briansmichaud

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i am just ready to start my medical training so excuse me if my question is naive. i thought i have heard of physians paying off their tremendous debts relatively fast after med school/ residency. for instance, lets say you are single, no kids, etc... and you pull crazy hours. is this possible/ realistic? i have heard of physicians "moonlighting"?? can stuff like this only be done after resident training? can you make extra money during residency??

please share any personal stories or stuff you have heard through the grapevine. i appreciate any comments. i hope this wasn't a lame question, but i thought i have heard of instantces like this

thank you
 

JonnyG

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just move to a place without a lot of doctors and get tuition reimbursement. In central PA, there are certain companies that own hospitals that pay you a regular (good) salary and then after 3 years pay a 100K of your tuition debt.
 

docbill

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From what I have been told..

YEs you can moonlight durring residency.. prob not first but later in second and third etc... a friend of mine is 3rd year residency and is doing really well this way.
 

docslytherin

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the problem with moonlighting now, as i understand it, is that the moonlighting hours are budgeted into your 80 hour work limit. that's why there are many residents against the new limitations.

basically, from the docs that i know that have paid off their debts quickly, the best thing to do is to continue living like a resident after your residency is over. the tendency is to get out of residency into practice and start splurging. docs have some of the highest debt ratios of any consumer. your loans are definitely not enough to live well on, so when you get out most people buy nice cars and nice houses, etc.

the best advice that i've gotten is to take the extra money that you earn as your physician salary above your resident salary and use it to pay down your student loans. so if you're making $3000/month as a resident and $8000/month as a doc, the extra $5000/month can really put a dent in your debt pretty quickly.

most experts say that it's best to stretch your student loan debt out for the whole 30 years because you can invest the extra in the stock market and make more than your total debt load. that being said, i have no desire to be paying off loans after i've retired and really want to be free of them as quickly as possible.

at KCOM, you can expect probably $50K/year in debt at just about the maximum loan disbursement. with undergrad, etc. assume about $250K total. pay $5000/month and it's gone in just over 4 years. that all assumes that it's you living alone on your salary. if you have a partner whose salary you can dip into as well, that's even better.

additionally, there are a LOT of repayment opportunities out there other than the military. many practices will pay back loans when you sign a contract with them and many states have repayment programs for docs providing care in certain areas. there are a lot of avenues so there's really no need to get stressed about paying it back.

it'll all be okay in the end.

good luck,
john
 

Karhu

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I work for an doc who had some pretty good advice. Live of 1/3 of your salary. Take 1/3 for your school loans. Invest the remaining 1/3. He explained it as taking a mortgage out on yourself. He graduated from med school about 20 years ago, so this equation may not fit in todays world- but it sounds pretty good on paper.
 

Dr JPH

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If school loan and consilidation interest rate stays as low as it does, you would be foolish to pay your loans off in anything less than 15 years.

I hope to graduate, consolidate at a low rate and pay off over 30 years.

This way, that $1000/month can be invested rather than paying off loans with a mere 2% interest rate. I can earn 5x that in investments.

Plus, not to mention the tax benefits of being a person paying off federal school loans.
 

docslytherin

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JPHazelton said:
If school loan and consilidation interest rate stays as low as it does, you would be foolish to pay your loans off in anything less than 15 years.

I hope to graduate, consolidate at a low rate and pay off over 30 years.

This way, that $1000/month can be invested rather than paying off loans with a mere 2% interest rate. I can earn 5x that in investments.

Plus, not to mention the tax benefits of being a person paying off federal school loans.
but most DO students are going to have personal loans which are not eligible for consolidation. also, there is a very real possiblity that students graduating in 2007 and after won't be able to consolidate anything anyway. and the current forecasts for next year are looking more like 5% than 2% and continuing to increase. we just had a harvard mba come to kcom and talk to us about loan stuff...

anyway... personally, i think it's foolish to have student loan debt after i've retired from practicing. i want it paid off as quickly as possible. if you consolidate at 4%, you're going to pay $10K in interest the first year on a loan of $250K. that seems to me to be ridiculous. get out from under it and enjoy the freedom of being debt free. pay cash for your car (that will keep you from buying something too extravagant) and buy your house on a very short term mortgage.

debt is not a necessity.
 

forreala

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Couldn't disagree more. You get to write off your student loan interest on your taxes and you get a very low interest rate for 30 years. If anything you should pay off your mortgage as this will build equity and net worth.

Of course you should talk to a financial advisor and run some numbers once your final S.L. interest rate is determined. Even if you earn a moderate return of 6% on your investments it's better to keep your student loan for full term and invest instead or paying down the loan (remember your tax writeoff). Just don't go out and use your extra $$ to buy a Porche and bling bling.
 

Dr JPH

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forreala said:
Couldn't disagree more. You get to write off your student loan interest on your taxes and you get a very low interest rate for 30 years. If anything you should pay off your mortgage as this will build equity and net worth.

