I think im taking on a stupid amount of debt dont know what to do.

[superdoctorman]

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My medical education is going to take me 5 years (1 year special masters and 4 years normal MD classes) resulting in a total debt of $384,972. I have no previous debt to worry about. This just seems nuts but undoubtedly there are other people in my position?

I am ineligible for the military for medical reasons otherwise that would be the obvious answer.

Am i making a mistake by doing this? I need advice I have been looking around for options but so far all I have found in the NHSC scholarship which is both competitive and not very attractive since it limits you to only doing primary care. I have also looked at IHS loan repayment (would love to work for IHS) but it is only 20k a year and its only after you graduate and start working for them. Are there other options and hope to make this work?

I really want to continue my medical education and I want to be able to take care and provide for my family in the future.

 

[Law2Doc]

My medical education is going to take me 5 years (1 year special masters and 4 years normal MD classes) resulting in a total debt of $384,972. I have no previous debt to worry about. This just seems nuts but undoubtedly there are other people in my position?

I am ineligible for the military for medical reasons otherwise that would be the obvious answer.

Am i making a mistake by doing this? I need advice I have been looking around for options but so far all I have found in the NHSC scholarship which is both competitive and not very attractive since it limits you to only doing primary care. I have also looked at IHS loan repayment (would love to work for IHS) but it is only 20k a year and its only after you graduate and start working for them. Are there other options and hope to make this work?

I really want to continue my medical education and I want to be able to take care and provide for my family in the future.

If you don't do a crazy long residency, and can land a post-residency job that pays at least the average income of a lower end specialty, you can probably service this kind of debt, but I won't kid you, it will necessarily impact your lifestyle. You will be paying this off over decades. Unless your spouse provides a really good second income, expect to be living very modestly, sending your kids to public schools, taking exclusively domestic vacations, making good use of public transportation, and loading up at every free luncheon and drug company dinner you get the 411 on.

 

[FSU2013]

Loan forgiveness (if the natl govt hasn't given it the ax) may be a viable option. Otherwise, you could 1) move to the middle of nowhere but has eat pay or 2) work somewhere that offers loan repayment.

Good luck!

 

[DrMidlife]

Spend 20 minutes in the repayment section on studentloans.gov. Get a little bit familiar with IBR and ICR, extended and graduated repayment.

If the majority of your debt is federal (Stafford/GradPlus), then you have options which take your income into account. If you get private loans, you're more likely to be in trouble.

When you're borrowing over $250k (which is the new normal for the non-trust-fund demographic), interest accrual will typically push this up over $500k during residency. This makes it interesting to look at forgiveness options such as PSLF. In general, you spend 10 years serving the underserved, then your balance is forgiven...but you pay taxes on it. Taxes on $300k (to pick a number) could be crippling, which is the thing nobody is talking about yet. Expect the AMA to (successfully) lobby for repayment options for the forgiven balance taxes before long.

Right now the calculators for payment amounts can't give you a quick answer to what you're in for after residency. The calculators can't handle the complexities of med student debt. Undergrad Staffords at 3.4, grad Staffords at 6.8, GradPlus at 7.9, interest accrual during school/grace or not, etc. There aren't any IBR/ICR calculators because there are too many variables. (I've had to make a fairly massive multi-tabbed spreadsheet to map mine out.)

In summary:
1. you're not alone
2. there are a variety of repayment programs
3. private loans, as a part of a big debt load, are bad
4. you can live in denial until about mid-3rd year, but then you really need to get your brain around compensation and regional trends as you finalize your specialty choices

Best of luck to you.

 

[link2swim06]

The worst part about that amount of debt is the compound interest. It would be a good idea to try to pay down at least 100-200K of that in the first couple of years post residency. It might mean living like a resident for another year or two. Otherwise, the amount of interest will become ridiculous.

There are many jobs which offer loan repayment as part of your employment compensation. Combining that with a portion of your salary can make a significant dent into the your debt.

 

[NightSwim]

go into orthopedic surgery. no brainer. maybe do a hand or spine fellowship.

 

[DrMidlife]

a total debt of $384,972

I hate to tell you this, but interest is always accruing, compounded daily, so the pain is quite a bit worse than you think. $384,972 is what you're borrowing, but what you'll owe when you get your MD is probably well over $500k.

 

[HLxDrummer]

I have a friend that is taking on 90K a year unsubsidized and he has a wife that isn't working and 2 kids. I am taking on 60K a year and it sucks but I'm learning to accept it. I'm ok with living very cheap (like $40/week for food, ride my bike everywhere, not going out, etc). Plan to continue this during residency (where I'll be making like 50K a year compared to my single parent making 20K/year when I was growing up, big step up in my eyes) and pay as much as possible to my loans. Live in a ****ty place with a cheap car (I can work on cars which helps)...

