Yes but that's the point. If NYU is $600k or if USC is $700k that might apply to say 25% of people. Another 25% might have parental help for all/part of it. Another 25% will have a master's degree (plus maybe no parental help) and will owe $900k+, another 25% might have scholarships etc. Point being that more often than not more people will be above it than below it, especially since these private schools rarely give out scholarships since so many people are lining up to pay sticker price.
That's not really what we mean when people talk about debt here. It's been well established that private schools are 500k+, and public schools are usually around 350k+. In neither of these circumstances have we added another 100k+ for undergrad and an SMP. NYU Dentistry alone is 635k+ for the usual out of state student and 500k for the usual in city student. Yes, both are still higher than public schools, but people get in way over their heads claiming weird numbers like 800k.
And get hit with a tax bomb. That $700-900k (for some people) will balloon to $1.5-$2m with minimal payments. After 20 years you would have paid $500k and still get hit with a $600k tax bomb.
Due to escalating tuition and easy credit, the U.S. has 101 people who owe at least $1 million in federal student loans. Five years ago, 14 people owed that much. More could soon be joining the group.
www.wsj.com
^^ He went to USC when it cost 60% of what it does now (rent and tuition has skyrocketed since). He also isn't busting his tail (I know several orthos making $500k+ whereas he's camping and hiking daily making $200k/year).
What really sucks is that PSLF (no tax bomb) isn't really a good option for dentists since most places that qualify are miserable to work at. My dentist friend (<$250k debt - great school), working at a FQHC in Cali and he's getting a decent chunk paid off but will only do it for a couple of years then move into PP. Had he stayed in the midwest he would have made 90k more in salary (he's making $130k and had 200K+ offers here), PLUS he could have found a place that offers loan repayment for 3-5 year contract and it's cheap as hell to live here.
For us in medical. Anyone doing ortho/ENT/Ophtho/Radiology + fellowship can easily hit 6-9+ years of PSLF qualifying payments during residency+fellowship, then just finish out the rest of the 120 payments working a chill ass academic hospital job (pays less but u work less) and get our loan wiped out. Or if say 6 years Like rads/ENT/ophtho and jump straight into PP making so much bank that 2-300k in loans isn't a big deal. Even my family med friends are getting 290k + $25k sign on offers working 4.5 days/week.
The point of RE/PAYE is not to count how much you have paid in the end. The point is how much you end up with in the end. You have to let the minimal initial payments save you enough money to give you a head start in building up capital, assets, and have a good life before you need to pay it back. If you're under RE/PAYE, you may be paying more than what you would have if you paid a fixed 10 year or even a 30 year loan, but the money you would save in those initial 10+ years would enable you to start a business to get a bigger salary, buy a house, invest in stocks, enough that you would essentially be much more wealthy than if you didn't. If you think about compounding, then it makes sense to put those 4k+ a month into the market or real estate instead of paying back student debt.
You can do samples of this:
If you graduate from dental school at 30 and put $3.5k/mo into the S&P at 10% ROR, then you will net $7.2 million in 30 years in time for retirement at 60. In contrast, your debt of $600k with a 6% interest rate and monthly payments of $1.5k will only balloon up to $1.6m in 25 years. (This totals $5k a month, $1.5k into debt repayment and $3.5k into the stock market). Even with the tax bomb of around $600k and another $100k in taxes to sell off some stocks, you're up $6.5m+ at retirement.
Now contrast this with if you refinanced it to a reasonable 3% of the full $600k and put 5k a month, it would take you 12 years to pay it off. In those 12 years, you are now debt free, but that only means you are now starting to invest and build capital. You start now to invest $5k a month for the next 18 years, and you will only end up at $2.9m. You are off by $3.6m from if you decided to do REPAYE and eat the taxbomb instead. That's the advantage of RE/PAYE.
Sure, you may have paid double the money you owe if you use RE/PAYE, but which method gets your net worth up by more than 2x?
And if you say, "REPAYE might not be here in 25 years, you never know if you end up qualifying." You can still do the math. At 25 years, with REPAYE plan, you owe $1.6m, and with investments in the first scenario, you will be at $4.3m. If somehow they said you're not eligible for REPAYE foregiveness and you gotta pay back everything with all the interest, then you will need to pay the $1.6m and another maybe $400k in taxes to sell off the stock, which is $2m. Subtract that from the $4.3m, you're still at $2.3m at 25 years. Continue to invest $5k for another 5 years, and by the 30 year mark, your net worth is now at $4.1m. Yes it sucks to have to pay $2m out of nowhere, but look, your net worth is a whole $1.1m more than if you paid it off traditionally with refinancing.
This is called leveraging debt.
