Recent grads, how are you handling debt?

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With a salary of ~200K, even with a spouse who stays at home and perhaps young children, it should be possible to pay off ~200K of debt in a few years post-residency by living frugally. On the other hand, if right out of residency you start buying regularly $100 bottles of wine, eating out every other week and paying $500 in the steak house, one or two new cars (a lexus/bmw/mercedes at least), a big house, and go on vacations to Europe twice a year, children in expensive private school, it'll take you decades to pay off that debt.

I have to say that I agree with the specific example that you gave.
Salary of $200K annually = $10K mo post-taxes
Paying off $200K @6.8% in 5 years = $4000/mo
" " in 3 years = $6200/mo

In both cases quite doable, maybe even allowing one to think about retirement or purchasing a home.

However, if you push the numbers a little further and look at someone making $150K per year with $250K in debt:
Salary of $150K annually = $7500 post-taxes
Paying off $250K @6.8% in 5 years = $5000/mo - living like a student, not saving for retirement, but doable.
Paying off $250K @6.8% in 3 years = $7700/mo - oops, more than you make!

The problem is that pre-meds applying to medical school and beginning the process of taking on this debt don't really know where they'll end up on this spectrum - both in terms of income and debt. When I was applying and deciding where to go I decided I was comfortable with up to $200K. Turns out I'm going to be closer to $250K because 1) My fin aid dept pulled a sizable need-based scholarship after my first year which they said was originally given in error because they had only considered one set of my parent's income vs. all 4 (I have 2 stepparents) and 2) I made my estimations based on the first years budget, which I failed to realized only covered 9mo of living expenses (and hence years 2 and 3 are much more expensive). And in terms of income, I set my sites in the first 2 years on specialties that would get me to that $200K mark right out of residency, but now in 3rd year have fallen in love with a specialty that won't.

So, while I agree that frugality can go a long way in getting your loans paid off quickly, it can be substantially more difficult for some to accomplish.
 
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Surgery is funny this way. Specialty programs often desire students with research experience and recruit MD/PhDs heavily to academic programs. Note that these students still need to be up to par with the high clinical grade and Step I expectations for all their MD applicants. To me this seems to be all a function of competition. For upper tier academic programs research is just one way to separate the field of extremely competitive applicants. Research experience and claimed love of research/academics is also an imperfect indicator of someone who's more likely to become academic faculty someday, which is typically the goal of big name academic programs.

Of course many programs also often have research built into residencies and place some value on research as a prestige generating unit. Of course it creates a pool of residents for emergencies and does create a cheap labor pool for the research faculty within the institution. But, a PhD seems to be extreme overkill for that residency work at least to me.

MD/PhD programs have the stated goal of producing majority career researchers. How many surgeons out there are majority researchers? There is data on this, and that data shows it's far less likely for an MD/PhD to pursue a majority research career in surgery than in most other fields. The pay just isn't there in grant money and it's too difficult for someone to keep up their skills in surgery if they don't operate frequently.

To me this all means to do a PhD just to try to get a more competitive residency is time wasted. Some programs may state they desire a year of research. Yet, most students will not have performed a year of research or more during med school at the vast majority of programs. It's far more common to just do some research during med school breaks and fourth year. Of course some students will have done a year out, but adding three years to that doesn't add much to your application compared to those year out students. The clinical requirements remain the same regardless and your medical school performance is still the major, overriding factor for residency programs.



Time to PhD averages are averages for a reason. You can't assume your average MD/PhD student just washes glassware in the lab. Most MD/PhD students are very motivated, prepared, and intelligent individuals. If the average is eight years, you can't assume that you're smarter/harder working/better prepared than all the other MSTPs at top programs. They are the best of the best coming into the programs.

That being said, I've written about time to graduation extensively in the past and I'm not sure hard work has anything to do with time to PhD completion. See my blog entry: Just how long is a MD/PhD program anyway?



