Stressed About Debt

[ERDOC555]

Hi everyone,

I've been accepted to Med School for the past couple of months and I've thought a lot about the total cost of attendance for 4 years at the current 7% interest rate. The debt has never worried me before as I know that the earning potentials I'll have as an attending will far outweigh the amount I'm going to take out. I even have a significant family contribution, but I will still be very highly in debt by the time I'm an attending. I've been perseverating over this the last few weeks and trying to justify spending any money beyond the bare essentials while in med school.

I guess what I'm asking is how you guys can balance living hundreds of thousands of dollars in debt while still living like a human being and going out to eat every once in a while, seeing a movie, buying a flight to see family, etc?

It just seems so overwhelming to imagine spending anything on non-essentials when I'll be saddled with such a large amount of debt. The idea of spending the next 7-9 years in a state of less than poverty is really freaking me out.

Does anyone feel the same way? Do people have tips for how to manage my finances? Any relevant personal experiences? Please share especially if you have encouraging words.

Thanks in advance.

Edits:
1. I never meant that I was ever even entertaining the possibility of not attending med school. Regardless of debt, I will be starting this Fall.
2. By less than poverty I mean financial status, not access to basic needs. In fact many med students can live like royalty if they max out all their loans.

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[673441]

TL; DR but I get the gist of what you wanna say... Ya it sucks. But what can you do about it really? You either take the risk and follow your dream, or play the safe route and work at a crappy 50k per year job lol that isn't your passion. You just don't think about the money, but rather being the best doctor you can be.


Sent from my iPhone using SDN mobile

 

[almostnever]

Make a budget. Follow it.

You'll be fine and live comfortably on your loans as long as you don't have a ton of debt coming in, aren't trying to support a family without other income, and don't spend like a fool.

Plenty of students before you have lived off of loans without any family contribution. You'll be fine.

 

[kmp0410]

You will not be living in a state of less than poverty. Not even close. You get a significant amount for living expenses. You will never have to be hungry, not have health insurance, worried about being homeless. While you might be borrowing the money you get, you won't have any problem getting it.

You will be in debt, that you will pay off eventually as physicians are one of the highest paid "jobs" period. Being in debt sucks sure, but its part of the process and everyone does it.

You can really budget and fret over every little detail and keep your debt less. Or you can not...and not. I think its fine to just be reasonably smart with your money, now obviously that means different things to different people so I'm not going to argue what that is, but I feel confident that my idea of it is just fine. Could I save 3k a year by eating ramen all the time and never doing anything? Sure...But I'd rather live my life to a certain degree of happiness and freedom. Every day now is just as much "your life" as every day in the future when you are making money. [/philosophical]

 

[Law2Doc]

You will earn enough to service you debt in medicine. But you will be paying it off for quite a while. That's just the reality of this field. I wouldn't lose any sleep over it, but you won't be buying a Rolls or a beach house any time soon.

 

[Perrotfish]

Hi everyone,

I've been accepted to Med School for the past couple of months and I've thought a lot about the total cost of attendance for 4 years at the current 7% interest rate. The debt has never worried me before as I know that the earning potentials I'll have as an attending will far outweigh the amount I'm going to take out. I even have a significant family contribution, but I will still be very highly in debt by the time I'm an attending. I've been perseverating over this the last few weeks and trying to justify spending any money beyond the bare essentials while in med school.

I guess what I'm asking is how you guys can balance living hundreds of thousands of dollars in debt while still living like a human being and going out to eat every once in a while, seeing a movie, buying a flight to see family, etc?

It just seems so overwhelming to imagine spending anything on non-essentials when I'll be saddled with such a large amount of debt. The idea of spending the next 7-9 years in a state of less than poverty is really freaking me out.

Does anyone feel the same way? Do people have tips for how to manage my finances? Any relevant personal experiences? Please share especially if you have encouraging words.

Thanks in advance.

A good way to make financial decisions

1) Assume that every dollar you borrow in medical school is 3 dollars you need to earn (pre tax) to pay back the debt back later on

2) Translate the dollars you need to earn into the minutes of your life you need to spend at the office to earn them. Assume a typical physician's salary of $240,000

Examples

$8,000 watch -> $24,000 attending dollars -> 36.5 days. Am I willing trade more than a full month of this life I'll never get back for this ticking piece of metal? NO

$100 running shoes -> $300 attending dollars -> 0.5 days. Am I willing to work a single afternoon to make my 3x/week running habit feel better for the next year? YES

$30 meal out every Friday -> $90 attending dollars each Friday -> $32,760 attending dollars over all of medical school and residency -> 60 days. Is it worth it to work for two consecutive months for the memories I'd get from going out with friends each Friday night for 7 years? MAYBE. Depends on your priorities, and your friends.

 

[Mad Jack]

It's not all that bad dude. I did all the things you mentioned when I was earning 50-60k a year pretax, and had plenty to spare. You're probably doubling or tripling your earning potential versus anything else, it's a sound investment for most people.

