What does $60k more in student loans REALLY mean?

[sovereign0]

Right now, I'm weighing my two acceptances.

School #1 is a well-established and well-respected school. Tuition is $38k a year.

School #2 is relatively new, but INSANELY well-funded. Tuition is $30k a year, and they offered me a $7k/year scholarship, so total tuition will run me $23k a year.

So, school #1 (my top choice) is $15k per year cheaper. My degree will cost me $60k more in the end. All my my tuition is going to be paid for by unsubsidized Stafford loans, current interest rate being 6.21%.

I'm sitting here looking at my debt and trying to get an understanding of what this actually means. I played with an amortization calculator, and going to my top choice means taking out $160k in loans, which translates to $215k total pay-off, and paid over 10 years that's $1,800 a month.

Going to school 2 means $100k in debt, a total of $135k paid, and a monthly payment of $1,100/mo.

Assuming a $60k/year resident salary, that means literally half my take-home pay would go to loan repayment every month... Not even considering if I end up matching somewhere with a high COL...

Can someone please stroke my hair and tell me it's going to be ok??? How can anyone afford to do this? Especially those who go to more expensive schools?!

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[nomoreequationsplease]

Not to upset you but you didnt factor in costs of living. Are you planning on staying at home and commuting? Otherwise you have to tack on those costs as well.

 

[sovereign0]

Not to upset you but you didnt factor in costs of living. Are you planning on staying at home and commuting? Otherwise you have to tack on those costs as well.

I've factored in cost of living and it will basically be paid for without loans at either location... Which just makes me ask again, how the hell can anyone afford to do this if they're taking out loans to cover the whole cost of education?

I can definitely see why medicine is such an elitist profession. I have no idea how people can survive going through undergrad and medical school entirely on loans.

Especially with the prospect of decreasing salaries for physicians in the future. This is the only thing I want to do, but goddamn is it the scariest thing I've ever done when you look at the finances.

 

[nomoreequationsplease]

I've factored in cost of living and it will basically be paid for without loans at either location... Which just makes me ask again, how the hell can anyone afford to do this if they're taking out loans to cover the whole cost of education?

I can definitely see why medicine is such an elitist profession. I have no idea how people can survive going through undergrad and medical school entirely on loans.

Especially with the prospect of decreasing salaries for physicians in the future. This is the only thing I want to do, but goddamn is it the scariest thing I've ever done when you look at the finances.

What I plan on doing is paying off what I can during residency and then paying most of it off my first few years post residency. I'm pretty sure in total I'll end up paying 300,000 to 350,000 between undergrad and med school...

 

[Okazaki Frag Grenade]

Assuming a $60k/year resident salary, that means literally half my take-home pay would go to loan repayment every month... Not even considering if I end up matching somewhere with a high COL...

You can always do IBR plans in residency, where you pay a set percentage of your salary. So you would not necessarily have to pay half your salary to loans every month.

 

[Mansamusa]

As someone who stresses a lot about this debt, I imagine it at the worst case scenario like a mortgage and put it into perspective.

My principle will be $285-300K. To pay my post-residency balance in 25yrs with no loan forgiveness, it will be ~$2.2-2.3K. My parent's mortgage is $2K/month and they make less than the average family medicine doctor starting salary and we live in NY (high state taxes and property taxes). They regret taking on such a large mortgage because money is really tight and we can't afford stuff like vacations or emergencies, but they can pay it and my dad will retire by 57 at the latest.

Doctors will almost certainly always have a way to make $200K, which is more than double my parent's income. If they can manage $2K per month, then I will at least get to maintain the standard of living I have now.

That is the worst case scenario and I hope to do the "live like a resident" thing and pay it off in less than 25 yrs.

You will have less than half of my debt, so you can absolutely afford it

 

[IlDestriero]

Most people don't pay much or any during residency. You can defer the payments, but it will still accrue interest. Then, if you're smart, you maintain an augmented but still modest lifestyle as an attending for the first few years and aggressively pay it down. Your debt load will be comparatively small either way, don't sweat it too much.


