How quickly does the average med student pay off their debt?

[asdasd12345]

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After you have finished, and of course if you are successful, you graduate perhaps 120,000 in debt. So how long does it take to pay that back after residency? Im thinking perhaps move back in with the folks for a year, pay it all off as soon as possible.

 

[Sharkfan]

You planning on living with your parents as a 29-year old (at the young end of the spectrum, assuming normal pace through college and a 3 year residency)??? Then again, I guess as long as your boyfriend/girlfriend/wife/husband/children don't mind...

As for me, I plan on living like a resident (aka very cheaply) for a year or two and sacrifice nearly all of my salary to the debt-monster...

 

[asdasd12345]

im not particularily bothered who i live with as long as its near free and i can get it paid it all off as soon as possible

 

[Megalofyia]

Living with your parents at 29 isn't that far off from what many people are doing. It's free, you get meals, laundry and maid service.

I would never move home but that's just because my family does much better with distance but if we got along it wouldn't seem like a bad idea.

 

[fullefect1]

It matter on what specialty you have completed. A Family Practice doctor making 120k after a couple years, and a Orthopedic making 400k would make a big difference.

 

[AmberE]

My brother had about 120 and he paid his off in 6 months. Of course he is not the norm at all. From the get go he paid the max he could and lived in a dumb and never spent any money. I don't know how he did it, but, he doen't have a wife or children. That makes a big difference. He doen't care about spending it, he just like to see it sitting in the bank. He's insane.

 

[medic8m]

I met an MD who has been paying on his student loan for 20 years. He said it didn't make sense to pay it off early because the interest was so low. Instead, he invested his earnings at a higher rate.

 

[hakksar]

This thread from the Emergency Medicine forum explains why it is actually a bad idea to pay of low interest school debt ASAP (be patient and read through it: it makes sense) http://forums.studentdoctor.net/sho...ge=20&highlight=paying off loans&pagenumber=2

 

[Fumoffu]

good thread that was linked

 

[mikeyboy]

The key is to realize that it's not bad to live in debt, it's bad to live in quickly growing debt. If you're going to give me $100k and tell me I can just pay it back, with no interest, whenever I want, I'm going to carry that $100k debt until I die (or you finally want the money). A Stafford loan at 4% is barely covering inflation. Almost anyone can make 10% (on average) in the stock market and more than cover the interest.

 

[Pinkertinkle]

What's the average rate on these loans? 4%?

 

[juddson]

Whoa, whoa.

Right now stafford loans are right around 3-4% (or something close). They CAN go as high at 8.25 (as they were when i was an undergrad 10 years ago). I expect interest rates to go up over the next three years, and to remain there for some time. I do NOT think that one should dismiss the possibility that rates will hit 8.25 for federal loans over the next 5-10%, which will fall within your borrowing or payment period.

That said, there is virtually no way one can "begin" to pay back thier school loans during residency. At best, interest may be capitalized (I'm not sure that subsidized loans continue to "subsidize" after med school) during residency.

Assuming you graduate with 120,000 of debt (a fairly low figure in this day and age, no?) you can expect that to be about 140,000 (or so) by the time residency is over unless you find a way to pay the interest as it accrues. At 5% interest (a nice middle of the road figure), you can expect to pay about $1500 a month, each month for ten years. If you are in primary care, your "take-home" (ie, after taxes) income will be something like $6500 a month, assuming you make about $120,000 a year. That leaves you $5000 to live on each month. Not too bad. But not rich either.

I cannot fathom how one could pay off $120,000 of debt in 6 months. Over that 6 month period, one would have to earn about $220,000 in gross income BEFORE taxes assuming he spent NO MONEY on ANY other thing. That translates into a yearly salary of $440,000. Possible??? For a first year right out of residency - I don't think that is common even in the super high paying specialties. One needs to be drawing equity to be earning that sort of coin I would have thought.

Judd

 

[Whisker Barrel Cortex]

Originally posted by juddson
Whoa, whoa.

Right now stafford loans are right around 3-4% (or something close). They CAN go as high at 8.25 (as they were when i was an undergrad 10 years ago). I expect interest rates to go up over the next three years, and to remain there for some time. I do NOT think that one should dismiss the possibility that rates will hit 8.25 for federal loans over the next 5-10%, which will fall within your borrowing or payment period.

