How much Debt is too much?

[Bernito]

Lets assume I have been accepted to a state school and a few OOSs that are for all intents of purposes equivalent (maybe slight edge to OOS school). I know what I would decide if the schools were equal in terms of $, but does it make sense to pass up the state tuition that is 1/4 price of the OOS schools?

More specifically for my case, my wife and I are both applying so its two debts that we have to worry about. If we both had the average of $100K debt from the OOS school we are looking at a scary total. Can you actually manage $200K? What about $250 or $300K (which it could turn into)?

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[pseudoknot]

does it make sense to pass up the state tuition that is 1/4 price of the OOS schools?

No. Absolutely not. Not if you're paying with loans.

 

[silas2642]

No. Absolutely not. Not if you're paying with loans.

Seconded. I would definitely go to your state school; in the long run it'll pay off. Just be grateful that you have a state school.

 

[Non-TradTulsa]

If you're a traditional student, these huge amounts of money may seem like play money. They're not. If I had any respect at all for my state school, I would be thrilled to go there. I'm certainly happy with my state school and I'm very, very grateful they took me. If you're a non-traditional, I think you have to look at money much more carefully. I'm over 40 and will have passed 50 by the time I finish residency. I might have 15 or 18 years to pay off my loans - but I really need to have them paid-off in 10 years so I can retire whenever I want to or need to after age 60.

I hate to bring this up, but it almost sounds like you're using financial figures that are 2 or 3 years old, which are waaaay out of date now. $150K and up is the typical pricetag for *in-state* tuition for the Class of 2010 from what I've already seen. Out of state tuition or private tuition - you can be looking at $220K or $240K. If you and your wife both go OOS or private, you might be nearly a half-million dollars in debt.

Scary, isn't it?

 

[tigress]

Yeah, I was going to say, for private tuition you're looking at around $240k in debt. I think for two people it would add up to more like $400 or $450k, which is huge.

But my husband and I will probably end up with that much debt. If we both want to be doctors we just don't have a choice. Yeah, it's terrifying. Thankfully we are happy living VERY frugally, so not only do we get by on minimum loan money (and this year I'm working, so we don't need the extra for cost of living), we also expect to repay the loans more quickly. On the other hand, we are also going to have children to add to our budget!

If I had the option of going to a state school I would jump at it. You'll still be racking up tons of debt, but it will be more manageable (and it also depends on the state; my state school isn't even that much less expensive!).

As it is, it looks like we don't have a choice. And we're very scared, but I'm not willing to just not become a doctor because of this. I know I'll just be miserable if I don't. At least this way I'll be happy, albeit poor

 

[Bernito]

If you're a traditional student, these huge amounts of money may seem like play money. They're not. If I had any respect at all for my state school, I would be thrilled to go there. I'm certainly happy with my state school and I'm very, very grateful they took me. If you're a non-traditional, I think you have to look at money much more carefully. I'm over 40 and will have passed 50 by the time I finish residency. I might have 15 or 18 years to pay off my loans - but I really need to have them paid-off in 10 years so I can retire whenever I want to or need to after age 60.

I hate to bring this up, but it almost sounds like you're using financial figures that are 2 or 3 years old, which are waaaay out of date now. $150K and up is the typical pricetag for *in-state* tuition for the Class of 2010 from what I've already seen. Out of state tuition or private tuition - you can be looking at $220K or $240K. If you and your wife both go OOS or private, you might be nearly a half-million dollars in debt.

Scary, isn't it?

Well my state (TX) tuition is really low. I bet we could make it out with <$150K together.

Many OOS schools offer need based grants which I would most certainly qualify for. So I don't think it would get to $500K. But $300K? Probably. And that is scary! We do live frugally though (grad student salary for last ~3 years). I guess what I am wondering is has it been done, can it be done and if so how?

In other words will someone hug me and tell me everything is going to be ok?

 

[McMD]

If I was accepted to a state school that's $17,000/year and is an OK school...and I've also been accepted to a private school that gives "in-state breaks" and is around $27,000 and is a much better school...should I worry about the $10K a year?

