Residency salary "sticker shock" anyone?

[ComputerGeek64]

I was looking at the salaries for family practice residents in Alabama & Tennessee today and was floored. After four years of medical education and around $240,000 of debt, a student can look forward to a whopping $40,000 annually for the three years of residency. My gosh, that's what anyone graduating with a BS can make. I'm truly concerned about being one step away from the poor house for 7 years before actually making a "real" salary. In the mean time, the 8.5% interest is going to be ballooning on the PLUS loan.

Am I the only one experiencing this concern?

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[MossPoh]

it goes between 40,000 and 60,000 and is because, after those 4 years of med school, you still know jack. The real learning begins during residency. There are added benefits such as insurance and stuff too. You usually don't start paying your loans back until after residency. Its just the way things are. You are really more of a burden until a year or so in, when you can start generating some income.

 

[Senor Hound]

In certain parts of America, 40k is quite sufficient to live a happy, healthy life. Perhaps doing a residency in the southeast or midwest will help you stretch your dollar further...

It does suck, IMO, but its the rules. At least you're paid accordingly for your services.

And I can say that 45k is literally three times what I make in a year right now working full-time, and I am still alive. I can't save for a retirement or anything, but I can live off of it. You just have to find the right spot. I suggest looking in the middle of nowhere, which is where I am...

 

[DrMidlife]

I'm told that the with-it kids get their loans consolidated at 3%.

 

[majiatas]

I don't think this is too surprising or concerning. Like MossPoh said, starting residents are experts on the human body but beyond that, they have little experience except the procedures they were able to assist with or watch during rotations in third and fourth year.

And I think 40,000+ is plenty for paying rent and bills. Not really enough to buy a new car or go on fancy European vacations, but who has the time/need for that during residency anyway?

 

[Instatewaiter]

You usually don't start paying your loans back until after residency. Its just the way things are. You are really more of a burden until a year or so in, when you can start generating some income.

While you may not be paying back your loans, you are accruing interest the entire time. So your debt is actually increasing. There is no more hardship deferment. Thanks congress.

And I can say that 45k is literally three times what I make in a year right now working full-time, and I am still alive. I can't save for a retirement or anything, but I can live off of it. You just have to find the right spot. I suggest looking in the middle of nowhere, which is where I am...

Really the take home is around 2500/mo. So it comes out to around 30K take home. That's not a whole heck of a lot, esp if you are planning not to live like a student.

 

[Krisss17]

And I think 40,000+ is plenty for paying rent and bills. Not really enough to buy a new car or go on fancy European vacations, but who has the time/need for that during residency anyway?

Totally. It's not like you are going to have that much free time anyway...working 80 hours a week and sleeping a lot during your off time, you'll probably only have a handful of freetime hours. And like others have mentioned, you'll still probably do better than before unless you are a career changer and had a well paying career before.

take it as 3 more years of education where in this case you are being paid for your time.

 

[DrMom]

Really the take home is around 2500/mo. So it comes out to around 30K take home. That's not a whole heck of a lot, esp if you are planning not to live like a student.

My whole family can live on this. You'll have plenty of money if you're single unless you live in a very high cost area.

You should definitely live in a financially responsible manner as a resident. Heck, you really should be careful until all of those loans are paid off.

 

[ComputerGeek64]

My whole family can live on this. You'll have plenty of money if you're single unless you live in a very high cost area.

You should definitely live in a financially responsible manner as a resident. Heck, you really should be careful until all of those loans are paid off.

My concern isn't so much about whether I'd be able to live on $40K. Granted, it seems a bit low compared to other graduate and professional programs but it's not a bad wage.

My biggest concern is having nearly a quarter of a million in debt accumulating interest while I'm in residency. At standard loan rates, that's close to $20K per year in interest rolling up. That much debt seems overwhelming and given a choice, I'd rather start paying it off sooner than later.

