Is anyone else worried about scary debt levels and declining reimbursements?

[Silent Cool]

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For those of you on this thread who don't understand finances, let me break it down for you:

Check out the Cost of attendance at Georgetown Medical School:
http://som.georgetown.edu/docs/Cost of Attendance 2013-2014.pdf

Now look at Tufts:
http://md.tufts.edu/Admissions/Fina...Costs/Cost-of-Attendance-MD-Program-2013-14-1

Per year, you are looking at ~80-85K cost of attendance.

Assume 50K of undergrad/SMP/Master's, etc..., debt. Then Assume the current avg. interest rate of 7.35%.

At the end of four years of medical school, that's:
~461K of debt.

At the end of 3 (minimum) years of training that's: 570K.

Take a look at this loan repayment calculator and calculate the repayment schedule at 12 years for a balance of $550,000.
The yearly repayment is ~$70,000.

So you are telling me that you are going to bust your ***** getting into and getting through medical school to become an FP, Ped or IM doc (exactly where MOST of you will end up) to make 200K and then face this debt?
If you live in California, your annual take-home will be:
~116K according to: http://www.paycheckcity.com/calculator/salary/result

I sure as hell am not going to school for a (minimum) 7 years to earn (post-tax, post-debt payment) an income of--what, 50K?

I could have stayed at my old job and eventually earned close to 90-100K.

Now do you understand how *sick* this level of debt is?

Granted, if you happen to be (one of the few) remaining practice-owning physicians, then there may be tax deductions and so forth that will change your take-home. But I think you get the general idea.

Now, I'm sure that some among you will jump up, saying, "but the avg. family lives off 40-50K per year" or whatever. But you are not average. You are a physician who spent 7 (minimum) years in training. Keep in mind, too, that many people in that average have been earning money from high school and never attended college (and therefore have no debt). I earned ~55K in my old biotech job with an extremely generous 401K, optional overtime, and a yearly bonus. Why on earth would I slave away in medical school to earn less than that (after taxes and loans)? Not to mention the opportunity cost of attending med school? I could have stayed at my old job and earned close to 100K by the time I would have finished med school.

That said, I would much rather be a doctor, especially with the attendant upward mobility of medical training and the flexibility and other opportunities the profession offers. But there are plenty of other health professions with far less debt that would offer me the same (or similar) income with much less debt and training time. Why in the hell should I go to medical school to become an FM? Ped? IM? Give me a break.

 

[StephanieZ]

lol you don't even know about the impact of taxes on paychecks
feel free to post all the snarky gifs you want but please get some real life experience before you decide to chime in

Except in every post I've made I've been sure to say "Gross - Taxes = Net". I've only ever talked about net income after taxes. I'm not sure where you are getting the idea that I don't understand the concept of taxes, or the idea that I have no real life experiences. It's not prudent to assume things about people you don't know.

 

[StephanieZ]

.

 

[Perrotfish]

But nobody is talking about earning 50k long-term. The original suggestion was to live on 50k for a few years to pay down debts, if you are the type of person who would rather not be saddled with debt for too long, and in spite of everything I still think that's a reasonable suggestion if you feel like you can delay that gratification of a larger income.

No one said a 'few' years, they said 12 years post residency, meaning until the age of 45. That's the average amount of time you need to live at 50K of after tax income to pay down the debt from an average private medical school (COA 280K), 50K of undergraduate and residency debt, and a (generous) salary of 200K/year. That's 50K/year for your expenses and your savings. A 7.5% interest rate that compounds continuously through your education and training is f-ing terrible. You owe twice what you borrowed before you even start paying it back, and then you ultimately pay back more than three times your original loan.

Is it doable? Yes. The question is whether the career is still worth it, when compared to less time intensive careers.

 

[StephanieZ]

No one said a 'few' years, they said 12 years post residency, meaning until the age of 45. That's the average amount of time you need to live at 50K of after tax income to pay down the debt from an average private medical school (COA 280K), 50K of undergraduate and residency debt, and a (generous) salary of 200K/year. That's 50K/year for your expenses and your savings. A 7.5% interest rate that compounds continuously through your education and training is f-ing terrible. You owe twice what you borrowed before you even start paying it back, and then you ultimately pay back more than three times your original loan.

Is it doable? Yes. The question is whether the career is still worth it, when compared to less time intensive careers.