 

[ERDOC555]

A good way to make financial decisions

1) Assume that every dollar you borrow in medical school is 3 dollars you need to earn (pre tax) to pay back the debt back later on

2) Translate the dollars you need to earn into the minutes of your life you need to spend at the office to earn them. Assume a typical physician's salary of $240,000

Examples

$8,000 watch -> $24,000 attending dollars -> 36.5 days. Am I willing trade more than a full month of this life I'll never get back for this ticking piece of metal? NO

$100 running shoes -> $300 attending dollars -> 0.5 days. Am I willing to work a single afternoon to make my 3x/week running habit feel better for the next year? YES

$30 meal out every Friday -> $90 attending dollars each Friday -> $32,760 attending dollars over all of medical school and residency -> 60 days. Is it worth it to work for two consecutive months for the memories I'd get from going out with friends each Friday night for 7 years? MAYBE. Depends on your priorities, and your friends.

That is a really great analogy! I think I feel a little bit better now, Thanks!

Does anyone else have any general advice of cool tips and tricks to save some money?

 

[Perrotfish]

That is a really great analogy! I think I feel a little bit better now, Thanks!

Does anyone else have any general advice of cool tips and tricks to save some money?

This website is a great source of money saving tips. Its basically an inspirational blog about the power of cheapness: http://www.mrmoneymustache.com/

In general the best thing that a medical student can do (other than going to the cheapest school they were accepted at) is to eliminate small parasitic expenses:
1) Get rid of cable. Roku + Netflix + Wi-Fi = all the TV you ever need for $50/month
2) Get rid of your phone carrier. Republic Wireless + Wi-Fi = all the communication you'll ever need for $15/month
3) Don't buy coffee. Ever. If there is free coffee drink that. If there is a Keurig then bring K-cups. If there is no Keurig but there is at least a workroom to put your bag in bring a vacuum thermos filled with a full pot of coffee.
4) Eliminate any monthly or annual subscriptions that you aren't using
5) This is the big one: when you choose an apartment calculate the cost of driving to and from work as an expense! You would be shocked to see how much 30 miles of driving each day is costing you.

The cable and phone alone will save you 15K between Ms1 and R3. That's 3 months of work you don't need to do, and you didn't even make a sacrifice.

What is tougher is figuring out if and when to trade money for time. or sanity Should you cook? Is a cheaper apartment better if its farther away? Should you work in medical school? Moonlight in residency? Can you afford a nice vaccation? You will hear different opinions on these topic but my answer is yes to cooking (with a crockpot) , no to the apartment and the work, and maybe on the moonlighting, depending entirely on how hard your residency is working you. Nice vacations probably should be a no... but I have taken them twice a year beginning in MS1.

 

[Ismet]

Moving to pre-allo

 

[ERDOC555]

Moving to pre-allo

May I ask why? I'm an accepted med student and am looking for feedback from current med students.

 

[Swish16]

Just match into ortho after med school then you'll never need to worry about money.

 

[Ismet]

May I ask why? I'm an accepted med student and am looking for feedback from current med students.

Plenty of med students frequent pre-allo and answer questions. Your question is more pertinent to pre-meds who may also be stressed about debt

 

[ERDOC555]

Plenty of med students frequent pre-allo and answer questions. Your question is more pertinent to pre-meds who may also be stressed about debt

fair enough. thanks for the explanation

 

[echidna001]

I was also extremely worried about the debt at first. I already have 45K of undergrad debt so taking out another 150-200K is a bit stressful. However, student loan debt is far more flexible than a home mortgage, medical bills or a car loan. Assuming you're sticking with federal loans, you'll be able to enter into income based repayment (or one of many other such options that help you with repayment). This way, you commit to paying 10-15% of your discretionary income. If you've been making payments for 20-25 years, your remaining loans are forgiven. With what most physicians make, this will likely put you on a normal 10 year repayment plan anyway, although is always an option and assures that you will in fact be far above the poverty line.

Additionally, with about 200K of debt your monthly payment would be at most $2,500. This sounds insane now. But if you put it in perspective, it's more than doable. Lets say, after taxes, malpractice et cetera you're only making 100K a year. That's still over $8,000 a month. Pay 3K to student loans and you're left with 5K to live on, or a comfortable 60K per year. And you'll likely start at far more than that after residency. From talking with physicians, loan repayment is never an issues unless someone starts living far beyond their means. Granted, I think finances get a little tighter if you have kids and a no spousal income.

Also, don't forget about the public service loan forgiveness. If you work at a state funded hospital and make payments for 10 years (this includes being on income based repayment plans) your loans are forgiven. Even better, if you start making income based repayments during residency (if your residency at a state funded institution), this time counts towards that. There are many options.