 

[ThisIsYourLife]

My concern isn't so much about whether I'd be able to live on $40K. Granted, it seems a bit low compared to other graduate and professional programs but it's not a bad wage.

My biggest concern is having nearly a quarter of a million in debt accumulating interest while I'm in residency. At standard loan rates, that's close to $20K per year in interest rolling up. That much debt seems overwhelming and given a choice, I'd rather start paying it off sooner than later.

one of my friends started residency this year.. he says that he is only able to defer his loans for two years into residency because of a bill president bush signed in.. and next year's first year residents will be able to only defer for one year.. and after that, you can no longer defer.. meaning me and anyone else that isn't a fourth year right now can not defer.. :-/ is this true? ive taken his word and haven't done my research.

 

[Bacchus]

True. They got rid of or modified the 20/220 law or whatever its called.

 

[auphlee]

My concern isn't so much about whether I'd be able to live on $40K. Granted, it seems a bit low compared to other graduate and professional programs but it's not a bad wage.

My biggest concern is having nearly a quarter of a million in debt accumulating interest while I'm in residency. At standard loan rates, that's close to $20K per year in interest rolling up. That much debt seems overwhelming and given a choice, I'd rather start paying it off sooner than later.

Hey, jackass, ever see a doctor in line for the gubment cheese? C'mon dude, have a broader perspective. The money will come.

 

[TexasTriathlete]

I'm getting a sugar mama, so I don't have to worry about this.

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[Chocolate Bear]

I'm getting a sugar mama, so I don't have to worry about this.

Posted via Mobile Device

Already got one. Check.

 

[auphlee]

I'm getting a sugar mama, so I don't have to worry about this.

Posted via Mobile Device

Not your best effort. I'll pretend I didn't read this, and I eagerly await redemption.

 

[JaggerPlate]

Hey, jackass, ever see a doctor in line for the gubment cheese? C'mon dude, have a broader perspective. The money will come.

Interesting ...

 

[auphlee]

Interesting ...

Easily interested...

 

[JaggerPlate]

Easily interested...

Possibly. However, my comment was regarding your attitude on the boards. I think you could be funny/awesome ... that is if you don't fade away as a troll or something. You've just joined this month, so I suppose only time will tell ...

 

[auphlee]

Possibly. However, my comment was regarding your attitude on the boards. I think you could be funny/awesome ... that is if you don't fade away as a troll or something. You've just joined this month, so I suppose only time will tell ...

Ha! I get banned as a troll repeatedly. I've been posting for over a year, but I'm always banned, so must always come up with a new identity. I'm the Superman of SDN - minus the altruistic motives, biceps, and spit curl.

 

[Senor Hound]

Ha! I get banned as a troll repeatedly. I've been posting for over a year, but I'm always banned, so must always come up with a new identity. I'm the Superman of SDN - minus the altruistic motives, biceps, and spit curl.

At least everyone knows where they stand with you... I guess your blisteringly-honest personality has some benefit.

I think this does suck. I'm not saying it doesn't. I kind of think loans shouldn't accumulate interest while you are in school/residency, but the credit companies aren't going to do that cause then they won't make enough money for the risk of lending (the interest rate is bad enough for them to make some dough). But this kind of shows you that although money is an okay reason to become a doctor, you'll probably be disappointed if its your primary motive.

Of course I'll wholeheartedly admit I'm naive to these sorts of things, and I could be wrong. But in my experience I end up becoming miserable when I follow my wallet instead of my mind and heart.

 

[TexasTriathlete]

1. Consolidate
2. Pay the minimum for the rest of your life (it is tempting to try and pay them off quickly, but it is a ******ed thing to do, so just pay the minimum)
3. Once you start making real money, invest it at a higher rate than what your loans are.

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[Senor Hound]

1. Consolidate
2. Pay the minimum for the rest of your life (it is tempting to try and pay them off quickly, but it is a ******ed thing to do, so just pay the minimum)
3. Once you start making real money, invest it at a higher rate than what your loans are.

