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Why you should borrow the maximum for medical school

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Magyarzorag

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These topics may be controversial. But I'll share my thoughts and why you should borrow the maximum for medical school (only do federal loans. Do private loans if interest is 2% or lower) and repay through IBR or in residency/as an attending.

We all know medical school is expensive, and 90% of us who don't have trust funds will have to borrow some money unless we get scholarships or go through the military. It may get to a point where $50k and $500k are the same amount of money. They only differ by one zero and is money we can't ever fathom. While this money seems like a lot of money to us right now, as attending they won't seem like nearly as much. For example, $10 may seem like a lot of money to a homeless person. He/she can eat for maybe 2-3 days with that much money. But for other people, they may not even realize if $10 disappears from their wallet, under their bed, or their bank account.

Likewise, as medical students, the difference between living in a blighted gentrified inner city apartment versus one in a safe middle class area is huge. So is the difference between driving a 20 year old Buick and getting that new or late model Toyota Corolla or Mazda 3. And the chance to backpack Europe, go on a Caribbean cruise, hike Machu Picchu, Trek across South East Asia, explore Australia, or visit Hawaii when you are young is something that money can't ever buy in your older years.

Given, these actions do have some consequences. You may have to repay more loans and have less disposable income as an attending. But those sacrifices are much smaller because of your income. There's a much smaller difference between a $250k home and $750k home (maybe 3bd/2ba vs 5bd/4 ba), than between a $300/month apartment in the inner city and a $600-$700/month apartment in a safe area. There's a smaller difference between a $95k Mercedes S-class and a $60k Mercedes E-Class than between a $2k 2001 Chevy Cavalier and a $10k 2019 Mitsubishi Mirage (cheapest new car). The memories you get spending $4k backpacking/sleeping in hostels for 6 weeks around Thailand, Malaysia, Cambodia, Vietnam, Singapore, and Indonesia is an experience you can never have once you're married with children. The damage you do to your body eating unhealthy to save money can cause thousands of medical bills farther down the line.

Given that the federal government is keeping interest rates at historic lows, I would borrow as much money as you WANT, not what you need. Furthermore, with IBR, I calculated after 20 years of payments, the effective interest rate is similar to that of a mortgage. So go out and go on your dream vacation, buy that expensive engagement ring for your girlfriend so she doesn't ditch you for an investment banker, live in that luxury apartment with marble countertops and stainless steel appliances. YOU ONLY LIVE ONCE.
 
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wanderingorion

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I think you don't adequately take into account the amount of expenses you accumulate as you get older. Yes your income increases as an attending, but you also have a mortgage, insurance, medical bills, car notes, daycare costs, and a hundred other things. I don't think encouraging people to make shortsighted financial decisions because YOLO is helpful. Do whatever you want with your money and debt burden, but don't give a blanket recommendation to others
 
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zoopers

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I think YOLO is the incorrect explanation for what you were trying to get across, but it is worth investing in yourself during med school.

Get the car that won't break down and require repeated maintenance throughout medical school. Get the house where you feel comfortable, safe, and can sleep. Get the 12 month subscription of UWorld instead of the 3 month. Get your girl an actual present instead of a homemade coupon book and a trip to Arby's for her birthday.

Regardless, everybody should take out all the loans that they can at the beginning of the loan period, because you can return the cash you don't need interest-fee within (I think) 120 days.
 
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ace_inhibitor111

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I think you don't adequately take into account the amount of expenses you accumulate as you get older. Yes your income increases as an attending, but you also have a mortgage, insurance, medical bills, car notes, daycare costs, and a hundred other things. I don't think encouraging people to make shortsighted financial decisions because YOLO is helpful. Do whatever you want with your money and debt burden, but don't give a blanket recommendation to others

I guess it’s all about perspective. Having a nice car, house, and kids are supposedly things that bring you happiness unlike what we are paying for in medical school. Taking out extra loans to travel or eat out with friends is worth the extra debt burden IMO at least for me.
 
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Tenk

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No. You borrow the minimum amount necessary.

Debt living isn’t living, it’s being a slave to your job and creditors. You don’t understand it until you start paying it off.

Do whatever you want but the day I became debt free my life became instantly more amazing and has only continued to improve. All my colleagues drowning in debt seem miserable and envious of my situation.
 