 

[Perrotfish]

Additionally, with about 200K of debt your monthly payment would be at most $2,500. This sounds insane now. But if you put it in perspective, it's more than doable. Lets say, after taxes, malpractice et cetera you're only making 100K a year. That's still over $8,000 a month. Pay 3K to student loans and you're left with 5K to live on, or a comfortable 60K per year. And you'll likely start at far more than that after residency. From talking with physicians, loan repayment is never an issues unless someone starts living far beyond their means.

Be aware that any physicians you are talking to will not have faced the same loan debt that you will face. The cost of tuition has been rising at more than twice the rate of inflation, year upon year, for decades. When you're an MS1 you are playing a very different ballgame than the guys in your school's current MS4 class. The guys who graduated a decade ago are playing an entirely different sport.

Also, again, if you're borrowing 200K the maximum rate you'll pay is not the 10 year repayment plan on 200K ($2500/month). It is the 10 year repayment plan on the 350K that the 200K principle compounds to at the end of residency ($4000/month).

 

[YF786]

Be aware that any physicians you are talking to will not have faced the same loan debt that you will face. The cost of tuition has been rising at more than twice the rate of inflation, year upon year, for decades. When you're an MS1 you are playing a very different ballgame than the guys in your school's current MS4 class. The guys who graduated a decade ago are playing an entirely different sport.

Also, again, if you're borrowing 200K the maximum rate you'll pay is not the 10 year repayment plan on 200K ($2500/month). It is the 10 year repayment plan on the 350K that the 200K principle compounds to at the end of residency ($4000/month).

You really put things into perspective, thank you for taking the time to help out so genuinely.

 

[The Knife & Gun Club]

Be aware that any physicians you are talking to will not have faced the same loan debt that you will face. The cost of tuition has been rising at more than twice the rate of inflation, year upon year, for decades. When you're an MS1 you are playing a very different ballgame than the guys in your school's current MS4 class. The guys who graduated a decade ago are playing an entirely different sport.

Also, again, if you're borrowing 200K the maximum rate you'll pay is not the 10 year repayment plan on 200K ($2500/month). It is the 10 year repayment plan on the 350K that the 200K principle compounds to at the end of residency ($4000/month).

Don't a good chunk of people start paying down loans during residency though?

 

[WildWing]

A good way to make financial decisions

1) Assume that every dollar you borrow in medical school is 3 dollars you need to earn (pre tax) to pay back the debt back later on

2) Translate the dollars you need to earn into the minutes of your life you need to spend at the office to earn them. Assume a typical physician's salary of $240,000

Examples

$8,000 watch -> $24,000 attending dollars -> 36.5 days. Am I willing trade more than a full month of this life I'll never get back for this ticking piece of metal? NO

$100 running shoes -> $300 attending dollars -> 0.5 days. Am I willing to work a single afternoon to make my 3x/week running habit feel better for the next year? YES

$30 meal out every Friday -> $90 attending dollars each Friday -> $32,760 attending dollars over all of medical school and residency -> 60 days. Is it worth it to work for two consecutive months for the memories I'd get from going out with friends each Friday night for 7 years? MAYBE. Depends on your priorities, and your friends.

This post is excellent, and the mod team and I have decided to award you a $10 amazon gift card for making such an insightful post.

Happy spending! Check your inbox.

 

[Mansamusa]

Don't a good chunk of people start paying down loans during residency though?

I've said this before, but for many people you will be basically be paying for residency (meaning you'll be gaining debt each year of residency).

Like if your loan is $300K and then capitalizes to 350k. $350K at 7% interest is 24.5k. I think most residents get ~35K post-tax. If you do IBR in residency, you will pay 5K per year towards loans, so in that case, you will be adding 19.4K to your loans each year. 350K become 470K after IM + fellowship for example

 

[Mansamusa]

@Perrotfish Don't forget that the interest rate has also doubled.

Our gov't "believes" in something called a free market, but a free market can never exist when there is a system of unlimited credit or credit in general. So they double the interest rate to "force consumers to minimize their educational spending and be smarter about their purchases" (which is bs speak for the higher education lobby has money to influence the gov't, whereas students do not), while not limiting the credit funds and encouraging the sellers to manage their price. Students have no power to bargain and IBR/PAYE clouds students' ability to understand what they are getting into and makes them feel more comfortable taking out loans they would otherwise not. It is a very gross system

 

[Catalystik]

Should you work in medical school?

OP, be aware that many med schools specifically prohibit outside employment during med school. Check to see if yours is one of them. Downside: If you are able to take on a job with meaningful hours, you are unlikely to remain at the top of your med school class. If you do not already have a very-strong science background, you may flounder and risk repeating a year (thus the reason for policies against holding a job).

 

[echidna001]

Be aware that any physicians you are talking to will not have faced the same loan debt that you will face. The cost of tuition has been rising at more than twice the rate of inflation, year upon year, for decades. When you're an MS1 you are playing a very different ballgame than the guys in your school's current MS4 class. The guys who graduated a decade ago are playing an entirely different sport.

