How much does the interest add up to?

[pmarank]

So I wanted to know how much an average medical student ends up paying in interest for their student loans? I'm currently deciding if I am going to take either 1 year or 2 years between undergrad and medical school and finances may be the decider. I did the calculations below but I am pretty sure I made some mistakes so help would be appreciated.

Assuming a student has to take out 50K per year TOTAL in loans (lets say parents help out with rent and food)
Interest rate is 6.8%
Subsidized loan amount is $8500 (meaning no interest during school...this value may be off)
Unsubsidized loan amount is $41500 (6.8% from day 1 of school)
Student is unable to pay off anything in a 3 year residency (may be totally off here)

The total debt after 4 years of medical school comes out to be 200k + Interest. This is how I did the calculation for interest:

$2822 after year one (.068 * 41500)
$5644 after year two (.068 * 83000)
$8466 after year three (.068 * 124500)
$11288 after year four (.068 * 166000)
Total Interest = $28220

Total Loan = $228,220

Then the 6.8% is applied to the total loan amount during the 3 year residency after which you end up paying $68697 in Interest.

Total interest = $96917
Does this seem accurate? I know if you paid a good amount off during residency the number would be lower but then you should also factor in the years you take to pay if off as an attending.

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[dyspareunia]

All new loans accrue interest during school. They got rid of sub loans a few years back.

Other than that, I can't help you. I'm one of those blissfully ignoring my debt load until it's time to pay up. Living as frugally as I can is all I can do right now and knowing the number is just going to stress me out.

 

[solitarius]

I think you're off.

The Stafford, or what you call subsidized, is no longer subsidized at the graduate school level. Interest accumulates on the original loan balance from Day 1, but interest is not charged on accumulated interest itself.

What you call unsubsidized is when the interest accumulates on day 1 and the interest is charged on the original loan amount + accumulated interest. So the loan amount you calculated above is on the low end.

 

[CodeRedDew]

All new loans accrue interest during school. They got rid of sub loans a few years back.

Other than that, I can't help you. I'm one of those blissfully ignoring my debt load until it's time to pay up. Living as frugally as I can is all I can do right now and knowing the number is just going to stress me out.

Put me in this category

 

[pmarank]

I think you're off.

The Stafford, or what you call subsidized, is no longer subsidized at the graduate school level. Interest accumulates on the original loan balance from Day 1, but interest is not charged on accumulated interest itself.

What you call unsubsidized is when the interest accumulates on day 1 and the interest is charged on the original loan amount + accumulated interest. So the loan amount you calculated above is on the low end.

Oh. Is there a limit to the amount of subsidized loans med students get? Do you know the typical amount of subsidized most students get?

EDIT: Also are you saying its not unusual to pay over 100k in interest alone?

 

[solitarius]

I believe there is a limit on the Stafford due its advantage of non-capitalized interest over private loans. I don't know what it is, but it's not going to cover the total thing.

Anyway, you should talk to your finance buddies on how the math looks. Can't help you there, but it's going to be a lot of money.

 

[Dr. Yes]

In before "Doctors make too much money!"

 

[Psai]

I think you get around 40.5k in loans at around 6% and then you can take out grad plus loans for around 7%. These rates are almost certainly going to go up next year.

 

[WhippleWhileWeWork]

You need to find out how the interest is compounded if you're going to do any sort of meaningful calculation. Then use an online interest calculator.

Or like someone suggested, make a friend in finance, you don't want to end up like this lady Doc.
"When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000. Since then, it has ballooned to $555,000.

It is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.

"Maybe half of it was my fault because I didn't look at the fine print," Dr. Bisutti says. "But this is just outrageous now."
http://online.wsj.com/news/articles/SB10001424052748703389004575033063806327030


Ignorance in this case, can cost you.

 

[pmarank]

You need to find out how the interest is compounded if you're going to do any sort of meaningful calculation. Then use an online interest calculator.

Or like someone suggested, make a friend in finance, you don't want to end up like this lady Doc.
"When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000. Since then, it has ballooned to $555,000.

It is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.

"Maybe half of it was my fault because I didn't look at the fine print," Dr. Bisutti says. "But this is just outrageous now."
http://online.wsj.com/news/articles/SB10001424052748703389004575033063806327030


Ignorance in this case, can cost you.

550k

Can any of you guys share the typical amount of interest you see med students accumulating?

 

[Mt Kilimanjaro]

You need to find out how the interest is compounded if you're going to do any sort of meaningful calculation. Then use an online interest calculator.

Or like someone suggested, make a friend in finance, you don't want to end up like this lady Doc.
"When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000. Since then, it has ballooned to $555,000.

It is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.

"Maybe half of it was my fault because I didn't look at the fine print," Dr. Bisutti says. "But this is just outrageous now."
http://online.wsj.com/news/articles/SB10001424052748703389004575033063806327030


Ignorance in this case, can cost you.