 

[sscooterguy]

You should also check to see about state schools (of which you are not a resident). I chose to go to an out of state school for me, and paid the extra $20K out of state fee for one year. At least for my school 1 year as a grad student without assistance will buy you in state residency. Am I glad I made the decision? Yes, I'm very confident that the training I'm getting now is far superior to the other in state school that I got in to. However, ask me again after I match next year...

sscooterguy

 

[Classof2010]

I think it depends a lot on what field of medicine you enter and how frugally you're willing to live before the debt is paid off. $300,000 is an enormous amount of debt, but if you're making $200,000 a year (before taxes) and living as if you're making, say, $100,000/year (after taxes), you can pay it off in a reasonable amount of time, i.e., 10 years or less.

For example, let's say you aim to be debt-free in 10 years and end up paying back about $600,000 (assuming that the accumulated interest is about the same as the principal). That's about $60,000/year towards debt repayment, and another $40,000/year towards taxes if you make $200,000/year (assuming married filing jointly with 2 dependents and a deduction for $30,000 student loan interest; see this site to estimate tax payments). That leaves $100,000/year after taxes to live on for all other expenses, which is way more than we (family of 4 with a house) live on now. Obviously the picture gets rosier if you end up with less debt and/or a higher income.

The point is, I think it can be done. Maybe the out of state school is worth the extra cost if it's a big name that will facilitate your entry into a competitive (i.e., lucrative) field. Doctors rarely default on their loans.

 

[.edu-MD]

For example, let's say you aim to be debt-free in 10 years and end up paying back about $600,000 (assuming that the accumulated interest is about the same as the principal). That's about $60,000/year towards debt repayment, and another $40,000/year towards taxes if you make $200,000/year (assuming married filing jointly with 2 dependents and a deduction for $30,000 student loan interest

You can only deduct up to $2500/year for student loan payments right now. And that phases out as your income rises. For married filing jointly, the phase-out begins at $105K. If you earn over $135K (MAGI) as joint filers, you can't claim the deduction.

Refer to IRS pub 970:

http://www.irs.gov/publications/p970/ch04.html#d0e4995

The point is, I think it can be done. Maybe the out of state school is worth the extra cost if it's a big name that will facilitate your entry into a competitive (i.e., lucrative) field. Doctors rarely default on their loans.

Almost anything can be done. And although you may not default, it will affect your quality of life for a large number of years. That's the decision you need to make.
And just because you go to a state school does not mean you're shut out of a competitive residency. And being only mediocre at a more well-known school can shut you out. That means you'd have to do well at a well-known school. And if you can do that, you can do well at any school, which is what will get you the competitive residencies. So, if the goal is a competitive residency, you need to do well wherever you go. Then, if you had the option of doing well at a (cheaper) state school or a 4X more expensive out-of-state school, what's your choice? Would you rather use that supposed lucrative career to pay back loans for 10-15 years or actually enjoy it?

 

[GujjuNo1]

You should also check to see about state schools (of which you are not a resident). I chose to go to an out of state school for me, and paid the extra $20K out of state fee for one year. At least for my school 1 year as a grad student without assistance will buy you in state residency. Am I glad I made the decision? Yes, I'm very confident that the training I'm getting now is far superior to the other in state school that I got in to. However, ask me again after I match next year...

sscooterguy

I have the same question as McMd. The other thing to factor in for me is living expenses. The private school is in NY. While the living at my OOS public school is much low.

sscooterguy - Did you have to buy a house or get a state driver license or something? I am in the same situation and loosing sleep over it. I can't decide. I like the public school much more so I am leaning towards it.

 

[Classof2010]

You can only deduct up to $2500/year for student loan payments right now. And that piddly amount phases out as your income rises. For married filing jointly, the phase-out begins at $105K. If you earn over $135K (MAGI) as joint filers, you can't claim the deduction.

Refer to IRS pub 970:

http://www.irs.gov/publications/p970/ch04.html#d0e4995

Thanks for the additional information. I confess that I hadn't looked into the details regarding deductions for student loans. It turns out that the tax calculator I used above takes the phase out into account, so the numbers I came up with above don't change.

