The Student Loan Market

[SurfingDoctor]

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Unprecedented Student Loan Overhaul In ‘Big Beautiful Bill’ Passes House, Heads To Trump

Never before has Congress passed a law that would take away benefits and relief from current student loan borrowers and college-bound families on such a massive scale.

www.forbes.com

I think I’m gonna invest in some banks so I can take in the money when they start charging all the medical students with 33% interest rates.

 

[Entadus]

Can you elaborate on the "33% interest rates"? Where are you seeing that?

 

[Hollow Knight]

As a student from a working-class background this is gonna be devastating. I absolutely would not go to med school now given these conditions.

Granted, I’m more risk-averse than most. I hate debt. I’m not saying other people shouldn’t to medical school. But this is gonna really increase the already present trend of med students being from mostly wealthy families

 

[Goro]

Can you elaborate on the "33% interest rates"? Where are you seeing that?

He's being sarcastic. Humor doesn't travel well over the electrons

 

[Ms Procrastinator]

Put off medical school and the world starts falling apart just as I decide to get serious again. Love this for me. Hugs to everyone else that’s going to be navigating all this.

 

[DO2015CA]

Put off medical school and the world starts falling apart just as I decide to get serious again. Love this for me. Hugs to everyone else that’s going to be navigating all this.

Name checks out hehe

 

[Hollow Knight]

Put off medical school and the world starts falling apart just as I decide to get serious again. Love this for me. Hugs to everyone else that’s going to be navigating all this.

I do want to say that you aren’t doomed. Going to your state MD school is still financially reasonable. DO school, kinda depends. I’d definitely avoid the new DOs or MDs.

I do think this will have A negative effect but you can still become a doctor and pay your loans off if that’s what you want.

People are (rightly) freaking out over PSLF but I don’t think anyone should be relying on that anyway for obvious reasons

 

[LucidSplash]

I do want to say that you aren’t doomed. Going to your state MD school is still financially reasonable. DO school, kinda depends. I’d definitely avoid the new DOs or MDs.

I do think this will have A negative effect but you can still become a doctor and pay your loans off if that’s what you want.

People are (rightly) freaking out over PSLF but I don’t think anyone should be relying on that anyway for obvious reasons

Look, I graduated from my state med school about 15 years ago. And I graduated with more federal loan debt than the new cap.

This new cap would have absolutely forced me to take on high interest private loans to finish, if it had happened in the middle of med school. And might have forced me to make the choice to do CRNA instead if it had happened before matriculation.

This will 💯 select out some students from lower socioeconomic backgrounds like I was, from pursuing professional or graduate level education. Which, IMHO, the goal of the cap. Just saying “your state medical school is still a financially reasonable option” is overly simplistic, naïve, and, frankly, not in touch with reality.

 

[Hollow Knight]

Look, I graduated from my state med school about 15 years ago. And I graduated with more federal loan debt than the new cap.

This new cap would have absolutely forced me to take on high interest private loans to finish, if it had happened in the middle of med school. And might have forced me to make the choice to do CRNA instead if it had happened before matriculation.

This will 💯 select out some students from lower socioeconomic backgrounds like I was, from pursuing professional or graduate level education. Which, IMHO, the goal of the cap. Just saying “your state medical school is still a financially reasonable option” is overly simplistic, naïve, and, frankly, not in touch with reality.

I think you should go read my post above the one you replied to

 

[LucidSplash]

I think you should go read my post above the one you replied to

I read it before. I think you should read my post again. We may agree that this is devastating for students of low socioeconomic backgrounds overall, but I stand by my assessment that to glibly suggest that one’s state school(s) remains affordable under these loan caps is not consistent with the reality of the costs of many/most state schools.

 

[SunMouse]

I do want to say that you aren’t doomed. Going to your state MD school is still financially reasonable. DO school, kinda depends. I’d definitely avoid the new DOs or MDs.

I do think this will have A negative effect but you can still become a doctor and pay your loans off if that’s what you want.

People are (rightly) freaking out over PSLF but I don’t think anyone should be relying on that anyway for obvious reasons

I know your comment was meant to be encouraging, and I agree there are still options. But it also presupposes your state medical schools have low tuition, and aren’t absurdly difficult to get into… none of my state schools gave me the time of day when I was applying and I wasn’t a particularly weak applicant, just lived in a competitive state. Even if I had gotten into one of them, I would not have been able to stay under the new loan cap and survive with living expenses anyway.

Nothing has ever gotten less expensive, and whatever the original effect of gradPLUS loans in encouraging tuition growth, it’s laughable to think this will cause schools to reduce their tuition. The horse is already out of the barn. All I can see it doing is causing the people who can’t rely on family support or scholarships to get private loans. Which I would assume is the actual goal.

 

[Hollow Knight]

I read it before. I think you should read my post again. We may agree that this is devastating for students of low socioeconomic backgrounds overall, but I stand by my assessment that to glibly suggest that one’s state school(s) remains affordable under these loan caps is not consistent with the reality of the costs of many/most state

Maybe numbers will help-

The general rule of thumb I’ve seen personal finance books give is not to borrow more than twice what you’ll make in a year. Let’s say your med school loans are gonna be $200,000-$300,000 (worst case scenario for most of your state MD schools)- yeah, that’s a lot of money, but most FM/IM PCP salaries are approaching that number. That’s a reasonable loan amount to take out for med school.