Also, again, if you're borrowing 200K the maximum rate you'll pay is not the 10 year repayment plan on 200K ($2500/month). It is the 10 year repayment plan on the 350K that the 200K principle compounds to at the end of residency ($4000/month).

Yikes. They're really sugar coating our potential debt load during these second looks. Both schools told us the average payment is ~$2,500 a month once you're out of residency if you take out ~200K. Perhaps they're just trying not scare everyone's already wide-eyed parents. 350K is a much more intimidating number, although that makes total sense with 7+ years of compounded interest. At the end of the day, no matter how much federal student loan debt you have, you still will never fall below the poverty line. Just don't buy into student loan consolidation unless you really know what you're doing. Interest rates may be lower but you lose many of the potentially helpful repayment programs.

 

[Mansamusa]

Yikes. They're really sugar coating our potential debt load during these second looks. Both schools told us the average payment is ~$2,500 a month once you're out of residency if you take out ~200K. Perhaps they're just trying not scare everyone's already wide-eyed parents. 350K is a much more intimidating number, although that makes total sense with 7+ years of compounded interest. At the end of the day, no matter how much federal student loan debt you have, you still will never fall below the poverty line. Just don't buy into student loan consolidation unless you really know what you're doing. Interest rates may be lower but you lose many of the potentially helpful repayment programs.

The only repayment program that saves anything is the PSLF 10-yr forgiveness. The others save you nada. The best thing to do if we graduate and PSLF is gone, is to refinance. The gov't loans are so crappy, that hopefully lenders will make themselves more and more competitive to attract us. Refinance at 3% and you will save a ton over the life of the loan.

And schools are businesses. They tell people what they want to hear, which is why I encourage everyone to use AAMC FIRST's loan calculator and really understand the terms of your loan

 

[echidna001]

The only repayment program that saves anything is the PSLF 10-yr forgiveness. The others save you nada. The best thing to do if we graduate and PSLF is gone, is to refinance. The gov't loans are so crappy, that hopefully lenders will make themselves more and more competitive to attract us. Refinance at 3% and you will save a ton over the life of the loan.

And schools are businesses. They tell people what they want to hear, which is why I encourage everyone to use AAMC FIRST's loan calculator and really understand the terms of your loan

I completely agree that refinancing will save you a TON of money, you just have to make sure your income/situation is stable before refinancing. The federal loans completely rob you however are so much more flexible with repayment than private companies. If you were to find yourself unemployed or disabled (without good disability insurance) the private company will still ask for that full payment (from my understanding) and then come after you if you cannot pay. Currently, I'm paying a lot to my undergrad loans but I had a "period of financial hardship" and was allowed to only pay $14 per month while remaining in good standing with no ill effects on my credit or pestering calls from collections. I'm not saying IBR saves you money, in fact you'll lose a ton money if you hang out on IBR for the 20-25 years. But, your loan payments will be manageable compared to what you're making. But yes, there are much more effective ways to pay off your loans. Hopefully PSLF is still an option for us.

 

[LizzyM]

Learn to shop and prepare food.
Brown bag your lunch.
Make coffee (or your preferred coffee shop beverage) at home.
Socialize 'at home' rather than in bars or restaurants. Potluck dinners or group kitchen activities are good for building friendships.
Take advantage of "free" food. Campus tour guide? Free food. Attend a lunchtime event? Free food. Figure out if the free food is worth the time the event takes.

Figure out the difference between living close enough to campus to walk vs. living further away and needing to take transportation.

Student discounts with your student ID.

Thrift shops! Dollar store!

Freebie pens, post-its, highlighters, etc at grad fairs.

Agree with above about telephones, internet, wifi, etc. Some housing offers free wifi. Figure that cost as well as laundry costs as you choose from among housing choices. (In-unit laundry vs coin laundry).

 

[Lawpy]

Learn to shop and prepare food.
Brown bag your lunch.
Make coffee (or your preferred coffee shop beverage) at home.
Socialize 'at home' rather than in bars or restaurants. Potluck dinners or group kitchen activities are good for building friendships.
Take advantage of "free" food. Campus tour guide? Free food. Attend a lunchtime event? Free food. Figure out if the free food is worth the time the event takes.

Figure out the difference between living close enough to campus to walk vs. living further away and needing to take transportation.

Student discounts with your student ID.

Thrift shops! Dollar store!

Freebie pens, post-its, highlighters, etc at grad fairs.

Agree with above about telephones, internet, wifi, etc. Some housing offers free wifi. Figure that cost as well as laundry costs as you choose from among housing choices. (In-unit laundry vs coin laundry).

Great post as always, LizzyM. Hopefully, the SDN mod team can reward you a gift card for your valuable suggestions and tips

 

[TBV]

Learn to shop and prepare food.
Brown bag your lunch.
Make coffee (or your preferred coffee shop beverage) at home.
Socialize 'at home' rather than in bars or restaurants. Potluck dinners or group kitchen activities are good for building friendships.
Take advantage of "free" food. Campus tour guide? Free food. Attend a lunchtime event? Free food. Figure out if the free food is worth the time the event takes.

