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Lets say someone graduates med school at the age of 25 with $230,000 debt. They than match in internal medicine (ave. pay $200,000). Including taxes and interest how long will it take them to pay of there debt ? Will they feel poor while doing so?

Additional info:This person doesn't want a family until early- mid 30's also is great at living within means. Also doesn't want to go to the Army.
 

TheWeeIceMan

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It really depends on how much you want to sacrifice. If you can live like a resident for a while as an attending, it shouldn't take you very long. Maybe 3-5 years if you are aggressive. Easier said than done, though.
 
Mar 18, 2013
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Here is an estimation:
Pre tax income: $200,000
Fed taxes (rough estimate): $45,000
Insurance (depends on where you live): $15,000

This gives you about a take home net of roughly $140,000 dollars. You then need to calculate your yearly cost of living. For me personally, I spend roughly $30,000 including housing, food, car, gas, etc. When I go back to school in August I am cutting that down to $20,000. This number really depends on your lifestyle. For argument sake, lets say your cost of living will be $45,000 (You can live VERY comfortably on this, i.e, going out to eat a few times a month at nice restaurants, buying healthy groceries, a modest car payment).

Now you have $100,000 left over. Here is a chart that will tell you how long it will take you to pay off $230,000 at 6% and what that will cost.

Principle $230,000
Interest 0.06
Years to play off 2 3 4 5 6 7 8
Yearly Payment ($125,450) ($86,045) ($66,376) ($54,601) ($46,773) ($41,201) ($37,038)
Monthly Payment ($10,454) ($7,170) ($5,531) ($4,550) ($3,898) ($3,433) ($3,087)
Total Cost ($250,901) ($258,136) ($265,504) ($273,006) ($280,640) ($288,407) ($296,306)
Total Interest Paid $20,901 $28,136 $35,504 $43,006 $50,640 $58,407 $66,306

As you see, you could easily pay it off in 3 years ($86,045 per year for 3 years) and have almost $14,000 dollars to add to your cost of living or save for retirement. Very doable.
 
Mar 18, 2013
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The above chart did not post very pretty. You need to follow each of the columns to understand it. For example, column one should be: 2 years, $125,450 per year, $10,454 per month, $250,901 total cost, $20,901 total interest.
 
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You need to factor in that if you leave school with $230,000, you will then have residency for at least three years, where you are making nowhere near $200,000 and will likely not be making substantial payments (if any payments at all) toward the loan, while the principle is still growing due to the interest.
 
Mar 18, 2013
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You need to factor in that if you leave school with $230,000, you will then have residency for at least three years, where you are making nowhere near $200,000 and will likely not be making substantial payments (if any payments at all) toward the loan, while the principle is still growing due to the interest.
During residency, my advice would be to select an Income-Based Repayment. After the 3-7 years of residency, the loan could be paid off in 3 years.

Another option would be to pay just the interest during residency, which would keep the principle at 230,000. The monthly interest payment will be 1,150. It will be tough while making only $50,000 the first year, but still doable. Anyway, you will be so busy during residency you won't have time to spend (waste!) any money anyhow :)
 
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carbonizedeyesockets

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I'll be graduating with ~340,000 in debt (includes undergrad debt) since I was ineligible for any grants or scholarships and don't have rich parents to pay for me (though, they are by no means poor). Debt after residency will be over 400,000. The total I'll payback, if done over 10 years (includes 3 yr residency), is ~584,000. Basically, paying ~300/month during residency (income based repayment) and then jumping to 6450/month after residency. I'm going into a specialty that pays ~240,000 on average. After taxes, it comes out to ~150,000 (this may be a lower estimate as I was told I could expect to take home 14-16K/month), so after debt repayments, I take home ~74,000/yr.
 
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That is certainly a hefty chunk of change. But you will pay it off, and 74,000 after taxes, loan, etc, isn't bad at all. You can live comfortably and still save for retirement.
 

carbonizedeyesockets

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That is certainly a hefty chunk of change. But you will pay it off, and 74,000 after taxes, loan, etc, isn't bad at all. You can live comfortably and still save for retirement.
Yeah, I'm not worried. I've even calculated opportunity cost, etc. I'll still make double what I could have had I stayed in my previous job.
 
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Seriously, OP, take it easy with the new threads. You've started 35 since August, and most of your questions have already been answered in previous threads.
Sorry you know pre-meds get a little crazy around mcat time :)
 
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Yeah definitely doable, and over the course of your career you would earn far more in almost any specialty (or even as a PCP making 200k ish) than you would in most other careers (business, law, etc.) unless you got to the top of those professions. People on here tend to talk about finance, etc. as where the real money is, but fail to realize that <1% of guys trying to make a fortune on Wall Street ever get there.
 