Of course you should talk to a financial advisor and run some numbers once your final S.L. interest rate is determined. Even if you earn a moderate return of 6% on your investments it's better to keep your student loan for full term and invest instead or paying down the loan (remember your tax writeoff). Just don't go out and use your extra $$ to buy a Porche and bling bling.
Exactly.

But if people want to pay off their loans right away then I say let them do it. We will see who will be able to retire earlier and buy a bigger island. ;)
 

docslytherin

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forreala said:
Couldn't disagree more. You get to write off your student loan interest on your taxes and you get a very low interest rate for 30 years. If anything you should pay off your mortgage as this will build equity and net worth.

Of course you should talk to a financial advisor and run some numbers once your final S.L. interest rate is determined. Even if you earn a moderate return of 6% on your investments it's better to keep your student loan for full term and invest instead or paying down the loan (remember your tax writeoff). Just don't go out and use your extra $$ to buy a Porche and bling bling.
these interest deductions are not automatic. you have to have income qualifications to take the credit. here is the relevent info from the irs:

the maximum deduction is $2500 if you are married filing jointly and are making less than $100K; the deduction is reduced if you are married filing jointly and make between $100K-130K. if married and filing jointly and making more than $130K, there is no deduction.

if you're single, head-of-household or a widow(er), the maximum deduction is available if you make less than $50K. between $50K-65 the deduction is phased out. if you make more than $65K, there is no deduction.

the average salary (based on http://www.physicianssearch.com/physician/salary1.html) for docs in their first year of practice in all specialties is a little bit more than $150K. and that salary information was based on 2002 data. my assumption is that once we're out of our residency, we're not going to get the tax deduction.

i understand the idea of investing in the market and getting a better return on my money... but it makes more sense to me to pay it off if 5 years, minimizing my paid interest and then take money and invest it in whatever i want. i'm then in a position of freedom in that i don't have to work anywhere i don't want to work for anyone i don't want to work for when i don't want to work for them... my oncologist friend has been out for about 7 years and has an entire year's salary in liquid assets. he has no debt (no even his houses - two of them). he calls it his "---- you account" and says that the level of freedom that it affords him is unbelievable. he goes to work because he loves it, not because he has to make money to pay bills. he paid off his loans during residency/fellowship and first couple years of practice

i have a hard time believing that dragging $200K dollars out over 30 years is the best idea. a loan at 4% on $200K for 30 years is going to cost $343,738.80 to pay off (payments of $954.83/month). adding about 72% onto the principal in interest. the same loan over 5 years will cost $220,998.26, an increase of 10.5% on the loan (payments of $3683.30/month).

if we are unable to consolidate loans when we graduate, this is all a moot point anyway. it looks like we're all going to be facing variable rate loans, in which case, no one in his/her right mind would tell you to stretch it out.
 

docslytherin

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JPHazelton said:
Exactly.

But if people want to pay off their loans right away then I say let them do it. We will see who will be able to retire earlier and buy a bigger island. ;)
i hope that your island has postal service so you can mail in your student loan payment at 60 years old! :D

meanwhile when i'm 55 and retired, i'll be sailing my boat around the globe with no worries about whether my payment got lost in the mail again.
 
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briansmichaud

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thanks everyone for your insightful info..
 

forreala

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Great stuff John...thanks for the info. I didn't realize the S.L. tax deduction was income dependent and that's good to know.

It will certainly be interesting to see what our interest rates do in the next few years. I was thinking about this last night (didn't do any research like you did, sorry) but what about paying down an asset like your house enough to use a Home Equity Line to pay off your existing S.L. I know that interest payment is tax deductible.

Anyway, there are going to be several options available and most of us will need some professional advice on what's best for our individual situations. I'm a risk taker and will most likely invest as opposed to paying off the Loan, however, if the rates balloon over the next few years I'll change my mind.
 

docslytherin

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forreala said:
Great stuff John...thanks for the info. I didn't realize the S.L. tax deduction was income dependent and that's good to know.

It will certainly be interesting to see what our interest rates do in the next few years. I was thinking about this last night (didn't do any research like you did, sorry) but what about paying down an asset like your house enough to use a Home Equity Line to pay off your existing S.L. I know that interest payment is tax deductible.

Anyway, there are going to be several options available and most of us will need some professional advice on what's best for our individual situations. I'm a risk taker and will most likely invest as opposed to paying off the Loan, however, if the rates balloon over the next few years I'll change my mind.
it's a pretty strange looking market right now with the expectation to be a significant increase in interest rates and the bush administration's push to make student loans variable rate instead of a fixed one (eliminating the ability to consolidate). it will be a while before i start paying mine back anyway and i'm sure that i'll be talking to a financial analyst before i do much of anything.