The True Student Debt Analysis-You may not like what you are about to learn

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wisconsindoctor

wisconsindoctor

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I'm taking a half-hour out of my time to make this post. I'm here to help pre-meds really understand just how much of a burden student loan debt actually is as a practicing physician.
Close to 50% of doctor's work in the area of FP. The average salary in the area of FP is $132k. So I will be using these numbers from here on out.
Loan balance: $200,000
Interest rate: 6.8%
Loan term: 30 years

A word of caution…..$132k is going to seem like earning pennies when you read a real analysis of medical student debt.
I'm taking a half-hour out of my time to make this post. I'm here to help pre-meds really understand just how much of a burden student loan debt actually is as a practicing physician.

Close to 50% of doctor's work in the area of FP. The average salary in the area of FP is $132k. So I will be using these numbers from here on out.
Loan balance: $200,000
Interest rate: 6.8%
Loan term: 30 years
A word of caution…..$132k is going to seem like earning pennies when you read a real analysis of medical student debt.

40% of your $132k is going to go to taxes. This gives you $79,200for the year.


Mortgage payment: this will vary from place to place. I'm going to use $2,000 per month. You will spend $24,000 per year on your mortgage.
You are now down to $55,200 left over for the year.
Now you have property taxes. I'm going to assume that you will need to pay around $6,000.
You are now down to $49,200 for the year.
Car payment: let's put down $400 a month. Your wife or husband have a car? Now you are close to $800 a month.
Car insurance? $1,500-$2,000 per year.
You are now down to $42,900
You need to pay back your student loans. With the above calculations, you will be paying $1,303.85 a month.
You are now down to $27,264
Do you have house repairs, children, car expenses, food, gas, health insurance?
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6K for property taxes? Where do you live? I think several of those figures are inflated.
 
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wisconsindoctor said:
I’m taking a half-hour out of my time to make this post. I’m here to help pre-meds really understand just how much of a burden student loan debt actually is as a practicing physician.
Close to 50% of doctor’s work in the area of FP. The average salary in the area of FP is $132k. So I will be using these numbers from here on out.
Loan balance: $200,000
Interest rate: 6.8%
Loan term: 30 years

A word of caution…..$132k is going to seem like earning pennies when you read a real analysis of medical student debt.

40% of your $132k is going to go to taxes. This gives you $52,800 for the year.


Mortgage payment: this will vary from place to place. I’m going to use $2,000 per month. You will spend $24,000 per year on your mortgage.

You are now down to $28,800 left over for the year.

Now you have property taxes. I’m going to assume that you will need to pay around $6,000.

You are now down to $22,800 for the year.

Car payment: let’s put down $400 a month. Your wife or husband have a car? Now you are close to $800 a month.
Car insurance? $1,500-$2,000 per year.
[You are now down to $17,400
Now add on car insurance. You are now down to $15,900
You need to pay back your student loans. With the above calculations, you will be paying $1,303.85 a month.
You are now down to -$264.

YES FOLKS, YOU ARE NOW IN THE RED.

Do you have house repairs, children, car expenses, food, gas, health insurance?
Click to expand...

If 40% is going to taxes, I guess there would be a higher % say 60% which is $79,200 to spend. So I guess you did your calculation all wrong.
Stop scaring people.

Most people have a spouse/partner that brings in some income. Let's say net about 30,000 a year. Together that is about 100,000 after taxes. Stop complaining already...Life is not a platter of roses:rolleyes:
 
wisconsindoctor said:
A word of caution…..$132k is going to seem like earning pennies when you read a real analysis of medical student debt.

40% of your $132k is going to go to taxes. This gives you $52,800 for the year.
Click to expand...

so 60% of 132k is 52,800? I don't have my calculator with me but that seems little off....

Let's add in some deductions, taxes will be lowered due to the fact you have loans. And how about them refinancing options for student loans? Also, let's not forget about investments. And why are we paying for the wife's car and insurance and what nots when she could have her own job? I'm just saying. This analysis seems poorly carried out. But then again, i'm an engineer, not an accountant.
 
1) First of all you are left with 79200 after taxes not 52800.
2) 40% taxes are you freakin mad (maybe 32%). There are these little things called deductions: home owner, paying back student loans, and lots of other crap.
3) Property taxes at 6000, where do you live, The White House Lawn.
4) Good thing you are not a CPA.
 