Almost anything can be done. And although you may not default, it will affect your quality of life for a large number of years. That's the decision you need to make.
And just because you go to a state school does not mean you're shut out of a competitive residency. And being only mediocre at a more well-known school can shut you out. That means you'd have to do well at a well-known school. And if you can do that, you can do well at any school, which is what will get you the competitive residencies. So, if the goal is a competitive residency, you need to do well wherever you go. Then, if you had the option of doing well at a (cheaper) state school or a 4X more expensive out-of-state school, what's your choice? Would you rather use that supposed lucrative career to pay back loans for 10-15 years or actually enjoy it?

All good points. The applicant has to decide if the more expensive school really is that much better than the state school in terms of resources, opportunities, prestige, etc.

 

[ddog01]

As long as you go to a US allopathic program, you are very competitive if you have competitive numbers. Period.

I know of a person going to a low tier (near the bottom of the ranked list) medical school, but smart and did very well (went to the school because of a full ride, so very smart), did well on boards, and got a competitive residency at UPenn. It happens. The key is doing well on the boards (USMLE). If you do less than stellar (which is my likely future-they're ****ing hard from what I hear) then your school's reputation may have more impact.

That's my take on the situation. Choice of school now is not as important as choice of residency, and choice of school has limited impact on residency opportunity if you do well on boards (assuming US MD school).

-D

 

[nvshelat]

As long as you go to a US allopathic program, you are very competitive if you have competitive numbers. Period.

I know of a person going to a low tier (near the bottom of the ranked list) medical school, but smart and did very well (went to the school because of a full ride, so very smart), did well on boards, and got a competitive residency at UPenn. It happens. The key is doing well on the boards (USMLE). If you do less than stellar (which is my likely future-they're ****ing hard from what I hear) then your school's reputation may have more impact.

That's my take on the situation. Choice of school now is not as important as choice of residency, and choice of school has limited impact on residency opportunity if you do well on boards (assuming US MD school).

-D

True, but there are plenty of people who went DO or Carribean, do well on their boards, and get competitive residencies as well. For instance, Drs. Litman, Denham, and Yeager are all doctors who are DOs at CHOP in the Anesthesiology/Critical Care Dept. I would assume that getting an anesthesiology residency at the nation's #1 pediatric hospital is competitive.
The point of all this (returning to the loan question) is that you don't have to go to a US MD school to do well enough to pay off your loans... Just to clarify, in case anyone thinks that going DO or Carribean would mean you wouldn't be able to pay off loans bc you wouldn't be able to get good residencies.

 

[Classof2010]

These are convincing arguments, and yet I'd wager that most applicants here at SDN would pick Harvard over their state school, even if they were convinced they could do well on the Boards at either place. I guess it depends on your career goals and the weight you place on various factors (affordability vs. prestige, etc.)

 

[nvshelat]

Also, this link is useful - I didn't know about it until yesterday and it's even here on SDN:
http://www.studentdoctor.net/loans/index.asp

Not so much for the nontrads, as they probably already know a lot of this stuff, but i found it somewhat helpful.

 

[ddog01]

True, but there are plenty of people who went DO or Carribean, do well on their boards, and get competitive residencies as well. For instance, Drs. Litman, Denham, and Yeager are all doctors who are DOs at CHOP in the Anesthesiology/Critical Care Dept. I would assume that getting an anesthesiology residency at the nation's #1 pediatric hospital is competitive.
The point of all this (returning to the loan question) is that you don't have to go to a US MD school to do well enough to pay off your loans... Just to clarify, in case anyone thinks that going DO or Carribean would mean you wouldn't be able to pay off loans bc you wouldn't be able to get good residencies.

Yes, I agree. You can definitely go to any residency coming from DO or foreign medical programs. But, as a DO, you probably have to outshine your allopathic competitor a bit to win the same (competitive) residency. As a foreign medical graduate, you will have to outshine both the domestic MDs and DOs considerably to get competitive residencies. The more competitive the residency, the more the DO or FMG must outshine the MD or domestic grads (MDs and DOs), respectively.

At least, that's my impression from talking to lots (LOTS) of people who would know (Chief Resident of a program at UPenn, fellow at a program at UCLA, etc.) and reading a lot.

I'm applying to both programs, and would be very happy as either (MD or DO), because I know I will work hard to do well in school and on my boards.

BTW, funny how we went from loans to DO and MD stuff, no? haha.

