This is excellent, conservative advice. I only want to point out one flaw in the analysis -- You have correctly calculated how $200K would conservatively grow over 30 years if it weren't borrowed, but assumed that a physician's salary wouldn't grow by at least the same amount over 30 years, as though physicians make the same amount today as they did in 1990.
Inflation actually makes long term debt more manageable over time, since the principal amount of debt is static while the income used to service that debt pretty much always grows (sometimes very substantially) over time. Assuming that the $200K salary increases 5%/yr, it would grow to $823,000/yr. in 2050. How overwhelming is an extra $200K in debt then? Of course, it would be paid off by then, but the principle (pun intended
) remains the same.
Again, I'm not saying this is right for everyone -- I'm just saying that nothing matters except cost is also not correct in all circumstances. If this were true, you'd in effect be saying that anyone who makes any choice other than their lowest cost option is making a mistake, whether they are borrowing the difference or their family is diverting money from investments to pay for it.
Your principal remains the same, but that is irrelevant since the interest is compounding, therefore, the amount you have to pay is growing. Faster than inflation I might add. How much your salary
might grow is also irrelevant. The issue is not that a physician won't be able to afford the extra debt. The issue is how someone could have easily avoided the extra debt and what they could be doing with the money instead. Instead of making extra loan payments, you could put that towards A LOT of more important things. The degree to which important as well. A small amount in yearly COA difference will grow to a decent amount. Even if you can pay it off in a year or two of attending, that amount could have easily been applied to a home down payment, a sweet new ride, or junior's college fund.
I agree cost is but one factor in deciding between schools. My main problem is that people too often don't recognize it as one of, if not the, most important factors, and they undervalue it against other factors, usually ones they can end up adapting to. They don't understand that compound interest will grow a small difference into a big one. They underestimate how much Uncle Sam is going to shortchange their doctor's salary. They don't understand that they will be on the hook for everything like rent, food, utilities, and how having a family will magnify that exponentially. They underestimate how much they need to save for retirement and emergencies. Yes, they will pay the debt off eventually. Yes, they live comfortably all the while (possibly artificially, though that's another topic). But the extra amount they pay can go a long way in other things, things that matter more than 4 years of, say, nice weather. Thus "personal" decision too often becomes the objectively worse decision.
I very strongly feel people need to be more intimidated by "large notional numbers." The amount of money you spend is
very real. What is notional is the belief that "I'm gonna pay off my loans ASAP" of "that is a small amount to compared to my doctor salary" because you have no control over what you're going to be doing 7+ years from now. You may decide instead of making extra payments, you'll put down a larger amount of a bigger house or fancier car; we are never as disciplined as we think. Or you might need to pay for emergency medical bills. What if you don't match? What if you get married and have a kid before/during residency? The point is you don't know or control decisions you'll make in the future, but you can definitely control the decisions you make now. For these reasons, one needs to be very cautious when writing checks that their future self has to cash out.
Edit:
Let's do some math~
You are choosing between School A and B, with B being "only" $5,000/year more expensive. After 3 years of residency and 1 year of attending, School A will become approx. $32,152.93 cheaper. With just that difference, you could walk into a dealership and buy straight-up a brand new car, or you could put it down on a $535,882 home (first time buyers averaged 6% down in 2019, according to NAR). Or you could go to School B and enjoy 4 years of nice weather or have the comfort of a "good" match list or the facilities are nicer.
If you weigh the other factors of a certain school to outweigh the difference in COA
and you understand how much money you're leaving off the table, then that is a good personal decision. But I'm willing to bet a lot of people are lacking in the former requirement. IMO, the only factor that trumps cost every time is personal health i.e. proximity to family/friends/SO if you'd be legitimately miserable/homesick/depressed without them.
| Fall M1 | Spring M1 | Fall M2 | Spring M2 | Fall M3 | Spring M3 | Fall M4 | Spring M4 | PGY1 | PGY2 | PGY3 | PGY4/Employment | 1 year of attending |
| Tuition | 2,500.00 | 2,500.00 | 2,500.00 | 2,500.00 | 2,500.00 | 2,500.00 | 2,500.00 | 2,500.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| 4.236% Origination | 105.90 | 105.90 | 105.90 | 105.90 | 105.90 | 105.90 | 105.90 | 105.90 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| 7.079% Interest | 0.00 | 92.24 | 187.74 | 286.62 | 389.00 | 495.00 | 604.76 | 718.40 | 836.06 | 1,731.31 | 1,853.87 | 1,985.11 | 2,125.63 |
| Total | 2,605.90 | 5,304.04 | 8,097.67 | 10,990.19 | 13,985.09 | 17,085.99 | 20,296.65 | 23,620.95 | 24,457.01 | 26,188.32 | 28,042.19 | 30,027.30 | 32,152.93 |
Assumptions:
-COA and interest charged at the beginning of each term in a 2 term academic year
-Extra cost taken out as Grad PLUS (7.079%, 4.236% origination) since you'll likely phase out of Direct Unsub when the incremental cost is added
-Terms stay the same throughout 4 years
-You defer payments until attending