Your plan is a great one if you can pull it off. However, most programs are not so flexible to allow you to do a PhD before a MD if you expect the MD to be fully funded. Also, most programs frown upon students continuing PhD work in the same lab they worked in as undergrads. Such plans are typically forbidden. Most PDs feel that a PhD is a time to start fresh on a new project. The type of PhD you're proposing would not be a "real" PhD in their minds. Besides, they have the work out of you that you did during undergrad. For all that med school tuition and stipend they want new hard work.

At my program I've seen students who did undergraduate research at the institution start here as PhD students, but the research they did as PhD students had to be with new labs and new projects. These students take just as long as everyone else. Maybe 15 years ago the program was more flexible to allow students to squeak through as 6 year MD/PhDs in their undergrad lab or a close affiliate, but that hasn't been true for a long time.

Some interesting points. That's why I am not 100% decided yet and obviously need to consult with more people like you to cover all the bases. I'll have to hang around MSTP subforum more. I'll just say for now that I am doing research at a medical school unrelated to my undergrad and my PI has already assured me that I would be working in the same field. It might not be the exact same project since I have my own ideas, but some of the most difficult parts in terms of training and sleepless nights is already behind me. Wherever I end up, I will be using the same skills.

Now the financial aspect of the MD/PhD program is related to this thread. So let's accept that your point about doing extra two years of research being a waste for a clinical doctor (minus one that you'd have to do after school anyway, even if not always) is absolutely valid. Where does this leave us in terms of debt? Don't you think that those extra two years won't really be a waste since not only you'll avoid around half a million dollar debt, but you'll also make money? Any attendings/residents here would have changed their past and gone the MD/PhD route so that they would not have to deal with debt right now? And what about you, Neuronix? Why did you go the MSTP route? Any regrets?
 
I'll just say for now that I am doing research at a medical school unrelated to my undergrad and my PI has already assured me that I would be working in the same field. It might not be the exact same project since I have my own ideas, but some of the most difficult parts in terms of training and sleepless nights is already behind me. Wherever I end up, I will be using the same skills.

The same advice applies to this scenario. MD/PhD programs do not want you to continue doing well established research into your PhD. The vast majority of students have a lot of research experience coming into their MD/PhD programs. I wouldn't assume your PhD is going to go any faster than the national averages based on this information.

Don't you think that those extra two years won't really be a waste since not only you'll avoid around half a million dollar debt, but you'll also make money?

I'm still standing by at least three years, and that's assuming you would have taken a year out of med school. Also, don't necessarily assume you'll have to pay full sticker price for med school. I could have done MD only with scholarships. My estimated debt would have been $120k.

And what about you, Neuronix? Why did you go the MSTP route? Any regrets?

http://forums.studentdoctor.net/blog.php?b=1212
http://forums.studentdoctor.net/showthread.php?t=604035 (#15 and #22 in particular)
http://forums.studentdoctor.net/showthread.php?t=636747
http://forums.studentdoctor.net/showthread.php?t=644390
 
The same advice applies to this scenario. MD/PhD programs do not want you to continue doing well established research into your PhD. The vast majority of students have a lot of research experience coming into their MD/PhD programs. I wouldn't assume your PhD is going to go any faster than the national averages based on this information.



I'm still standing by at least three years, and that's assuming you would have taken a year out of med school. Also, don't necessarily assume you'll have to pay full sticker price for med school. I could have done MD only with scholarships. My estimated debt would have been $120k.



