Non-trad finances

[remo]

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I have been lucky enough in a previous career that I can basically pay cash for med school. I'm wondering if other people in this position still take out loans. I was thinking of doing that so I could keep my investments. Does this make sense?

 

[Sol Rosenberg]

I'm having the same dilemma. The textbook answer, from a purely business standpoint, is that if your savings is returning more than the interest rate on your loans, then keep the savings and take out loans.

 

[Non-TradTulsa]

I have enough in my 401(k) to pretty much pay for med school - but there is absolutely no way I'm touching that money. As an older non-trad, there is always some possibility that my health could fail or that I could become disabled for some other reason. If you become permanently disabled, your Staffords can be put into permanent forebearance. Your 401(k) money has all sorts of legal protections and can't be touched to satisfy even a federal loan debt. So, I'd have some small amount of security in addition to a social security check should I become disabled. If I'd spent it on school, though, there's no way to get it back. It's worth it to me for the peace of mind.

 

[albaniandoc]

I got about 1 yr of tuition into my 401K. We have about 150K or slightly more into home equity that in case we need the money we can sell the house and pretty much be debt free. However a house it's not just a house, it's a home. Therefore, I am taking student loans. At 4% interest it's a great deal and besides I could participate into loan forgiveness program or something. There is no such thing as real estate money back program.

 

[oldpro]

I have been lucky enough in a previous career that I can basically pay cash for med school. I'm wondering if other people in this position still take out loans. I was thinking of doing that so I could keep my investments. Does this make sense?

I would take the loans if you are doing something that will pay off student loans, hey the most I have seen is 5yr comitment and some pay up to 200K!

It is a good deal but this is not offered by all specialties, Mine is FP rural so I know that will not be a problem.

You can always pay it off later with the money in the bank, yea you will pay interest but if you do a specialty that has loan repayment, well you make out way big in the end!

 

[remo]

Does anyone know what the average interest rate is for med school loans? Also, does the interest compound all through med school and residency or is there some period of time where they don't charge you interest?

 

[Non-TradTulsa]

Does anyone know what the average interest rate is for med school loans? Also, does the interest compound all through med school and residency or is there some period of time where they don't charge you interest?

That's a very complex question - if you go to the AAMC website and read up on MEDLOANS I imagine it'll explain it pretty well. Your subsidized Staffords do not accrue interest while you are in school. Your unsubsidized Staffords do accrue interest from date of disbursement. Any private loans you take will also accrue interest from disbursement. There are forebearance periods for school, residency, and hardship but I don't believe the interest clock stops running. Interest accrues but does not compound until the unpaid interest is capitalized - hopefully that's only once at graduation. Starting next academic year (July 1?), Staffords will no longer be variable - they'll be fixed at 6.8% - which, now that interest rates are rising, is pretty close to what they would have been under the old method. Private loans will still be variable - I don't remember offhand the terms of GRAD LOANS.

I'd spend some time in the financial aid forum. There's a whole new language you need to learn to speak with medical school loans!

 

[wook]

I'm having the same dilemma. The textbook answer, from a purely business standpoint, is that if your savings is returning more than the interest rate on your loans, then keep the savings and take out loans.

👍 (agreed with above statement) and IMO do NOT touch the 401K!

 

[PhDtoDO]

I know people who took out loans just to invest.

I'm starting med school, own one duplex and thought I might buy another one before school starts if the opportunity arrises. I'm just going to hire someone to manage my investment property so I can be building up equity during med school and residency...then I can pull it out later for a downpayment when I finally decide to settle.

It's legal, rational...and if interest rates stay low...go for it.

Also Stanford loans can be subsidized and even if they're not, they are still the cheapest money around (desides SBA loans of course).

Also, they don't count against your credit rating the same way ie they are a different sort of dept


I say go for it if you know what you're doing.

PhDtoDO

 

[ncalcate]

I have been lucky enough in a previous career that I can basically pay cash for med school. I'm wondering if other people in this position still take out loans. I was thinking of doing that so I could keep my investments. Does this make sense?

