough for me to miss my child's upbringing. If I didn't have to get deployed or could bring my wife and child on EVERY tour and deployment and all that, then that would be great. But i'm not willing to miss my kid growing up and his first words/walk etc et

respect. (serious)

 

[I Want Food]

Lol. Loved that episode. The Navy is a no-go because I am having a kid while in dental school and no amount of money is good enough for me to miss my child's upbringing. If I didn't have to get deployed or could bring my wife and child on EVERY tour and deployment and all that, then that would be great. But i'm not willing to miss my kid growing up and his first words/walk etc et

Just wanted to say you are a great father and husband 🙂 They are lucky to have you.

 

[Demps]

Hit the lotto jackpot

 

[iralex801]

Income-based repayment? You won't be debt free until you're about 46 years old. Have fun lugging around a million dollars in debt 🙄

Like I said, I don't know the details, but it's seems to be a good idea if you aren't making a lot of money as a dentist. Everyone always assumes that they are going to be extremely rich as a dentist, but it's not always the case.

Everyone also seems to have a completely structured plan to pay off their debt. What people don't realize is that most likely you are not going to follow that plan strictly when unforeseeable things happen in the future. Your income could change (recession), your wife could lose her job, you could get a divorce, your kid might be really sick, etc. With IBR, I believe it is a percentage of your income. IBR is not a good option if you're going to own some high-end cosmetic dental practice. But realistically, how many of those types of dentists are out there.

 

[AwesomeTeeth]

Like I said, I don't know the details, but it's seems to be a good idea if you aren't making a lot of money as a dentist. Everyone always assumes that they are going to be extremely rich as a dentist, but it's not always the case.

You make ~100k starting out as a dentist and depending on where you live. After taxes, it's about 75K.

IBR is not a good idea and should only be used as a last resort if you're in over your head. When you do IBR, you only have to pay 15% of your income max to pay off your loan. If you still haven't paid off your loan after 25 years, then they just wipe it clean. That means you'll be around 46 when your loan is wiped away.

Technically you could just pay the minimum for 25 years and then it'll vanish when you're 46. I'm guessing this is why people think IBR is going to solve all their problems. But the interest continues to accrue on your student loan so you'll literally be carrying around a million or more debt for 25 years. Not sure how well that's going to go when you try to buy a house, car, finance something, etc.

 

[iralex801]

You make ~100k starting out as a dentist and depending on where you live. After taxes, it's about 75K.

IBR is not a good idea and should only be used as a last resort if you're in over your head. When you do IBR, you only have to pay 15% of your income max to pay off your loan. If you still haven't paid off your loan after 25 years, then they just wipe it clean. That means you'll be around 46 when your loan is wiped away.

Technically you could just pay the minimum for 25 years and then it'll vanish when you're 46. I'm guessing this is why people think IBR is going to solve all their problems. But the interest continues to accrue on your student loan so you'll literally be carrying around a million or more debt for 25 years. Not sure how well that's going to go when you try to buy a house, car, finance something, etc.

True. I'm pretty sure Obama just signed a new law that it is now 10% of your income within 20 years. You're right though. I don't know how the interest accrued will affect other loans for houses, cars, etc.

 

[AllahIsGreater]

NYU does not cost $375k when you live at home.......more like $280k...

 

[A6project]

lol

 

[letsdoitbama]

Important thing about IBR is any remaining balance is counted as TAXABLE INCOME after I guess now 20 years. So yes interest will skyrocket and you will have one very, very, very large bill in 20 years. Oh, and that's if the government doesn't just decide to abolish the program in 15 years. Then, you are literally screwed for life. Anybody willing to take that chance?

 

[AwesomeTeeth]

This is kinda off topic but im thinking about specializing now. 🙁
I wanna do general dentistry, help people and do all good stuffs, but looking at the tuition and interest rates, I know i will be a deep shi t hole for next 20 years.

You do realize that some general dentists make quite a bit of money right? Like more then some specialists?

And you don't even know if you have what it takes to specialize. It's not something you just decide to do one day in dental school. You have to work hard for it and really know that it's want to do it for the rest of your life. Just worry about getting through dental school for now.

 

[A6project]

p

 

[UltimateHombre]

You do realize that some general dentists make quite a bit of money right? Like more then some specialists?

True, but not the majority... the averages speak for themselves.


Practice Net Income:

General Practice Dentists: $233,200
Periodontists: $279,540
Orthodontists: $290,200
Pediatric Dentists: $346,070
Endodontists: $366,340
OMFS: $516,260


https://www.ada.org/sections/profess...fs/09_sdpi.pdf

 

[AwesomeTeeth]

True, but not the majority... the averages speak for themselves.


Practice Net Income:

General Practice Dentists: $233,200
Periodontists: $279,540
Orthodontists: $290,200
Pediatric Dentists: $346,070
Endodontists: $366,340
OMFS: $516,260


https://www.ada.org/sections/profess...fs/09_sdpi.pdf

Lol notice where I said some general dentists. And keep in mind that there are thousands of new dental graduates every year who start out at ~100K. There are more then enough general dentists who are making 300K+ to help even out that average to 233K.