Figure out the difference between living close enough to campus to walk vs. living further away and needing to take transportation.

Student discounts with your student ID.

Thrift shops! Dollar store!

Freebie pens, post-its, highlighters, etc at grad fairs.

Agree with above about telephones, internet, wifi, etc. Some housing offers free wifi. Figure that cost as well as laundry costs as you choose from among housing choices. (In-unit laundry vs coin laundry).

Protip for incoming M1s: Don't actually attend the event, watch lecture nearby (or whatever you do with your hour not attending event) and collect leftover food when they're done!

 

[ERDOC555]

Protip for incoming M1s: Don't actually attend the event, watch lecture nearby (or whatever you do with your hour not attending event) and collect leftover food when they're done!

You sir are a genius! Good tip!

 

[caffeinemia]

You will earn enough to service you debt in medicine. But you will be paying it off for quite a while. That's just the reality of this field. I wouldn't lose any sleep over it, but you won't be buying a Rolls or a beach house any time soon.

Just think of it this way -- you'll be making 10-15% less than the salary you think you will be making. So like 85% of a lot.

Additionally, think about it like this -- chances were you weren't going to ever have that Rolls or the beach house without medicine anyhow... and if you were ... then what the hell were you thinking when you quit banking?

 

[Mad Jack]

May I ask why? I'm an accepted med student and am looking for feedback from current med students.

Once you're in it, there's no turning back. This is information best reached by those that have not yet entered the dark tunnel that is med school.

 

[LizzyM]

I knew a resident who kept a plastic fork in the pocket of his white coat just in case some unexpected birthday cake came his way.

That's hardcore.

 

[Mansamusa]

And OP, one possible hope is that every presidential candidate (even Trump) claims that they want to reduce the loan interest rate. Honestly, if we don't, then our country is incredibly stupid (both its leaders and the public for not willing to stand united and protest this ridiculousness)- we are obviously heading for a large economic crisis if we continue the path we are on. If the interest rate is 7%, I will finish residency at $500K. If it is 3%, I could finish under $400K. Then I will pay $350K less over the life of the loan. It will save a tremendous amount (as long as it is made clear to universities that they will not be able to raise costs with no accountability like they currently do).

Then if you are still feeling down, think of the students like me, who will likely have a $350K principle balance and be glad you are not us, hahaha -_-

(As for phones, you can also try to do a large family plan with family members. I have a bunch of siblings and we intend on staying on a family plan for as long as possible, so my bill is only $40/month)

 

[Oh_Gee]

I knew a resident who kept a plastic fork in the pocket of his white coat just in case some unexpected birthday cake came his way.

That's hardcore.

wouldn't that fork get kinda dirty through out the years?

 

[Oh_Gee]

Hi everyone,

I've been accepted to Med School for the past couple of months and I've thought a lot about the total cost of attendance for 4 years at the current 7% interest rate. The debt has never worried me before as I know that the earning potentials I'll have as an attending will far outweigh the amount I'm going to take out. I even have a significant family contribution, but I will still be very highly in debt by the time I'm an attending. I've been perseverating over this the last few weeks and trying to justify spending any money beyond the bare essentials while in med school.

I guess what I'm asking is how you guys can balance living hundreds of thousands of dollars in debt while still living like a human being and going out to eat every once in a while, seeing a movie, buying a flight to see family, etc?

It just seems so overwhelming to imagine spending anything on non-essentials when I'll be saddled with such a large amount of debt. The idea of spending the next 7-9 years in a state of less than poverty is really freaking me out.

Does anyone feel the same way? Do people have tips for how to manage my finances? Any relevant personal experiences? Please share especially if you have encouraging words.

Thanks in advance.

Edits:
1. I never meant that I was ever even entertaining the possibility of not attending med school. Regardless of debt, I will be starting this Fall.
2. By less than poverty I mean financial status, not access to basic needs. In fact many med students can live like royalty if they max out all their loans.

Does the USA worry about getting into debt? be like the USA

 

[LizzyM]

wouldn't that fork get kinda dirty through out the years?

Oh dear! Have you not heard of soap and water?

 

[deleted731525]

You will earn enough to service you debt in medicine. But you will be paying it off for quite a while. That's just the reality of this field. I wouldn't lose any sleep over it, but you won't be buying a Rolls or a beach house any time soon.

This. Also even if things somehow go South or you decide you want to do something that is on the lower end of compensation, there is REPAYE which is available to all borrowers(as long as its federal loans). Basically your loan payments will be 10% of your discretionary income for 25 years and then the remaining balance is forgiven. You have to pay taxes on the forgiven balance but only to the point where you wont be insolvent(Say the forgiven balance is 70k, your liabilities including the loan is 170k, your assets are 150k you are insolvent by 20k so you only have to pay taxes on 50k of the forgiven balance. Here is a good article with more examples https://lawyerist.com/83690/defusing-student-loan-interest-tax-bomb/ ). That being said as a physician, 10% of your discretionary income will pay off your loans in 25 years unless you have a huge loan and go into one of the lowest paid specialties(but even then at least you have this safety net to lead a good life). Note that this is all separate from PSLF which may or may not be around in the long term.

