paying off loans?

[stat3113]

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do most docs actually take 30 years to pay off their loans? i like to think that as soon as I get my first position after residency, I will do all I can to pay off the loans as soon as possible. Even if it means paying half my paycheck. Is it possible to be loan-free in 5 yrs? Do people actually do this? If not, then how come?

I am in undergrad and will graduate with 60k in loans so I am very familiar with how depressing that is, so my top priority would be to get loan-free after residency.

 

[AmoryBlaine]

do most docs actually take 30 years to pay off their loans? i like to think that as soon as I get my first position after residency, I will do all I can to pay off the loans as soon as possible. Even if it means paying half my paycheck. Is it possible to be loan-free in 5 yrs? Do people actually do this? If not, then how come?

I am in undergrad and will graduate with 60k in loans so I am very familiar with how depressing that is, so my top priority would be to get loan-free after residency.

Many many medical students have alot of fear about this issue, and many schools are very expensive. It is entirely possible to kill a medical education debt in 5-10 years if you must, but you shouldn't. Why? Because assuming your debt is consolidated at a reasonable rate you can make more money by investing and only paying the minimum on your loans. Trust me, I'm scared to have 6 figures hanging over my head like that, but I also know I'm going to be worth 6 figures for the rest of my life.

 

[Keg]

Many many medical students have alot of fear about this issue, and many schools are very expensive. It is entirely possible to kill a medical education debt in 5-10 years if you must, but you shouldn't. Why? Because assuming your debt is consolidated at a reasonable rate you can make more money by investing and only paying the minimum on your loans. Trust me, I'm scared to have 6 figures hanging over my head like that, but I also know I'm going to be worth 6 figures for the rest of my life.

I don't know - I don't think there's a way to invest and get a guaranteed 7% on your return, unless you have plenty of capital and can get into the real estate market (though now, with interest rates slowly creeping up, I don't even know about that anymore...) If you can consolidate below 5%, that's definitely do-able, but I'd be weary with trying to beat anything higher than that.

 

[lord_jeebus]

Another thing to consider if you have a family is that government loans die with you. So if you die before paying off your loans it's that much more money for those you've left behind.

 

[georgia_md]

Many many medical students have alot of fear about this issue, and many schools are very expensive. It is entirely possible to kill a medical education debt in 5-10 years if you must, but you shouldn't. Why? Because assuming your debt is consolidated at a reasonable rate you can make more money by investing and only paying the minimum on your loans. Trust me, I'm scared to have 6 figures hanging over my head like that, but I also know I'm going to be worth 6 figures for the rest of my life.

Aww ya! All you six figgas ****** holla! 👍

 

[julie29524]

On your comment about "paying off as soon as possible, even if it means paying half your paycheck", I remember reading somewhere that you can't contribute that much, like its unethical for your loan service to take half of your pay-check or something. I forgot what the cut-off was, maybe the maximum is 25 or 33.33% of your paycheck can be paid towards education loans. Maybe someone else will read this thread and have some concrete details.

I think you shouldn't worry about it yet, enjoy college. Taking out all these loans is just investing in yourself, you can't lose if you work hard, try to go to a state medical school if you are really concerned with the cost. Thats what I am doing, because I have loans from my masters already, I don't want to amount to too much.

do most docs actually take 30 years to pay off their loans? i like to think that as soon as I get my first position after residency, I will do all I can to pay off the loans as soon as possible. Even if it means paying half my paycheck. Is it possible to be loan-free in 5 yrs? Do people actually do this? If not, then how come?

I am in undergrad and will graduate with 60k in loans so I am very familiar with how depressing that is, so my top priority would be to get loan-free after residency.

 

[Wizard of Oz]

Another thing to consider if you have a family is that government loans die with you. So if you die before paying off your loans it's that much more money for those you've left behind.

Are you saying that we should not pay our loans off quickly so that we can get out of repaying the people we borrowed from in the event of our untimely death? Does your lender not have the right to sue your estate for what you owe them when you die? I honestly don't know, but it seems like the taxpayers would be out a lot of dough if this strategy was routinely employed. All you'd have to do to keep from paying them off is to continually taking 6 hours of online credit somewhere and repeatedly deferring the loans until you die.

On your comment about "paying off as soon as possible, even if it means paying half your paycheck", I remember reading somewhere that you can't contribute that much, like its unethical for your loan service to take half of your pay-check or something. I forgot what the cut-off was, maybe the maximum is 25 or 33.33% of your paycheck can be paid towards education loans. Maybe someone else will read this thread and have some concrete details.

I think you shouldn't worry about it yet, enjoy college. Taking out all these loans is just investing in yourself, you can't lose if you work hard, try to go to a state medical school if you are really concerned with the cost. Thats what I am doing, because I have loans from my masters already, I don't want to amount to too much.

There will be differences between lending companies. If you are borrowing from Uncle Sam (actually John Q. Taxpayer), you can select an income-contingent repayment plan. If you are putting your tuition on your Mastercard, the repayment terms you agreed to when you signed up for the card are binding. Either way, I don't think anybody would mind if you pay them back sooner rather than later.