I love your tax data there. There's no 40% tax bracket for people with a salary of 130k. Not only can you deduct your interest on these loans, but then you're going to be able to get tax credits for a ton of stuff. Like you mentioned, lets say this doctor owns his own business... Can he take down his taxable income even more? How about the 15k he's putting into a 401k that drops his taxable income. Since you mentioned kids... lets go there too... That's a good discount. How about owning a house? How about the other 100 deductions that people with families, businesses, loans, etc get to claim to get it down...


The Federal tax tables show that for a person making 98,000/year he will pay (21.8k if single and 17.5k if married).

What you also didn't take into consideration is that a lot of these family practices get HUGE bonuses from the hospital system that they are in. I know an Internal Med. guy that has a base salary of 180k/year. He gets ~160k/year in bonuses.

Here's the over 100k tax publication for a married couple...

Section B—Use if your filing status is Married filing jointly or Qualifying widow(er). Complete the row below that applies to you.

Taxable income.

At least $100,000 but not over $128,500 $ × 25% (.25) then subtract $ 7,152.50 $

Over $128,500 but not over $195,850 $ × 28% (.28) then subtract $ 11,007.50 $

Over $195,850 but not over $349,700 $ × 33% (.33) then subtract $ 20,800.00 $

Over $349,700 $ × 35% (.35) $ $ 27,794.00 $


What you do, is take your income up to 99,000 (which is 17k for a married couple) and tax anything over 100,000 according to these tables.

So if you make 400k/year after deductions..

first 100k is 17k worth of taxes
next 300k is at 35% tax - $27,794
 
LOL you completely screwed up your calculations and gave ridiculous numbers
 
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McLovinMD said:
Scary stuff, but taking away 40% of 132k leaves you with $79,200.
Click to expand...

McLovin!!! Great SN. I don't think I know anyone that actually liked that movie, but I couldn't stop laughing during the fake I.D. bit. :thumbup:
 
bodonid said:
McLovin!!! Great SN. I don't think I know anyone that actually liked that movie, but I couldn't stop laughing during the fake I.D. bit. :thumbup:
Click to expand...

Are you kidding? everyone I know and their grandmother loves that movie!

okay maybe 50% of the grandmothers
 
bodonid said:
McLovin!!! Great SN. I don't think I know anyone that actually liked that movie, but I couldn't stop laughing during the fake I.D. bit. :thumbup:
Click to expand...

are you serious? i havent met someone who DIDNT like that movie.

maybe it's time for new friends?
 
132K is rather lowballing your physicians salary, and 200K of debt translates into a rather expensive medicial school. However if you DO think you´re are going to make less than 150K as an attending, expecially if you´re going to that medical school, then at least from a financial prospective I recommend you join me and the other HPSPers in the military. 30K/year with no debt as a medical student (including ADT Pay and signing bonus, no debt includes fees and books as well as tuition) with personal health insurance, nearly 80K/year as a resident (if you do the military residency) with no malpracice and full benefits, and then you make nearly 6 figures as an attending for your 4 years of AD with no malpractice and full benefits.. Not necessarily a wise financial decision, but it´s a spectacular financial decision if you believe this analysis.

Also the tax information you gave was friggin crazy. I hope you`re not one of the ones who thinks he could be a brilliant investment banker.
 
I don't think that the FP avg. salary is that low. At least in the NYTimes article on dermatology that came out about a week ago they have a chart listing the average FP salary as $178,859, and the source is Medical Economics. So that's about another $40k that you need to correct for.
 
Perrotfish said:
132K is rather lowballing your physicians salary, and 200K of debt translates into a rather expensive medicial school. However if you DO think you´re are going to make less than 150K as an attending, expecially if you´re going to that medical school, then at least from a financial prospective I recommend you join me and the other HPSPers in the military. 30K/year with no debt as a medical student (including ADT Pay and signing bonus, no debt includes fees and books as well as tuition) with personal health insurance, nearly 80K/year as a resident (if you do the military residency) with no malpracice and full benefits, and then you make nearly 6 figures as an attending for your 4 years of AD with no malpractice and full benefits.. Not necessarily a wise financial decision, but it´s a spectacular financial decision if you believe this analysis.
Click to expand...


oh military, I would so sign up if you would actually let me CHOOSE MY OWN SPECIALITY. After I read the fine print I ran for the door...
 
Loan balance: $200,000
Interest rate: 6.8%
Loan term: 30 years

Now that you have $27,264 left over, which will be closer to $15,000-18,000 once you get all other costs added in for each year, you won't get your medical student loan debt paid off in ten years.
After 30 years of payments and add on your interests for the 30 years, you will be paying close to $469,386.44 to get the debt paid off.
 