http://forums.studentdoctor.net/blog.php?b=1212
http://forums.studentdoctor.net/showthread.php?t=604035 (#15 and #22 in particular)
http://forums.studentdoctor.net/showthread.php?t=636747
http://forums.studentdoctor.net/showthread.php?t=644390
Sometimes ignorance can be a bliss. There is a lot of information out there convincing me why i should not do MD/PhD. It is amazing how much stuff you had to go through and are still hanging in there. I agree with your philisophy about standing up for rights - no one has ever yelled on me, besides my mother, and I am not sure I would be able to take it humbly. Anyway, it seems that the most important aspect of the given program is the environment. If anything, the above information makes me think that I am really lucky at this school. And while I would like it to be more prestigious, there is no way for me to know if I'd be happy at another school (like at your program) which in turn could affect my academic output. Sucks. I have already been in two very high caliber places and did not like the politics and sycophants at all. I'll think twice before applying to MD/PhD at schools other than where I am already. I am not sure anyone is capable of putting up with very high stress environment for 7-8 years without having his/her future be affected in some negative fashion. Thanks for the info.
 
. All I am saying is that you should not allow your frugality to be your only weapon to achieving wealth.


It's not that hard to find a tenant. You obviously interview them. But the most important part of that is your contract. You do have the right to regular entry (weekly if you need to) to check up on the property to avoid any long term issues like a toilet leak. Just have to reflect it in the contract.

Also think about this - you say you rent now. Well, what do you think? Is your landlord running a charity? No! He is making money off of you and his other tenants.

Finally, good financial decisions start when you are leaving high school (preferably before). You must try to accumulate as little debt as possible in undergrad. You can do this by always having a job and living frugally. Also choosing your school wisely. I have done that and there is a chance that I might leave undergrad with no debt at all. Yet what do most people do? They buy a fancy car, get in the debt row of conspicuous consumption, never work, and graduate with debt and without clue about money management. When these people are allowed to go straight to medical school, their life can end up being a disaster. It's like those prisoners who do time 11 to 16 years (UG+MD+PGY) and then are let out. Most of them just can't deal with the society and end up going back. It would help a lot if medschools did not concentrate so much on some useless volunteer work in some uber-conservative hospital and rather required their students to have some work experience, in addition to just a little volunteer work. No wonder we have so many dissatisfied doctors. And to add insult to injury, many people end up being social invalids as well - unable to attract the right girl due to zero skills, lonely, depressed...

I am glad to see how difficult it is even for attendings to make it. The premeds must really see this thread. I used to not want to do MD/PhD because of the extra time involved and because the main theme in that subforum is that it does not make financial sense to spend those extra three years just to get out of school debt free since you can make more money as a doctor in those extra three years. Correct me if I am wrong, but that seems to be the wrong advice. And are you really wasting those three years? For some subspecialties you most definitely are not because it seems that some of the fields almost require you to take a year or so off after medschool anyway to do research before you can be competitive for residency. So then why the hell not do it as part of the MD/PhD program and kill three birds with one baseball bat? Half a million dollar debt is no joke, especially if you have never earned a dime in your life.

I never said frugality should be the only weapon to achieve wealth. I DO think it isn't being exercised enough in association with other smart strategies. I wanted to be a doctor so bad that I didn't care about the debt. If I had a flux capacitor that is one thing I would change. I never imagined that I would hate being a doctor. OR that I would feel a slave to debt. I was a nontraditional med student too, so one could argue that I should have known better. Better late than never, I guess.

You are right, it's not that hard to find a tenant. It isn't so easy to find a GOOD tenant. My first tenant seemed fine, interviewed well and then consistently paid late for two months in a row before breaking lease, not paying at all the third month, and moving out just before eviction proceedings began. Didn't pay the utility bill either so I got stuck with that. Second tenant was fine, but the property was older, stuff kept breaking and I wasn't making a profit. I know many real estate investors (belong to a club, even) and one of the biggest issues is finding good tenants. There are a lot of tenants out there who are very familiar with the law, know exactly how long they can go without paying, and work the eviction law to their favor (I do live in the People's Republic of New York, laws favor tenants heavily, could be different in other states). I decided that for now, the hassle of owning property isn't for me.