That said, there is virtually no way one can "begin" to pay back thier school loans during residency. At best, interest may be capitalized (I'm not sure that subsidized loans continue to "subsidize" after med school) during residency.

Assuming you graduate with 120,000 of debt (a fairly low figure in this day and age, no?) you can expect that to be about 140,000 (or so) by the time residency is over unless you find a way to pay the interest as it accrues. At 5% interest (a nice middle of the road figure), you can expect to pay about $1500 a month, each month for ten years. If you are in primary care, your "take-home" (ie, after taxes) income will be something like $6500 a month, assuming you make about $120,000 a year. That leaves you $5000 to live on each month. Not too bad. But not rich either.

I cannot fathom how one could pay off $120,000 of debt in 6 months. Over that 6 month period, one would have to earn about $220,000 in gross income BEFORE taxes assuming he spent NO MONEY on ANY other thing. That translates into a yearly salary of $440,000. Possible??? For a first year right out of residency - I don't think that is common even in the super high paying specialties. One needs to be drawing equity to be earning that sort of coin I would have thought.

Judd

Interest rates can be locked in for the life of the loan when you consolidate loans, which is what most MDs do. You can get a rate as low as 2.75%.

You can not pay off much of your loans in resdidency, but you can make payments on the interest if you want to (I don't). You don't "capitalize" you loans, that is what happens when you don't pay the interest, i.e. the interest capitalizes and becomes part of the principal.

If you are willing to go to smaller towns, many surgical specialties and radiology pay enough to pay off loans. One of our senior residents is starting at 600K in the nothern midwest. Two of our fellows are starting at 500K in small towns further south. One has 400K in bonuses only in addition to a salary of about 300K. So its possible. I'm sure surgical subs such as ortho and neurosurg make similar numbers right out of residency.

 

[LaurieB]

Here are two good links from the AAMC site about debt, repayment, and Stafford loan rates:

http://www.aamc.org/students/financing/debthelp/factcard03.pdf

http://www.aamc.org/students/medloans/interestratehistory.pdf


The site I found these on is:

http://www.aamc.org/students/financing/debthelp/start.htm


PS I have to give props to the Financial Aid Coordinator at Rush for including the factcard in the aid information packet.

 

[Blade28]

From what I've heard from attendings who were in debt after graduation, between 10-20 years.

 

[beriberi]

Just had my exit interview with the financial aid people.

107,000 in debt. I will be paying it off over 30 years. Though it turns my stomach a bit to be thinking about making loan payments when I am in my 50's, it is the only financially smart thing to do (I will lock in my loans at about 2.8% for the lifetime).

To the above poster who said that it is impossible to make loan payments in residency: no on will ask you if you feel you can afford to. I do not qualify for deferrment because only 2/3 of my loans are govt (1/3 are institutional). Therefore I will be expected to pay 760 a month on my institutional (no way around that without broken kneecaps) and 750 on my govt loans. I will get my parent to take out some home equity on the institut loan and will pay them back over 15 years, knocking that figure down to 425. I will consolidate the govt loans and pay only interest for the first 10 years (175) and the remainder over 20 years (400 month). That means, the best I can do is knock my loan payments down to 600 month. I will be dumping as much as I can afford (residency and beyond) into retirements. Then, I can stop working at 50 if I want and still make loan payments.

But, all whining aside, I will be taking home 2700/month.

I don't think anyone cares so much about my personal situation, but I know that people rarely post hard numbers and it is difficult to get an idea of how you really come out.

 

[kito]

Originally posted by Whisker Barrel Cortex
One of our senior residents is starting at 600K in the nothern midwest. Two of our fellows are starting at 500K in small towns further south. One has 400K in bonuses only in addition to a salary of about 300K. So its possible

Wow. Are they joining private practices, opening their own or are they hospital based? How much is liability coverage?

 

[juddson]

You were able to lock in a 2.75% interest rate on a 30 year loan? You must be joking!!!!

Judd

 

[AmberE]

Judd,
quoted:
I cannot fathom how one could pay off $120,000 of debt in 6 months. Over that 6 month period, one would have to earn about $220,000 in gross income BEFORE taxes assuming he spent NO MONEY on ANY other thing. That translates into a yearly salary of $440,000. Possible??? For a first year right out of residency - I don't think that is common even in the super high paying specialties. One needs to be drawing equity to be earning that sort of coin I would have thought.