My school has a Ph.D./M.D. program that pays your tuition and gives you a stipend. Can you do something like that? Work a few hours during school and work a ton during off time?

What speciality would you like to get into? If your going to be making 200K/year when your out and can live on 20K/year you'll pay your loans off fairly quick.. Just keep in mind now that the $1.80 coffee you buy will be a lot more than that by the time you pay it off..

 

[superdoctorman]

I hate to tell you this, but interest is always accruing, compounded daily, so the pain is quite a bit worse than you think. $384,972 is what you're borrowing, but what you'll owe when you get your MD is probably well over $500k.

Yes I know, I figure the fact that I realize that now and not when I graduate can work to my advantage if I can be aggressive about reducing this amount by any possible means.

I have heard a lot about PSLF being taken away after the government realizes how much it costs them. Is this overblown? If so then I think its a great option and I shouldnt be as worried but Im kind of not counting on it.

 

[DrMidlife]

have heard a lot about PSLF being taken away after the government realizes how much it costs them. Is this overblown? If so then I think its a great option and I shouldnt be as worried but Im kind of not counting on it.

The names & details of the repayment programs will change, yes. But each change requires congress to act. Anything that negatively affects student debt holders will cost office-holders re-election votes. So changes are highly publicized, thus small and slow.

Note that PSLF/NHSC/et al are specific to primary care. Lack of primary care providers is arguably the 2nd biggest hole in US healthcare reform (Nixoncare/Romneycare/Obamacare, whatever you want to call it). (The biggest hole, of course, is overall cost containment.) Point being, an interest in primary care increases your odds of repayment assistance over the long term.

Best of luck to you.

 

[mzarrowsmith]

It's clearly Obama's fault.

1) I assume if you're not medically qualifiable for HPSP, you wouldn't be able to do the FAP either, but that could be one option. http://www.goarmy.com/amedd/physician/benefits.html

2) If you happen to go for primary care (which I would argue is attractive given the number of loan repayment options available), NHSC loan repayment program is a no-brainer.

3) Depending on your interests in working overseas, Global Health Service Corps is a new thing that I think will knock 30k per year off of your debt per year of service. http://www.globalhealthservicecorps.org/

4) Read these: https://www.aamc.org/advocacy/meded/79048/student_loan_repayment.html

https://www.aamc.org/services/first/

5) If you're a fairly smooth operator with the ladies, you might try to woo this Hong Kong billionaire's lesbian daughter for a shot at a cool $64 million.

 

[Barcu]

It's clearly Obama's fault.

1) I assume if you're not medically qualifiable for HPSP, you wouldn't be able to do the FAP either, but that could be one option. http://www.goarmy.com/amedd/physician/benefits.html

2) If you happen to go for primary care (which I would argue is attractive given the number of loan repayment options available), NHSC loan repayment program is a no-brainer.

3) Depending on your interests in working overseas, Global Health Service Corps is a new thing that I think will knock 30k per year off of your debt per year of service. http://www.globalhealthservicecorps.org/

4) Read these: https://www.aamc.org/advocacy/meded/79048/student_loan_repayment.html

https://www.aamc.org/services/first/

5) If you're a fairly smooth operator with the ladies, you might try to woo this Hong Kong billionaire's lesbian daughter for a shot at a cool $64 million.

The major problem with all of these programs is what you have to give up to use them. Sure, the money sounds great, especially now. However, any person who does these will tell you do not, do not, DO NOT do them for the money. Check out the mil med group on SDN if you are curious. You pretty much have to put up with a bunch of crap (undesireable living situations or frequently changing situations, delays in training, lower salaries, deployments and family separation in the military) that the cost is just not worth it.

If you are interested in being an officer in the military or interested in primary care, these are good programs, and coming out debt free is just a cherry on top. If you are doing them for the money, you will be miserable.

OP, that is a lot of debt. As law2doc said, it will impact your life. However, it is manageable debt that will be ok with good financial planning, so instead of worrying about the debt, spend that extra time figuring out how to best pay it down. It's still worth it.

 

[gasblaster]

Note that PSLF/NHSC/et al are specific to primary care.

PSLF is not just limited to primary care specialties. Anyone that works for a non-profit is eligible.

 

[werd]

it's a lot of debt, but you'll be okay if you go into a field with good income. also, a lot depends on the interest rate that you have. look into repayment options and what you can do to minimize your loans' impact on you. some lenders give significant interest rate reductions (as much as 2.5%) if you sign up for automatic online payments.
paying 2-3k a month for loans doesn't hurt that much if you're bringing in 15k a month, but could be quite burdensome if you're bringing in 8. something to think about as the end of med school gets closer.

 

[todds]

My medical education is going to take me 5 years (1 year special masters and 4 years normal MD classes) resulting in a total debt of $384,972. I have no previous debt to worry about. This just seems nuts but undoubtedly there are other people in my position?

