how do i figure out how much i will owe?

[karizma098]

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hey guys..

just trying to figure out how much in debt i'm going to be....

i'm an MS1, and i'm borrowing 30k from grad plus and stafford each year , so i'm borrowing 120k in total for 4 years of medical school.

how do i figure out where i'll be when medical school ends and then how much i'll owe if i just pay the minimum 15%/month payments during residency for 5 years?

just not sure how it works, any info would be greatly appreciated.

thanks!

 

[TMP-SMX]

Why are you taking out grad plus if you are only taking out 30k? The Stafford limit per year is 40,500. Also, keep in mind that you are likely to need more money next year as the school year is longer.

Anyway, calculate it this way as a quick estimate at graduation before capitalization assuming you have all staffords at 6.8%. Convert it as needed for the 8.5% as grad plus. If you want to be exact, you are going to have to multiply by 12 and convert the interest rate as needed as there are two disbursements per year:

M1: 30,000*0.068*4= $8,160 ready to capitalize after graduation
M2: 30,000*0.068*3= $6,120 ready to cap
M3: 30,000*0.068*2= $4,080
M4: 30,000*0.068= $2,040

Estimate ready to capitalize assuming the above: $20,400 on top of the principal amount of $120,000. Total amount $140,400 after capitalization. As for after residency use this calculator though it isn't exactly what you want.

 

[nontrdgsbuiucmd]

a comment if you want to get a little closer to the $$ you'll owe..

Stafford loan presumably is 8,500 per year, interest on this is paid by fed gov't (or should I say, all taxpayers) so this won't grow during med school, although I believe all other loans will continue to accrue interest.

Other loans - say during M1 you incur 21,500 of other loans and the interest rate is 6.8% -- 21,500 * 1.068 * 1.068 * 1.068 * 1.068 would be how much you owe for the M1 year upon graduation approximately. Do the same thing for M2, but multiply by one fewer 1.068 as there is one fewer year of interest compounded. This is the joy of compound interest!

 

[Postictal Raiden]

a comment if you want to get a little closer to the $$ you'll owe..

Stafford loan presumably is 8,500 per year, interest on this is paid by fed gov't (or should I say, all taxpayers) so this won't grow during med school, although I believe all other loans will continue to accrue interest.

Other loans - say during M1 you incur 21,500 of other loans and the interest rate is 6.8% -- 21,500 * 1.068 * 1.068 * 1.068 * 1.068 would be how much you owe for the M1 year upon graduation approximately. Do the same thing for M2, but multiply by one fewer 1.068 as there is one fewer year of interest compounded. This is the joy of compound interest!

I thought that when you are in school, you don't pay interests on interests. So, it would be 4*(21,500*.068)+21,500= the amount owed for M1 upon graduation. Some one correct me if I am wrong.

 

[TMP-SMX]

I thought that when you are in school, you don't pay interests on interests. So, it would be 4*(21,500*.068)+21,500= the amount owed for M1 upon graduation. Some one correct me if I am wrong.

You are correct. It doesn't have interest on interest until capitalization after graduation.

 

[nontrdgsbuiucmd]

well that's cool. thank you for the correction! Guess it's been too many years since I've been in school and taken out any loans.

 

[Mdude]

Ok, I'm still fuzzy on this topic.

Let's say I take out the 8,500 max subsidized Stafford for all four years, and then say 16,500 a year of unsubsidized Stafford, for a total of 25,000/yr principal. Both at 6.8% interest.

Here is what confuses me:
-What exactly does it mean that it's capitalized?
-I understand now that for the unsubsidized, I will accrue interest during med school as previously noted on this thread. What I don't understand is, AFTER med school, how does interest accrue?

So, for the first four years, it looks something like this:
8,500*4 + 16,500*.068*4 + 16,500*.068*3 + 16,500*.068*2 + 16,500*.068=A BIG ##

But then, how does interest accrue thereafter. Is it 30,000*.068 per year? Or is it via compound interest, and in that case, is it basically 30,000 principal, compounded at a 6.8% rate per year, or is it done differently? Thank you guys who understand this stuff for explaining it!