-D

 

[ddog01]

These are convincing arguments, and yet I'd wager that most applicants here at SDN would pick Harvard over their state school, even if they were convinced they could do well on the Boards at either place. I guess it depends on your career goals and the weight you place on various factors (affordability vs. prestige, etc.)

Yes I agree. Harvard has such immediate name recognition worldwide that the extra expense would be worth it. But for the original poster, it seems as if the state school is more or less on par with the out-of-state one, and the extra expense may not be worth it in that scenario.

 

[pseudoknot]

These are convincing arguments, and yet I'd wager that most applicants here at SDN would pick Harvard over their state school, even if they were convinced they could do well on the Boards at either place. I guess it depends on your career goals and the weight you place on various factors (affordability vs. prestige, etc.)

I wouldn't, and I think anyone who would is an idiot. Prestige isn't worth that much.

 

[Bernito]

Yes I agree. Harvard has such immediate name recognition worldwide that the extra expense would be worth it. But for the original poster, it seems as if the state school is more or less on par with the out-of-state one, and the extra expense may not be worth it in that scenario.

This is part off my dilemma. How much money is prestige worth? Im not in it for the prestige. But isnt paying extra worth it b/c the prestige could make up for not doing as well on the Steps. Therefore your stress at a top school would be less b/c you would know that not doing so well on the Steps isnt the end of your chances for some residency programs (as it might be a state school)?

From speaking to some people about it, it seems like the debt at some of these top tier schools is really not that much more than for state schools. I've heard that the explanation, at least partially, is the amount of money they have available to give students as grants. Anyone know more about this/ can verify/ have other explanations?

 

[tigress]

I think if the issue is money, I'd choose state over prestige. That would be an easier decision for me than what I'm faced with, which is private schools no matter what, so I have to choose between prestige and comfort. Meaning my "gut feeling" tells me one school, I like it better, but my ego says go for the more prestigious school. But they basically cost the same. If money were the deciding factor, the decision would be made for me.

As far as private schools having more money for grants, I know that's not true for all of them. Most of the top ranked schools do have money available, because they have large endowments, but because the applicant pool is so strong it's extremely difficult to get that money unless you're dirt poor. So if your family has anything, I wouldn't count on grant money from top schools. At the same time, of course you should wait until you receive financial aid packages, so you can compare what it will really cost you.

 

[laboholic]

Ok, im not very good at money issues, but a grad student that works in my lab said that since there is a cap on the amount of federal loans you can get ~180k then he would put the extra on credit cards (the ones that give you like 1 year no/low APR and dont have any membership fees) I have a very good credit rating and can get a card with a 10-15k limit. Then after a year (in theory) I could transfer my balance to another no interest or low interest card. Anyone heard of someone who has done this? Again, I stress that it would have to be a card with no fees and transferring to a card with no/low balance transfer charge.

 

[Shredder]

prestige over frugality. debt is the american way. interest rates arent that high. as future docs we all know we will have no problem paying anything off. ppl take enormous mortgages yet skimp on educational spending, makes no sense. theyre both considered investments, one in physical capital and the other in human capital--the most important human capital of all, oneself. there is a difference between good schools and mediocre schools.

there should be a poll with this thread. 200 or 250k is pushing it on debt but the disparity between schools also has to be accounted for

 

[Bernito]

prestige over frugality. debt is the american way. interest rates arent that high. as future docs we all know we will have no problem paying anything off. ppl take enormous mortgages yet skimp on educational spending, makes no sense. theyre both considered investments, one in physical capital and the other in human capital--the most important human capital of all, oneself. there is a difference between good schools and mediocre schools.

there should be a poll with this thread. 200 or 250k is pushing it on debt but the disparity between schools also has to be accounted for

I don't care for a poll b/c I don't want an opinion without justification. For example the above poster who said, no and you are an idiot if you do, didn't help much.

Like mortgages, people buy cars well above their means all the time, and this 'investment' only loses money. Why not invest in yourself, thats earning power for the rest of your life? Now in this case both are good investments but the ROI is hard to compare. Im leaning towards the OOS, higher debt now, but those high numbers really intimidate me. I mean, all I have in my wallet now is a couple of moths!!

Thanks for the advice.

