If you owe 300k, you’ll have to earn roughly 500k pre-tax to pay it off in a lump sum (very unlikely). If paying it off over 10 years you may have earn 600k pretax.
hahahaha wut.
Saying you need to earn 600k pretax to pay off 300k in loans is a hilarious and sad example of how horrible some physicians are with money, for a variety of reasons.
600k pretax is WORST CASE (Los Angeles, filing single, not married) $340k post tax or a ridiculous $28,300 PER MONTH after taxes. Now, let's say it took you a long and difficult 7 years after med school to become an attending (not unheard of for gen surg + fellowship or neurosurgery, otherwise, PGY-5 or 6 is where most high paying specialties like anes, rads, ortho, surgical optho, Mohs derm finish training, but we are talking about a worst case here). Let's also say for your $300k of debt you payed the minimum income based payment using the REPAYE plan during residency/fellowship. This puts your interest rate at about 3%. We will just ignore those little income-based payments and pretend you just let your debt balloon from interest with 0 payments (makes the math easier). Again, this is worst case, but with some financial acumen because you did use REPAYE to get half of your interest each month paid by Uncle Sam.
Now you are an attending and your debt is $370,000 in 2021 dollars (your debt increase in reality has barely out paced inflation...your inflation adjusted interest rate is more like 1-1.5% but we are doing worst case here so we will ignore that). You don't know any better so you don't refinance your loan down to 3% from 6% now that you make too much money to qualify for IBR/REPAYE.
Ok, here is the hard part: you have just 3 years to repay your loan (10 year loan - 7 years of residency = 3)!!!! Oh no!!! Sounds like a financial disaster right? Not at all. Your monthly loan payment for $370,000 of debt paid that needs to be paid off in 3 years is $10,700/month. So every month for 3 long years, you throw $10k at your loans and have to live like a peasant off $17,600/month post tax. Or in other words, you are going have a
net income of $211k/year post tax and after loan payments. Better get used to ramen and a 300 square foot apartment in a rough part of town. For reference, that post-tax salary after loan payments is what a single person in LA making $350k would bring home...also known as the 97-98th percentile
household income in the US.
Now, a more realistic scenario is making $320k/yr as an FM trained hospitalist. You want to pay off your debt quickly so you take a job in a state with no state income tax and a lower cost of living. You are lucky enough to be married by age 30 so you get that sweet sweet "married filing jointly" tax break. You are looking at $250k/yr or $20,800/month post tax . You are used to living off $55k/yr as a resident, or about $4,000/month post tax. You give yourself a 100% raise so now you spend $8000/month. You throw the remaining $12,800k of disposable income at your loans and pay it off in 2 years and 4 months. Afterwards, you ride off into the sunset working an average of 42hr/week making an income in the top 2-3% of one of the richest countries in the world.
Bonus fun fact: if you want to get about of debt in a year after your 3 year FM residency, work residency hours for a year (65hrs/week) and pick up extra hospitalist shifts. You can clear $500k pretax/$366k post-tax...live off $46k, pay off your $320k in loans in one year.
Tl;dr: you don't need $600k/yr to pay off a 10-year $300k loan. You can knock that amount of debt out in 2-3 years in a specialty with a 99% match rate as long as you break 210 on step 1. Thank you for coming to my ted talk.
to be fair, it seems like all the old-timers constantly complain about that.