Haha, you caught that before I had a chance to delete it. I realized I'd misunderstood Silent Cool's post so please disregard that.

I can't seem to impress upon some of you how much ignorance is present amongst both premeds and medical students. The more you make, the more tax you pay, period.

I don't see where anyone is ignorant of that. To quote my own post in response to your post, I said "Gross - Taxes = Net" I don't care if your taxes are 1% of your paycheck or 99% of your paycheck, that still applies. Then I said, "If your net pay after taxes is less than the average american salary, than medical school is a bad investment." If your take home after taxes is 100k and you live on 50k, than 50k is surplus. I'll admit I'm not too knowledgeable about finance, but the concept I'm trying to convey is very very basic.

Look, guys, I'm really tired of arguing, but I feel like some of you are trying to talk about differential equations when I'm just talking about algebra. I admit I don't understand how finance works on more advanced levels, but really, need it be so complicated? Your pay is X after taxes, your expenses are Y. That's pretty much it, IMO.

 

[558363]

Ignoring interest/passion in the field, are you basically telling me that there's not much to gain financially, or even worse to gain financially, by becoming a doctor?

Because this is exactly the type of position I may be in. I am not going to be getting any scholarships anywhere, and if I end up going to some OOS private school, I am going to paying a fortune for education. Granted by parents and my sister may be able to give at most 20k per year, but even that's iffy. And let us assume I end up in IM or Ped or FM.

I always presumed the strong earning power of a physician offsets the massive debt accrued during medical school and pays back the long years in training.

If that's the case, I might as well just switch to getting a BBA or a Comp Sci degree and making 70-150k with much easier debt loads.

 

[yehhhboiii]

Haha, you caught that before I had a chance to delete it. I realized I'd misunderstood Silent Cool's post so please disregard that.



I don't see where anyone is ignorant of that. To quote my own post in response to your post, I said "Gross - Taxes = Net" I don't care if your taxes are 1% of your paycheck or 99% of your paycheck, that still applies. Then I said, "If your net pay after taxes is less than the average american salary, than medical school is a bad investment." If your take home after taxes is 100k and you live on 50k, than 50k is surplus. I'll admit I'm not too knowledgeable about finance, but the concept I'm trying to convey is very very basic.

Look, guys, I'm really tired of arguing, but I feel like some of you are trying to talk about differential equations when I'm just talking about algebra. I admit I don't understand how finance works on more advanced levels, but really, need it be so complicated? Your pay is X after taxes, your expenses are Y. That's pretty much it, IMO.

there's more than that for a practicing physician
malpractice insurance, overhead, examination fees, equipment, it support, ehr system if you're in a small group
if you're in a group, you're trying to get them to keep you on and making full partner which gives you uncertainty and you will start off with a low salary despite working more or a bad schedule as you pay your dues
this is on top of trying to pay off your loans and providing for your family

it's not just well okay you make 150k and you pay 50k taxes so you have 100k left and you pay 50k in loans so you pay it off in 4 years and live off 50k a year

 

[pre med 2014]

It's such a different era, attendings practicing now probably all had less than 100K in debt when they went to medical school.

I make about 25K take home pay after taxes. Even if my take home pay was 100K, 4 times more than it is now, I could not imagine paying down 300K in debt. I can barely pay off a $3000 credit card bill on 25K, paying off an amount 100X that on a 7X salary doesn't seem fun.

It sounds easy to say i will live on 50K and pay 100K a year but in the real world money somehow always disappears and its not going to be so easy.

 

[TheWeeIceMan]

It's such a different era, attendings practicing now probably all had less than 100K in debt when they went to medical school.

I make about 25K take home pay after taxes. Even if my take home pay was 100K, 4 times more than it is now, I could not imagine paying down 300K in debt. I can barely pay off a $3000 credit card bill on 25K, paying off an amount 100X that on a 7X salary doesn't seem fun.

It sounds easy to say i will live on 50K and pay 100K a year but in the real world money somehow always disappears and its not going to be so easy.

Yep, it's weird to think about how much things have changed. Not even that long ago, med students could get loans at like 2-3% and had some subsidized loans. Honestly, it's not so much the increase in tuition that bugs me as it is the increase in interest rates. We are no longer able to draw out the payment term, pay a reasonable monthly amount, and let investments and inflation wipe the debt. We are left with choosing the extreme method of living on very little and "starting" adult life much later or getting killed by interest and paying obscene overall amounts.