Plus, it seems like people aren't sure how the tax brackets work. Tax brackets are tiered, so if you move from one bracket to a higher bracket, the higher tax rate applies only to the amount above the cutoff point of the lower bracket. Therefore, for a single person making 132k, that person is in 4 different brackets, and pays the corresponding tax rate at each bracket.
 
Yeah, the very first calculation is wrong. But point made. If you're an FP you might not be as rich as your established finance friends. So what do you suggest people do? Leave the practice of medicine? What happens when you get old and are not able to practice OP? Who is going to take care of you and write your prescriptions?
 
Hopefully this "doctor" in question wouldn't pay his minimum amounts on the loans. Put 5k/month on those loans and they are paid off in 4-5 years. My brother and his wife are making about 200k/year and they have a morgage that is 5,800. They have 2 kids, a big boat, jet skis, etc and still paid off the 100k of loans without a problem.

:)
 
mtam323 said:
Plus, it seems like people aren't sure how the tax brackets work. Tax brackets are tiered, so if you move from one bracket to a higher bracket, the higher tax rate applies only to the amount above the cutoff point of the lower bracket. Therefore, for a single person making 132k, that person is in 4 different brackets, and pays the corresponding tax rate at each bracket.
Click to expand...

I'll be the first to admit that I don't know how tax brackets work. I've never studied it before.
 
I'm really not that worried. Say I do go into family practice and my goal is to pay off my $250,000 student loan debt in six years, which after 3 years of deferment through residency has accumulated ( see deferment calculator at http://www.fincalc.com/AID_03.asp?id=13972 ) to around $290,000 of debt.

My starting salary as a family practice physician: $110,000
My total take home pay minus taxes (married, jointly, 1 kid and not taking into account additional deductions): $95,000
My monthly income: $95,000 / 12 is approximately 8,000 monthly (assuming my salary does not increase).
My monthly expenses if I continue to live "meager" (which is lavish by my current standards): $2,500
Remaining income towards student loans: $5,500

From here it is simple math to obtain how long it will take me to pay off $290,000 dollars of debt at a 6.8% interest rate for stafford loans = 5.3 years.

Now, this is worst case scenerio with me. Chances are I'll get some scholarships, probably move back to Montana and practice in an underserved area, get raises, and deduct from my taxes more than I listed. With my math (correct me if I'm wrong), I will probably be ok with paying off my loans in less than six years.
 
fahimaz7 said:
Hopefully this "doctor" in question wouldn't pay his minimum amounts on the loans. Put 5k/month on those loans and they are paid off in 4-5 years. My brother and his wife are making about 200k/year and they have a morgage that is 5,800. They have 2 kids, a big boat, jet skis, etc and still paid off the 100k of loans without a problem.

:)
Click to expand...

[FONT=ARIAL, HELVETICA]Loan Balance: .[FONT=ARIAL, HELVETICA]$200,000.00 .[FONT=ARIAL, HELVETICA]..
[FONT=ARIAL, HELVETICA]Loan Interest Rate: .[FONT=ARIAL, HELVETICA]6.80%.
[FONT=ARIAL, HELVETICA]Loan Fees: .[FONT=ARIAL, HELVETICA]0.00%.
[FONT=ARIAL, HELVETICA]Loan Term: .[FONT=ARIAL, HELVETICA]5 years.
[FONT=ARIAL, HELVETICA]Minimum Payment: .[FONT=ARIAL, HELVETICA]$0.00 .
[FONT=ARIAL, HELVETICA]Monthly Loan Payment:.[FONT=ARIAL, HELVETICA]$3,941.39 .
[FONT=ARIAL, HELVETICA]Number of Payments: .[FONT=ARIAL, HELVETICA]60.
[FONT=ARIAL, HELVETICA]Cumulative Payments: .[FONT=ARIAL, HELVETICA]$236,483.75 .
[FONT=ARIAL, HELVETICA]Total Interest Paid: .[FONT=ARIAL, HELVETICA]$36,483.75.

