Paying med school loans into retirement

[i61164]

AAMC Study

According to this study (page 15), if you owe $200,000 at the end of residency, your monthly payment is roughly $2,200 assuming a 10 year repayment and 2.82% interest. Obviously the payment gets higher as interest rates increase, but lets go with these assumptions for now.

If $2,200 is too burdonsome for you, you can consolidate your loans and stretch them out for 30 years. Your monthly payment will be about $1000 for 30 years.

I will be anywhere from 37 - 40 years old when I finish residency. If I want to retire before I turn 70, there is a distinct possibility that I will still be paying my student loans when I retire.

Worse case scenario: I have $23,000 in undergraduate debt now. Say I go to Wake Forest and rack up another $200,000. I will owe $223,000 at the start of residency. By the end it will be more, but I don't know how much more. $300,000 maybe? $250,000? Anyway, lets say that by then interest rates have gone back up to 8.5% like they were in 2000. In this case, I will have to consolidate (even if I'm a radiologist) because the payment would be like half of my salary. If this happens, I may be paying $2,000 per month into retirement.

What do you guys think?

MD/PhD, Military, Primary Care in Underserved Area Scholarships might be great for some, but what about the rest of us?

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[OrthoFixation]

I couldn't view the document, but here goes.

From am spreadsheet, $200K at 2.82% for 10 yrs is $1,914.64, not $2,200/mo.

Since you can only get $38,500 per year fed loans, some of that must also be at higher private rates and will counter the subsidized $8,500 per year fed loans. Exactly how much the trade off is depends on the total principal and repayment rates.

On to the $223,000 you mentioned . . . considering a 4 year residency with a net overall blended rate of 5%, you will have $271,000 upon start of repayment. Certainly, you should try to pay some interest during residency to minimize the total due. Worst case:

$271,000 at 5% for 10 yrs = $2,875/mo
$271,000 at 6% for 30 yrs = $1,625/mo

Your available income:
$150,000 netting 70% take home = $105,000 or almost $9,000/mo
$300,000 netting 60% take home = $180,000 or $15,000/mo

Do you think you can live on a minimum of $6,000 net per month? If so, then you have no problem. Also, your pay will increase but payments will not (fixed rate repayment).

Then there is always the second job or working through one of the many weeks of vacation you might have to supplement your income and ability to pay down the debt.

No worries

 

[i61164]

Do you think you can live on a minimum of $6,000 net per month?

I'm not sure about that. The payment on my Mercedes will probably be about $800 per month and my wife's Mercedes will be another $800. Then we've got our mortgage payment which will probably be another $3500 per month and our daughter's private school tuition will be another $5000 per month. So my question is: where's the money for my country club dues?

I think the scariest part is that this heavy burden may be with me until I'm 70. Typically, a person's income drops precipitously when they retire. If I can't afford to retire at the age of 68 it will be a bummer.

I have spoken to a lot of primary care docs that express resentment over their debt burdens. They have kids in college and still are paying their med school loans, meanwhile their incomes are squeezed by HMO's, etc. Maybe they are just cry babies, but based on data in the study above (the link works for me) we will have it worse than they do.

 

[OrthoFixation]

I understand being afraid of debt. I plan to minimize mine by going in-state (hopefully) and am interested in specializing. If all goes well, paying $5,000/mo should have me done in 3 years. Having no current debt or car payments will be a big help. Just gotta hope those cars last. Damn that blasted health and auto insurance!

 

[thackl]

I've told my wife all along that we're staying put (in inexpensive house) for two yrs after residency. In that time, we will pay off all loans and purchase the cars we want with cash....... then move up to the home/lifestyle we want. No matter what the interest rates are, I refuse to have $160k in debt hanging over me.

My brother owes big money too and subcribes to the theory that if his interest rate is low (which it is), he is better off investing it. But really, how many out there will really invest it?

 

[OrthoFixation]

Smart move thackl. Do you plan on doing your residency in Lubbock? I really like the school and city environment (family considerations).

I'm waiting on the day of reckoning (Feb. 1) to determine my future home locale. I would like the potential of spending 8-9 years without moving. I'm ready to shed this DFW traffic.

 

[Pharos]

AAMC Study

According to this study (page 15), if you owe $200,000 at the end of residency, your monthly payment is roughly $2,200 assuming a 10 year repayment and 2.82% interest. Obviously the payment gets higher as interest rates increase, but lets go with these assumptions for now.

If $2,200 is too burdonsome for you, you can consolidate your loans and stretch them out for 30 years. Your monthly payment will be about $1000 for 30 years.

I will be anywhere from 37 - 40 years old when I finish residency. If I want to retire before I turn 70, there is a distinct possibility that I will still be paying my student loans when I retire.

Worse case scenario: I have $23,000 in undergraduate debt now. Say I go to Wake Forest and rack up another $200,000. I will owe $223,000 at the start of residency. By the end it will be more, but I don't know how much more. $300,000 maybe? $250,000? Anyway, lets say that by then interest rates have gone back up to 8.5% like they were in 2000. In this case, I will have to consolidate (even if I'm a radiologist) because the payment would be like half of my salary. If this happens, I may be paying $2,000 per month into retirement.

What do you guys think?

MD/PhD, Military, Primary Care in Underserved Area Scholarships might be great for some, but what about the rest of us?