 

[jombojuice22]

No one said a 'few' years, they said 12 years post residency, meaning until the age of 45. That's the average amount of time you need to live at 50K of after tax income to pay down the debt from an average private medical school (COA 280K), 50K of undergraduate and residency debt, and a (generous) salary of 200K/year.

...

Is it doable? Yes. The question is whether the career is still worth it, when compared to less time intensive careers.

Ignoring interest/passion in the field, are you basically telling me that there's not much to gain financially, or even worse to gain financially, by becoming a doctor?

...

If that's the case, I might as well just switch to getting a BBA or a Comp Sci degree and making 70-150k with much easier debt loads.

Disclaimer - I'm not a physician, so this is just my impression from reading and researching:

As Perrotfish said above, you may not pay off your loans until your 40's - this means you won't be able to start seriously investing until that age. However, at that point you'll be earning 2-3 times what other professionals make, and if you keep working until you're 60 you will overtake them in the end. There is still much to gain, and you'll end up better off than the vast majority of professionals in other fields. However, you'll need to be in it for the long haul (and healthcare reform will need to not screw your salary).

I have several friends who graduated with Comp Sci degrees who were making 100k+ 2 years out of college. That's essentially a 20 year headstart on saving and investing for them, and they work normal 9-5's without call or overnights, find their work fulfilling, etc. If they chose to (and they didn't have to support kids and a non-working spouse), they could probably retire comfortably before a doctor of the same age was even starting to hit his stride financially. You're thinking about med school so you should be capable of running the math yourself. Look at what happens when somebody contributes the max to an IRA, invests somewhat aggressively, etc, starting at age ~24. They end up with a pretty serious chunk of change. (Making 100k right out of college is not representative of every computer science professional - most make a good bit less than that. You have to be good at your job, and I imagine you have to be good at politics.)

Basically, if you go into ANY field purely for the money, you are going to be bitterly disappointed. If you go into comp sci purely for the money, you likely won't end up making very much and trust me when I say that you will be miserable. If you go into medicine for the money you'll probably end up making plenty of it, but you might regret sacrificing so much of your time/life to get there that you won't feel that the sacrifice was worth it in the end.

I guess I'd answer your question by saying, "there is a lot to gain, but it comes at a great price." You'll sacrifice a massive chunk of your life and end up not that much better off in the end.

 

[StephanieZ]

there's more than that for a practicing physician
malpractice insurance, overhead, examination fees, equipment, it support, ehr system if you're in a small group
if you're in a group, you're trying to get them to keep you on and making full partner which gives you uncertainty and you will start off with a low salary despite working more or a bad schedule as you pay your dues
this is on top of trying to pay off your loans and providing for your family

it's not just well okay you make 150k and you pay 50k taxes so you have 100k left and you pay 50k in loans so you pay it off in 4 years and live off 50k a year

Okay, I'll give you malpractice, but unless you are self-employed why are you paying for overhead, equipment, etc.? But even if you do pay these things, these are job-related expenses so why even count them as part of take-home pay? If I run a business and I pay X amount in overhead every year just to be able to run my business, I'm not going to count that X amount as part of my profits. So when I say "take home pay", I actually mean all that money that is yours to do whatever the hell you want with it, whether that's buying a house and a car or living off the grid in a camper in the Smokey mountains. Are you saying that amount is likely to be less than 50k a year? If so, then medical school is a damn bad investment, but somehow I don't buy that.

It's such a different era, attendings practicing now probably all had less than 100K in debt when they went to medical school.

I make about 25K take home pay after taxes. Even if my take home pay was 100K, 4 times more than it is now, I could not imagine paying down 300K in debt. I can barely pay off a $3000 credit card bill on 25K, paying off an amount 100X that on a 7X salary doesn't seem fun.

It sounds easy to say i will live on 50K and pay 100K a year but in the real world money somehow always disappears and its not going to be so easy.

I really don't get this "money disappears", "money flies out the window" thing 😕 Unless you are talking about what they take out in taxes, or job related expenses that you need to pay just to practice, how does money disappear? Are you saying you don't have the discipline to make yourself keep living on 25k if you are making 100k? If so, that's a valid concern and it's good you recognize that about yourself, but it doesn't apply to everyone.