I just don't think you should decide to specialize right now because you want to make more money. How do you know you even like perio/ortho/peds when you haven't even started dental school yet?

 

[oae]

True, but not the majority... the averages speak for themselves.


Practice Net Income:

General Practice Dentists: $233,200
Periodontists: $279,540
Orthodontists: $290,200
Pediatric Dentists: $346,070
Endodontists: $366,340
OMFS: $516,260


https://www.ada.org/sections/profess...fs/09_sdpi.pdf

Does anyone think its a better idea to use some of the money to invest in other assets (ie. real estate, businesses, stable long-term stocks)?

Student loans I hear are super stress-free loans and the government doesnt hassle you. Interest rates on student loans are low, and generally speaking, its often very easy to get flexible payment plans at any point in time. All of these reasons,including other good reasons, are points to consider when trying to pay off student loans in 4-5 years. It may not necesarily be the best investment.

For example, a dentist graduate right now. He works for 1 year and brings home 100,000 (after all other expenses in his life).

if he invested 50,000 in real estate, and the other 50,000 towards student loans, wouldnt this be better, because the potential to earn wealth from a smart investment may be much greater than benefits of paying off student loan debt quicker.

Inflation also plays a role here. Money loses its value over time. $100,000 dollars in the 1980s was ALOOOOOTTTTTT. Dentists from the 1980's who might still be paying back student loans debt today are probably laughing at that 100,000 dental school cost cause its a chump change Where as if these same dentists had purchased $20,000 beach penthouses in Miami which are worth in the millions today probably dont care that they are still repaying student loans debts.


Any opinions? Enlighten me someone

 

[A6project]

p

 

[AwesomeTeeth]

For example, a dentist graduate right now. He works for 1 year and brings home 100,000 (after all other expenses in his life).

A dentist who just graduated is not going to be bringing home $100,000 unless he inherits his dad's practice or has some great connection. A fresh graduate makes ~100K which is 75K after tax. After that, it's hard to predict where all the money goes because everyone is different. Some have families, some are going to pay rent, others are going to be living at home, some went to private schools, etc. Every situation is different. There's no financial plan that fits everyone.

Does anyone think its a better idea to use some of the money to invest in other assets (ie. real estate, businesses, stable long-term stocks)?

When you first graduate, no I don't think you should be investing in real estate/business/stocks/etc. That's just my opinion. Your greatest investment in the future will be your own office and the faster you pay off your loan, the faster you can get started on saving up.

 

[UltimateHombre]

Lol notice where I said some general dentists. And keep in mind that there are thousands of new dental graduates every year who start out at ~100K. There are more then enough general dentists who are making 300K+ to help even out that average to 233K.

I just don't think you should decide to specialize right now because you want to make more money. How do you know you even like perio/ortho/peds when you haven't even started dental school yet?

I wasn't trying to start any type of argument, i was just saying that specialists generally make more than GPs, thus making paying back loans easier/faster. Also, your same logic applies to the rest of the specialties... there are more than enough endodontists making 420K+ to even the average out to 360K.

But i agree with you, that nobody should ever be dead set on specializing before dental school... especially when we don't know if we can cut it academically.

But your same logic could be applied to dentistry in general... how do you know you want to be a dentist? I mean you haven't even started dental school? Usually shadowing, pay, life style, family member, etc, lead to the determination of a predent becoming a dentist. Same logic could be applied to a predent desiring to specialize right?

 

[UltimateHombre]

Does anyone think its a better idea to use some of the money to invest in other assets (ie. real estate, businesses, stable long-term stocks)?

Any opinions? Enlighten me someone

My personal plan would be to max out my retirement funds and Roth IRA, then the rest would go to paying down student loans.

Retirement funds and Roth IRA are very low risk, with good yield, especially if your employer matches funds. I will get into higher risk investments (real estate, stocks, etc) after my loans are paid off.

Again, this is a basic game plan, but running everything by a financial adviser is definitely your best bet.

 

[coolbeans123]

But your same logic could be applied to dentistry in general... how do you know you want to be a dentist? I mean you haven't even started dental school? Usually shadowing, pay, life style, family member, etc, lead to the determination of a predent becoming a dentist. Same logic could be applied to a predent desiring to specialize right?

I believe its different when you want to be a dentist. Its a life dream. Specializing is another story.

 

[AndrewNJ]

Just an FYI, kids are expensive. I think it is going to be VERY difficult to raise that kid right and take care of all other ancillary costs on ~$30k after tax.

And it doesn't sound like you are factoring interest into your payment plan. Even if you only take out $280k, by the time you graduate thats probably going to be $330k. Even if you manage to put $125k/year towards it, its going to take over 3 years.

 

[yappy]

I agree that no one can know for sure they want to do specialty X; however, it seems smart to work hard and aim at the grades needed to get into one. That way you're not closing any doors.

However, during D school you can always find that you enjoy general dentistry alot or you may just not have what is needed to get the class rank. But if you can why not keep your options open?

I believe its different when you want to be a dentist. Its a life dream. Specializing is another story.