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libertyyne

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Private loans are not eligible for IBR or PSLF , may have variable interest rates that may go up.
2. Schools will only allow you to borrow up to the COA so it’s not like you can borrow more.
3. debt is debt , especially if it is non dischargeable debt.
 

zero0

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I actually agree with you. I say live it up while you're young enough to actually enjoy it. If these uncertain times have taught us anything, it's that the future you so meticulously planned for can fall apart in an instant.
 
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Accumulating interest, maintaining domestic life (preparing to have a family, purchasing a home, etc), financial freedom, and retirement would all like to have a word with you. By all means, improve yourself. But be cautious. Of course your actions don't feel impactful now, you're not paying for them yet.

Also, if your girlfriend is ditching you for an investment banker over an expensive ring, she is doing you a very large favor.
 
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Magyarzorag

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Also, I think of federal loans as having several protections:

In case doctors incomes significantly go down in the future, you wouldn't have spent so much on medical school for nothing (since your payments will be lower)

In case you fail out of medical school or find its not your calling, you won't have to pay the whole debt

Most importantly: In the chance that loans are forgiven in the future by politicians (or at least the taxable part of forgiven amounts are eliminated). Joe biden also expressed interest in lowering payments to 5% of AGi instead of 10%. I feel like some this can definitely happen in the next 20-25 years, especially given how much student debt is right now.
 

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No. You borrow the minimum amount necessary.

Debt living isn’t living, it’s being a slave to your job and creditors. You don’t understand it until you start paying it off.

Do whatever you want but the day I became debt free my life became instantly more amazing and has only continued to improve. All my colleagues drowning in debt seem miserable and envious of my situation.

Same reason why staying an hour late at work simply to help a colleague out just feels better than staying an extra hour at work because you have to. In the former you choose to, the latter you have to. To the outsider they look the same when they are not.
 
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Also, I think of federal loans as having several protections:

In case doctors incomes significantly go down in the future, you wouldn't have spent so much on medical school for nothing (since your payments will be lower)

In case you fail out of medical school or find its not your calling, you won't have to pay the whole debt

Most importantly: In the chance that loans are forgiven in the future by politicians (or at least the taxable part of forgiven amounts are eliminated). Joe biden also expressed interest in lowering payments to 5% of AGi instead of 10%. I feel like some this can definitely happen in the next 20-25 years, especially given how much student debt is right now.

Protections are fickle things. As are political promises. Relying on these things are a recipe for disappointment.
 
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DV-T

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I take out the minimum federal student loans to cover my tuition and max out on the 0% interest loans my school gives as part of my financial package. Because I live below my means (my car is a 17 year old Toyota), I take whatever is left and put it into the market. Thus far my ROI has been more than the 6-7% interest rate on the federal loans. When the time comes, the plan is to cash out and use the capital gains for residency-related expenses without having to take out more loans. :xf:
 
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Magyarzorag

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I take out the minimum federal student loans to cover my tuition and max out on the 0% interest loans my school gives as part of my financial package. Because I live below my means (my car is a 17 year old Toyota), I take whatever is left and put it into the market. Thus far my ROI has been more than the 6-7% interest rate on the federal loans. When the time comes, the plan is to cash out and use the capital gains for residency-related expenses without having to take out more loans. :xf:

I’m too afraid to invest that much money, so I just keep it in a 1 percent savings account. However, maybe if the market crashes in the near future, I’ll start investing. Currently, only 10 percent of my cash is invested cause I’m scared. And how do you get 0% loans?
 
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I think the truth lies somewhere in the middle. I calculated everything I needed for the school year and added a little bit more so that I wouldn't have to penny pinch.

My rational is that an extra $5k or so per year to spend on experiences (travel, nice dates, concerts) is ultimately worth it in the long run.
 
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InvestingDoc

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Personal finance is personal. I agree that skimping on some things will cost you in the long run.

My med school roommate and I were cheap as hell. Spent almost no money, never travelled, drank cheap beer in med school. I look back and say now for what?

She is dead at 32 from colon cancer with no family history, no risk factors. The last 2 years of her life on chemo while she was finishing residency was spent talking about how she wants to travel and enjoy things in life.

Now, that chance has passed her by. I sometimes think...what if that was me? I ate **** food, lived in **** apartments, never traveled while in med school and for what? So that I came out of residency with 30k ish less in debt that could have bought some bitchin vacations and hostels while traveling....