 

[pre med 2014]

Get a full time job out of college and you'll see. When you're an undergrad $1000 paycheck after taxes every 2 weeks sounds awesome, but its really not that much after credit cards, loans, etc... I live at my parents house and don't even pay rent and it still doesn't cover everything. Don't get me wrong my credit is great and I pay all my loans/bills/credit card but its not easy, I have to live paycheck to paycheck.

I got loans out for seat deposits and paying back credit card bills loaded up from applications. Before you know it that $1000 paycheck isn't looking like much

And I'm only paying debts in the singles of thousands, which I can manage. Med school loans will be about 100X more than the kind of loans I'm paying now. whereas my salary will only be about 10X more and that's IF I'm successful and getting paid above median. To go up to paying loans in the hundreds of thousands, close to half a mil is no joke when you think how much it sucks just paying loans in the single thousands right now.

 

[558363]

Disclaimer - I'm not a physician, so this is just my impression from reading and researching:

As Perrotfish said above, you may not pay off your loans until your 40's - this means you won't be able to start seriously investing until that age. However, at that point you'll be earning 2-3 times what other professionals make, and if you keep working until you're 60 you will overtake them in the end. There is still much to gain, and you'll end up better off than the vast majority of professionals in other fields. However, you'll need to be in it for the long haul (and healthcare reform will need to not screw your salary).

I have several friends who graduated with Comp Sci degrees who were making 100k+ 2 years out of college. That's essentially a 20 year headstart on saving and investing for them, and they work normal 9-5's without call or overnights, find their work fulfilling, etc. If they chose to (and they didn't have to support kids and a non-working spouse), they could probably retire comfortably before a doctor of the same age was even starting to hit his stride financially. You're thinking about med school so you should be capable of running the math yourself. Look at what happens when somebody contributes the max to an IRA, invests somewhat aggressively, etc, starting at age ~24. They end up with a pretty serious chunk of change. (Making 100k right out of college is not representative of every computer science professional - most make a good bit less than that. You have to be good at your job, and I imagine you have to be good at politics.)

Basically, if you go into ANY field purely for the money, you are going to be bitterly disappointed. If you go into comp sci purely for the money, you likely won't end up making very much and trust me when I say that you will be miserable. If you go into medicine for the money you'll probably end up making plenty of it, but you might regret sacrificing so much of your time/life to get there that you won't feel that the sacrifice was worth it in the end.

I guess I'd answer your question by saying, "there is a lot to gain, but it comes at a great price." You'll sacrifice a massive chunk of your life and end up not that much better off in the end.

If you were to advise a pre-med senior (majoring in a Bachelor of Sciences) who wants to make a career change from medicine to engineering and/or business, what would you advise? I always presumed computer science was one of the hottest/in-demand fields that pays well.

Why is it miserable?

 

[exitonly29]

If you were to advise a pre-med senior (majoring in a Bachelor of Sciences) who wants to make a career change from medicine to engineering and/or business, what would you advise? I always presumed computer science was one of the hottest/in-demand fields that pays well.

Why is it miserable?

Almost zero human interaction. I sit in my office 8 hours a day and once or so a week have an hour or so conference call. It's not sooo miserable but when you can't talk about your job because no one understands what you are talking about, and you don't talk to anyone all day it gets pretty boring and unsatisfactory. FYI I'm going the other way, did comp sci, currently working, now applying to med school.

 

[558363]

Well, this is indeed something that I am very worried about.

Looking at my own resume, if I do manage to get into medical school, it would be at some expensive, OOS private DO school where once I add the cost of tuition + living and everything, its like 80 grand a year. Times that by 4 = 320k. And then you add in annual interest...that's honestly too ridiculous.

And I know DOs can apply for any specialty, but if I was go into Family/IM/Ped like the majority, it would be incredibly difficult for me to pay all of that back...

From a financial point of view, even if I am already a senior in undergrad, I would probably take the additional years to switch into engineering/business and save myself the hassle.

 

[occams_razor]

Well, this is indeed something that I am very worried about.

Looking at my own resume, if I do manage to get into medical school, it would be at some expensive, OOS private DO school where once I add the cost of tuition + living and everything, its like 80 grand a year. Times that by 4 = 320k. And then you add in annual interest...that's honestly too ridiculous.

