How long to pay off 200k loans?

[farmville]

Hey,

would anyone know how long it would take to pay off a 200 K loan right after dental school with an average associates salary?

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[Screwtape]

I'll do a quick and dirty one for ya. That loan amount is actually similar to mine, I am expecting to do it in 5 years. Disclaimer: I am single and am pretty flexible with location after dental school.

$200k loan paid over 5 years at 6.8%: total loan repayment = $268,000

Average salary over the 5 years would probably be around $140k (I would consider this maybe a slightly conservative figure, at least for my area)
After taxes that's about ~$90k depending on state and a few other things
Live off of $30k post-tax, pay $60k towards loans for a little under 5 years

 

[farmville]

Thanks!!

 

[Incis0r]

I'll do a quick and dirty one for ya. That loan amount is actually similar to mine, I am expecting to do it in 5 years. Disclaimer: I am single and am pretty flexible with location after dental school.

$200k loan paid over 5 years at 6.8%: total loan repayment = $268,000

Average salary over the 5 years would probably be around $140k (I would consider this maybe a slightly conservative figure, at least for my area)
After taxes that's about ~$90k depending on state and a few other things
Live off of $30k post-tax, pay $60k towards loans for a little under 5 years

I like that calculation, especially how you emphasized the importance of flexibility after dental school.

My calculation assumes the following things:
You take out 50K/yr for loans (evenly distributed for all four years of dental school)
You have interest rate of 7%, compounding interest. Your loans start compounding/accruing interest each year.
You do an AEGD after dental school
You are open to the idea of working with the underserved in community health centers

That means that your total loan liability upon graduation is determined by the following calculations

Loans at end of Year 1: 50K
Loans at end of Year 2: 50K*1.07 +50K= $103,500
Loans at end of Year 3: $103,500* 1.07 + 50K = $160,745
Loans at end of Year 4: $160,745 * 1.07 +50K=$221,997.15

Total at end of four years of dental school = $221,997.15

Here's my calculation/plan for you- this plan lets you pay off the loans in THREE years (Actually four since AEGD is not really a repayment year).

Year 1: AEGD; You earn just enough ($50K) to live off of and pay the interest ($15K) to keep the loan from growing.

Year 2: Sign a 2-year contract with the NHSC to work in a health center that is in a health professional shortage area. Get 50K upfront, tax free for loans. Salary is negotiated separately with the center. With AEGD, you could estimate this to be 130K + benefits (I had made a thread about this months ago...and multiple dentists confirmed this estimate). Post-tax is about 87K. Live off of 27K (doable in many parts of the country), and throw 60K at your loans. So, this year you knock out 60+50= 110K loans. So, you have 222K-110K= 112K left. Almost HALFWAY THERE!

Year 3: 112K loans left. But wait, it grew at 7%, so it's actually 120K. Knock out another 60K this year.

Year 4. 60K left with interest becomes 64.2K in loans. After finishing your initial 2 year obligation with the NHSC, you can renew for one-year increments with 30K/yr award. So, you pay only 34.2K post-tax, and work at the center for one year (this year), and you've paid off your loans.

Congrats! You're done!

 

[dp93]

i know in theory it sounds really smart to be aggressive about loan payments but we just cannot factor in all the different variables that could arise. Emergency medical operation, getting married and buying a house, the urge to buy a sports car, etc. Id say a more reasonable estimate is probably 6-8 years.

 

[Incis0r]

i know in theory it sounds really smart to be aggressive about loan payments but we just cannot factor in all the different variables that could arise. Emergency medical operation, getting married and buying a house, the urge to buy a sports car, etc. Id say a more reasonable estimate is probably 6-8 years.

Fair enough; I mean, there are things in your list that are predictable and can be avoided (like buying a sports car, taking on a house mortgage, or even getting married at a big, expensive wedding), but I agree with your general premise, which is that unexpected things can happen (like medical expenses) and take a big part of the budget.

 

[dp93]

Fair enough; I mean, there are things in your list that are predictable and can be avoided (like buying a sports car, taking on a house mortgage, or even getting married at a big, expensive wedding), but I agree with your general premise, which is that unexpected things can happen (like medical expenses) and take a big part of the budget.

idk about you but i definitely don't wanna be riding around in my 2004 Ford when im 4 years out of Dental school. 🙂

 

[free99]

i know in theory it sounds really smart to be aggressive about loan payments but we just cannot factor in all the different variables that could arise. Emergency medical operation, getting married and buying a house, the urge to buy a sports car, etc. Id say a more reasonable estimate is probably 6-8 years.

Saving for a practice loan, in some instances, may be a better use of your money than paying down your students loans as well. I plan to strike a balance between savings and student debt reduction, with some variability depending on where I'm working and what opportunities to own are available.

 

[Faux]

idk about you but i definitely don't wanna be riding around in my 2004 Ford when im 4 years out of Dental school. 🙂

I actually hope my honda fit 2007 is still good to go for another 5-10 years. I even want to buy another one down the line. Very affordable.

I've always been more of a TV kinda guy than anything else 😛

 

[Tebros]

I'll do a quick and dirty one for ya. That loan amount is actually similar to mine, I am expecting to do it in 5 years. Disclaimer: I am single and am pretty flexible with location after dental school.

$200k loan paid over 5 years at 6.8%: total loan repayment = $268,000

Average salary over the 5 years would probably be around $140k (I would consider this maybe a slightly conservative figure, at least for my area)
After taxes that's about ~$90k depending on state and a few other things
Live off of $30k post-tax, pay $60k towards loans for a little under 5 years

you really think after taxes it'll be 90k? 🙁 Just curious cause it sounds like I'm on the same boat as you. 200k, single, flexible haha.