Posted via Mobile Device

This is great advice. Right now, inflation is higher than a lot of student loan APRs. This means that with every day you don't pay your loans, they are becoming smaller and smaller in size when factoring in inflation. So pretty much any investment will work, even an investment in something inflation-adjusted (i.e. gold), would be better than paying your loans off.

But that feeling of being debt-free is a great feeling, and I wouldn't blame anyone for wanting to pay off their loans as soon as possible, even if it financially doesn't make sense.

Not to go off topic too much, but IMO an index fund such as SPDRs would provide someone with enough percentage gain over inflation and student loans, that you could actually make money off of your borrowed money. But that's an opinion, and anyone actually doing that should talk to a professional about it.

 

[meggielou]

I'm getting a sugar mama, so I don't have to worry about this.

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I thought we weren't going to tell anyone about our little arrangement, TT?

But seriously, as much as it may suck during residency not to be making bank, doctors have been doing it for a long time, and like someone said before, you don't see too many doctors using food stamps. Not to be preachy, but when I was growing up, I'm sure my parents would have been thrilled to be making $40k a year. We'll all get by

 

[TexasTriathlete]

I was unaware that we were keeping that a secret.

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[MossPoh]

Just volunteer to live in the middle of nowhere and you can make huge cash usually. Most people aren't THAT concerned with it though. Debt is one of those things they worry and complain about, but not enough to take an action like living in a small southern or midwest town where they don't have their shopping malls and wide range of restaurants.

It really is amazing how much more money you can make in some of those towns. I don't want to give exact numbers but when we moved to a smallish midwest town, his income increased about 4x and the amount of frivolous lawsuits more than halved. The downside was that I grew up in a place where our fun was towing people on sleds across fields at breakneck speeds with a 4 wheeler and "opossum bashing".

 

[Law2Doc]

In certain parts of America, 40k is quite sufficient to live a happy, healthy life.

The cost of living in the area you work makes all the difference, and can make and break you. In some places, more than half of that $40k is going to go towards rent on your small studio apartment. You probably pay about $6k in federal, state and local taxes. That really doesn't leave much for your transportation costs, food, utilities. So yeah, you'll be doing quite a few years of PB&J, grilled cheese and Ramen noodles if you choose to live in a high cost of living area. Good thing you didn't do this for the money.

 

[DiverDoc]

TT for your #2, why not pay off the loans quickly... if one is able and sure not to be in trouble after doing so?

 

[buccos35]

I dont think a residents salary should come as too big of a shock. Back in the 70s, surgical interns were paid like 7 grand per year to do 125 hours of work per week. Granted 40k isnt a lot in comparison due to inflation and the low cost of schooling back then but it is livable. Oftentimes the best residencies actually pay the least.

 

[scpod]

....So yeah, you'll be doing quite a few years of PB&J, grilled cheese and Ramen noodles if you choose to live in a high cost of living area....

But then there's also moonlighting. If you live in a state with a one-year licensing requirement you can pick up a couple of shifts a month and earn another $25,000 or so a year after internship.

 

[Cp22kjer]

But then there's also moonlighting. If you live in a state with a one-year licensing requirement you can pick up a couple of shifts a month and earn another $25,000 or so a year after internship.

I know of two residents doing this. Both are extremely busy but have families to support and say that it's worth it if you have the time or can make it.

 

[DrMom]

Debt is debt. Some types are better than others, but you still want to get rid of it as soon as you can. For the first few years out of residency I'll be splitting up money for savings, retirement, and debt paydown. If I live like a resident for 5 extra years I can have my large student loans gone. Saves all of that interest accruement, which is a ton of $$ over 30 years even at low interest.

And, yes, you can make a dencent supplemental income with moonlighting. I make more moonlighting than I do in residency. Just be sure to hold out money for the taxman, because very few moonlighting gigs withhold anything for you.