Some private schools I’ve seen (more DO than MD) are approaching the $400,000-thats stretching it. I wouldn’t borrow that much personally, but some people who are less risk averse than me are gonna go for it and I wouldn’t call them dumb persay.

And I think once you start approaching much over that (say the $500,000-$600,000 range)- that’s the point at which you will really struggle to pay your loans off even as a physician. Depends on your specialty of course but I’d advise my sibling/whoever not to be a doctor if it meant borrowing that much money.

If you’re a premed and you’re reading this- the beauty is, you don’t have to trust any of us. It’s just math. You can go get a student loan calculator and check it all out for yourself.

 

[Hollow Knight]

I know your comment was meant to be encouraging, and I agree there are still options. But it also presupposes your state medical schools have low tuition, and aren’t absurdly difficult to get into… none of my state schools gave me the time of day when I was applying and I wasn’t a particularly weak applicant, just lived in a competitive state. Even if I had gotten into one of them, I would not have been able to stay under the new loan cap and survive with living expenses anyway.

Nothing has ever gotten less expensive, and whatever the original effect of gradPLUS loans in encouraging tuition growth, it’s laughable to think this will cause schools to reduce their tuition. The horse is already out of the barn. All I can see it doing is causing the people who can’t rely on family support or scholarships to get private loans. Which I would assume is the actual goal.

I’m not arguing the loan cap is good. I’m saying the cap doesn’t necessarily mean all people without rich parents have to not go to med school.

Of course it hinges on what terms and interest your private loans are under but if you can keep your cost of attendance in the $200-300,000 range I still think it’s reasonable to go to med school, even if you have to take out some private loans. I wouldn’t do it but that’s more of a personal preference than a fact of mathematics.

 

[LucidSplash]

I’m not arguing the loan cap is good. I’m saying the cap doesn’t necessarily mean all people without rich parents have to not go to med school.

Of course it hinges on what terms and interest your private loans are under but if you can keep your cost of attendance in the $200-300,000 range I still think it’s reasonable to go to med school, even if you have to take out some private loans. I wouldn’t do it but that’s more of a personal preference than a fact of mathematics.

Maybe numbers will help-

The general rule of thumb I’ve seen personal finance books give is not to borrow more than twice what you’ll make in a year. Let’s say your med school loans are gonna be $200,000-$300,000 (worst case scenario for most of your state MD schools)- yeah, that’s a lot of money, but most FM/IM PCP salaries are approaching that number. That’s a reasonable loan amount to take out for med school.

Some private schools I’ve seen (more DO than MD) are approaching the $400,000-thats stretching it. I wouldn’t borrow that much personally, but some people who are less risk averse than me are gonna go for it and I wouldn’t call them dumb persay.

And I think once you start approaching much over that (say the $500,000-$600,000 range)- that’s the point at which you will really struggle to pay your loans off even as a physician. Depends on your specialty of course but I’d advise my sibling/whoever not to be a doctor if it meant borrowing that much money.

If you’re a premed and you’re reading this- the beauty is, you don’t have to trust any of us. It’s just math. You can go get a student loan calculator and check it all out for yourself.

The current estimated 4-year in-state cost of attendance including living expenses at my alma mater, the only public med school in the state, is $365k+. Private loans currently have variable interest rates but can run up to 17% or so. When federal loans are capped, I suspect we could expect higher interest rates to develop, because that’s how the market works. It’s just math after all.

My loans have been discharged. I’m not worried about me. But rapidly, medical school is going to become out of reach for low income students, even at their state schools, and it was already a huge leap of faith with the potential for financial ruin for those not graduating or those not going into high paying specialties.

 

[Big Time Hoosier]

If it makes any of you feel better, at least you’re not a student at a dental school like USC or NYU where the all in cost of attendance is bumping up against $800,000. Then imagine having to potentially borrow another $300,000 for a specialty residency.

William Bennett was right; unchecked federal student loans and aid have empowered institutions to inflate their tuition. The inflation we’ve seen in higher education over the last few decades would not have been able to happen otherwise. The correction back to reality is going to be painful. Corrections always are.

https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr733.pdf

Big Hoss

 

[Flashfonic5]

The new changes here regarding loans are definitely going to have a huge impact. I graduated in 2010 with 244K in loans (subsidized and unsubsidized, as well as grad plus). If it were not for grad plus loans, there is no way I would have been able to afford my education and live where I was. Private loans were unavailable without cosigner. I made it work on 12k for living expenses, which was tough in the city, and I ate much worse than in college. My loans ballooned to 302k in 5 years even though I was making $400 + payments (IBR) in residency and fellowship. As an attending, I was paying 22.5k in INTEREST per year, putting only about $300/mo toward principle and this was way more than my mortgage payment. I got lucky with PSLF in 2023, but had paid back much of it in interest by then. I had a plan and stuck to it with PSLF. Unfortunately, this is unlikely to work out much longer. That was back in the day. Costs are MUCH higher now, don't just base your numbers off of the tuition. You do need to eat and sleep somewhere. All of those little fees, books and equipment charges (ophthalmoscope, etc.) add up too!