As an attending I can pay that **** off in a month or two but I lived like **** and so did she for 4 years with her now having nothing to show for it and no memories of travel.

Life is short and although I don't like to think in absolutes, you do bring up a good point that not every dollar spent or saved is equal emotionally.

Spend on the things that give you a huge emotional return.
 
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mehc012

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Things that were important to me in med school:
- Not having to budget for groceries. This doesn't mean "go crazy", but it meant that after a long week during MS3 or 4, I could just go to the grocery store, get mid-brand everything, a few treats ("oohh, those strawberries look really good!") and a bottle of wine without couponing or spending extra time comparison shopping for every dollar saved.
- Keep my car running. This usually meant "fix it myself" during M1-M2, but during M3, I damn straight went ahead and paid someone to spend the time on it for me.
- Live somewhere nice, but with roommates.
- Buy whatever length UW, etc. subscriptions I needed without stressing overly much.
- Budget travel to maintain my global health and Spanish language exposure.
- SAVE FOR RESIDENCY APPS AND MOVING TO RESIDENCY

Those don't seem like egregious goals, but they were enough that I took out the max. Could I have done cheaper? Yeah probably, but having lived on shoestring budgets and seeing how small the difference would make for me down the line (my COL was maybe 1/4 of the total COA as is), I didn't bother. The extra debt was worth the decrease in mental energy and stress.
 
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Neopolymath

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Personal finance is personal. I agree that skimping on some things will cost you in the long run.

My med school roommate and I were cheap as hell. Spent almost no money, never travelled, drank cheap beer in med school. I look back and say now for what?

She is dead at 32 from colon cancer with no family history, no risk factors. The last 2 years of her life on chemo while she was finishing residency was spent talking about how she wants to travel and enjoy things in life.

Now, that chance has passed her by. I sometimes think...what if that was me? I ate **** food, lived in **** apartments, never traveled while in med school and for what? So that I came out of residency with 30k ish less in debt that could have bought some bitchin vacations and hostels while traveling....

As an attending I can pay that **** off in a month or two but I lived like **** and so did she for 4 years with her now having nothing to show for it and no memories of travel.

Life is short and although I don't like to think in absolutes, you do bring up a good point that not every dollar spent or saved is equal emotionally.

Spend on the things that give you a huge emotional return.
This is my biggest issue with the maniacal FIRE over literally everything frenzy in medicine now where people who make 400k are driving 7k cars and living in 120k houses in an awful part of town so they can turn their nose up at people enjoying the fruits of their hard work during the only guaranteed time they have: now. It's like these people never saw anything bad happen during their training...
 
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Espressso

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This is my biggest issue with the maniacal FIRE over literally everything frenzy in medicine now where people who make 400k are driving 7k cars and living in 120k houses in an awful part of town so they can turn their nose up at people enjoying the fruits of their hard work during the only guaranteed time they have: now. It's like these people never saw anything bad happen during their training...

Spot on. As others have said there is a happy medium that is different for everyone. I think anyone saying blanket statements like "take out max loans YOLO" is silly IMO but for some, that might be the move. My first two years I took out minimal loans and tried to pinch pennys and it sucked. Last two years I've taken out extra and built that into my yearly budget and so far, so good. It's different for everyone. But only focusing on the future definitely makes you lose out on the present, that's for sure.
 
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Kuratz

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My philosophy is about being reasonable and doing things in moderation.

You can live decently and still be a good steward of your indebtedness. You can live in a decent apartment, go out on occasion, drive a reasonable car, take a few reasonable vacations and still not come anywhere near $500k. But it's about being reasonable. If you want to take multiple expensive vacations, lease a new car, live alone in a luxury apartment, go out frequently etc etc, you certainly can but you will pay the price on the back end. Whether that is worth it to you is personal and far be it from me to suggest otherwise. But to suggest there is negligible difference between $50k and $500k is pretty disingenuous or naive. I ended up with $100k in debt by attending state school, applying for a rural scholarship where you had to do an extra rural rotation, living with roommates, driving an old Honda, cooking most my meals, traveling domestically, saving up from working during undergrad and during part of med school. I didn't feel like anything had been taken from me by living like this. It wasn't a huge sacrifice. Most your peers fresh out of college are living like this too.