 

[Wacaggie]

The subsidized loans will be 8500*4 = 34000

The unsubsidized loans will be 16,500*.068*4 + 16,500*.068*3 + 16,500*.068*2 + 16,500*.068 + 16,500*4 = 77,220

Add them together and you get 111,220

The interest does not capitalize in medschool meaning the unsubsidized loans principle (16500 each year will not = 17622 after one year because then for the next year you would need to find the interest on 17622 and not 16500)

when you are out of school all the interest turns into principle and then there can be interest on interest which is a bad compounding effect if you are on the borrowing side of the loan and wonderful if you are the bank or other entity loaning the money.

 

[dragonfly99]

I'm not going to run the math for you 'cause I suck at it.
Plus your financial aid office should be able to do it for you.

I borrowed a total of 132k in med school.
That became $540/month student loan payments for 30 years when I started paying them back 6 months after graduation, after I consolidated them at 2.87% interest I think it was. If you only do income-based repayment as a resident I think you'll be paying less than your interest (actually, you surely will be) which will mean your loans will be getting bigger and bigger. So at the end of that you'd have >>$540/month payments if it's a 30 year loan, assuming you'll have 6.8% interest rather than the 2.8something I had.

 

[Mdude]

The subsidized loans will be 8500*4 = 34000

The unsubsidized loans will be 16,500*.068*4 + 16,500*.068*3 + 16,500*.068*2 + 16,500*.068 + 16,500*4 = 77,220

Add them together and you get 111,220

The interest does not capitalize in medschool meaning the unsubsidized loans principle (16500 each year will not = 17622 after one year because then for the next year you would need to find the interest on 17622 and not 16500)

when you are out of school all the interest turns into principle and then there can be interest on interest which is a bad compounding effect if you are on the borrowing side of the loan and wonderful if you are the bank or other entity loaning the money.

This was very helpful. The thing I still don't understand is how exactly does interest compound, given that you are now paying off the loan after med school.

To keep the numbers simple, let's say your principles + capitalized interest= 110,000 on graduation day. Let's say first year of residency, you pay off 5K, but at the same time, you accrue interest at 110,000*.068=7,480. Now, for your second year post-med school, how does interest accrue? Is it (110,000+7,480)*.068, OR, taking into account your paid off 5,000, is it (110,000+7,480-5,000)*.068? Or is it (110,000-5,000)*.068.

Thanks again!

 

[TMP-SMX]

Remember that it is a month-to-month basis for interest. Think of it like a credit card payment. Each month, interest is added to the principal and each month you pay off a certain portion. So whatever the difference between interest and payment is what is added to the principal each month.

For example, if you have 100,000 in loans at 6.8% it would be $567 of added interest in the first month of repayment figured by 100,000*0.068/12. So if you pay $567 that month then your principal will still be 100,000 the next month and the interest will be the same. However, if you pay less than that then you will be paying interest on a larger principal for the next month and the interest will be a bit higher and vice-versa.

 

[AldousHux]

I just used my schools budget for in-state students, not including their student insurance plan, and upon graduation I will have accrued 224,085.64 in debt. If my interest rate were still 6.8% upon graduation each month I would owe 1,269.82 just to cover my monthly interest. Also, third year my school assumes you will be traveling a lot more, since our hospital is far away, and there is no public transportation, as well as testing and fees being a lot more, I'll have to take out 49, 248 out that year. Which is obviously above my max.

Luckily I never took government loans during undergrad, so I don't have to worry about the total max, but what can I possibly do to not spend that extra 9 grand third year?! I've been scared of actually figuring this out. Sigh, looking at the numbers hurt. And they hurt more knowing I'll have a long, long residency assuming I get the specialty I want.

the price we pay, huh.