 

[Mansamusa]

I'm watching a CSPAN special on student loan debt with a DoE rep and NYT columnist (I'm really cool guys, I swear).....it looks like we are incredibly stupid. These guys are putting so many spins on this stuff it's not even funny.

So there is no student loan crisis because many people aren't defaulting....? The people defaulting are those in for-profit schools and "it's rare for a graduate school grad to have over $200K in debt." And we need to "inoculate" students from the fear of relying on those loan and encourage them to not be scared off by those sticker prices....the hell?

So basically Mr. Rohit Chopra from the DoE thinks that there is no student debt crisis as long as people aren't defaulting. Who cares if people can't retire or afford a house, etc? (Mostly referring to non-med fields). And he said no crises or bubble will happen because the repayment plans won't allow a fast acting change (which is exactly what I said IBR was for). Oh, and now they said the people who borrowed the most are least likely to default, which indicates that they aren't suffering or delaying their spending....? What? These people can't be that stupid..... anyways I'm going to stop live-blogging this now

 

[Oh_Gee]

Wonderful advice, but it is kinda depressing to see that we have to live as such cheapos for the prime of our lives to become Doctors.

i work at a research institute and i scan my email regularly for free food events. i am well trained for this already

 

[deleted731525]

I'm watching a CSPAN special on student loan debt with a DoE rep and NYT columnist (I'm really cool guys, I swear).....it looks like we are incredibly stupid. These guys are putting so many spins on this stuff it's not even funny.

So there is no student loan crisis because many people aren't defaulting....? The people defaulting are those in for-profit schools and "it's rare for a graduate school grad to have over $200K in debt." And we need to "inoculate" students from the fear of relying on those loan and encourage them to not be scared off by those sticker prices....the hell?

So basically Mr. Rohit Chopra from the DoE thinks that there is no student debt crisis as long as people aren't defaulting. Who cares if people can't retire or afford a house, etc? (Mostly referring to non-med fields). And he said no crises or bubble will happen because the repayment plans won't allow a fast acting change (which is exactly what I said IBR was for). Oh, and now they said the people who borrowed the most are least likely to default, which indicates that they aren't suffering or delaying their spending....? What? These people can't be that stupid..... anyways I'm going to stop live-blogging this now

TBF he does have somewhat of a point. With REPAYE/IBR the worst case scenario is you pay 10%/15% of your discretionary income for 25 years and then deal with the tax bomb on the forgiven amount. I ran the numbers using the IBR calculator on the website and even if you have over 500k in debt and make 200k a year you would pay off the balance before the 25 year mark on IBR. If you make 300k you would pay it off on REPAYE before the 25 years is up. So the worst case for most people going to med school is paying 10/15% of their discretionary income per year which will still let one save/invest a lot of money. Many wont even have to use these programs after residency and will elect to throw more money at the loans to pay it off in 10 years or less and a very small subset of the physician population that has debt greater than 500k and income less than 200k will have to potentially worry about a one time tax bomb that cant make you insolvent. Im not saying this is all ideal or even good policy, but the worst case for physicians still gives you a lot of discretionary income.

I will say this though, I wouldnt rely on PSLF.

 

[mvenus929]

Additionally, with about 200K of debt your monthly payment would be at most $2,500. This sounds insane now. But if you put it in perspective, it's more than doable. Lets say, after taxes, malpractice et cetera you're only making 100K a year. That's still over $8,000 a month. Pay 3K to student loans and you're left with 5K to live on, or a comfortable 60K per year. And you'll likely start at far more than that after residency. From talking with physicians, loan repayment is never an issues unless someone starts living far beyond their means. Granted, I think finances get a little tighter if you have kids and a no spousal income.

Also, don't forget about the public service loan forgiveness. If you work at a state funded hospital and make payments for 10 years (this includes being on income based repayment plans) your loans are forgiven. Even better, if you start making income based repayments during residency (if your residency at a state funded institution), this time counts towards that. There are many options.

1. You have to pay taxes on the forgiven balance after 20-25 years.

2. As mentioned above, your costs getting through med school are going to be different than mine, and I just graduated 2 years ago. Also, keep in mind that while you may only take out 200K in loans, you will be gaining interest on all of those loans (thanks to the lack of subsidized loans for you) during medical school, residency, and fellowship. So that 200K in loans is going to balloon to a low more by the time you start meanfully paying it back.