I have >300K debt as well. The way I think of it, is that you are paying off a mortgage (but with no house). This is not going to happen in the next few years.

I think of it as taking 25 years to pay it off, little by little so I dont think of it. With interest, roughly 400K post residency, it will take roughly 2500/mo. to pay it off in ~25 years.

The way I think of it, you will just make 30K less per year as a physician then what you think. So if you make 200K as oupatient IM, instead you will make 170K, which at that point doesnt seem bad. 350K as cardiologist, instead 320K. Again, not as bad as it made out to be.

I also dont think its completely important to pay off your loans immediately. As a physician, you will take home more than you need to live comfortably. Because unlike most professions, you have stable income, you should have a stead flow of income that you should invest conservatively. Over time that will accumulate and hopefully those investments in themselves will be able to pay off loans, mortgage. Key points are if you invest intelligently and not in any get rick quick schemes, and you don't live an extraordinary lavish lifestyle.

Like others said, dont send your kids to private school, save the money for college instead. As an example, lets say you do outpatient IM because you want a decent lifestyle. 200K/yr, after taxes ~160K/yr. After loans in the above example, 130K/yr. In most places in the country, you can live very well on 60K a year (take home), and lets say 10K for vacations, etc... 50K/yr savings. Assuming you have a spouse you will add in their earnings into savings. The invest in low risk investments, and even with low yields in <10 years, your investments should start paying your loans instead of you. So you can hopefully at that point starting investing more income for your kids, retirement etc..

 

[kpcrew]

Wouldn't it be better to just pay off your loans as quick as you can instead of investing your money? 6.8% compound interest is no joke.

 

[link2swim06]

I have >300K debt as well. The way I think of it, is that you are paying off a mortgage (but with no house). This is not going to happen in the next few years.

I think of it as taking 25 years to pay it off, little by little so I dont think of it. With interest, roughly 400K post residency, it will take roughly 2500/mo. to pay it off in ~25 years.

The way I think of it, you will just make 30K less per year as a physician then what you think. So if you make 200K as oupatient IM, instead you will make 170K, which at that point doesnt seem bad. 350K as cardiologist, instead 320K. Again, not as bad as it made out to be.

I also dont think its completely important to pay off your loans immediately. As a physician, you will take home more than you need to live comfortably. Because unlike most professions, you have stable income, you should have a stead flow of income that you should invest conservatively. Over time that will accumulate and hopefully those investments in themselves will be able to pay off loans, mortgage. Key points are if you invest intelligently and not in any get rick quick schemes, and you don't live an extraordinary lavish lifestyle.

Like others said, dont send your kids to private school, save the money for college instead.

The only thing crappy thing about this plan is you are not optimizing your savings for retirement. You are rarely going to being able to invest at a higher rate than current loans are set at (6.8% +). Therefore from a long term standpoint its better to pay off loans quickly.

If instead of paying it off in 25 years, if you aggressively paid it off in 5 years (sacrificing your attending standard of living). And instead added $30,000 to a retirement fund per year for the remaining 20 years you would have ~$1,000,000 saved vs just having paid loans.

Obviously there is no point in dying rich, but then again most people want to retire with amble funds at some point. Its an individual decision where the balance between short term need and long term goals is optimal for your life. But you should know all the numbers/options before deciding with one.

 

[gravitywave]

Wouldn't it be better to just pay off your loans as quick as you can instead of investing your money? 6.8% compound interest is no joke.

neither is giving up 8+% per annum returns so you can pay those 6.8% loans off, which is what you'd have been doing if you didn't invest that money in US stocks over the past ten years.

 

[gravitywave]

You are rarely going to being able to invest at a higher rate than current loans are set at (6.8% +). Therefore from a long term standpoint its better to pay off loans quickly.

not really, provided you're taking all that lettuce that you would use to cram down those loan balances, and investing it instead. I believe US stocks are still a good bet as a long term investment - but i understand it is a gamble, the results of which you wouldn't know until those 25 years are up. I'll be taking that bet.

 

[kpcrew]

neither is giving up 8+% per annum returns so you can pay those 6.8% loans off, which is what you'd have been doing if you didn't invest that money in US stocks over the past ten years.

Well if you didn't invest in Apple stock, then you'd probably be behind.

 

[gravitywave]

Well if you didn't invest in Apple stock, then you'd probably be behind.

maybe so, but that's the beauty of index funds. fire and forget, baby.

 

[todds]

The only thing crappy thing about this plan is you are not optimizing your savings for retirement. You are rarely going to being able to invest at a higher rate than current loans are set at (6.8% +). Therefore from a long term standpoint its better to pay off loans quickly.

If instead of paying it off in 25 years, if you aggressively paid it off in 5 years (sacrificing your attending standard of living). And instead added $30,000 to a retirement fund per year for the remaining 20 years you would have ~$1,000,000 saved vs just having paid loans.