I am WELL AWARE that my current landlord is making money off me. He deserves to. The place is well maintained. The bank was making money off of me by the interest they charged when I owned property too, so that's not a valid argument for not renting. That's the American way. The difference to me right now is that, by renting, I lower my monthly out of pocket expenses so that I can devote money to repaying other debt (thus gaining my freedom) without feeling like a pauper. PLUS I don't have to hassle with mowing the lawn, or shoveling snow, or arranging for repairs and maintenance.

Agree with your last paragraph wholeheartedly. I don't think most students realize how onerous student loan debt is, and how it snowballs by continuing to accumulate interest during deferrals, etc. Add to that a mortgage, car and some credit cards and POOF: you are stuck in a job just to pay your debt!
 
There are more dimensions to the rent vs. own debate than have been mentioned here. Some things that don't initially seem to be applicable to the financial aspects of home ownership are key:

1. Schools. When you have a family, frugal living means finding good public schools. Schools are better and fellow classmates more stable in home-ownership areas rather than neighborhoods with rentals. This can be a startling difference -- Palo Alto vs. East Palo Alto in CA, e.g. Newton vs. Arlington in Boston area.

2. Safety. Not always, but often, safer areas are those where people are homeowners. This will affect your well-being as well as your homeowners and car insurance rates.

3. Neighborhood "feeling". If you want a good community experience where you know your neighbors and develop a community over the long term, you might want to own. Not only will you be more likely to stay in one place, so will your neighbors (and your kids' friends, their children). This one may be hard to quantify in dollar terms.

4. Your own house. Many people like to own their own house and the first thing they say when they lose their house is "Someday I'll own another house." Maybe this is a luxury, this feeling of owning, but since so many have the feeling, it shouldn't be dismissed too quickly. People also begin to resent the landlord building the equity at their expense, etc.

5. Mortgage interest deduction. I know other people have mentioned this, but having owned a couple of houses, this is HUGE. And it's only interest on 2nd mortgages, as I understand it, that is not calculated into the AMT.

There are more, but I just want to point out that even issues that seem to be not-financial can affect the financial outcomes one way or the other.
 
Excellent point about public schools. I don't have kids so I didn't think about that. I disagree wholehartedly about safety, though if you are renting a house that may more likely be the case. I'm currently in a complex, which gives ammenities/services I couldn't get if I were renting a house, like snow removal, grass mowing, heat/hot water, cable wifi included in rent. All I pay is rent and electricity for lights and stove.

Here is an interesting article from WSJ:

http://online.wsj.com/article/SB125903489722661849.html?mod=WSJ_hpp_LEFTTopStories
 
This is extremely market dependent, and a lot of financial gurus would disagree with this statement. Paying rent is a big income drain.
Also too market-dependent to make such sweeping statement. My brother pays almost as much in property taxes and utilities as I do for rent (which includes utilities), to say nothing of his mortgage, and that's only on a $185K house.
 
One thing left out of the rent vs. own debate is that being a renter sucks in many ways because many landlords or property management companies don't care much about their tenants. They just want your money and to suck you dry. My current apartment complex is a good example of this. However, I still think it is overall better for me to rent, given that I didn't know whether I'd be in this area > 3 years and the housing prices may continue to be volatile the next few years. I did look into buying at the beginning of my fellowship earlier this year, but I found that the costs were significantly higher, factoring in the mortgage, property taxes, etc. even before any maintenance costs. Also, there is definitely a credit crunch in the sense that if you don't have 20% down you will probably get stuck with a sucky loan and you of course have to pay mortgage insurance which is another fixed cost every month that only benefits the bank, not you.

I think the MD/PhD route may become more attractive as med school tuition continues to go up faster than inflation, but it's definitely only good for those who like research...otherwise too painful. I do think that a PhD can be helpful in securing a more competitive residency, based on experiences of med school classmates. One still needs good clinical grades and USMLE scores, but probably not quite as good to get a comparable residency position WITHOUT the PhD. Students with PhD's appear to be particularly prized in the ivy league type IM programs and in derm residencies.
 
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