 

[Revilla]

Just volunteer to live in the middle of nowhere and you can make huge cash usually. Most people aren't THAT concerned with it though. Debt is one of those things they worry and complain about, but not enough to take an action like living in a small southern or midwest town where they don't have their shopping malls and wide range of restaurants.

It really is amazing how much more money you can make in some of those towns. I don't want to give exact numbers but when we moved to a smallish midwest town, his income increased about 4x and the amount of frivolous lawsuits more than halved. The downside was that I grew up in a place where our fun was towing people on sleds across fields at breakneck speeds with a 4 wheeler and "opossum bashing".

This is a great point! Some of my friends already turn their noses up at small-town residencies in favor of the big cities, but one of the advantages of the smaller towns is the cost of living.

I lived in a decent sized town in the midwest (population was about 150,000, so I wouldn't call it "small"). It had everything I needed/wanted -- really nice hospital (and I know because I was a patient for five days LOL), plenty of grocery stores, movie theaters, parks, a big mall, and the traditional Wal-Mart, Target, etc. I lived in an apartment building that was newly built. My apartment was on the third floor (elevator) and it was a brand new, never-lived-in large one-bedroom with -- most important to me -- a washer/dryer in the apartment, ceiling fans in every room, a carpeted balcony, 24-hour security and maintenance, and closed-circuit TV channel with cameras spanning the property. Everyone had to be buzzed in so if you were expecting someone, you could watch for them. Downstairs in the lobby, we had an indoor pool and an outdoor pool, a sauna, a spa, an exercise room with locker rooms, vending machines, etc. It was an incredible place and it all cost $600.00 a month. Try finding a place like that in the big cities for under $2000.00. You'll be lucky to find a studio in NYC for a thousand. Big cities are over-rated, IMO.

 

[harposnarpo]

Debt is debt. Some types are better than others, but you still want to get rid of it as soon as you can. For the first few years out of residency I'll be splitting up money for savings, retirement, and debt paydown. If I live like a resident for 5 extra years I can have my large student loans gone. Saves all of that interest accruement, which is a ton of $$ over 30 years even at low interest.

If the low interest is below what you make in a savings instrument, as it often is, then this is terrible advice. You should make minimum payments for the rest of your life and put tons of money in the highest yield savings. You should also consider your salary growth, depending on your field.

Savings comes with 2 distinct benefits here:
1. $10 saved over 1 year at 10% is worth $10.48 worth of debt accumulating for one year at 5% interest.
2. Have emergency funds.

 

[SoCuteMD]

1. Consolidate
2. Pay the minimum for the rest of your life (it is tempting to try and pay them off quickly, but it is a ******ed thing to do, so just pay the minimum)
3. Once you start making real money, invest it at a higher rate than what your loans are.
Posted via Mobile Device

'cause it's SO easy to invest your money in a way that makes more than 9% plus taxes. Just ask all my i-banking friends. They'll have LOTS of time to explain how to do it, since half of them have been laid off in recent months!

 

[Law2Doc]

But then there's also moonlighting. If you live in a state with a one-year licensing requirement you can pick up a couple of shifts a month and earn another $25,000 or so a year after internship.

The catch there is that moonlighting has to fit within the 80 hour hour restriction, so in certain residency paths it's not going to be an option.

 

[mastamark]

Debt is debt. Some types are better than others, but you still want to get rid of it as soon as you can. For the first few years out of residency I'll be splitting up money for savings, retirement, and debt paydown. If I live like a resident for 5 extra years I can have my large student loans gone. Saves all of that interest accruement, which is a ton of $$ over 30 years even at low interest.

And, yes, you can make a dencent supplemental income with moonlighting. I make more moonlighting than I do in residency. Just be sure to hold out money for the taxman, because very few moonlighting gigs withhold anything for you.

This is the approach I will most likely take. If I can find a way to do it, I will try and just devote all or most of that residency money towards loans.

I guess you could always pay he minimum and be more comfortable at the time, but in the long run it seems wasteful (With interest accruing and all). Tis almost like dumping wads of cash into a commode.