Obviously there is no point in dying rich, but then again most people want to retire with amble funds at some point. Its an individual decision where the balance between short term need and long term goals is optimal for your life. But you should know all the numbers/options before deciding with one.

If you saved 50K making 200K, that would take somebody at least 9-10 years to pay off with interest. After 9-10 years of hard work and hardly having any capital to do anything with (assuming your spouse is not saving very much) IMO is not the best way to go about it.

For example: if you or you and your partner can save 500K after lets say 6-7 years and after making the minimum loan payment of lets say ~30K, then that 500K investment in US stock market should yield something close to 8%. Assuming a 2-3% inflation/taxes, you will still make ~30K while maintaining the value of your initial capital - enough to pay your yearly student loans for however long it takes. After thats done, your initial capital will be part of your retirement anyway. All the while you continue to live your life and not really worry so much. You can continue to invest for your retirement thereafter.

 

[notbobtrustme]

neither is giving up 8+% per annum returns so you can pay those 6.8% loans off, which is what you'd have been doing if you didn't invest that money in US stocks over the past ten years.

eh, that's pretty risky and subject to tons of volatility. You have to time it right and make some pretty smart investments to see that kind of return.

Regarding high debt amounts, no government program is going to be worth it. PSLF requires non-profit employment, which can be 50-75% of private practice salaries, even if you factor in the residency training period. Very few people will be in residency/fellowship training for 10 years, so unless your debt is astronomical and your training period is long, there's no point in PSLF programs. Primary care assistance programs require being a PCP, which is a 50-70% pay cut vs specialization.

The best bet is to specialize in a lucrative field (surgical subspecialties, IM subspecialties, etc), go into private practice and aggressively pay down your loans. Moonlight as much as you can in residency to bring down your total debt burden.

 

[calvnandhobbs68]

neither is giving up 8+% per annum returns so you can pay those 6.8% loans off, which is what you'd have been doing if you didn't invest that money in US stocks over the past ten years.

This is just not right...the risk doesn't outweigh the reward in this case. Even if I set aside 300K to put in stocks hoping to get an average of 8% a year instead of paying off the 6.8% loans I'd come out $3600 ahead a year to touch my principal with. Sorry but $3600 a year on 300K isn't worth the risk that making anything under 6.8% a year every year will put me behind.

You also need the guarantee that you'll make over 6.8% a year every year until you pay off those loans with the money you'd be using to pay them off. That just doesn't happen.

 

[link2swim06]

If you saved 50K making 200K, that would take somebody at least 9-10 years to pay off with interest. After 9-10 years of hard work and hardly having any capital to do anything with (assuming your spouse is not saving very much) IMO is not the best way to go about it.

For example: if you or you and your partner can save 500K after lets say 6-7 years and after making the minimum loan payment of lets say ~30K, then that 500K investment in US stock market should yield something close to 8%. Assuming a 2-3% inflation/taxes, you will still make ~30K while maintaining the value of your initial capital - enough to pay your yearly student loans for however long it takes. After thats done, your initial capital will be part of your retirement anyway. All the while you continue to live your life and not really worry so much. You can continue to invest for your retirement thereafter.

I am doing calculations to show the extremes. Not necesarily an ideal for anyone.


Let consider the following situation:

But residents make ~50K. Lets say he gets a great job in EM and makes 250K post tax.

After a 3 year residency his total debt would be $468,967.67.

The extreme of paying early:

Continue to live like a resident for 3 more years (equiv. to the length of a surgical residency + fellowship).

Loans 100% paid off. Then 30K per year for next 22 years. You will have saved approx. 1.1 million.

The extreme of paying off late

Getting 25 year extended term to pay loans off.

Loan Balance: $460,000.00 (post residency number)
Adjusted Loan Balance: $460,000.00
Loan Interest Rate: 6.80%
Loan Fees: 0.00%
Loan Term: 25 years
Minimum Payment: $50.00

Monthly Loan Payment: $3,192.73
Number of Payments: 301

Cumulative Payments: $957,820.31
Total Interest Paid: $497,820.31

So in this case you pay nearly 1 million dollars and have ZERO nest egg when done.

Your proposed idea

The reason this doesn't make sense is:

1. You assume 8%, I think 5% is more reasonable.

2. You assume there is a consistent 5 or 8% return. Which there isn't...you might have 3 years where you lose money. How will you pay student loans for that 3 year period?

3. The loan interest accumulation is consistent and highest while the principle is highest. Therefore, its better to pay off loans early to prevent it from compounding more.

4. You ARE double taxed on investments (initial income tax for earning the money then capital gains tax). If you just straight pay the loans then you are only single taxed (income tax).


Obviously somewhere in the middle of the road is best for most. But I don't see any situation where planning to delay student loan payment to invest money to then pay them makes numerical sense.