In my case, I was 70K in the red at the onset of med school, but I am keeping my med tech job the first two years of school. I'll wind up with the max for Staffords ($189K), but I really don't want to go over that. When I get a real job, I want the loans GONE ASAP. I'm tired of owing people money.

 

[yadayadadude]

It is entirely possible to kill a medical education debt in 5-10 years if you must, but you shouldn't. Why? Because assuming your debt is consolidated at a reasonable rate you can make more money by investing and only paying the minimum on your loans.

This is hogwash. For those of us who started medical school last year or have yet to start, Staffords are locked in a 6.8% and Grad Plus loans at 8.5%, so the weighted average for all your loans will probably be in the 7.5% neighborhood. The stock market has averaged about a 10% return over the past several decades, so your spread would likely be around 2% before taxes and expenses (fees associated with trading or your mututal fund). You easly lose a third to taxes and another 0.5-1.0% in fees, even if you do a good job of keeping costs low. So now your spread is more like 1%. How is a 1% return possibly worth holding on to all that debt for 30 years? (Especially when you consider that, in some ways, student loan debt is very risky debt: it's the one kind of debt that can't be discharged in a bankruptcy.)

Think about it: would you ever borrow $200K simply to invest it and make a 1-2% spread? No one in their right mind would do that. The risk is too big to justify a return that ammounts to diddly. Pay those suckers off as fast as you can!

 

[SteveUTexas]

Lets do a little math. Assume 200K in debt at 6.8% interest.

Paid off over 10 years the monthly payment would be $2,301.61
Now say that you want to live in a $500,000 house @ 5.75% for 30 years the monthly payments will be $2917.86
Toss in a $40,000 car note at 6.95% interest and the monthly payments are $791.10

To keep an AA credit rating you should have a debt to income ratio of no more than 20%. Using the numbers above and no considering credit card payments or any other type of debt you would need to make $360,634.20/year, not a lot of physicians make that much.

 

[jdh71]

Lets do a little math. Assume 200K in debt at 6.8% interest.

Paid off over 10 years the monthly payment would be $2,301.61
Now say that you want to live in a $500,000 house @ 5.75% for 30 years the monthly payments will be $2917.86
Toss in a $40,000 car note at 6.95% interest and the monthly payments are $791.10

To keep an AA credit rating you should have a debt to income ratio of no more than 20%. Using the numbers above and no considering credit card payments or any other type of debt you would need to make $360,634.20/year, not a lot of physicians make that much.

easy solution - don't drive the $40,000 car and don't live in the $500,000 house

 

[deleted77919]

It is possible to kill a medical education debt in 10 years (post residency), and as others have noted at 6.8% on the Staffords, it's smart to pay it off asap. What happens in actuality is people get married, have kids, buy a BMW, etc and paying off the debt does not become the highest priority in their lives.

It's hard to make much headway on major loans during residency unless you have a spouse who can basically support you.

 

[ANCAdoc]

You can do it, but you need a specialty that pays well. One urologist I know finished his fellowship a few years ago and plans to have his loans payed off in about 5 or so years. Not sure how much he owed, though.

BUT, education debt is considered a healthy debt. The interest rates are pretty low, and with the DEMOCRATS taking control of the Senate in Jan, they have already said that one of their TOP priorities is cutting the Stafford loan interest rate in half (to make it ~3.2-3.6%). That, my friends, is amazing.

News about cutting stafford rates (LA Times)
http://www.bradenton.com/mld/bradenton/news/local/16110513.htm?source=rss&channel=bradenton_local

 

[lilnoelle]

easy solution - don't drive the $40,000 car and don't live in the $500,000 house

Yeah, thats what I thought. I figure my $130K mortgage and a 10K car will do me fine for my first years out of residency.

 

[Flopotomist]

easy solution - don't live in the $500,000 house

Then don't live in CA, NY, HI, most major cities...

 

[Sartre79]

Is there a tax benefit to maintaining the school debt for that long (write-offs)? Or would that easily be outweighed by the interest?

 

[DrLizzie]

Aww ya! All you six figgas ****** holla! 👍

???

 

[AmericanIMG]

alot of states have programs where if you work in a rural setting they will pay you for your service AND put money towards your loans. Maine i believe is the highest paying...they give you like 50-75k a yr in loan bonuses.

 

[lilnoelle]

alot of states have programs where if you work in a rural setting they will pay you for your service AND put money towards your loans. Maine i believe is the highest paying...they give you like 50-75k a yr in loan bonuses.

Usually they require you to work in primary care in a rural setting.

 

[mjl1717]

do most docs actually take 30 years to pay off their loans? i like to think that as soon as I get my first position after residency, I will do all I can to pay off the loans as soon as possible. Even if it means paying half my paycheck. Is it possible to be loan-free in 5 yrs? Do people actually do this? If not, then how come?

I am in undergrad and will graduate with 60k in loans so I am very familiar with how depressing that is, so my top priority would be to get loan-free after residency.