"The fine print" like actually paying it off?

 

[Ryan17]

Let's not forget the last 10 years have been a falling interest rate environment, and the next 10 will be a rising one.

Ouch.

 

[WhippleWhileWeWork]

"The fine print" like actually paying it off?

She sounded rather naïve and irresponsible. But over half a million in debt on a FM doc's salary is a noose, she's pretty screwed. Hopefully this will scare some people into understanding their loan details and responsibilities.

 

[Porfirio]

She sounded rather naïve and irresponsible. But over half a million in debt on a FM doc's salary is a noose, she's pretty screwed. Hopefully this will scare some people into understanding their loan details and responsibilities.

You mean as in not going into primary care - check.

 

[WhippleWhileWeWork]

You mean as in not going into primary care - check.

Ha, not in all cases.
My school gives free tuition if you're willing to do PCP in a rural area for 5 years. Rural primary also seems to pay more around here. Free tuition is like a 150k+ bonus on top of your salary.
Minimal debt + good salary = win.

 

[Psai]

I've heard that for every dollar you borrow, you will end up paying back double. I guess it depends on how long your residency is, if you do fellowship, what field it is, etc. Never did the calculations myself but it sure curbs my spending.

 

[mulberry]

You mean as in not going into primary care - check.

Must suck to not know family/relatives in primary care hitting the 400k mark after taxes. I surely do.

 

[Porfirio]

Must suck to not know family/relatives in primary care hitting the 400k mark after taxes. I surely do.

N=1, publish that **** before somebody else does!

 

[Porfirio]

Ha, not in all cases.
My school gives free tuition if you're willing to do PCP in a rural area for 5 years. Rural primary also seems to pay more around here. Free tuition is like a 150k+ bonus on top of your salary.
Minimal debt + good salary = win.

True, not all cases. You just have to go to a rural area for 5 years after residency (which could mean more than 5 years - plenty of "what if's"). Have you looked into what is considered "rural?"

 

[WhippleWhileWeWork]

True, not all cases. You just have to go to a rural area for 5 years after residency. Have you looked into what is considered "rural?"

Yup, basically let's say your state has 10 cities and 60 counties. The 50 counties not containing a big city count as rural.
We're not talking rural Yukon Men Alaska or anything like that.

 

[mulberry]

N=1, publish that **** before somebody else does!

Nah, I'm not the only one in this case. There are plenty of other students on here who have hardworking parents/relatives who are making that type of money in primary care/private practice. That paycheck obviously comes with hard work and lots of hours, but still, it's doable.

 

[pmarank]

http://www.finaid.org/calculators/loanpayments.phtml

I used that calculator with a 160K loan balance, 6.8% rate, 10 year repayment, $1841 in monthly payments. The interest alone is a little above 60k.

 

[sazerac]

The rules on which loans accumulate interest and when are quite complex. This is not as simple as a home mortgage calculation.

How often interest capitalization occurs is a big factor. So is the repayment plan you choose during residency, and again as an attending. Your best best is to enter your actual and projected loans into the AAMC Medloans calculator (link) and see for yourself. A 4-year resident salary of $50,000 and an attending salary of $250,000 are good rough estimates for now.

It will break out how much interest you paid, and if you are lucky it might even show you some loan forgiveness. Most students are surprised at how large their loans really are, and simultaneously how little they have to pay towards them per month.

 

[synecdoche]

Can any of you guys share the typical amount of interest you see med students accumulating?

I hope I used the medloans calculator correctly, but here are hypothetical values for a person who goes to private school and borrows about $280k over the course of 4 years ($70k per year, assuming $50k tuition and fees + $20k cost of living):

 

[sazerac]

All right, you found the right tool! If these are recent loans it would be more realistic to use PAYE instead of IBR, and then actually open that repayment tab. It is highly unlikely that somebody in the above situation would pay 39% of their income choosing the standard repayment plan.

 

[synecdoche]

All right, you found the right tool! If these are recent loans it would be more realistic to use PAYE instead of IBR, and then actually open that repayment tab. It is highly unlikely that somebody in the above situation would pay 39% of their income choosing the standard repayment plan.

Oops, you're right, I didn't realize which tab I had open when I took the screen shot. At the very least it illustrates how much interest accumulates even under the most optimistic (and unrealistic) repayment plan.

I assumed that Stafford Unsub was maxed out and $50k per year of Grad Plus, though I have no idea what "FFEL" means and how that differs from the other Grad Plus loans listed. Funny how we had almost exactly the same salary assumptions!

 

[TheWeeIceMan]

Must suck to not know family/relatives in primary care hitting the 400k mark after taxes. I surely do.

500k+ for primary care is a huge outlier. Going into primary care thinking that a top 1% income is waiting for you is kind of dumb for the average student without connections to wildly successful practices.