3. Don't count on PSLF. It's great in theory, but no one has actually taken advantage of it, and the chance that it'll still be around in it's current form when you are ready to take advantage of it are slim. Plus, a lot fewer jobs qualify for it than you would think. Just working at a non-profit hospital doesn't mean that you are paid by said non-profit group, and most physicians are not actually employees of the hospital they work for.

Don't a good chunk of people start paying down loans during residency though?

That's amusing. I pay far more than most of my colleagues do towards loans--about $500 per month. I am still accruing interest on my loans. So, no, I am not paying down my loans during residency. I do plan to pay one of them off in between residency and fellowship, though.

Just don't buy into student loan consolidation unless you really know what you're doing. Interest rates may be lower but you lose many of the potentially helpful repayment programs.

The federal loans completely rob you however are so much more flexible with repayment than private companies. If you were to find yourself unemployed or disabled (without good disability insurance) the private company will still ask for that full payment (from my understanding) and then come after you if you cannot pay.

Consolidation is actually a great option for the majority of people. If you are not going to work for a non-profit agency and not count on PSLF, you are far better off consolidating your loans. And many loan companies have options available for forbearance or other economic hardship. But that's why you get good disability insurance while you are still a resident.

I knew a resident who kept a plastic fork in the pocket of his white coat just in case some unexpected birthday cake came his way.

That's hardcore.

One of the guys I went to school with would carry empty tupperware containers in his backpack and fill them up at the end of a lunch meeting. I thought that was ingenious, but was never quite ballsy enough to do it myself.

 

[Mansamusa]

TBF he does have somewhat of a point. With REPAYE/IBR the worst case scenario is you pay 10%/15% of your discretionary income for 25 years and then deal with the tax bomb on the forgiven amount. I ran the numbers using the IBR calculator on the website and even if you have over 500k in debt and make 200k a year you would pay off the balance before the 25 year mark on IBR. If you make 300k you would pay it off on REPAYE before the 25 years is up. So the worst case for most people going to med school is paying 10/15% of their discretionary income per year which will still let one save/invest a lot of money. Many wont even have to use these programs after residency and will elect to throw more money at the loans to pay it off in 10 years or less and a very small subset of the physician population that has debt greater than 500k and income less than 200k will have to potentially worry about a one time tax bomb that cant make you insolvent. Im not saying this is all ideal or even good policy, but the worst case for physicians still gives you a lot of discretionary income.

I will say this though, I wouldnt rely on PSLF.

I have the wonderful pleasure of being one of those few who will have over $500K after residency (unless I get a residency in a location where I could live with family or I don't get in off a waitlist in the next few months), and I don't believe you are considering the interest on the loans. If I do IBR with a $250K, I will pay ~$960K and have $80K forgiven. If I do PAYE on a $250K income, I will pay $465K and have $528K forgiven.

If I do a 25 yr plan that would completely payoff the loan, I will pay $1million. Now if I make $250K, my max (ie. a state with no state income tax) take home would be $173K. That is a 4.3million take home pay over 25 year. So taking that 1million for loans will still leave a decent amount of money (but does make it scarier when reimbursements decrease or federal taxes increase). And I wouldn't worry so much about not being able to afford living, so much as getting to the point where you have a lower pay (take home pay + benefits, since many physicians don't get fantastic benefits packages) than a PA

Now you shift to $200K salary. PAYE: $326K paid, $624K forgiven. IBR: $781K paid, $340K forgiven. Or pay the $1million over 25 yrs.

Orrrrrr when I am paying back, the interest starts at a level of $28K/yr and I'm paying a little more than $37.5K/yr on IBR, so I instead refinance to 3% interest. Now my interest is $12K/yr and 16K more is being applied to my loan than if I stayed on the government plan.

Again, this is why I definitely recommend people play around with AAMC FIRST

 

[mvenus929]

I have the wonderful pleasure of being one of those few who will have over $500K after residency (unless I get a residency in a location where I could live with family or I don't get in off a waitlist in the next few months), and I don't believe you are considering the interest on the loans. If I do IBR with a $250K, I will pay ~$960K and have $80K forgiven. If I do PAYE on a $250K income, I will pay $465K and have $528K forgiven.

You didn't do calculations with REPAYE, which might change things for you a bit, since you get a 50% subsidy on your interest for the first three years under the plan. Of course, then your maximum payment is not topped out at the 10 year repayment, but that probably wouldn't be an issue with you. It could result in significantly less debt at the end of residency, though.

 

[Debt Free Doctor]

Hi everyone,

I've been accepted to Med School for the past couple of months and I've thought a lot about the total cost of attendance for 4 years at the current 7% interest rate. The debt has never worried me before as I know that the earning potentials I'll have as an attending will far outweigh the amount I'm going to take out. I even have a significant family contribution, but I will still be very highly in debt by the time I'm an attending. I've been perseverating over this the last few weeks and trying to justify spending any money beyond the bare essentials while in med school.

I guess what I'm asking is how you guys can balance living hundreds of thousands of dollars in debt while still living like a human being and going out to eat every once in a while, seeing a movie, buying a flight to see family, etc?