 

[gravitywave]

eh, that's pretty risky and subject to tons of volatility. You have to time it right and make some pretty smart investments to see that kind of return.

risky, yes. volatility, sometimes. timing has surprisingly little to do with it, provided you diversify broadly and make contributions to your investments at regular (monthly - quarterly) intervals. making stock picks? no need. the backbone of retirement investments ought to be index funds - once you've maxed out your tax-advantaged opportunities, of course.

This is just not right...the risk doesn't outweigh the reward in this case. Even if I set aside 300K to put in stocks hoping to get an average of 8% a year instead of paying off the 6.8% loans I'd come out $3600 ahead a year to touch my principal with. Sorry but $3600 a year on 300K isn't worth the risk that making anything under 6.8% a year every year will put me behind.

You also need the guarantee that you'll make over 6.8% a year every year until you pay off those loans with the money you'd be using to pay them off. That just doesn't happen.

you do not need to make over 6.8% every year in order to win - that mindset is how people get themselves into trouble. you just need to adopt an investing strategy that maximizes your chances of seeing better than 6.8% annualized return over the long term.

what if i told you that $3600 was going to be worth over $24k in 25 years?

 

[todds]

I am doing calculations to show the extremes. Not necesarily an ideal for anyone.

Obviously somewhere in the middle of the road is best for most. But I don't see any situation where planning to delay student loan payment to invest money to then pay them makes numerical sense.

Interesting discussion. I think one thing i was assuming is that someone will make ~160K post tax instead of 250K which i think is quite generous. Another thing is that 1 million in 25 years is not the same value of 1 million dollar now. With inflation, the real value of 1 million would be less - but my analysis includes into effect inflation.

I am assuming that someone who pays minimum on their debt is investing the rest conservatively. I think historically 8% is the yield for a conservative fund, and i already took into account taxes/inflation with should be around 3% yr for your investments, thus arriving at the number 5% which i agree with.

I think at the end, i agree there should be some sort of mix between the extremes, however i guess im going to tend be on the wait to pay loans side as i feel investing intelligently will be able to take care of my loans, and thus i wont pay the bulk of it.

 

[todds]

The best bet is to specialize in a lucrative field (surgical subspecialties, IM subspecialties, etc), go into private practice and aggressively pay down your loans. Moonlight as much as you can in residency to bring down your total debt burden.

I really disagree with the above statement. We have no idea what will remain lucrative or not in the future. Furthermore, there is CONSIDERABLE variation in income across regions of the country, practice set ups, etc..

Furthermore, if people dont do what they like (aside from not being motivated to be good in that specialty) you will likely not want to work the hours required to make that income. People though General surgery and OB-Gyn were the most lucrative fields 20 years ago and they though you would be stupid to go into radiology, rad onc, derm. Now look. You can never really know.

 

[gravitywave]

I am doing calculations to show the extremes. Not necesarily an ideal for anyone.


Let consider the following situation:

lets compare apples to apples here. in order to do that, you have to rerun your extreme paying late scenario including all the payments made in the first three years of the extreme early paying scenario to pay off the $468k in debt. otherwise it's not a fair fight.

count up the total payments made under both scenarios. the reason you find early repayment coming out with more money at the end is because you made more total payments, ~ $200k more over the whole period. front-end load late payment scenario with that extra money and invest that. that's the winner.

5% a year for 25 years is an incredibly pessimistic outlook.

 

[duckie99]

your debt will be even larger if you defer making payments (which is very likely) until after residency. I doubt you'll be able to afford the minimum interest payments to be honest on a resident's salary. My advice is to skip out on that "special master's degree". Anything other than a PhD is essentially useless (especially MPH). There are some degrees such as MSCR which I believe you get payment of some kind for. MBA can be done with weekend classes after you are done training.

Also you really aren't in that much a different situation than most every other med student. You'll make enough when all is said and done (hopefully anyway) to pay off your debts. Also I wouldn't marry another med student with massive debt either...

 

[link2swim06]

Interesting discussion. I think one thing i was assuming is that someone will make ~160K post tax instead of 250K which i think is quite generous.

I was assuming EM job out in the midwest making 350K. I realize not average, but if you are willing to be flexible with location, I think its possible. I figure 350K would be 250K post tax.

lets compare apples to apples here. in order to do that, you have to rerun your extreme paying late scenario including all the payments made in the first three years of the extreme early paying scenario to pay off the $468k in debt. otherwise it's not a fair fight.

count up the total payments made under both scenarios. the reason you find early repayment coming out with more money at the end is because you made more total payments, ~ $200k more over the whole period. front-end load late payment scenario with that extra money and invest that. that's the winner.

5% a year for 25 years is an incredibly pessimistic outlook.

You are correct...