 

[tigress]

I think it's also easier to say you should go with prestige when it's coming from somebody who's looking at $200 or $250 in debt. I, like you, will be looking at double debt from both my husband and me. And from the perspective of soon-to-be parents, having been married for a few years and understanding what it's like to want a stable life, I do think the double debt is huge. It may also depend on what you hope to go into, but you could always change your mind. I think that even living frugally it will take us at least 15 years to pay off our combined debt (and to think of how much we'll actually be paying is just shocking). That's a long time to not be saving up for our childrens' futures, scrimping on everything, etc.

But of course, like I said, we'll do it anyway. It's just tough and intimidating. So from my personal perspective, if a state school were an option, I'd jump at it.

But you see, my ego still says go with prestige. There are obviously no easy answers. A few years ago I would have said prestige, no doubt about it. Somehow being settled down with my husband and having a baby on the way has changed that. So while I still have the nagging ego telling me to go with prestige, I'm too concerned with debt to give in to it, I think.

 

[ddog01]

This is part off my dilemma. How much money is prestige worth? Im not in it for the prestige. But isnt paying extra worth it b/c the prestige could make up for not doing as well on the Steps. Therefore your stress at a top school would be less b/c you would know that not doing so well on the Steps isnt the end of your chances for some residency programs (as it might be a state school)?

I don't agree with you here Bernito. I certainly could be wrong, because I don't know of any examples to back up my hunch, but my hunch says that even if you go to a top school (UCSF, Harvard, Johns Hopkins, etc.), if you do mediocre on your boards, you will not get a top competitive residency. The more prestigious and competitive the residency, the more important each component of your application becomes, and the less that one component can make up for another (i.e. prestigious school won't make up for mediocre performance on USMLE). But I guess for some residencies that aren't super competitive, then maybe your school name will help you out a bit. But I think it's only a bit, so again, unless the difference in prestige is really big between your state school and the out-of-state one, I would opt to save money.

And, if you don't mind disclosing, I think we could all give more concrete opinions if we knew which two schools you were considering.

-D

 

[Shredder]

I think it's also easier to say you should go with prestige when it's coming from somebody who's looking at $200 or $250 in debt. I, like you, will be looking at double debt from both my husband and me. And from the perspective of soon-to-be parents, having been married for a few years and understanding what it's like to want a stable life, I do think the double debt is huge. It may also depend on what you hope to go into, but you could always change your mind. I think that even living frugally it will take us at least 15 years to pay off our combined debt (and to think of how much we'll actually be paying is just shocking). That's a long time to not be saving up for our childrens' futures, scrimping on everything, etc.

But of course, like I said, we'll do it anyway. It's just tough and intimidating. So from my personal perspective, if a state school were an option, I'd jump at it.

But you see, my ego still says go with prestige. There are obviously no easy answers. A few years ago I would have said prestige, no doubt about it. Somehow being settled down with my husband and having a baby on the way has changed that. So while I still have the nagging ego telling me to go with prestige, I'm too concerned with debt to give in to it, I think.

double debt is balanced by double incomes, it could be 10x debt and it would be the same rationale. but assuming large debts is a daunting prospect, understandable. just look to uncle sam as a role model! really though, the reason the US assumes so much debt is due to confidence in future ability to repay it. same with docs, probably more so than any other career path. thats why immediately upon being granted the MD after ones name, credit rating jumps up.

its mostly a financial decision based on ROI. however i also think there is intangible value in going to a great school, something that goes beyond mere dollars and cents. its odd coming from me, but maybe theres more to it than the numbers. the friends, connections, experience, ambience, location--those are all worth something too.

 

[tigress]

Yeah, Shredder, I hear you. And that ought to make sense. But my husband is probably going into IM, so who knows what his earning potential will be. And I don't know what's going to happen to the healthcare system in the next decade, either. It might not be pretty

It's true that credit rating jumps up with the MD. I've seen some awesome mortgages advertised for residents.

What you're saying about "friends, connections, experience, ambience, location," those are all true, I think. Aside from connections, I think they aren't particular to prestigious schools, though.

 

[Bernito]

Yeah, Shredder, I hear you. And that ought to make sense. But my husband is probably going into IM, so who knows what his earning potential will be. And I don't know what's going to happen to the healthcare system in the next decade, either. It might not be pretty

It's true that credit rating jumps up with the MD. I've seen some awesome mortgages advertised for residents.