I think it will work if you want it bad enough. You are not alone - I will likely be about $250,000 in debt if this endeavor works out. I will be 39 or 40 when I'm done residency. I figure that I'm most likely going to work somewhere between 20 and 30 yrs more as a physician when I'm done. The loans financed over 20 yrs will be in the approx $2,000 - $2,500/mo. range depending on interest rates. I have resigned myself to the fact that I will probably never drive a Porsche, but I think that I will be able to live "comfortably" even after the student loan payments. I am not in it for the money (but let's face it, money is certainly nice to have).

I think the underserved area programs are a great idea if don’t mind working in the designated areas. (I, myself, will likely do this). There is enough to worry about getting through school, residency, etc. It sucks to have to worry about the money also - but I think you’ll find that it will fall into place and work out in the end.

 

[Khenon]

I've told my wife all along that we're staying put (in inexpensive house) for two yrs after residency. In that time, we will pay off all loans and purchase the cars we want with cash....... then move up to the home/lifestyle we want. No matter what the interest rates are, I refuse to have $160k in debt hanging over me.

This is what I'm doing too. It won't kill me and my family to live a little more conservatively for a few years, to pay down some debt. I don't know that I'd be able to hold out until ALL my student loan debt is paid (I "need" a Mercedes!
), but I definitely don't need a half-million dollar home right away either. I'm not stressing too bad about the loan debt . . . of course I don't even have an accpeptance, so what am I talking about!

 

[i61164]

Damn that blasted health and auto insurance!

 

[eddiescott]

Sounds like you are trying to talk yourself out of it !!! Just do it and worry about paying the bills later. Plus, you wont need all that money anyway after you start working as a doctor because you wont have anytime to spend it!!!

Eddie

 

[clkimmey]

i don't know about your area, but around here if you specialize and end up signing on with a group practice after residency, upon signing a contract with them you can receive a lump sum of money that will more than cover your loans.

plus, one of my small group preceptors is a psychiatrist at a state hospital and told us that no one will have a problem paying off their loans within 5-7 years of ending residency.

worry about the medicine, the finances will sort out in the end.

 

[OrthoFixation]

i don't know about your area, but around here if you specialize and end up signing on with a group practice after residency, upon signing a contract with them you can receive a lump sum of money that will more than cover your loans.

The best signing bonus I have seen posted online is $50,000.

I have heard of loan repayment compensation packages, but those have been spread over several years, are taxable to the individual, and would be certain to reduce your overall pay package.

I would be a shrewd negotiator with less debt could come out with a bigger paycheck. Remember:

There is no Free Lunch !

 

[dswonger]

The best signing bonus I have seen posted online is $50,000.

I have heard of loan repayment compensation packages, but those have been spread over several years, are taxable to the individual, and would be certain to reduce your overall pay package.

I would be a shrewd negotiator with less debt could come out with a bigger paycheck. Remember:

There is no Free Lunch !

I'm following a neurosurgeon resident @ a mid major research school in midwest. He is from a small town in North Dakota. Went to the state school, then grad school in neuro and then med school. this kid, probably 28-29 years old, intelligent, good with people, really good guy, no god complex, no attitude and for an intern, a good doc. We get to talking about debt, etc. after school. He tells me his story and how last week (1 year ago) this group in N.D. started recruiting him. They started him with $500K signing bonus (to be paid over the next 7 years. Thats within his residency!!), Another 250K when he finishes residency and if he completes a fellowship within their guidelines an additional amount. + All loans gone, malpractice insurance paid and a big salary, partnerships, etc.. This kid has never seen that much $$, never been around it, etc. For that matter, who here has! I told him, find a couple of docs around here to mentor you, get one of their attorneys and see if this is going anywhere. Then I said, Let 'em sit for awhile. Give them a call and let them know you're interested, but it is early in your residency and then let them know, there may be other offers and you really want what is best for your future and your family's future! They know he is just out of the Dakota's and the easiest sell is a homesick sell and If they are hitting you that hard now, in 6 mo. to a year it could be better and from several others. He says, ya know, I'm not sure my wife and I want to go back there for a 5 year contract!! 5 years! is a blip in time. No B.S. He was being as upfront and honest as he could be. And I've done outside sales for 10 years and can read people when it gets too deep! We had been together doing rounds for 2 weeks and he pops this on me. It was really weighing on him. He needed the money. He and his wife were living like paupers with the lottery knocking on their door. But, he had decisions to make. 1mill in N.D. or $500K to start in Florida. He rotated off and I haven't caught back up with him. Amazing. IF I hear anything, i'll let you guys know.

Mark 3:34

 

[rgerwin]

also, if you pay the interest during your residency, and then net probably a minimum of 100,000 after that, even if you live off of 50,000 a year (which is comfortable) you'll be free in five years. that leaves 20 years to save, which if you save the amount you were paying off, comes a million dollars to retire on. This is obviously less the needs of your kids, but still not too shabby.

 

[JAMMAN]

Shrewd residents are able to use student loan debt as a bargaining chip when looking for a job. Of course the more desirable your specialty and the more difficulty a potential employer has finding a doctor, the more they will be willing to pay.

Signing bonuses are a reality, but if you don't ask, they won't offer. Typically they are around $10K, but I do know of some hospital which offer up to $30K for certain specialties.

When I was a chief resident, my fellow chief started getting $2K per month from the day he signed his contract til the day he started working on top of his signing bonus.

When I was a resident another chief received a bonus $10K for starting work 2 weeks earlier than he had planned (mid July instead of August 1).

The same co-chief of mine was able to get $100K loan repayment over 3 years as well.