And I know DOs can apply for any specialty, but if I was go into Family/IM/Ped like the majority, it would be incredibly difficult for me to pay all of that back...

From a financial point of view, even if I am already a senior in undergrad, I would probably take the additional years to switch into engineering/business and save myself the hassle.

with an average COA of 280k, most people need to ask themselves the question - do you love medicine enough that you are willing to be in debt for a very long time, or would you be okay with another career where you will be financially secure sooner?

the rising costs of education, interest rates and overall debt levels are not unique to medicine. I have friends in law with similar 6 figure debts but they are entering an unstable job market. most people I know have either been in grad school, are currently in grad school or are planning on grad school and all but the few from very wealthy families anticipate taking on significant debt to further their education

 

[558363]

with an average COA of 280k, most people need to ask themselves the question - do you love medicine enough that you are willing to be in debt for a very long time, or would you be okay with another career where you will be financially secure sooner?

the rising costs of education, interest rates and overall debt levels are not unique to medicine. I have friends in law with similar 6 figure debts but they are entering an unstable job market. most people I know have either been in grad school, are currently in grad school or are planning on grad school and all but the few from very wealthy families anticipate taking on significant debt to further their education

To be honest, I rather be financially secure in a job. Although ultimately, I would happy to be upper middle class.

Unfortunately, I'm already a senior who is hoping to apply next year. I'm already behind engineers/business majors, so I'm really in a bind in what direction to go (I love medicine, but my financial future is important too)

I don't mind going into DO at all, but if I do, I have to make sure I get into a field where I am making more than 200k if I want to live upper middle class by the time I finish all my training, or at least aim to be at level by my 40s. I just don't know how considering half a million in debt will take so many years to pay off...

 

[558363]

with an average COA of 280k, most people need to ask themselves the question - do you love medicine enough that you are willing to be in debt for a very long time, or would you be okay with another career where you will be financially secure sooner?

the rising costs of education, interest rates and overall debt levels are not unique to medicine. I have friends in law with similar 6 figure debts but they are entering an unstable job market. most people I know have either been in grad school, are currently in grad school or are planning on grad school and all but the few from very wealthy families anticipate taking on significant debt to further their education

To be honest, I rather be financially secure in a job and live in the middle-upper middle class like my parents.

Unfortunately, I'm already a senior who is hoping to apply next year. I'm already behind engineers/business majors, so I'm really in a bind in what direction to go (I love medicine, but my financial future is important too)

I don't mind going into DO at all, but if I do, I have to make sure I get into a field where I am making more than 200K if I am hoping to pay off that half a million in debt as fast as I can. By the time I'm 35, I want to be living comfortably (middle-upper middle class), so I could be able to provide for my family well.

I don't want to put in the money/years/stress for it all to be a bad investment.

 

[Doudline]

For those of you on this thread who don't understand finances, let me break it down for you:

Check out the Cost of attendance at Georgetown Medical School:
http://som.georgetown.edu/docs/Cost of Attendance 2013-2014.pdf

Now look at Tufts:
http://md.tufts.edu/Admissions/Fina...Costs/Cost-of-Attendance-MD-Program-2013-14-1

Per year, you are looking at ~80-85K cost of attendance.

Assume 50K of undergrad/SMP/Master's, etc..., debt. Then Assume the current avg. interest rate of 7.35%.

At the end of four years of medical school, that's:
~461K of debt.

That's nice and all, but IIRC the average debt at the end of undergrad + med school is currently sitting at $17X K. Not to be a party buster... you're just $300k overboard.

 

[exitonly29]

That's nice and all, but IIRC the average debt at the end of undergrad + med school is currently sitting at $17X K. Not to be a party buster... you're just $300k overboard.

Average does not equate to what a normal person might have. Average also takes into account people on full ride HSPS, md/phd students, students who have parents who help, students from Texas (15k year tuition) I think his numbers are pretty right on for an average person at least at a lot of schools

 

[TheWeeIceMan]

That's nice and all, but IIRC the average debt at the end of undergrad + med school is currently sitting at $17X K. Not to be a party buster... you're just $300k overboard.

Averages are an awful way to project how much debt one should/will have.