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Il Destriero

 

[ridethecliche]

http://forums.studentdoctor.net/thr...y-decide-based-on-cost.1196941/#post-17693699

I worked out an example in the above link of
-what the full loans would be after 4 years
-what a payback plan would be for a 20 year period
-percent of income that payback would be

A very rough rule of thumb is $100,000 or less shouldnt be the deciding factor

Are you saying that a total of 100k shouldn't be a deciding factor or a difference between 100k shouldn't be a factor? I'd disagree with you if it's the latter!

It depends on how much you're starting off with to begin with re: undergrad.

The difference between a total of 50k vs 150k and 250k vs 350k is pretty substantial!

I think my decision came down to two schools where the difference in COA was about 100-120k and I went to the cheaper school. One of the things you're not factoring in is that we're starting late in terms of saving money/retirement. If the 100k leads to a 9k yearly payment and the total with interest on a 100k loan is 225k, then that's a lot of money that you could have made work for you!

(Sorry for the ninja edit)

 

[lampshade4u]

Are you saying that a total of 100k shouldn't be a deciding factor or a difference between 100k shouldn't be a factor? I'd disagree with you if it's the latter!

I agree... 100k is freakin huge difference

 

[ridethecliche]

I agree... 100k is freakin huge difference

Especially if you factor in retirement etc. and the fact that you're at a disadvantage starting out. Now factor in goals and cost of living in the area you want to end up in. Higher cost of living means you're stretched even more thin.

 

[tantacles]

Right now, I'm weighing my two acceptances.

School #1 is a well-established and well-respected school. Tuition is $38k a year.

School #2 is relatively new, but INSANELY well-funded. Tuition is $30k a year, and they offered me a $7k/year scholarship, so total tuition will run me $23k a year.

So, school #1 (my top choice) is $15k per year cheaper. My degree will cost me $60k more in the end. All my my tuition is going to be paid for by unsubsidized Stafford loans, current interest rate being 6.21%.

I'm sitting here looking at my debt and trying to get an understanding of what this actually means. I played with an amortization calculator, and going to my top choice means taking out $160k in loans, which translates to $215k total pay-off, and paid over 10 years that's $1,800 a month.

Going to school 2 means $100k in debt, a total of $135k paid, and a monthly payment of $1,100/mo.

Assuming a $60k/year resident salary, that means literally half my take-home pay would go to loan repayment every month... Not even considering if I end up matching somewhere with a high COL...

Can someone please stroke my hair and tell me it's going to be ok??? How can anyone afford to do this? Especially those who go to more expensive schools?!

I would suggest this tool:

https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action

Keep in mind that with IBR or REPAYE, the max you'll be paying is 15% of your discretionary income (or, if you're married, 15% of the sum of your and your spouse's discretionary income).

 

[ridethecliche]

First to be clear, my statement was a very rough estimate $100,000 of total in COA should not be the deciding factor in choosing schools

Again, I'm saying if both are in the ballpark of 100k COA (which is pretty low) then do whatever, but a 100k difference is pretty substantial. Even with accelerated payments. 225k of total repayment for a 100k is a lot of money even if it's *just* one year of salary. If every additional 100k in cost is 225 after repayment... then that's a ton of money. Like, how much are you planning on spending a year after retirement, especially if your house and car are paid off?

 

[DrBowtie]

Right now, I'm weighing my two acceptances.

School #1 is a well-established and well-respected school. Tuition is $38k a year.

School #2 is relatively new, but INSANELY well-funded. Tuition is $30k a year, and they offered me a $7k/year scholarship, so total tuition will run me $23k a year.

So, school #1 (my top choice) is $15k per year cheaper. My degree will cost me $60k more in the end. All my my tuition is going to be paid for by unsubsidized Stafford loans, current interest rate being 6.21%.