 

[engineeredout]

But then there's also moonlighting. If you live in a state with a one-year licensing requirement you can pick up a couple of shifts a month and earn another $25,000 or so a year after internship.

How the hell do you moonlight while working 80 hours a week?

 

[DrMom]

If the low interest is below what you make in a savings instrument, as it often is, then this is terrible advice. You should make minimum payments for the rest of your life and put tons of money in the highest yield savings. You should also consider your salary growth, depending on your field.

Savings comes with 2 distinct benefits here:
1. $10 saved over 1 year at 10% is worth $10.48 worth of debt accumulating for one year at 5% interest.
2. Have emergency funds.

The market is in a negative growth rate, meaning that a vast majority of investments have had a negative return (meaning loss) for the last 18-24 months. The likelihood of a 10% return anytime in the near future is unlikely at best.

Also keep in mind that the debt affects your ability to buy other things, like a house. Say you have $200K in loans and your 1st job pays you $200K a year. Your debt to income ratio is 1:1 (not even assuming credit card debt that MOST people carry a ton of also) and you're going to have a heck of a time qualifying for a home loan. On top of that, the loans are still accruing compounded interest and growing if you're paying anything near the minimum, so your debt to income ratio is constantly becoming worse. If you're paying off your loans more rapidly, you're constantly improving your debt to income ratio plus you're saving $$ on the interest you're not accruing.

 

[TexasTriathlete]

Okay, I'm not a financial guru or anything, but who the **** consolidates loans at 9% or whatever? A few of my friends, who are young attendings, are all doing pretty much the same thing: consolidate at 3-4%, and investing. Some have CDs at like 5%, which are safe, and not all that hard to come by. Others are a little more daring.

I've had several docs in the past month tell me that I have **** for brains if I try to pay everything off quickly. I assume they've looked into it. One of them I know for sure is very good with finances.

 

[harposnarpo]

The market is in a negative growth rate, meaning that a vast majority of investments have had a negative return (meaning loss) for the last 18-24 months. The likelihood of a 10% return anytime in the near future is unlikely at best.

What is "the market?" The U.S. economy hasn't had a negative growth rate in a long time, it's just growing slower than it has previously. 10% was just an example to make for simple math. As others are saying, it's not uncommon for a guaranteed CD to exceed the interest rate of consolidated debt.

Also keep in mind that the debt affects your ability to buy other things, like a house. Say you have $200K in loans and your 1st job pays you $200K a year. Your debt to income ratio is 1:1 (not even assuming credit card debt that MOST people carry a ton of also) and you're going to have a heck of a time qualifying for a home loan.

Plenty of doctors have >"1:1 debt to income ratios" and have nice houses. School loans don't count as normal debt. Credit card debt is irrelevant, obviously you won't put money away earning 10%/year if your credit card interest is greater than that.

On top of that, the loans are still accruing compounded interest and growing if you're paying anything near the minimum, so your debt to income ratio is constantly becoming worse. If you're paying off your loans more rapidly, you're constantly improving your debt to income ratio plus you're saving $$ on the interest you're not accruing.

As others have said, savings vehicles often outpace consolidated student loans, so by paying off loans you're actually losing money. Debt:income ratio is not very important.

 

[DrMom]

What is "the market?" The U.S. economy hasn't had a negative growth rate in a long time, it's just growing slower than it has previously. 10% was just an example to make for simple math.

The market is investments (stocks, bonds, mutual funds, savings accts, etc). It is not the same thing as the economy.

As others are saying, it's not uncommon for a guaranteed CD to exceed the interest rate of consolidated debt.

If you tie up your money in a CD for 5-10 years you can exceed the low consolidated debt interest rates. You still won't get anywhere near the 10% you were using.

Plenty of doctors have >"1:1 debt to income ratios" and have nice houses. School loans don't count as normal debt. Credit card debt is irrelevant, obviously you won't put money away earning 10%/year if your credit card interest is greater than that.