So if you saved the 500K in the first 3 years and used interest to pay loans then:

5% interest on 500K is $25,000 per year.

Loan Balance: $500,000.00
Adjusted Loan Balance: $500,000.00
Loan Interest Rate: 6.80%
Loan Fees: 0.00%
Loan Term: 22 years
Minimum Payment: $50.00

Monthly Loan Payment: $3,655.78 ($43,869 per year --- this wouldn't even be covered by interest on previously saved 500K!)
Number of Payments: 265

Cumulative Payments: $965,128.41
Total Interest Paid: $465,128.41

With this situation you end up needing more capital to generate enough interest to make loan payments. Not to mention your loans have compound really compound in those 3 years from 500K to $609,093.22.


I assume 5% because you have capital gains tax. The whole "tax the rich movement" is essentially a push to increase capital gains rates. 5% post tax I think is reasonable for a well diversified portfolio. You can disagree.

 

[gravitywave]

I was assuming EM job out in the midwest making 350K. I realize not average, but if you are willing to be flexible with location, I think its possible. I figure 350K would be 250K post tax.




You are correct...

So if you saved the 500K in the first 3 years and used interest to pay loans then:

5% interest on 500K is $25,000 per year.

Loan Balance: $500,000.00
Adjusted Loan Balance: $500,000.00
Loan Interest Rate: 6.80%
Loan Fees: 0.00%
Loan Term: 22 years
Minimum Payment: $50.00

Monthly Loan Payment: $3,655.78 ($43,869 per year --- this wouldn't even be covered by interest on previously saved 500K!)
Number of Payments: 265

Cumulative Payments: $965,128.41
Total Interest Paid: $465,128.41

With this situation you end up needing more capital to generate enough interest to make loan payments. Not to mention your loans have compound really compound in those 3 years from 500K to $609,093.22.


I assume 5% because you have capital gains tax. The whole "tax the rich movement" is essentially a push to increase capital gains rates. 5% post tax I think is reasonable for a well diversified portfolio. You can disagree.

yes at 5% my plan is a loser, but that's because I am in essence continuing to borrow at 6.8% so that i can invest at 5%. this is obv a bad idea.

capital gains tax as it stands now should take off 15% of whatever i sold, if i sold it this year, provided i had taxable income >$33,950. but you don't pay capital gains tax unless you realize an actual profit : in this case, selling the stocks. so if you buy and hold, you only pay the tax once. and you can only ever pay tax once on anything you put through a 401k/403b account - it's exempt from income tax the year you put it in, and you only pay the tax when you take $$ back out again decades later - at which point, as things stand now, distributions to you are taxed as ordinary earned income - same as whatever the "tax the rich" people are paying at the time. unless of course you truly are rich by then, in which case i don't think you're going to care about this conversation. my goals are to retire earlier with a middle of the road income, rather than later with heaps and piles.

again, i just have to believe this strategy will be the superior one - and it's just that - a belief. no crystal balls here. if you don't, then i really think that entails a profoundly pessimistic attitude toward the economic future of the entire planet.

 

[thesauce]

If you don't do a crazy long residency, and can land a post-residency job that pays at least the average income of a lower end specialty, you can probably service this kind of debt, but I won't kid you, it will necessarily impact your lifestyle. You will be paying this off over decades. Unless your spouse provides a really good second income, expect to be living very modestly, sending your kids to public schools, taking exclusively domestic vacations, making good use of public transportation, and loading up at every free luncheon and drug company dinner you get the 411 on.

All things I plan on doing anyway!

 

[Amnipotem]

Wouldn't it be better to just pay off your loans as quick as you can instead of investing your money? 6.8% compound interest is no joke.

Yes, right now returns on investments are low. OP should put a lot into his 401k to avoid federal and state taxes then put down as much as he can on his loans.

I think 384,000 is too high at 6.8 and 7.9% interest (subsidized and unsubsidized), even with a six figure job. By the time you can repay the interest accrued per month you will owe, as someone else mentioned, 500k. Drop the master's degree. If you haven't already matriculated, go cheap at an in-state school. My friends going to in state med schools are graduating with 100k in debt.

My loan amount is around half of your proposed debt amount, make six figures, and still have trouble servicing that debt while living like a reasonable person.

I am not going to lie, with 400k/500k in loans you will be living like a poor person even with a six figure salary for years, if not decades. If you went into medicine for the money, I don't think it's worth it financially unless your salary is 400k+. The general rule of thumb is that you should not borrow more than your one year salary, especially since interest rates are now 7 to 8 percent instead of 1 to 2 like they were in the past.

An alternative is IBR, but the downsides are that at your interest rate your principal will increase dramatically in little time and who knows what Congress will do in the meantime to the program. And if you ever plan on buying a house, the amount you owe will be counted against you when you're trying to get a mortgage. You should pay off your loans before taking on new debt.