 

[TMP-SMX]

I just used my schools budget for in-state students, not including their student insurance plan, and upon graduation I will have accrued 224,085.64 in debt. If my interest rate were still 6.8% upon graduation each month I would owe 1,269.82 just to cover my monthly interest. Also, third year my school assumes you will be traveling a lot more, since our hospital is far away, and there is no public transportation, as well as testing and fees being a lot more, I'll have to take out 49, 248 out that year. Which is obviously above my max.

Luckily I never took government loans during undergrad, so I don't have to worry about the total max, but what can I possibly do to not spend that extra 9 grand third year?! I've been scared of actually figuring this out. Sigh, looking at the numbers hurt. And they hurt more knowing I'll have a long, long residency assuming I get the specialty I want.

the price we pay, huh.

You can take out grad plus 8.5% loans up to your cost of attendance after you max out your stafford loan limit of $40,500. Who knows though by the time you get to third year the limit for staffords will probably increase.

 

[dragonfly99]

Remember that it is a month-to-month basis for interest. Think of it like a credit card payment. Each month, interest is added to the principal and each month you pay off a certain portion. So whatever the difference between interest and payment is what is added to the principal each month.

For example, if you have 100,000 in loans at 6.8% it would be $567 of added interest in the first month of repayment figured by 100,000*0.068/12. So if you pay $567 that month then your principal will still be 100,000 the next month and the interest will be the same. However, if you pay less than that then you will be paying interest on a larger principal for the next month and the interest will be a bit higher and vice-versa.

This is totally correct.
But wow. WOW. That 6.8% interest rate really blows...not sure which congressman had the stupid idea that lender's should get 6.8%...can they really not make enough money if they get less? That's an evil amount of interest to be paying. For people like me who graduated a few years ago, we could at least afford to pay the interest every month in residency, even if borrowing 120k or more...though it wasn't fun. Now if someone borrows 200k or something, they will be hard pressed (or more than likely find it impossible) to pay even the interest while in residency. My advice is pay as much as you can during residency, while still keeping a reasonable lifestyle...you don't want your loans to balloon up to be TOO huge, even though you are eventually going to have a good salary.

 

[TMP-SMX]

This is totally correct.
But wow. WOW. That 6.8% interest rate really blows...not sure which congressman had the stupid idea that lender's should get 6.8%...can they really not make enough money if they get less? That's an evil amount of interest to be paying. For people like me who graduated a few years ago, we could at least afford to pay the interest every month in residency, even if borrowing 120k or more...though it wasn't fun. Now if someone borrows 200k or something, they will be hard pressed (or more than likely find it impossible) to pay even the interest while in residency. My advice is pay as much as you can during residency, while still keeping a reasonable lifestyle...you don't want your loans to balloon up to be TOO huge, even though you are eventually going to have a good salary.

Exactly. Plus your sub staffords didn't capitalize until after residency deferment and you could make payments towards principal rather than interest after getting your $2500 deduction. We won't have the luxury of deferment and our sub staffords will be just like the unsubs after school and we don't have a choice whether or not we have to pay monthly. Forbearance is an option, but not a good one.

 

[dragonfly99]

I know, it sucks.

I actually fought for raising the income limits for being able to take the student loan interest tax credit when I was a 1st/2nd year med student. The gov't did this (used to be you could only make 45k, now you can make 55k and still take the credit).

The AMA, AMSA, etc. also fought to keep economic hardship loan deferral, but that got done away with. It really sucks for you guys. I don't have any great advice except try to take out the least loans you can (but be reasonable...can't eat ramen every day and don't want to live somewhere scary) and start paying them ASAP. I personally started paying a little on mine even <6 months after graduation. I mean, I had the residency salary so I figured why not...you can get used to putting several hundred/month toward your loans as an intern so that you don't feel deprived. That might not work if you live in Manhattan or have kids, though.