I'm sitting here looking at my debt and trying to get an understanding of what this actually means. I played with an amortization calculator, and going to my top choice means taking out $160k in loans, which translates to $215k total pay-off, and paid over 10 years that's $1,800 a month.

Going to school 2 means $100k in debt, a total of $135k paid, and a monthly payment of $1,100/mo.

Assuming a $60k/year resident salary, that means literally half my take-home pay would go to loan repayment every month... Not even considering if I end up matching somewhere with a high COL...

Can someone please stroke my hair and tell me it's going to be ok??? How can anyone afford to do this? Especially those who go to more expensive schools?!

I'd assume you'll make no tangible progress on paying off your loans during residency and calculate the end amount after a 3, 4, or 5 year residency. The difference will continue to rise. IBR during residency is just going to offset interest accrual.

 

[darkjedi]

Just name the schools that you're trying to decide between. We really can't help you with just vague information. Are some schools work 60k more, possibly, depending on what you're looking to get out of med school.

IBR maxes out your loan repayment at 10% of your salary per year. Because I made no money in my fourth year, my loan provider set my repayment to 0$ for the next year. I would pay at most ~350$/mo in residency for loans.

 

[IlDestriero]

Even if the schools are not significantly different based on research and networking/prestige, where you live for 4 years should weigh into the equation. 4 years is a long time, don't fool yourself. It was the deciding factor in what would be my #1 choice.


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Il Destriero

 

[Perrotfish]

First to be clear, my statement was a very rough estimate $100,000 of total in COA should not be the deciding factor in choosing schools
\.

I would disagree. If you paid back 100K, I would agree that's probably not a good deciding factor but remember that you need to assume that for every extra $1 you borrow

1) It accrues 1.5 x that amount interest before you can begin paying it back

2) You pay back 1.5 x as much as you owe at the start of the repayment plan

3) You pay back the loan with after tax dollars, so you need to earn 1.5 x as much as you need to pay back.

So an extra 100K in the COA is an extra 300K you need pay back. So multiple working years, to do nothing other than pay for going to one school vs another school.

There's actually data that its even worse that that: the more debt people have, the more risk averse they are, and the LESS they tend to earn over a lifetime, because they tend to stick with crappy jobs rather than risk seeking out new opportunities. That extra 100K in COA could actually cost you 500K or more in pretax dollars.

 

[ridethecliche]

Even if the schools are not significantly different based on research and networking/prestige, where you live for 4 years should weigh into the equation. 4 years is a long time, don't fool yourself. It was the deciding factor in what would be my #1 choice.


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Il Destriero

That's the weird thing, it was for me as well, but I went the opposite way you did. I was picking between two schools: Jeff and UMass. I loved Jeff more and wanted to be in philly since that's where I'm from... But Jeff was legit 25-30k a year more.

I thought I'd hate worcester, but it's okay. I get a lot more for my loan $$$$$$ here. It's no philly, but there's plenty for me to do here in the free time that I have. Would I be happier at Jeff? Maybe, but I've come to accept that you make the most of what you have. That 120ish K difference over 4 years would come out to be like 250k after loans. Even if I make that much a year, that's a metric crap ton of money. Not going for the sunk cost fallacy, but I think that makes a pretty substantial difference especially since I'm starting off a bit older anyway.

I'm sure I'd find stuff I disliked about every city/school, but overall you make the most of where you are.

On the flip side, I would have absolutely paid more to not go to Albany or NYMC. I guess it comes down to the options you have and what all you want to make of it.

I did the same for undergrad as well. I ended up going to the cheapest school. It was weird at first, but I came around and loved it and did well there. People are pretty resilient. If the decision is even close, i.e. if you think you can see yourself at a cheaper school, I think it merits thinking really hard about.

TLDR: In the end it comes down to whether you think you'll be more successful at the more expensive school because you're happier there. If you're okay with the fact that you might end up losing out on a years salary because of that over the course of your career, then that's worth it for you.