EvenStevens

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Are malpractice suits frequent enough to factor them into loss of income?
I know they are pretty common in OB/GYN
 

Ibn Alnafis MD

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I'll be graduating with ~340,000 in debt (includes undergrad debt) since I was ineligible for any grants or scholarships and don't have rich parents to pay for me (though, they are by no means poor). Debt after residency will be over 400,000. The total I'll payback, if done over 10 years (includes 3 yr residency), is ~584,000. Basically, paying ~300/month during residency (income based repayment) and then jumping to 6450/month after residency. I'm going into a specialty that pays ~240,000 on average. After taxes, it comes out to ~150,000 (this may be a lower estimate as I was told I could expect to take home 14-16K/month), so after debt repayments, I take home ~74,000/yr.
240K/year after 3-year residency = Emergency Medicine
 

Burla

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240k -> 150k after taxes = doesn't know how to do taxes
 

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TheWeeIceMan

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Something I've given some thought to lately. I imagine that if you have to borrow close to or at the COA each year, you will probably eventually end up exhausting federal loans and have to opt for private (right?). My understanding is that private loans do not have the same income-based or even graduated repayment options that federal loans feature. So what on earth do you do about these private loans during residency? Just keep the amounts low and eat the payments? Are forbearances during residency frequently sought and likely to be awarded?
Grad Plus loans will cover everything you need on top of Stafford loans. No need for private.
 
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carbonizedeyesockets

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240k -> 150k after taxes = doesn't know how to do taxes
Oh, snap. You got me. I don't calculate the taxes that get taken out of pay-checks as I have never had a job that required it. So, yes, the calculation is based on that done with one of the online paycheck calculators (same one cited above). If you want to provide a more accurate amount according to your expertise, please feel free to do so.
 

torshi

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Lets say someone graduates med school at the age of 25 with $230,000 debt. They than match in internal medicine (ave. pay $200,000). Including taxes and interest how long will it take them to pay of there debt ? Will they feel poor while doing so?

Additional info:This person doesn't want a family until early- mid 30's also is great at living within means. Also doesn't want to go to the Army.
There's also .mil scholarships (full-tuition), but obviously not meant to pursue for that sole purpose to avoid debt.
 

Espadaleader

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The advice on here is spot on. Thanks.
 

sazerac

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While anybody can run their numbers through the Medloans Organizer and then the Medloans Calculator available free from the AAMC website, just for fun I ran the OP's numbers through the site.

I entered data that I thought was very generous, namely a 6% loan in the amount of $230,000 at graduation, not married no kids, $50,000 residency salary for three years, and $200,000 salary after that. Selecting the Pay As You Earn (PAYE) loan repayment program, the loan will never be paid off. After 20 years the government will be sick of you making these small loan payments that are based on 10% of your discretionary income, and just forgive the loan for you.

So, basically, OP, you (and many of the pre-med readers of this forum) have entered what you can call the "post-loan era" of medical school education. Medical school loans are not required to be paid off by you.

If we enter more realistic information, like maybe you get married, have some kids, lengthen your residency (isn't IM actually four years instead of three?), etc., then your loan payments will be even lower and the amount forgiven through the PAYE program is even higher.

Congratulations, OP (and any other pre-med who is reading this post today), it's free money that the federal government has no expectation of you ever paying back.

Here are the results, copied directly from the Medloans Calculator from AAMC:
Pay As You Earn RepaymentTotal: $410,736
Monthly: $1,484 - 2,452
Mo. Payment: 9%
PAYE Forgiven: $87,552


P.S. / disclaimer: PAYE requires a payment of 10% of your discretionary income. PAYE forgives loans after 20 years. All unsubsidized staffords and gradPlus loans qualify for the PAYE program. PAYE is NOT repeat NOT the PSLF loan forgiveness program, which is a separate loan forgiveness program which might also apply here and would forgive the loan after a mere 10 years from graduation.
 

TheWeeIceMan

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Did you really not make a single mention of the "tax bomb?" I would be very careful with some of the things you are saying about "free money" and the "government doesn't expect you to pay it back."
 