Once you have finished residency and your student loans come into repayment, they are counted the same as any other debt. In fact, even while they are in deferment or forebearance most banks count them in debt:income. The physician/resident mortgages are the exception to that.

As others have said, savings vehicles often outpace consolidated student loans, so by paying off loans you're actually losing money.

As I said earlier, the market is not currently like this. You're not likely to get anywhere near the 10% returns on your investments that you computed.

Debt:income ratio is not very important.

It may not be important to you, but it is to anyone you wish to borrow from.

I am a physician who recently built a house that is quite affordable for my income and just went through all of this process. My husband and I have an 800 credit score. My loans are currently deferred, but they were a huge issue with banks. If you think they don't matter, you're deluding yourself.

 

[Senor Hound]

The market is investments (stocks, bonds, mutual funds, savings accts, etc). It is not the same thing as the economy.

If you tie up your money in a CD for 5-10 years you can exceed the low consolidated debt interest rates. You still won't get anywhere near the 10% you were using.

Once you have finished residency and your student loans come into repayment, they are counted the same as any other debt. In fact, even while they are in deferment or forebearance most banks count them in debt:income. The physician/resident mortgages are the exception to that.

As I said earlier, the market is not currently like this. You're not likely to get anywhere near the 10% returns on your investments that you computed.

It may not be important to you, but it is to anyone you wish to borrow from.

I am a physician who recently built a house that is quite affordable for my income and just went through all of this process. My husband and I have an 800 credit score. My loans are currently deferred, but they were a huge issue with banks. If you think they don't matter, you're deluding yourself.

They're only an issue while you're a resident. Keep in mind your debt:income ration will be only about 1/4 of what it is now when you finish your residency. And we're talking about paying off your loans once you're an attending.

The 10% return is very feesable. The market is slow now, but its also the perfect time to buy. And besides, looking at current market trends instead of planning for a long-term investment (30-years plus) is silly. I don't think there's been a point in the last 50 years where any 30-year period (i.e. 55-84, 56-85, etc.) where the return on the S&P was less than something like 8%. You can just ride the wave of the market with index funds (which really requires almost no skill), and make money by not paying off your loans as fast as possible. But there is some risk to it (though not nearly as much as people think), and it doesn't solve the emotional factor of just wanting to have everything paid for (not being in the red is a beautiful thing).

I would be willing to bet that as soon as you finish your residency, you would probably more than be approved for a million dollar loan with a physician's income, whether your student loans are repaid or not.

 

[DrMom]

That's why I gave an attending type salary in my example.

I'm not going to continue repeating myself. I just wanted to give people a more realistic scenario.

 

[Toohotinvegas33]

Alot of residencies will work you 55-65 hours a week, after your first year you can get a licence and moonlight. In this area I have heard from residents working at rural hospitals for $100 an hour for family medicine/ urgent car type of work.

 

[engineeredout]

Alot of residencies will work you 55-65 hours a week, after your first year you can get a licence and moonlight. In this area I have heard from residents working at rural hospitals for $100 an hour for family medicine/ urgent car type of work.

Not fairrrr I wanna make 100$/hr.

 

[GreenShirt]

Okay, I'm not a financial guru or anything, but who the **** consolidates loans at 9% or whatever? A few of my friends, who are young attendings, are all doing pretty much the same thing: consolidate at 3-4%, and investing. Some have CDs at like 5%, which are safe, and not all that hard to come by. Others are a little more daring.

I've had several docs in the past month tell me that I have **** for brains if I try to pay everything off quickly. I assume they've looked into it. One of them I know for sure is very good with finances.

When you consolidate federal loans they take the average of the interests on all the loans you are consolidating and round up....so you can only consolidate at 3% if your original loans were at 3% (I believe only Perkins is this low, which you can't get in medical school). At least this was the case when I consolidated my undergrad Staffords....unless I got a raw deal or something.