 

[jombojuice22]

If you were to advise a pre-med senior (majoring in a Bachelor of Sciences) who wants to make a career change from medicine to engineering and/or business, what would you advise? I always presumed computer science was one of the hottest/in-demand fields that pays well.

Why is it miserable?

Computer science is a great field to be in, or so it seems to me. I started out as a CS major, and a lot of my friends are computer people. Some of them work for Google, Microsoft, etc, and do really well. Some of them are part of start-ups working long hours on things they care about, getting good experience doing lots of cool things, make very little money but are happy and hoping they get somewhere. Then I have friends working boring code-monkey, QA, etc, jobs. They're unhappy AND don't make very much money.

I didn't mean the field is miserable as a whole, I meant you will be miserable if you simply view CS as a get-rich-quick career. You need to care about it, put in time to learn and improve your skills, keep up on advances in the field, etc. It's extremely difficult to be good enough at something you don't like to become successful at it (I expect this goes for every field). You don't get hired by Google if you're just in it for the money - you won't be able to compete with the guys who eat, breathe and live programming / technology.

That's why I added that caveat to my post... It's not like you go into programming and are handed a 100k salary. I just looked up the average salary and it was ~70k in 2010, which is actually higher than I expected. One thing to be mindful of is that CS is an unstable and constantly changing field, so there's a danger of your job being automated, made obsolete, outsourced, "in-sourced" (companies bring over foreigners and pay them less...), etc. You need to constantly stay on top of things or risk being left behind.


I'm not sure what advice I would give you... It's a tough decision. Money seems to be extremely important to you. While it is possible to make a great living in CS, it also seems to be pretty difficult to get much higher than 100k salary. I think the same holds true for most engineering type jobs: it's relatively easy to make a solid living, but difficult to rise very far above "middle class" unless you are business savvy and willing to take some risks.

Have you looked at other healthcare careers? RN/NP, PA, etc? Seems like they might suit you better. Going into a field you aren't interested in because it seems like an easy ticket to a middle class lifestyle is probably not a good plan.

Almost zero human interaction. I sit in my office 8 hours a day and once or so a week have an hour or so conference call. It's not sooo miserable but when you can't talk about your job because no one understands what you are talking about, and you don't talk to anyone all day it gets pretty boring and unsatisfactory. FYI I'm going the other way, did comp sci, currently working, now applying to med school.

This is not the case everywhere, at least in my experience. Everyone is moving towards a model of working together a lot more. The days of a guy sitting in his basement writing all the code himself are long gone. In jobs I've worked at, I was part of a team and we were always bouncing ideas off each other, asking each other for advice, etc. Maybe I got lucky and worked for good companies, though.

 

[exitonly29]

It may not be the norm everywhere, but as a general rule I would say most computer science jobs at least development work have little interaction with others, some jobs more than others, my last one was more interaction then my current job, but at the end of the day it's not enough and i want to make a difference in my job and have more satisfaction on a daily basis then being a developer. Just my two cents. There are things I love about the job, but not nearly enough to stay for a life career

 

[Silent Cool]

That's nice and all, but IIRC the average debt at the end of undergrad + med school is currently sitting at $17X K. Not to be a party buster... you're just $300k overboard.

The average doesn't mean anything. The average is artificially low because of all the people who have someone else paying for their education. My numbers are based on YOU the student borrowing the money. Obviously if someone is paying for your education then this thread doesn't apply.

So, my numbers are spot-on for someone borrowing the money for his/her education. How could they not be? I posted the links to two medical schools, both of which are broadly representative of the costs of private medical education. So, if you are borrowing the COA, then my numbers show what you will owe.

 

[sazerac]

Disclaimer - I'm not a physician, so this is just my impression from reading and researching:

As Perrotfish said above, you may not pay off your loans until your 40's - this means you won't be able to start seriously investing until that age...

I have several friends who graduated with Comp Sci degrees who were making 100k+ 2 years out of college. That's essentially a 20 year headstart on saving and investing for them,

That 20 years head start on investing will make a humongous difference in their retirement portfolio. Compound interest is a force greater than gravity. Those investments will have been working 24/7 for twenty years.

Let's say an attending lives like a resident until he is 40 to pay off those loans, how many more years would he have to live like a resident to match the retirement portfolio of an ordinary computer engineer? Will today's medical school applicant ever get to live like an attending?

 

[Perrotfish]

To be honest, I rather be financially secure in a job and live in the middle-upper middle class like my parents.