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sazerac

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Did you really not make a single mention of the "tax bomb?" I would be very careful with some of the things you are saying about "free money" and the "government doesn't expect you to pay it back."
A "tax sparkler" of $90,000 of additional income would cost perhaps $30,000 in additional taxes in year 20. You could pay that in year 20, or with a little foresight simply save $2,000 a year for 15 years on an attending's $200,000 salary. It is hardly an issue in the scenario as posted by the OP.
 

BlueLabel

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While anybody can run their numbers through the Medloans Organizer and then the Medloans Calculator available free from the AAMC website, just for fun I ran the OP's numbers through the site.

I entered data that I thought was very generous, namely a 6% loan in the amount of $230,000 at graduation, not married no kids, $50,000 residency salary for three years, and $200,000 salary after that. Selecting the Pay As You Earn (PAYE) loan repayment program, the loan will never be paid off. After 20 years the government will be sick of you making these small loan payments that are based on 10% of your discretionary income, and just forgive the loan for you.

So, basically, OP, you (and many of the pre-med readers of this forum) have entered what you can call the "post-loan era" of medical school education. Medical school loans are not required to be paid off by you.

If we enter more realistic information, like maybe you get married, have some kids, lengthen your residency (isn't IM actually four years instead of three?), etc., then your loan payments will be even lower and the amount forgiven through the PAYE program is even higher.

Congratulations, OP (and any other pre-med who is reading this post today), it's free money that the federal government has no expectation of you ever paying back.

Here are the results, copied directly from the Medloans Calculator from AAMC:
Pay As You Earn RepaymentTotal: $410,736
Monthly: $1,484 - 2,452
Mo. Payment: 9%
PAYE Forgiven: $87,552


P.S. / disclaimer: PAYE requires a payment of 10% of your discretionary income. PAYE forgives loans after 20 years. All unsubsidized staffords and gradPlus loans qualify for the PAYE program. PAYE is NOT repeat NOT the PSLF loan forgiveness program, which is a separate loan forgiveness program which might also apply here and would forgive the loan after a mere 10 years from graduation.
Wait a minute... I'm a little confused. You have monthly payments ranging from $1484 to $2452. Assuming that lifestyle doesn't change from residency to attending status (as it appears you do assume), your income quadruples over this period and therefore so should your discretionary spending. Why does the monthly payment not also increase by a factor of 4?

My understanding was that PAYE is a good deal for low earners, but once you're actually bringing home the attending bacon, it's actually cheaper by the month to pay the 10 yr standard repayment. In reality I know very little about how all this stuff works, so please tell me where I'm wrong.
 

TheWeeIceMan

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A "tax sparkler" of $90,000 of additional income would cost perhaps $30,000 in additional taxes in year 20. You could pay that in year 20, or with a little foresight simply save $2,000 a year for 15 years on an attending's $200,000 salary. It is hardly an issue in the scenario as posted by the OP.
Yeah, in the OP's scenario, it's not a big deal. However, if the numbers get less favorable, some of us may be looking at our loans ballooning because of the lower payments not covering interest. In that case, the tax on the amount forgiven is a much bigger deal.

Btw, do you know how the discretionary income is calculated for PAYE?
 

CarlosDanger

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Wait a minute... I'm a little confused. You have monthly payments ranging from $1484 to $2452. Assuming that lifestyle doesn't change from residency to attending status (as it appears you do assume), your income quadruples over this period and therefore so should your discretionary spending. Why does the monthly payment not also increase by a factor of 4?

My understanding was that PAYE is a good deal for low earners, but once you're actually bringing home the attending bacon, it's actually cheaper by the month to pay the 10 yr standard repayment. In reality I know very little about how all this stuff works, so please tell me where I'm wrong.
The problem is that you have to be employed by a non-profit to get PAYE. Since many, many hospitals are non-profit that sounds fine, but its hard to count on that 100% for 20 years. Theres also the concern that the fed will eliminate that program, and then you'll still be stuck with the debt. 20 years is a long time to assume that the program won't be subject to cuts. As a resident, PAYE is the best idea because it will pay of all your excess interest that your meager payment doesn't cover, AND the interest doesn't capitalize very often (I think it does only once during your first year of residency). If you didn't do that, you would either want to cover the interest payments out of pocket which would cost more money probably, or just take the extra $400 a month and pocket it - although I think that is probably not the best idea.

There is a ton of really helpful discussion about this in the finance/debt forums, and if you spend about an hour reading those threads, you'll have these programs figured out pretty well.
 