 

[GreenShirt]

one of my friends started residency this year.. he says that he is only able to defer his loans for two years into residency because of a bill president bush signed in.. and next year's first year residents will be able to only defer for one year.. and after that, you can no longer defer.. meaning me and anyone else that isn't a fourth year right now can not defer.. :-/ is this true? ive taken his word and haven't done my research.

If I'm correct on the details...you will no longer be able to defer your loans period (which means no interest or principal payments). However, you will still be able to apply for Forbearance for Economic Hardship (if you don't make enough to pay the monthly balance on your loan)...under forbearance you don't have to pay the monthly principal but your interest will grow for the 3-7 years you're in residency. The government makes a few extra bucks off your loans.

A friend of mine says that Congress is working on a Bill that will forgive student loans 25yrs into the life of the loan assuming the borrower makes payments proportional to their loans for those 25yrs. It sounds too good to be true to me....but would be sweet if it happens.

In the end, I'm almost thankful we get paid anything during residency instead of having to pay more tuition since it's a continuation of our training.

 

[yadayadadude]

Consolidating at a low rate is OVER, people. Federal student loans disbursed after July 1, 2006 have fixed interest rates: 6.8% for Staffords and 8.5% for GradPlus. Medical student who graduated three or four years ago had variable rate federal student loans and were able to consolidate the whole enchilada at rates in the 2-4% range. For those of us still in school or just starting out, we're looking at a mix of 6.8% and 8.5% ... so if you're borrowing the full COA for a higher-priced school, your weighted interest rate is probably in the 7.5% range. If anyone can find a CD or other guaranteed return investment that offers 7.5% after taxes, I'd love to see it. My "high yield" savings account is returning 3% right now, and 60 month CDs from the same bank (ING Direct) return 4%.

ETA: you can still consolidate, but the interest rate on your consolidation loan will be equal to the weighted interest rate of the loans you included in the consolidation.

 

[yadayadadude]

When you consolidate federal loans they take the average of the interests on all the loans you are consolidating and round up....so you can only consolidate at 3% if your original loans were at 3% (I believe only Perkins is this low, which you can't get in medical school). At least this was the case when I consolidated my undergrad Staffords....unless I got a raw deal or something.

This has been true since July 1, 2006.

(And BTW, Perkins is fixed at 5% and some medical students do get these loans. I have about $15K in Perkins. They're the best deal in federal student loans right now.)

 

[mastamark]

The market is in a negative growth rate, meaning that a vast majority of investments have had a negative return (meaning loss) for the last 18-24 months. The likelihood of a 10% return anytime in the near future is unlikely at best.

Also keep in mind that the debt affects your ability to buy other things, like a house. Say you have $200K in loans and your 1st job pays you $200K a year. Your debt to income ratio is 1:1 (not even assuming credit card debt that MOST people carry a ton of also) and you're going to have a heck of a time qualifying for a home loan. On top of that, the loans are still accruing compounded interest and growing if you're paying anything near the minimum, so your debt to income ratio is constantly becoming worse. If you're paying off your loans more rapidly, you're constantly improving your debt to income ratio plus you're saving $$ on the interest you're not accruing.

Dr. Mom,

I agree with everything you are saying as far as getting those loans paid down. As far as the Debt/Income ratio, why would they count your total amount owed vs. annual income in the ratio? Wouldn't it be the monthly minimum to monthly income(or annual payment vs. annual income)? If they take the total principal vs. income then we are all screwed.

A calculated loan payment on a 200,000 loan at %6.8 percent would be about $2400 a month. If you get lucky enough to land a specialty paying 200,000 a year(anesthesiology or whatever) you would figure that you getting 16,666 monthly(before the goverment jumps in) and 12550 afterwards. Doesn't the bank calculate you debt/income before taxes?

Again I agree that it is not financially prudent to carry that debt over 30, 15, or even 10 years. I'm just trying to figure out how it would be myself. As attending that is. It's gonna be rough during residency no matter how you stack it.