Unfortunately, I'm already a senior who is hoping to apply next year. I'm already behind engineers/business majors, so I'm really in a bind in what direction to go (I love medicine, but my financial future is important too)

I don't mind going into DO at all, but if I do, I have to make sure I get into a field where I am making more than 200K if I am hoping to pay off that half a million in debt as fast as I can. By the time I'm 35, I want to be living comfortably (middle-upper middle class), so I could be able to provide for my family well.

I don't want to put in the money/years/stress for it all to be a bad investment.

FWIW I think medicine remains a good investment. You're still looking at several million dollars of extra lifetime earnings vs your average college educated worker, vs. a cost of barely a million (If you go to an OOS school on loans, pay everything back on a 10 year plan, and factor in opportunity cost of not earning during your education)

Is an engineering or business major a better investment? Maybe but not necessarily. I was an engineer at an engineering school. The career trajectories of my engineering friends have been variable, to say the least. You get fooled by the fact that most of them have strong salaries out the gate. Seven years in many of my friends' careers are essentially frozen in place. Many more didn't get/keep jobs at competitive firms and are now slogging through lower paying HVAC jobs. The career progression we're taught to expect, with annual raises and promotions every few years, seems to be the exception rather than the rule for private sector engineers. That's not to say a STEM major isn't a better investment than the liberal arts, on average, but I'm not sure it tops medicine even with insane medical school loans.

The lesson on this thread is to think seriously about money now, so you'll have at least some options later. Apply to every medical school in your state and go to the cheapest school that will take you. Consider work when you have free time: every dollar you don't pay in tuition is three dollars you don't need to pay back. Seriously consider getting a loan from family if they're in a position to give you one: If you pay their 2.5% APR loan back after residency you could end up paying half as much as if you borrowed a 7.5% APR loan from the government (of course the downside being that you're ineligible for IBR, and have your parents involved in your finances). However I don't think the financial situation in medicine is yet dire enough that you should consider a last minute scramble into engineering if you don't have any experience or interest in the field. Even if you went to a private school 100% on loans you would probably do at least as well if you went into medicine.

 

[kami333]

That 20 years head start on investing will make a humongous difference in their retirement portfolio. Compound interest is a force greater than gravity. Those investments will have been working 24/7 for twenty years.

Let's say an attending lives like a resident until he is 40 to pay off those loans, how many more years would he have to live like a resident to match the retirement portfolio of an ordinary computer engineer? Will today's medical school applicant ever get to live like an attending?

I don't know that many of my former classmates that have taken the high paying job path and have maximized their savings/investments through their 20s and early 30s.

I know several that have taken huge risks with theirs careers, some have paid off (joining Google in 2002) and others have been busts (Myspace/Yahoo or even worse, the self funded startups). Others I know have taken jobs abroad (I was one of those, screw the salary I wanted to travel) or worked for a few years and then traveled (seems common in banking). Or they spent their money on fancy cars and a huge bar bill. The unluckiest were the ones who bought a house and were laid off. The only ones I know that have been "successful" at saving, buying a house, settling down, etc early have tended to be in the more "unexciting" professions like teaching but they also knew from the beginning that they would never see a huge increase in their salary.

While I think it's fun to think about the hypothetical "what would I have done instead", I don't think any of us would have made or will make the same decisions if we hadn't been interested in attending med school.

 

[pre med 2014]

Do people actually take a loan out from their parents and pay back at 2.5% instead of 7.5%? How would that even work, would a bank arrange that kind if loan/account? It makes a lot of sense, keep the money in the family and out of the hands of the government.

 

[Perrotfish]

Do people actually take a loan out from their parents and pay back at 2.5% instead of 7.5%? How would that even work, would a bank arrange that kind if loan/account? It makes a lot of sense, keep the money in the family and out of the hands of the government.

Yes they do. Loans are a lot cheaper when you have an asset that the bank can seize in the event that you don't pay the loan. Your family likely has a house. A mortgage rate/home equity line these days will have an APR of 2.5% or less. The parents then loan the loaned money to you for tuition for the APR rate (or maybe just for nothing, and they eat the APR).