 

[Amnipotem]

I think of it as taking 25 years to pay it off, little by little so I dont think of it. With interest, roughly 400K post residency, it will take roughly 2500/mo. to pay it off in ~25 years.

http://cgi.money.cnn.com/tools/studentloan/studentloan.html

Unsubsidized interest is 7.9 percent last time I checked. Subsidized is 6.8%. I averaged the two for the purposes of looking at loan repayment, but the majority of your loans will be unsubsidized so interest rates are probably leaning towards 7.9. You can't even cover interest with 2500 a month. You're looking to pay around 3k a month minimum to pay it off in 25 years and that's optimistic because I think the actual interest is higher than that. If you pay 2600 a month on 400000 and 7.5% interest, you're looking at a 44 year repayment plan.

 

[calvnandhobbs68]

http://cgi.money.cnn.com/tools/studentloan/studentloan.html

Unsubsidized interest is 7.9 percent last time I checked. Subsidized is 6.8%. I averaged the two for the purposes of looking at loan repayment, but the majority of your loans will be unsubsidized so interest rates are probably leaning towards 7.9. You can't even cover interest with 2500 a month. You're looking to pay around 3k a month minimum to pay it off in 25 years and that's optimistic because I think the actual interest is higher than that. If you pay 2600 a month on 400000 and 7.5% interest, you're looking at a 44 year repayment plan.

Nope.

http://www.staffordloan.com/stafford-loan-info/graduate-stafford-loan.php

You're thinking about PLUS loans with the 7.9% rate not Stafford loans.

 

[Amnipotem]

Nope.

http://www.staffordloan.com/stafford-loan-info/graduate-stafford-loan.php

You're thinking about PLUS loans with the 7.9% rate not Stafford loans.

It says that the rate is 3.4% for one year. What is it after one year? Or the rate stays the same? I thought some federal loans' interest rates increased post-graduation.

Assuming 400k at time of repayment, 6.8% interest rates across the board, at 2500 a month, the repayment period is 35 years. The smart thing to do is to aggressively pay down your loans once you max out your 401k since you will be paying far less interest. I still wouldn't take out more than your one year salary though, so drop out of your master's program if you can.

 

[DrMidlife]

Federal loans. That means government. If you're looking at a dot-com, you're not looking at official info. Official info: goodness.

Good place to start: studentloans.gov. From there you can get to a list of current rates: http://www2.ed.gov/offices/OSFAP/DirectLoan/student.html

Percentage rate depends on when your loans pay out because Congress can change the rates from year to year. This year's Staffords for med students are unsubsidized 6.8%. This year's GradPlus are unsubsidized at 7.9%.

Best of luck to you.

 

[Amnipotem]

Federal loans. That means government. If you're looking at a dot-com, you're not looking at official info. Official info: goodness.

Good place to start: studentloans.gov. From there you can get to a list of current rates: http://www2.ed.gov/offices/OSFAP/DirectLoan/student.html

Percentage rate depends on when your loans pay out because Congress can change the rates from year to year. This year's Staffords for med students are unsubsidized 6.8%. This year's GradPlus are unsubsidized at 7.9%.

Best of luck to you.

lol Ok, so I am not going crazy.

 

[calvnandhobbs68]

Federal loans. That means government. If you're looking at a dot-com, you're not looking at official info. Official info: goodness.

Good place to start: studentloans.gov. From there you can get to a list of current rates: http://www2.ed.gov/offices/OSFAP/DirectLoan/student.html

Percentage rate depends on when your loans pay out because Congress can change the rates from year to year. This year's Staffords for med students are unsubsidized 6.8%. This year's GradPlus are unsubsidized at 7.9%.

Best of luck to you.

The info at the link I posted was correct anyway. The fixed rate has stayed the same since 2006 so no, for the forseeable future the interest rate on any unsubsidized Stafford loan will be 6.8%. They haven't changed from year to year for six years now. Plus loans have been at 7.9% for the same amount of time. The only things that have been changing over this time period have been the subsidized Stafford loans which are no longer available to graduate students.

 

[calvnandhobbs68]

It says that the rate is 3.4% for one year. What is it after one year? Or the rate stays the same? I thought some federal loans' interest rates increased post-graduation.

Assuming 400k at time of repayment, 6.8% interest rates across the board, at 2500 a month, the repayment period is 35 years. The smart thing to do is to aggressively pay down your loans once you max out your 401k since you will be paying far less interest. I still wouldn't take out more than your one year salary though, so drop out of your master's program if you can.

It does not say that. Look at the columns...you're looking under unsubsidized. When people on here are referring to loans with 6.8% interest rates they're typically referring to graduate unsubsidized Stafford loans. I'd recommend taking a look at the .gov link that was posted or this one http://studentaid.ed.gov/ so you can be a bit more clear on the different types of loans.