Grrrr....I hate the computer I'm using.
 
wisconsindoctor said:
[FONT=ARIAL, HELVETICA]Loan Balance: .[FONT=ARIAL, HELVETICA]$200,000.00 .[FONT=ARIAL, HELVETICA]..
[FONT=ARIAL, HELVETICA]Loan Interest Rate: .[FONT=ARIAL, HELVETICA]6.80%.
[FONT=ARIAL, HELVETICA]Loan Fees: .[FONT=ARIAL, HELVETICA]0.00%.
[FONT=ARIAL, HELVETICA]Loan Term: .[FONT=ARIAL, HELVETICA]5 years.
[FONT=ARIAL, HELVETICA]Minimum Payment: .[FONT=ARIAL, HELVETICA]$0.00 .
[FONT=ARIAL, HELVETICA]Monthly Loan Payment:.[FONT=ARIAL, HELVETICA]$3,941.39 .
[FONT=ARIAL, HELVETICA]Number of Payments: .[FONT=ARIAL, HELVETICA]60.
[FONT=ARIAL, HELVETICA]Cumulative Payments: .[FONT=ARIAL, HELVETICA]$236,483.75 .
[FONT=ARIAL, HELVETICA]Total Interest Paid: .[FONT=ARIAL, HELVETICA]$36,483.75.

Grrrr....I hate the computer I'm using.
Click to expand...

Well, your html font thing makes quotes difficult.. But, you're saying that with 3.9k/month on loans that it's paid off in 60 months.

No worries there.

How about if he takes his 20k signing bonus and puts that on the loans too.. then what? Or in my case, lets say his wife is making 60k/year. That would help too.

:)
 
wisconsindoctor said:
Loan balance: $200,000
Interest rate: 6.8%
Loan term: 30 years

Now that you have $27,264 left over, which will be closer to $15,000-18,000 once you get all other costs added in for each year, you won't get your medical student loan debt paid off in ten years.
After 30 years of payments and add on your interests for the 30 years, you will be paying close to $469,386.44 to get the debt paid off.
Click to expand...

That's pretty damn lame. This is where I wish that the government completely subsidized the interest for college and professional school student loans for 10 year loans or less. They bailed out JP Morgan for Bear Stearns and want to bail out the people in the housing crunch. Why can't they help out the working professionals and intellectuals of the next generation? That'd be a good investment, wouldn't it? It'd help the economy indirectly, wouldn't it?
 
Concubine said:
I'm really not that worried. Say I do go into family practice and my goal is to pay off my $250,000 student loan debt in six years, which after 3 years of deferment through residency has accumulated ( see deferment calculator at http://www.fincalc.com/AID_03.asp?id=13972 ) to around $290,000 of debt.

My starting salary as a family practice physician: $110,000
My total take home pay minus taxes (married, jointly, 1 kid and not taking into account additional deductions): $95,000
My monthly income: $95,000 / 12 is approximately 8,000 monthly (assuming my salary does not increase).
My monthly expenses if I continue to live "meager" (which is lavish by my current standards): $2,500
Remaining income towards student loans: $5,500

From here it is simple math to obtain how long it will take me to pay off $290,000 dollars of debt at a 6.8% interest rate for stafford loans = 5.3 years.

Now, this is worst case scenerio with me. Chances are I'll get some scholarships, probably move back to Montana and practice in an underserved area, get raises, and deduct from my taxes more than I listed. With my math (correct me if I'm wrong), I will probably be ok with paying off my loans in less than six years.
Click to expand...

I have a nearly identical analysis in the thread I posted earlier today:
http://forums.studentdoctor.net/showthread.php?t=508637

You might find some helpful critiques in there, if you're interested. :)
 
In the back of NEJM it says that the lowest paid physician in a prison is $250k! So just work there a few years until you get your debt under control lol

There are also many, many opportunities that list "educational loan payback" as one of the benefits
 
Are people taking inflation into account? Physician salaries might change by the time we're done.
 
Little Etoile said:
I have a nearly identical analysis in the thread I posted earlier today:
http://forums.studentdoctor.net/showthread.php?t=508637

You might find some helpful critiques in there, if you're interested. :)
Click to expand...

I even overstated some things:

Chances are that I am $250,000 in debt will be very low. That was out-of-state budget from the school I've been accepted to for all four years. I'll be instate after the first, so knock off about $30,000 from that number. Also, I believe with the new laws on deferment during residency (correct me if I'm wrong: http://www.ama-assn.org/ama/pub/category/18025.html and http://forums.studentdoctor.net/showthread.php?t=455867&highlight=deferment ), we will have to make payments on the student loans and will not qualify for complete deferment. This will at least decrease the interest accruing on our loans.
 
Lecter said:
Are people taking inflation into account? Physician salaries might change by the time we're done.
Click to expand...

No. I don't know how to adjust calculations to take inflation into account.
 