What you're saying about "friends, connections, experience, ambience, location," those are all true, I think. Aside from connections, I think they aren't particular to prestigious schools, though.

IM has some good fellowships after, and even if he doesn't do that he's still looking at between $100-150 starting.

We've still got a few years before we start with the kids, so we don't have that added expense. But still you should be fine.

 

[gostudy]

What you're saying about "friends, connections, experience, ambience, location," those are all true, I think. Aside from connections, I think they aren't particular to prestigious schools, though.

At the most prestigious schools friends = connections.

 

[tigress]

At the most prestigious schools friends = connections.

Maybe. Then again, my uncle went to Harvard and practices rheumatology in a small private practice with a few other doctors in a quiet area in a nice city. His Harvard connections aren't doing much for him right now. His practice is great, and I'm sure he's happy with what he does, but he could have done the same thing coming from anywhere. So it also depends on your goals. I think mine are more like what my uncle is doing than what Paul Farmer (or insert famous doctor here) is doing.

Bernito, I don't know about your numbers. I'd say starting in IM you're looking at more like $90k. It depends on your practice, of course, but I know plenty of general practitioners who aren't making more than that, even after years of working. So while it's very possible, maybe likely, that it would be more, I can't actually rely on anything over about $90k. And he actually wants to do a GI fellowship, but those are uber competitive so he might not be able to get one. If he does, of course, we'll be loaded.

But still, I have to say it again -- what's going to happen in the next decade? Nobody knows. Maybe medicine will be less lucrative 10 or 15 years from now. So I feel like taking out so much in loans is a gamble. It's a gamble I'll be taking, but it's a gamble nonetheless.

 

[Shredder]

At the most prestigious schools friends = connections.

basically yeah--at top notch schools all of those things are not only present but to a greater degree. friends, ambience, facilities and etc are just going to be superior at Ivy U compared to podunk U. education is about more than just racking up degrees and letters. healthcare in the next decade--is that a recent concern for premeds though, or has it been a concern for decades now? it would suck if we all got screwed though. IM does have a lot of fellowships. well, as a young single guy (and planning to continue as such for a long time) im all about debt, so thats my perspective on the matter.

just gamble it up, no rewards without risks. besides, i dont personally know any docs who are mired in debt, does anyone? and i dont mean freshly minted docs

 

[deleted77919]

just gamble it up, no rewards without risks. besides, i dont personally know any docs who are mired in debt, does anyone? and i dont mean freshly minted docs

I do, I know several that have gone through bankrupcy. However, none of that was due to medical school loans, it was mostly due to pulling in $300k and having a wife that would spend $500k. Or another guy who got married 4 separate times and had 9 kids between all of the wives (he later lamented that he wished he had crushed his manhood at an early age and didn't have to deal with so much child support, sad commentary really). None of these problems were even particular to medicine tho. Moral of the story, medical debts aren't a problem for people who manage their finances and personal life appropriately.

The reason I'm aware of these cases has to do with my father's work, he deals with a lot of people in dire financial straits.

 

[Shredder]

wow what an evolutionary beast that guy is, bravo. good moral

 

[AlanAlan]

i went to an ivy league school for undergrad and my feeling now is that prestige is highly overrated. It may be different when seeking a residency, but what matters in getting into medical school is primarily your mcat.

While coming from a good school may give your grades a little more validity and might give you more options, you are also competing with generally more talented students.

 

[Epi]

average graduating medical student debt is around 115K according to 2004 figures. Slighty higher for private schools and lower for public schools. The majority of people (> 50%) have loans to pay off in the 6 figures. Going to a state school is still not cheap. If you have that much debt to pay off, its really really hard to pay it all off in 10 years. You get 30 years to pay it off, it may seem like a long time, but with today's interest rates, you can consolidate your loans after you graduate (and now while in school) to lock in a fixed rate for the life of you loan, so it isn't too bad.

Of course each situation is different, but sometimes it makes sense to use the whole 30 years to pay off your debt. There is a difference between paying off around 90K for a state school vs 150K for a private school and only you can make the decission whether that extra money is worth it to you or not.