 

[Amnipotem]

It does not say that. Look at the columns...you're looking under unsubsidized. When people on here are referring to loans with 6.8% interest rates they're typically referring to graduate unsubsidized Stafford loans. I'd recommend taking a look at the .gov link that was posted or this one http://studentaid.ed.gov/ so you can be a bit more clear on the different types of loans.

I know what the interest rates are, but I referred to Stafford as subsidized and PLUS as unsubsidized. My bad. When I was in school, we typically got a max of 20,500 in Stafford, then the rest with PLUS. Not sure if they changed the law, but this is why most of our loans were PLUS at the 7.9% interest rate. Either way, at 6.8 or 7.9 interest, 500k loans by the time you can repay your interest per month is insane.

 

[calvnandhobbs68]

I know what the interest rates are, but I referred to Stafford as subsidized and PLUS as unsubsidized. My bad. When I was in school, we typically got a max of 20,500 in Stafford, then the rest with PLUS. Not sure if they changed the law, but this is why most of our loans were PLUS at the 7.9% interest rate. Either way, at 6.8 or 7.9 interest, 500k loans by the time you can repay your interest per month is insane.

Ahh got it. I guess the confusion was just with the wording then and yeah I think the max is still $20500 Stafford.

 

[notbobtrustme]

I really disagree with the above statement. We have no idea what will remain lucrative or not in the future. Furthermore, there is CONSIDERABLE variation in income across regions of the country, practice set ups, etc..

Furthermore, if people dont do what they like (aside from not being motivated to be good in that specialty) you will likely not want to work the hours required to make that income. People though General surgery and OB-Gyn were the most lucrative fields 20 years ago and they though you would be stupid to go into radiology, rad onc, derm. Now look. You can never really know.

True, but at the same time, you can rule out primary care, pediatrics and low paying specialties with that kind of debt.

We don't know what specialties will be lucrative, but we can have a general idea. A general internist is not going to make anywhere near what a neurosurgeon will make, for example.

 

[peteB]

True, but at the same time, you can rule out primary care, pediatrics and low paying specialties with that kind of debt.

We don't know what specialties will be lucrative, but we can have a general idea. A general internist is not going to make anywhere near what a neurosurgeon will make, for example.

Can you really go to med school if you have to rule out all of the low-paying specialties? I mean, the other ones are incredibly competitive. If there's no way you can survive unless you land neurosurg, then maybe it's better not to go to med school at all?

 

[alienwares]

Can you really go to med school if you have to rule out all of the low-paying specialties? I mean, the other ones are incredibly competitive. If there's no way you can survive unless you land neurosurg, then maybe it's better not to go to med school at all?

I think it's fair to say there is a point at which medical school is not a (financially) intelligent option. I'm lucky to be in a cheaper state (Texas), but if I had to attend an OOS school my decision to go to medical school would not have been quite so clear-cut. $160k in debt before interest is no joke, but it's payable on a primary-care salary. $500k+ is... much more than I would be comfortable with.

I don't have much advice for you, OP, but I wish you the best of luck.

 

[peteB]

There are some well paying specialties that aren't that competitive. For instance, Neuro isn't that competitive at all and average neurologist salary is in the high 100s-low 200s I think.

Isn't that basically the same as primary care salary?

 

[calvnandhobbs68]

Isn't that basically the same as primary care salary?

Yeah in the same range but a little higher.

Mean neurologist compensation was $184,000 according to the Medscape survey.
Mean internist compensation was $166,000
Mean FM compensation was $158,000.
Mean pediatrics was $156,000.

So yeah still not one of the best but still 30K a year on average above FM and Peds. But there are definitely other specialties that pay more in the same competitiveness range as neurology (like gas and gen surg).

 

[notbobtrustme]

Can you really go to med school if you have to rule out all of the low-paying specialties? I mean, the other ones are incredibly competitive. If there's no way you can survive unless you land neurosurg, then maybe it's better not to go to med school at all?

There are lots of specialties that aren't terribly competitive.

Outside of GI/Cards, IM specialties aren't that competitive. Heme/Onc is getting there, but still no where near GI/Cards level and the average compensation of Heme/Onc is like 300k. As others have said, anesthesiology isn't terribly competitive and that has an average salary of 300k or so.

 

[peteB]

Yeah in the same range but a little higher.

Mean neurologist compensation was $184,000 according to the Medscape survey.
Mean internist compensation was $166,000
Mean FM compensation was $158,000.
Mean pediatrics was $156,000.

So yeah still not one of the best but still 30K a year on average above FM and Peds. But there are definitely other specialties that pay more in the same competitiveness range as neurology (like gas and gen surg).

How accurate do you think these surveys are? Do doctors really report their true income?

What are the standard deviations like on these numbers?

I'm just curious. If you know where I can find this info, please let me know.