I know it sounds impossible but it was done. My brother is a Diagnostic Radiologist. He finished residency in Sept 2003. He started off making $380. When he temps at other hospitals he make 1,000 a day. He started paying on his loan in residency and he lived very, very cheap. His housing was a dump and he paid about 350 as a roommate of someone. Once he got a job, he paid like 10,000 a month until it was paid off which was 6 months. It is not a lie. If you knew him you would beleive it. He is the cheepest, tighest person ever. He makes 380 now and wont ever go out and buy a new bed. He bought a used one. That definetly wont be our family. When you sacrafice for so long, you wont nice things. He drove a 87 ford festiva until is actually crashed. I am telling you he is beyond cheap. I keep telling him now, go out and buy yourself a shrimp or lobster dinner and enjoy your life. THat will never happen. He said I will not rest assured until I have 1 million in the bank, which will be in about a year from now. I forgot to mention that he lives in a rental mobile home and makes 380. Like I said, he is INSANE!!!

 

[japhy]

wouldn't he have to pay $20,000 a month to pay it off in 6 months?

 

[AmberE]

No, because he paid off as much as he possible could while he was in his residency. He was making 35,000 a month then and paid as much as he could. I promise it is true and very hard to believe.

 

[Blisterpeanuts]

I've read somewhere that sometimes a private practice or a hospital will offer to pay off someone's loan as part of the hiring package. Is this at all common?

 

[Sharkfan]

A million in the bank, earning all sorts of sweet interest...

I can understand that kind of motivation. Props to your brother!!! (Assuming he will start treating himself to a little well-earned luxury after he reaches his goal...)

 

[beriberi]

Originally posted by juddson
You were able to lock in a 2.75% interest rate on a 30 year loan? You must be joking!!!!

Judd

Wow. You should try some outside sources for information on student loans. Or your financial aid office. Depending on the ratio of stafford sub/stafford un-sub and perkins, your rate will be around 2.5-3.5 if graduating this year. Really. Student loans are cheap and when you graduate you can guarentee they will remain so.

 

[Adapt]

Originally posted by AmberE
No, because he paid off as much as he possible could while he was in his residency. He was making 35,000 a month then and paid as much as he could. I promise it is true and very hard to believe.

I don't think anyone makes 35K a month in residency since their salary for a year is around 40K.

If you meant he made 35K a month after residency, that's a net income of 420K a year as a starting radiologist, and this is assuming after taxes. First, I don't even think the gross income is that much, but if it was, after taxes that number will come down much. From looking at salary.com, the average salary for a radiologist was $258K a year, with half the people earning between $223K and $312K.

I'm sorry but I just don't see how it adds up.

 

[AmberE]

Sorry , I meant to say 35k a year in residency.

 

[Adapt]

Originally posted by AmberE
Sorry , I meant to say 35k a year in residency.

I see well that clears it up. From your other post, I would have to say that your brother was mighty fortunate to start off at $380K per year compared to the average salary of radiologists.

Makes you want to think about specializing if it is possible to pay off that massive debt in 6 months.

 

[AmberE]

quoted:
I see well that clears it up. From your other post, I would have to say that your brother was mighty fortunate to start off at $380K per year compared to the average salary of radiologists.

The reason he make so much is that he search all the jobs to find which one payed the most. He has no wife or family and the most important thing to him was making the most money. He lives and works in Carbondale IL. It is two hours from an airport and he says its a small town with nothing to do. He wanted to go to Vegas but it didn't pay as much. I wish he would have, then he would have been closer to family. Also the job he got started out at 350k but since he was up on all the new equipment and also knows how to do interventional rad he talked them into paying him more.

He still is now pissed off that he will only make 500k next year because when they told him they were partner he would make 600k. Boo Hoo!! I told him quit complaning and be happy that you are in the top 5% of incomes in the nation.

 

[cardsurgguy]

Amber

Sorry, but I don't mean to beat this to death, but I was curious. (basically so I could do the same thing in the future...

So your brother paid off his 120 grand debt in 6 months, but not during his residency right? Since it would be impossible to pay 120 grand off with 6 straight months of income totaling 17.5 grand before taxes (1/2 of 35 grand a year)

The only way he could have paid off 120 grand in 6 months is if he didn't pay it off during his residency, but paid it off when he was making over 350 grand a year (which is about 30 grand a month)

However, this is still not possible since 30 grand a month before taxes, translates into below 20 after taxes (even if he lives in a state like Texas or Alaska, without any income tax) He still would have had to pay federal income tax, which he would be in the highest bracket which if I remember from discussing with my father who is an economist I believe is 39% income tax. This reduces the 30K a month to 19K. This in and of itself times 6 doesn't equal 120 grand. But still then you have to take away from this 19K rent, food, car insurance, and other living expenses. So this would lower it more.