There are downsides to this plan. The first, of course, is that your family home is now in your hands. People DO fail out of medical school. People get fired from residency. Sometimes people just get sick or injured. If you're the unlucky one your family is now out on the street. The second problem is that in this plan your family is intimately involved with your finances into your mid 30s, which is various degrees of awful depending on your family and really makes a long, slow repayment plan a non-option. Finally the government repayment programs, like PSLF and PAYE, require you to have 7.5% student loans. A lot of people grumble that those programs won't be there when its time for forgiveness, but then bet on them anyway by only paying the IBR minimum. If you take a loan from your parents you are really committing yourself to actually paying back your loan, because IBR doesn't apply.

If it was me I would seriously consider this plan if I had a upper middle class family. If I thought my parents were on track to have a million or more in assets accumulated for retirement, I could talk myself into betting 300K of that on my future. If my parents were more typically true/lower middle class, and a 300K mortgage would involve them betting ALL their assets (and then some) on my future, I don't think I could handle the stress. That's just me, though.

 

[TheWeeIceMan]

Yes they do. Loans are a lot cheaper when you have an asset that the bank can seize in the event that you don't pay the loan. Your family likely has a house. A mortgage rate/home equity line these days will have an APR of 2.5% or less. The parents then loan the loaned money to you for tuition for the APR rate (or maybe just for nothing, and they eat the APR).

There are downsides to this plan. The first, of course, is that your family home is now in your hands. People DO fail out of medical school. People get fired from residency. Sometimes people just get sick or injured. If you're the unlucky one your family is now out on the street. The second problem is that in this plan your family is intimately involved with your finances into your mid 30s, which is various degrees of awful depending on your family and really makes a long, slow repayment plan a non-option. Finally the government repayment programs, like PSLF and PAYE, require you to have 7.5% student loans. A lot of people grumble that those programs won't be there when its time for forgiveness, but then bet on them anyway by only paying the IBR minimum. If you take a loan from your parents you are really committing yourself to actually paying back your loan, because IBR doesn't apply.

If it was me I would seriously consider this plan if I had a upper middle class family. If I thought my parents were on track to have a million or more in assets accumulated for retirement, I could talk myself into betting 300K of that on my future. If my parents were more typically true/lower middle class, and a 300K mortgage would involve them betting ALL their assets (and then some) on my future, I don't think I could handle the stress. That's just me, though.

I actually thought he meant that his parents would loan him the money from their personal assets and he pays them back directly. In that case, the bank wouldn't be involved and you would create a contract with your parents. This is obviously the best case scenario if you need loans to pay for med school.

 

[Perrotfish]

I actually thought he meant that his parents would loan him the money from their personal assets and he pays them back directly. In that case, the bank wouldn't be involved and you would create a contract with your parents. This is obviously the best case scenario if you need loans to pay for med school.

That's definitely the best case. That being said, if your parents have 300K of assets lying around that aren't tied up in a house, IRA, or emergency fund.... wow. Good on them.

 

[pre med 2014]

I actually thought he meant that his parents would loan him the money from their personal assets and he pays them back directly. In that case, the bank wouldn't be involved and you would create a contract with your parents. This is obviously the best case scenario if you need loans to pay for med school.

Yea but it would be easier to make payments to a bank, with making all the interest calculations and keeping track of such a large amount of money it would be really difficult to pay your parents back directly without a 3rd party like a bank keeping track of the loan.

 

[pre med 2014]

That's definitely the best case. That being said, if your parents have 300K of assets lying around that aren't tied up in a house, IRA, or emergency fund.... wow. Good on them.

I think the poster said your parents can somehow use their house to give out a loan at a lower rate. The downside being is you risk your parents house if you fail.

Since a bank can take the house if the loan defaults they are willing to give out a loan for lower rates. I think this is what equity is, but I know nothing about business or finance I could be wrong here.

 

[Perrotfish]

Yea but it would be easier to make payments to a bank, with making all the interest calculations and keeping track of such a large amount of money it would be really difficult to pay your parents back directly without a 3rd party like a bank keeping track of the loan.

What you're talking about is a cosigned student loan, like a direct advantage loan. I personally have never understood these things. The practical effect is the same as your parents taking out another mortgage and loaning you the money directly (they bet their assets on your education) but the interest rate is WAY higher, normally more than 5%. Is it really worth hundreds of thousands so that you don't need to calculate the interest rate on your own loan? Is there an advantage to a cosigned loan that I'm.missing?