 

[Tebros]

Fair enough; I mean, there are things in your list that are predictable and can be avoided (like buying a sports car, taking on a house mortgage, or even getting married at a big, expensive wedding), but I agree with your general premise, which is that unexpected things can happen (like medical expenses) and take a big part of the budget.

idk about you but i definitely don't wanna be riding around in my 2004 Ford when im 4 years out of Dental school. 🙂

Sigh* there goes my dreams of driving a Mercedes (graduate present to myself) out of Dental School. 🙁

 

[Faux]

you really think after taxes it'll be 90k? 🙁 Just curious cause it sounds like I'm on the same boat as you. 200k, single, flexible haha.

http://www.paycheckcity.com/calculator/salary/

 

[Redskins5]

sometimes its better to invest in retirement savings then to quickly pay off your student loans.

 

[Incis0r]

Sigh* there goes my dreams of driving a Mercedes (graduate present to myself) out of Dental School.

What kind of Mercedes do you want?

I myself am a Jeep guy.

sometimes its better to invest in retirement savings then to quickly pay off your student loans.

True but this is extremely dependent on the situation. The principle is that you want to maximize your rate of return. If your investment accounts are returning 3% while your loans are charging you 6.9% interest, it is much better to pay down the loans first.

However, if you can find an investment that is returning you above 6.9%, then yeah I'd put the minimum monthly payment on the loans.

Good point.

 

[Cold Front]

Pay your student debt last, focus on investing in a new business/office that will give you more that 6.9% return.

I opened my office with $180k loan from Wells Fargo bank. I made $250k first year (40% return), $300k year 2 (65% return) and $350k 3rd year (95% return). That's just in 3 years for 1 of 3 offices.

So should I have spent the first 5 years of my career worried about my $250k debt at 6.9%?

Think potential. You are a dentist.

 

[whitepapertree]

Sigh* there goes my dreams of driving a Mercedes (graduate present to myself) out of Dental School. 🙁

Lease it bruh

 

[Incis0r]

Pay your student debt last, focus on investing in a new business/office that will give you more that 6.9% return.

I opened my office with $180k loan from Wells Fargo bank. I made $250k first year (40% return), $300k year 2 (65% return) and $350k 3rd year (95% return). That's just in 3 years for 1 of 3 offices.

So should I have spent the first 5 years of my career worried about my $250k debt at 6.9%?

Think potential. You are a dentist.

True, but doesn't starting a new business carry tremendous risk? I'd hate to think what would happen with 450K of debt, no patients, etc. I guess my real question is- what steps did you take to ensure you'd get a good return with your offices?

 

[Cold Front]

True, but doesn't starting a new business carry tremendous risk? I'd hate to think what would happen with 450K of debt, no patients, etc. I guess my real question is- what steps did you take to ensure you'd get a good return with your offices?

Less than 1% of dentists default on their business. So you have 99% chance of running a dental office well, or at least to pay its bills and get a decent income.

http://www.kenrubincpa.com/siteAssets/site8804/files/Phenomenal_time_to_be_a_dentist_KR_Website.pdf

Yes, the debt is scaring more grads from opening or buying an office, but you have to separate the debt/risk of student vs. business. One is for human capital (your diploma, skills, hands, etc), the other is an investment (your practice). Yes, globally you are in more debt, but they will work together so well that it should still generate substantial income/profits for that level of debt. Assuming the debt and numbers make sense, and most of the time it does.

 

[charlestweed]

Lease it bruh

+1 on leasing. German cars are fun to drive and to look at. I like the adaptive cruise control feature, which allows me to drive in heavy LA traffics without having to step on the gas nor the brake pedal. I leased the 745i, E500, GL450, 745LI, S550, CL550 in the past and I can tell you that German cars are not very reliable. They all have electrical problems. That’s why I don’t buy the German cars but only lease them. I feel sorry for the people who bought the cars that I returned after lease ended.

Just today, I can’t drive my current 2014 750LI because the power door lock stops working. I had to climb out of the car’s window in order to get out. That’s embarrasing. I have to bring the car to the dealer this coming Monday. This will be my 6th time bringing it to the dealer since I leased this car.

 

[Cold Front]

+1 on leasing. German cars are fun to drive and to look at. I like the adaptive cruise control feature, which allows me to drive in heavy LA traffics without having to step on the gas nor the brake pedal. I leased the 745i, E500, GL450, 745LI, S550, CL550 in the past and I can tell you that German cars are not very reliable. They all have electrical problems. That’s why I don’t buy the German cars but only lease them. I feel sorry for the people who bought the cars that I returned after lease ended.

Just today, I can’t drive my current 2014 750LI because the power door lock stops working. I had to climb out of the car’s window in order to get out. That’s embarrasing. I have to bring the car to the dealer this coming Monday. This will be my 6th time bringing it to the dealer since I leased this car.

I like German cars, love my S5. No electric or any other issues yet.

Leasing is a great option if you don't drive or commute much. Otherwise, the mileage limits will run your tab really high. Not to mention wear and tear assessment after the lease ends.

 

[Tebros]

What kind of Mercedes do you want?

I myself am a Jeep guy.




True but this is extremely dependent on the situation. The principle is that you want to maximize your rate of return. If your investment accounts are returning 3% while your loans are charging you 6.9% interest, it is much better to pay down the loans first.

However, if you can find an investment that is returning you above 6.9%, then yeah I'd put the minimum monthly payment on the loans.

Good point.

Well It definitely wasn't going to be a brand new Mercedes, most likely a used one. Alittle higher than C class but not too flashy, just one that can be driven around town without people having the idea of keying my car. lol (I went to California for a road trip with my friends and I drove my parent's Denali, some *** keyed it 🙁 lets just say my parents were not happy when I got back home)