It just seems so overwhelming to imagine spending anything on non-essentials when I'll be saddled with such a large amount of debt. The idea of spending the next 7-9 years in a state of less than poverty is really freaking me out.

Does anyone feel the same way? Do people have tips for how to manage my finances? Any relevant personal experiences? Please share especially if you have encouraging words.

Thanks in advance.

Edits:
1. I never meant that I was ever even entertaining the possibility of not attending med school. Regardless of debt, I will be starting this Fall.
2. By less than poverty I mean financial status, not access to basic needs. In fact many med students can live like royalty if they max out all their loans.

you are very smart to start thinking about total cost of medical school now, rather than at the end of medical school like many. some people don't even think about debt until they "believe" they can do something about it (i.e. attending hood.) But I believe there is very much one can do NOW, today, as pre med/ med student/ resident/ or attending.

Pre-med and MS are the best time to start managing debt actively; like in medicine, prevention is always the best medicine.

I have attached 2 flowcharts I made on student loan management for MS4 and PGY's, it will give you an idea of what lies ahead.
Good historical changes available to you that is NOT available to my class/2014 are 2 folds:
1. for the first time, one can refinance their student loans with private banks to a lower interest rate
2. RePAYE with 50% interest subsidy on difference between accrued interest & RePAYE payment became available Dec 2015
3. rates are lower than the 7% that hit us, though loan origination fees are still ridculous (4% for plus loans, worst than balance transfer checks with 3% for 18 mos= effective 2% interest rate)

I will be making a flowchart on student debt minimization/prevention for MS/pre-med soon.
Please feel free to ask me any question; I have tasted the freedom from student loan as an intern last year and hope to help others do so.

 

[Mansamusa]

You didn't do calculations with REPAYE, which might change things for you a bit, since you get a 50% subsidy on your interest for the first three years under the plan. Of course, then your maximum payment is not topped out at the 10 year repayment, but that probably wouldn't be an issue with you. It could result in significantly less debt at the end of residency, though.

Oh, cool. I thought back when I first starting at loan stuff that REPAYE was only for people who took out loans before PAYE and IBR emerged, so I never looked at that plan. It still looks like my loan will increase by a little more than $10K/yr of residency, but that's less than I anticipated. Thanks for the heads up!

 

[caffeinemia]

Oh dear! Have you not heard of soap and water?

Uh... no.

try some Avagard, betadine dip, or hand sanitizer. So much faster.

 

[EverStriving]

TBF he does have somewhat of a point. With REPAYE/IBR the worst case scenario is you pay 10%/15% of your discretionary income for 25 years and then deal with the tax bomb on the forgiven amount. I ran the numbers using the IBR calculator on the website and even if you have over 500k in debt and make 200k a year you would pay off the balance before the 25 year mark on IBR. If you make 300k you would pay it off on REPAYE before the 25 years is up. So the worst case for most people going to med school is paying 10/15% of their discretionary income per year which will still let one save/invest a lot of money. Many wont even have to use these programs after residency and will elect to throw more money at the loans to pay it off in 10 years or less and a very small subset of the physician population that has debt greater than 500k and income less than 200k will have to potentially worry about a one time tax bomb that cant make you insolvent. Im not saying this is all ideal or even good policy, but the worst case for physicians still gives you a lot of discretionary income.

I will say this though, I wouldnt rely on PSLF.

Unless you're saving for a specific lump-sum payment (down payment, vacation,etc.) it is almost always going to be far better use of your extra income to pay down more of the 7% compounding debt than to save or invest in something else.

 

[LizzyM]

Wonderful advice, but it is kinda depressing to see that we have to live as such cheapos for the prime of our lives to become Doctors.

You think that this is "the prime of your life" but believe me, every age can be wonderful. I know one retired doc who was still sailing, kayaking, snowshoeing, at 80 or 85 (never ask a lady her age).

And you can live "cheap" and still have fun. Living as your patients live, (or with even greater simplicity) puts you in solidarity with them which is not a bad thing.

 

[drwoofs]

How feasible without kids is it to simply just live off 30k a year and commit all of your income to loans for two-three years? I seems insane to pay that much interest. If I take 173k after taxes and have 143k to commit to loans for three years sound just about do it. Of course this sounds naive.

 

[LizzyM]

How feasible without kids is it to simply just live off 30k a year and commit all of your income to loans for two-three years? I seems insane to pay that much interest. If I take 173k after taxes and have 143k to commit to loans for three years sound just about do it. Of course this sounds naive.

I know a doc who paid off her loans by living very frugally for a few years after graduation. Living on 30K would be okay or not depending on the cost of housing. People who actually live on 30K wages are sometimes eligible for low income housing but you would not be. The old rule was to spend not more than 30% of income on housing but in some areas that rule is out the window and people are paying 40-50%. In some areas $833/mo might get you a decent place to live but in others it would be almost impossible.