Should I take out student loans for medical school?

[Lonebush]

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I'm fortunate enough to start medical school this fall. I've done the math and realized that I had saved up enough money that I could essentially pay off my med school tuition as I attend for the next four years. My parents sat down with me and recommended that I take out a student loan. Is this a financially sound decision? Would it be financially smarter to pay off med school out of pocket or take out a loan and pay it off slowly after I start residency? Would it cost more or less with consideration of tax reduction and etc to take out student loans and pay it off gradually? Any input would be much appreciated.

 

[AlteredScale]

pay it off (tuition) right now. you'll probably need some loan money for room and board though.

 

[DrStephenStrange]

You could either pay it off now, or pay it off later with 7% interest a year (from day 1). Which number do you think will be bigger? You'll probably still need to take out some loans for cost of living though, but you'll take substantially less than you would have taken out with tuition included meaning you'll have less to pay back and less interest.

 

[Dr. Death]

The longer you wait to take out a loan, the less interest you accrue. If that means you go 2 years of tuition, room and board and then take out loans or 3 years if you can stretch it. No reason to take anything out in loans now if you have the cash.

 

[libertyyne]

Does the money you currently have in hand give you an opportunity to earn a 8% return ? If not it is more prudent to pay for your medical school with cash considering the interest rate of students loans is around 6-8%.
I am not an accountant but you can consult with one. But the student loan interest tax deduction is 2500. Which means if you are paying 25% taxes on that is an effective savings of 625 dollars in tax.
So you are essentially paying 2500 dollars to save 625 dollars in taxes, which I hope you can deduce is a stupid decision.

 

[PierreMD]

Why would your parents recommend taking out loans? They must know it would be more expensive so I imagine they must have a really good reason.

Otherwise, I recommend burning through all your cash before taking any loans. I mean all of it. In the meantime, stick in a good savings account. Interest rates are falling, but you can still find lots with 1.5% or more.

 

[M&L]

put away enough cash for about 6 months worth of expenses just in case, and spend the rest, then take out student loans. But dont touch that 6 months worth or cash. Thats your emergency fund for moving and stuff.

 

[DrRedstone]

It might be worth investing it. It looks like the interest rate for student loans is about to plummet.

 

[Goro]

I'm fortunate enough to start medical school this fall. I've done the math and realized that I had saved up enough money that I could essentially pay off my med school tuition as I attend for the next four years. My parents sat down with me and recommended that I take out a student loan. Is this a financially sound decision? Would it be financially smarter to pay off med school out of pocket or take out a loan and pay it off slowly after I start residency? Would it cost more or less with consideration of tax reduction and etc to take out student loans and pay it off gradually? Any input would be much appreciated.

No loans as long as you can possibly avoid them. Debt is real. Most pre-meds have no conception of this.

 

[123456123456]

Loans have interest. It is better to pay it off as you go (not do loans)
But you will prob need loans at least for living expenses unless you have enough saved for that or family willing to cover that.
So only take out loans for what you cannot pay for. Idk why your parents would say that, most people that have to take out loans would be elated to be in the same position as you

 

[DrStephenStrange]

It might be worth investing it. It looks like the interest rate for student loans is about to plummet.

The stock market can plummet too though. It's been unstable for a while now.

 

[letsgetstarted1234]

what about Public Service Loan Forgiveness? Im in a similar situation and have been wondering, the same.

 

[DameJulie]

At this pandemic time the interest rate is 0, right? Would it be advantageous to max out the loans now and pay back slowly until the interest rate returns to normal?

 

[OraclePL]

I'd be curious as to your parents reasoning. On the surface of it, it seems like uniquely terrible advice.

Student loans are not something to take lightly. At current 7% rates, you minimize your loans as much as possible. You're in the rare position of being able to pay for your med school tuition, don't waste it.

 

[libertyyne]

At this pandemic time the interest rate is 0, right? Would it be advantageous to max out the loans now and pay back slowly until the interest rate returns to normal?

the interest rate is only temporary, and will return to baseline probably in fall. It is a few months of reprieve. And OP cant take out all 4 years of loans right now. Also there are origination fees etc that are non negotiable.

 

[RangerBob]

I can’t say how much less stress and anxiety I’d have if I had no student loans (or if my loan burden was smaller).

Unless you have something really worthwhile to put that money towards (a 3-6 month emergency savings being one of the few that would qualify in my mind), I would recommend you use that money to borrow as little as possible.

Your future self will thank you.

 

[RangerBob]

It’s also worthwhile to note that if you had income this year and need to pay taxes, you should be eligible for the Lifetime Learning Credit (you’re unlikely to be eligible for the American Opportunity Credit since it only covers the first 4 years of education).

I doubt you can claim that credit if you’re using loans. Maybe you can-I don’t really know much about the credits other than a superficial google search taught me. Regardless, it’s worth looking into.

 

[mm5869]

a balance between some loan and some out of pocket could make sense, and give flexibility given the multiple unknowns in the economic / student loan environment...but for me, I would
-definitely avoid the grad plus loan and its monster origination fee.
-consider maxxing the stafford loan (just announced 4.3% interest rate) set it in an online savings account to earn interest (>origination fee). most schools have a date to give back all/part of the loan, re-evaluate at that point, and consider giving back some.. but not more than what prevents you from maximizing the lifetime learning credit (10k in education expenses for 2k tax gain, i believe)
-reevaluate over xmas. not sure there's a need to make a decision regarding financing all 4 years all at once.

i think a plan that pushes the decision into the future allows a bit more flexibility. what if some portion of loans ends up getting forgiven (some modified version of the heroes act) or what the 0% interest period keeps getting pushed longer and longer?

 

[Osminog]

Don’t expect to receive sound financial advice from a bunch of pre-meds and med students on an online forum. Talk to a certified financial advisor, who will take into account your entire financial situation and help you make the right decision.