BlueLabel

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The problem is that you have to be employed by a non-profit to get PAYE. Since many, many hospitals are non-profit that sounds fine, but its hard to count on that 100% for 20 years. Theres also the concern that the fed will eliminate that program, and then you'll still be stuck with the debt. 20 years is a long time to assume that the program won't be subject to cuts. As a resident, PAYE is the best idea because it will pay of all your excess interest that your meager payment doesn't cover, AND the interest doesn't capitalize very often (I think it does only once during your first year of residency). If you didn't do that, you would either want to cover the interest payments out of pocket which would cost more money probably, or just take the extra $400 a month and pocket although I think that is probably not the best idea.

There is a ton of really helpful discussion about this in the finance/debt forums, and if you spend about an hour reading those threads, you'll have these programs figured out pretty well.
That is not true, as sazerac mentioned PAYE is different from loan forgiveness. Anyone can opt for PAYE repayment if they have eligible loans, the question is just whether this will actually lower your monthly payments at your level of income.
 

BlueLabel

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Here we go, I think I've found the issue with @sazerac 's idea.

https://www.aamc.org/services/first/first_factsheets/324676/payasyouearn.html#.UssFZtJDtt0

In order to qualify for PAYE, you must demonstrate partial financial hardship, meaning that your monthly payments exceed 10% of your discretionary income. Most residents do have a PFH, I imagine that once you're an attending bringing home north of 200K you would not. At that point, you would no longer be eligible for PAYE and have to go with a different, by definition higher monthly repayment plan.
 

sazerac

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Wait a minute... I'm a little confused. You have monthly payments ranging from $1484 to $2452. Assuming that lifestyle doesn't change from residency to attending status (as it appears you do assume), your income quadruples over this period and therefore so should your discretionary spending. Why does the monthly payment not also increase by a factor of 4?

My understanding was that PAYE is a good deal for low earners, but once you're actually bringing home the attending bacon, it's actually cheaper by the month to pay the 10 yr standard repayment. In reality I know very little about how all this stuff works, so please tell me where I'm wrong.
Your payments during residency would be between 249 and 299/month. I assume the two values are presented because there are some transition years where you spend half the year on the old (or non-existent student) salary and half the year on the new salary.

Your discretionary income will skyrocket when you switch from resident to attending; as a resident a significant portion of your income is NOT discretionary.

Discretionary is defined as the income above the federal poverty level for your family size. US Poverty levels by family size can be found on wikipedia.
 

sazerac

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Here we go, I think I've found the issue with @sazerac 's idea.

https://www.aamc.org/services/first/first_factsheets/324676/payasyouearn.html#.UssFZtJDtt0

In order to qualify for PAYE, you must demonstrate partial financial hardship, meaning that your monthly payments exceed 10% of your discretionary income. Most residents do have a PFH, I imagine that once you're an attending bringing home north of 200K you would not. At that point, you would no longer be eligible for PAYE and have to go with a different, by definition higher monthly repayment plan.
As an attending with $200,000 of income, 10% of your discretionary income would be about $2,500 a month, assuming normal raises and a 20 year timeframe.

To pay of the loan balance in 10 years time would require monthly payments of $3,820.

The monthly payments would exceed 10% of the discretionary income of an attending's salary.

The attending physician is under a partial financial hardship, as defined by PAYE.


Don't take my word for it. I'm not making these numbers up, I'm just reporting the results from the Medloans Calculator as distributed for free by the AAMC. Have at it. Ain't nobody paying off these medschool loans.
 

BlueLabel

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Your payments during residency would be between 249 and 299/month. I assume the two values are presented because there are some transition years where you spend half the year on the old (or non-existent student) salary and half the year on the new salary.

Your discretionary income will skyrocket when you switch from resident to attending; as a resident a significant portion of your income is NOT discretionary.

Discretionary is defined as the income above the federal poverty level for your family size. US Poverty levels by family size can be found on wikipedia.
Per the AAMC link, actually it is income above 150% of the poverty line for your family size. In any event I think the link I posted shows that most attendings probably will not exhibit partial financial hardship and thus will no longer be eligible for PAYE. So how do you get around that?
 

BlueLabel

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As an attending with $200,000 of income, 10% of your discretionary income would be about $2,500 a month.

To pay of the loan balance in 10 years time would require monthly payments of $3,820.

The monthly payments would exceed 10% of the discretionary income of an attending's salary.

The attending physician is under a partial financial hardship, as defined by PAYE.


Don't take my word for it. I'm not making these numbers up, I'm just reporting the results from the Medloans Calculator as distributed for free by the AAMC. Have at it. Ain't nobody paying off these medschool loans.
Ah okay, I didn't realize it would be that high. Thanks.