So the only way he could pay off 120 grand in 6 months, is if he used money he saved up during his residency, which I'm guessing was 4 years for interventional radiology, not sure, just a guess. Then used his new income after his residency plus his savings from 3-4 years of residency to pay off his debt.
Is that how he did it?

Yet still, even this is strange, because if he graduated with 120 K debt after med school, it would fly up due to interest during his residency, so he would have had to pay more than 120K if he paid it off after his residency.

Like I said, sorry for beating a dead horse, but I'm pretty curious.

 

[AmberE]

Ok, heres the deal. I just got off the phone with my bro doc, the one who payed off his loans in 6 months, and not only did he pay them off, but right now he has $40,000 in the bank (yes, finished residency in August, 2003). His residency was four years. He lived off exactly $800.00 dollars a month every month without fail (rent $300.00-I visited him a couple times and let me tell you his place was a DUMP-he drove a 87 Ford Fiestiva which died 6 months before finishing his residency when he bought a Honda- says he spent around $200 on food-) Some months he payed $1000.00 dollars towards his loan, some months less. At the end of his residency he had some money in the bank and he put everything towards his loan. He thinks that he probably ended up paying off around $40,000 before making the big bucks. He really doesn't know exactly what his loans amounted to, but when he started working he payed exactly $20,000 per month and it was payed off by the sixth month. He works most weekends at various hospitals/clinics so this adds up to a lot of extra money along with his 380K per year, plus, to this day he lives in a trailer home, is sleeping on a used bed and is so cheap it's ridiculous. Honestly, his life seems awfully depressing to me so I don't know that I would suggest living like he did to pay your loans off so fast, but it definately can be done. Also, he nets $18,700 a month as a base salary (not sure if that is after SS is payed for the year or not), but working those weekends brings in a whole lot of extra money (not sure exact amount-said this month he made 40K gross all together-seems to like that 40K number)

 

[cardsurgguy]

I would assume it's prolly easier to live like your bro did with a debt of 120 grand
that would prolly give you a little motivation to live a bit on the frugal side

 

[AmberE]

Oh yeah-
About the taxes- I do know that he nets $18,700/month just from his base salary (I'm not sure if this is after or before Social Security is payed for the year). Like I said above he works most weekends so I guess that is how he was able to pay the 20K per month.

He temps a lot and makes $1500 a day on the weekends that he has off when other docs don't want to work. Most of them are almost retired age. Their ready to relax and he's ready to work hard now and bring in the dough.

 

[Blade28]

All I can say is...WOW. I'd be happy to pay off my loans within 5 years of finishing residency/fellowship.

 

[EMRaiden]

Hi- I followed this thread over from the version in the EM forum...

I know that debt makes some people very anxious and panicky... their palms get sweaty and they feel nauseated... but not all debt is a bad thing.

You should be able to consolidate your loans at someting less than 4% (sometimes much less than 4...) My lender consolidated last year at 4.25, I get a 1/4 reduction for using automated payment and if my first 48 payments are on time I get an additional 2%!!!! off. This means that I will be paying off this loan for the next 30 years at 2% with a smile on my face.

This is the ONLY loan you will ever be given with essentially no risk involved- if you can't make a payment, ask for a forebearance, if you die the loan is forgiven. Why put 1500... 2000.. or more towards paying off the loan, when you can pay $500 a month and "save" the excess-- use it to buy a house and build equity, or invest it in the stock market and earn (on average) 9% per year.

If you are thinking about paying $1500 towards your loans and getting everything paid ion 10 years, consider this...
If you pay $500 towards your loans, and invest the $1000 overage every month... in 30 years you would have FIVE HUNDRED THOUSAND in the bank, AND your loan is paid...

Paying off the loan in 5-10 years saves you a couple of thousand in interest, but costs you hundreds of thousands in potential earnings down the road.

Trust me on this. You are going to be physicians at the end of this road, no one is going to care about a piddly student loan. It won't affect your ability to get a car or a house. Run the numbers yourself...

EMRaiden

 

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