Considering modest salaries of M.D.s./and somewhat flambouyant lifestyles {Im not faulting this flamboyant part just being aware that it is the mere human side of man especially in the U.S.} I think a Jewish lawyer or Donald Trumph would say "dont payback the heavyweight loan immediatly, make interest". Even if it seems like it will last forever.

 

[p9142]

I am in undergrad and will graduate with 60k in loans so I am very familiar with how depressing that is, so my top priority would be to get loan-free after residency.

If you graduate with 60K in loans, then it will gain interest for eight years while you are in med school and residency.

60k @ 7% becomes 103k after 8 years. I would do everything I could to get into a state school if I were you.

 

[deleted77919]

If you graduate with 60K in loans, then it will gain interest for eight years while you are in med school and residency.

60k @ 7% becomes 103k after 8 years. I would do everything I could to get into a state school if I were you.

Well, keep in mind you don't borrow the entire amount up front and then let it collect interest while in medical school, and that the Stafford subs are interest deferred until graduation (but that interest deferal doesn't continue if you defer during residency).

But the point remains, unless interest rates change then the current loans (at 6.8%!) are not the bargain interest deals of yesteryear.

 

[deleted109597]

Yeah, but some of us still have those interest rates.
And if they change it back to less than 5%, you'll still be beating inflation. You may as well take it out for other things.

 

[p9142]

Well, keep in mind you don't borrow the entire amount up front and then let it collect interest while in medical school, and that the Stafford subs are interest deferred until graduation (but that interest deferal doesn't continue if you defer during residency).

But the point remains, unless interest rates change then the current loans (at 6.8%!) are not the bargain interest deals of yesteryear.

The OP stated that s/he has 60k in loans from undergrad, so those loans will accrue interest the entire time. This adds 100k to whatever is borrowed for med school.

 

[lilnoelle]

The OP stated that s/he has 60k in loans from undergrad, so those loans will accrue interest the entire time. This adds 100k to whatever is borrowed for med school.

Other than any subsidized loans of course.

 

[georgia_md]

It is possible to kill a medical education debt in 10 years (post residency), and as others have noted at 6.8% on the Staffords, it's smart to pay it off asap. What happens in actuality is people get married, have kids, buy a BMW, etc and paying off the debt does not become the highest priority in their lives.

It's hard to make much headway on major loans during residency unless you have a spouse who can basically support you.

I know a way that you can pay off all your loans in just as little as 8 years. It's called HPSP. But you must qualify before you apply, both physically and academically.

Also, do you know what is the average student loan debt amount for a F.E. Herbert School of Medicine graduate? It's $0.00.

 

[p9142]

Other than any subsidized loans of course.

Good point. How cool would it be if they raised the cap on unsubsidized loans. I also think we should get a better rate than other students. It seems to me that we are about the lowest risk of any graduates out there. We basically have a guaranteed job of at least $150k when we graduate, yet we pay the same interest rate as someone getting a political science degree.

 

[juleswinfield]

Get the smallest monthly payment you can find which means signing up for the longest term you can (30 years or more). This way you are REQUIRED to pay a smaller amount of your monthly income. If you can pay a more aggressive monthly payment, then do it but still sign up for the lowest payment possible.

When you pay extra $$$ each month, the extra goes to paying down principal. Paying down the principal on top of the regular payment is the only way to finish a loan early. A coworker refinanced her house about a year ago and got a 15-year loan (and higher payment, shorter term) instead of a 30-year (and lower payment, longer term). She confessed that the 15-year loan was a mistake because if she had gotten the 30-year loan and paid the higher 15-year loan monthly payment every month, she would've had the loan paid off in 12 years instead of 15.

Another variation of "under-promise and over deliver".

 

[lilnoelle]

Get the smallest monthly payment you can find which means signing up for the longest term you can (30 years or more). This way you are REQUIRED to pay a smaller amount of your monthly income. If you can pay a more aggressive monthly payment, then do it but still sign up for the lowest payment possible.

When you pay extra $$$ each month, the extra goes to paying down principal. Paying down the principal on top of the regular payment is the only way to finish a loan early. A coworker refinanced her house about a year ago and got a 15-year loan (and higher payment, shorter term) instead of a 30-year (and lower payment, longer term). She confessed that the 15-year loan was a mistake because if she had gotten the 30-year loan and paid the higher 15-year loan monthly payment every month, she would've had the loan paid off in 12 years instead of 15.

Another variation of "under-promise and over deliver".

I disagree with this because usually an individual who has a shorter pay off time (in a mortgage) has a lower interest rate. For a person who is paying twice as much of their mortgage payment anyway, they would have been smarter to go with the lowest interest rate possible (the shorter term loan).

 

[Guile]

Is there any way that you can make payments during residency without making the "full" payment? I know that most residents go into deferral and forebearance after graduating to pay them off after residency, but is there any way to make limited payments during residency or is it "all-or-nothing" system where you can either make the full payments or nothing at all?

 

[deleted77919]

As far as I know (someone correct me if I'm wrong) you can make additional payments against your federal loans without penalty. Your private loans might be a different matter entirely.