I was in a somewhat similar situation so I can speak from experience. If you want to get loans, you'll need to fill out the FAFSA form. Assuming you fill it out truthfully, you'll have to disclose your total net worth. If you have say $150K in assets, you can forget about getting any subsidized loans. The subsidized loans will go to individuals who do not have a sizeable nest egg... and you'll be stuck with loans at a not-so-desirable interest rate.

When this happened to me, I evaluated the interest rate on the loans offered, plus the fact that there are origination fees. I ultimately decided to use my savings for first year and probably second year. For me, I couldn't justify the interest rate on the loans, given that they are heading much higher right now, and due to other factors.

On a slightly different subject, money held in a 401(k)/IRA or equity in your main home are NOT considered part of your total net worth. So if you dump money in there, you don't have to declare it on your FAFSA.

Hope that helps.

 

[NY Musicologist]

Oy--enough cash for med school, fat 401(k)s, multiple homes...now I'm depressed! 🙁

Congrats to all, though, on having accomplished enough in previous careers to have acquired those assets AND on starting med school (neither of which I have yet managed to do...) 🙂

 

[Non-TradTulsa]

Congrats to all, though, on having accomplished enough in previous careers to have acquired those assets AND on starting med school (neither of which I have yet managed to do...) 🙂

LOL! I did acquire a nice 401(k) balance thanks to a very generous employer hospital (and, when you work for a not-for-profit, they have to give you cash instead of company stock). I was feeling sorry for myself, though. The equity that I've built in my house in the last 16 years I could have built in less than six months if I'd lived on the coast. I missed that train.

 

[Orthodoc40]

Oy--enough cash for med school, fat 401(k)s, multiple homes...now I'm depressed! 🙁

Congrats to all, though, on having accomplished enough in previous careers to have acquired those assets AND on starting med school (neither of which I have yet managed to do...) 🙂

I second these sentiments!!

I'm just trying to figure out how to pay for applications right now...!

 

[Poety]

Just take out the loans, you'll be able to pay them back when you're done.

Im a nontrad too - with about 240 K debt, and although I was worried excessivly, I realized the amount of money I'll make vs. the payment each month is NOTHING - don't rush to pay back something that will always be fixed too.

I did as someone else said on this board and took out added loans to invest - and I made some nice money during med school - its possible 🙂

 

[remo]

LOL! I did acquire a nice 401(k) balance thanks to a very generous employer hospital (and, when you work for a not-for-profit, they have to give you cash instead of company stock). I was feeling sorry for myself, though. The equity that I've built in my house in the last 16 years I could have built in less than six months if I'd lived on the coast. I missed that train.

I lived on the coast and missed the train. I've been predicting a crash for the last 5 years. Hopefully I'm a better doctor than real estate investor

 

[old_guy]

My job pays well, and I have about 170K in a 401K. My wife and I concur...NO WAY will that be touched!! I'd hate to sell the house, because if I get into my alma mater's SOM, it's <1 hour away. I also hate the thought of uprooting my children in what will be their Junior and Senior years of HS. OTOH, the state's Osteopathic school is 3 hours away, and that may be our only option. Praying and keeping fingers crossed while I study for the 04/07 MCAT!

TT

 

[Doctor Bagel]

I lived on the coast and missed the train. I've been predicting a crash for the last 5 years. Hopefully I'm a better doctor than real estate investor

Me, too. 🙂 Well, we also didn't have the money and realized we might have to move at any moment, but that's another issue.

 

[TypeA]

ANYTHING can happen between MS1 and "grad, MD/DO." I'm not touching any savings, 401K, nothin'!

I'm going the loans route...even the unsubsidized are a great deal compared to the risk of investing serious savings. ANYTHING can happen.

 

[oldpro]

ANYTHING can happen between MS1 and "grad, MD/DO." I'm not touching any savings, 401K, nothin'!

I'm going the loans route...even the unsubsidized are a great deal compared to the risk of investing serious savings. ANYTHING can happen.

One other thought if you go into a specialty with loan repayemnt options, only student loans, Federal or priviate are eligible for the money, they must be student loans not money borrowed for school from other sources, a loan for students. I will get my loans mostly if not all paid for as an FP, just a thought.