It took you 30 minutes? Here, I'll take 5 and use even more ridiculous numbers:

You have $130k. Let's chop it in half for ****s and giggles. You now have $65k. Let's throw $20k at student loans a year. That puts you at $45k. Well, look at that.

After taxes, student loans, and a generous donation to the IRS: you still make more than the median family before taxes! It's going to be rough making, as an individual and after taxes and debt, more than most households bring in. I think we'll survive though.

No medicine won't make you filthy rich. You're not going to be eating Ramen either. You'll live on a decent income influenced largely by your personal career goals...
 
wisconsindoctor said:
I'll be the first to admit that I don't know how tax brackets work. I've never studied it before.
Click to expand...

wisconsindoctor said:
No. I don't know how to adjust calculations to take inflation into account.
Click to expand...

You may want to rename your thread!:thumbup:

The UnTrue Student Debt Analysis-You may not like what you are about to learn becuase I really don't know what I am talking about.
 
Lecter said:
Are people taking inflation into account? Physician salaries might change by the time we're done.
Click to expand...

Meh, inflation causes the price of everything to rise, so it won't make that much of a difference in the ability to pay. However, just for estimation purposes assume that inflation will be approximately 3% on average per year. However, performance/seniority based raises, i.e. not cost-of-living adjustments, are a fair consideration.

I'm not too worried about it anyway, I expect to be "only" about $100k in debt since I have some savings and I'm going to my state school. If I'm lucky I'll be able to make a dent in it during my residency.

On a side note, does anyone know what it would take for them to lower the interest rates on federal loans, now that the Fed has reduced rates so much?
 
oh military, I would so sign up if you would actually let me CHOOSE MY OWN SPECIALITY. After I read the fine print I ran for the door...
Click to expand...

To be clear, I think the only reason to do the military are patriotic, and the scholarship has many serious drawbacks. However, on the residency thing.

1) They can make it more difficult for you to get the residency of your choice

2) They can keep you from getting a residency at all (you do an internship and then serve out your enitre obligation)

3) They CAN´T force you into a residency you don´t want. If you don´t match into the residency of your choice, you do an internship and then do your residency when you´re done with your obligatoin. No one gets a letter telling them "You´re ordered to be an OBGYN"
 
xanthomondo said:
In the back of NEJM it says that the lowest paid physician in a prison is $250k! So just work there a few years until you get your debt under control lol

There are also many, many opportunities that list "educational loan payback" as one of the benefits
Click to expand...

This is wrong. My dad is a prison warden, and he just hired an MD. At the time he hired him, his salary was 110K. Shortly after he was hired, the state gave prison docs a raise. I'm not sure what he makes now, but I can assure you that it's no more than 140K, and all prison docs in the state make roughly the same. (These are state prisons, and this doesn't include private or federal prisons.) Despite the "low" salary, prison docs don't have it all that bad. The state will often agree to pay off student loans on a year-for-year basis, (similar to military with a shorter minimum commitment.) Also, the doctor pays no malpractice insurance, or any other costs associated with practice. And he works 8-4, 5 days a week.
 
No economist, i just don't think you should use current physician salaries to calculate paying off debt 10 years from now. But whatever, we're all gonna owe a sh1ttonne of money either way.
 
6.8% is a bit high most loan consolidations are at or below the rate of inflation (4%).


Myth: you will be poor if you go into medicine
Fact: you will be filthy rich :thumbup:
 
jpro said:
6.8% is a bit high most loan consolidations are at or below the rate of inflation (4%).


Myth: you will be poor if you go into medicine
Fact: you will be filthy rich :thumbup:
Click to expand...

Wrong! You won't be filthy rich. Filthy rich is earning millions of dollars a year...or over a life-time. Most doctors are not filthy rich.

A doctor might make a great income, but when you compare a person making a very similar salary, the life-time income IS GREATER FOR THE OTHER PERSON.
 
wisconsindoctor said:
Wrong! You won't be filthy rich. Filthy rich is earning millions of dollars a year...or over a life-time. Most doctors are not filthy rich.

A doctor might make a great income, but when you compare a person making a very similar salary, the life-time income IS GREATER FOR THE OTHER PERSON.
Click to expand...

Who cares?
 
wisconsindoctor said:
Wrong! You won't be filthy rich. Filthy rich is earning millions of dollars a year...or over a life-time. Most doctors are not filthy rich.

A doctor might make a great income, but when you compare a person making a very similar salary, the life-time income IS GREATER FOR THE OTHER PERSON.
Click to expand...

I was using sarcasm.
 
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