Take a salary of $250k. Post-tax is roughly $195k

Exhibit A: To pay off $500k @6% in 10 years you're looking at $80k per year... i.e. 41% of your take-home. And you presumably haven't started building retirement wealth or building equity in a home.

Exhibit B: To pay off $100k @ 6% in ten years you're looking at $16k per year... i.e. 8% of your take-home.

Seems to me that's a huge premium to pay to live the high life as a student. If someone end up making money over fist as a cardiac surgeon or whatever then yeah the impact isn't as great, but most people will not end up in that situation and far more likely to be practicing primary care. God forbid you enjoy general peds or academics. It's ok to make a calculated decision but to bury your head and assume the consequences are minimal because "Doctor's are rich" will bite you in the ass. I guarantee it.
 
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Osminog

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I make most of my significant, life-altering financial decisions on the basis of what random people on a medical school forum tell me is best. I especially pay attention to financial advice from users who offer thoughtful, compelling arguments, such as “YOLO.”
 
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RangerBob

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#1--be careful with investing loan money. I believe it's illegal. I think borrowing the money for a car technically is too, but if you got audited, you could much more easily defend spending your loan money for transportation than you could using it to invest.

As someone who borrowed the max and is now in repayment, when you get above $300k it really does impact your qualify of life. It's going to take a while to pay it off because we opted to live near family, which is in a high COL area. If we were closer to $200k, I'd be in a much more comfortable and lower-stress position.

I recommend not counting on IBR/PAYE/REPAYE forgiveness. With the huge tax bomb you really don't come out ahead financially all that much (though worsened inflation could fix that), and you have to deal with the stress of that debt hanging over your head for 20-25 years.

You do only live once (what happened to carpe diem? Sounds much better then YOLO...). But the habits you develop now will follow you for life. Be reasonable, not excessive. Don't be overly frugal, but don't be excessive either. Learning that balance is something that is even more critical for physicians, who are generally known for being poor money managers.
 
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Mass Effect

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These topics may be controversial. But I'll share my thoughts and why you should borrow the maximum for medical school (only do federal loans. Do private loans if interest is 2% or lower) and repay through IBR or in residency/as an attending.

We all know medical school is expensive, and 90% of us who don't have trust funds will have to borrow some money unless we get scholarships or go through the military. It may get to a point where $50k and $500k are the same amount of money. They only differ by one zero and is money we can't ever fathom. While this money seems like a lot of money to us right now, as attending they won't seem like nearly as much. For example, $10 may seem like a lot of money to a homeless person. He/she can eat for maybe 2-3 days with that much money. But for other people, they may not even realize if $10 disappears from their wallet, under their bed, or their bank account.

Likewise, as medical students, the difference between living in a blighted gentrified inner city apartment versus one in a safe middle class area is huge. So is the difference between driving a 20 year old Buick and getting that new or late model Toyota Corolla or Mazda 3. And the chance to backpack Europe, go on a Caribbean cruise, hike Machu Picchu, Trek across South East Asia, explore Australia, or visit Hawaii when you are young is something that money can't ever buy in your older years.

Given, these actions do have some consequences. You may have to repay more loans and have less disposable income as an attending. But those sacrifices are much smaller because of your income. There's a much smaller difference between a $250k home and $750k home (maybe 3bd/2ba vs 5bd/4 ba), than between a $300/month apartment in the inner city and a $600-$700/month apartment in a safe area. There's a smaller difference between a $95k Mercedes S-class and a $60k Mercedes E-Class than between a $2k 2001 Chevy Cavalier and a $10k 2019 Mitsubishi Mirage (cheapest new car). The memories you get spending $4k backpacking/sleeping in hostels for 6 weeks around Thailand, Malaysia, Cambodia, Vietnam, Singapore, and Indonesia is an experience you can never have once you're married with children. The damage you do to your body eating unhealthy to save money can cause thousands of medical bills farther down the line.

Given that the federal government is keeping interest rates at historic lows, I would borrow as much money as you WANT, not what you need. Furthermore, with IBR, I calculated after 20 years of payments, the effective interest rate is similar to that of a mortgage. So go out and go on your dream vacation, buy that expensive engagement ring for your girlfriend so she doesn't ditch you for an investment banker, live in that luxury apartment with marble countertops and stainless steel appliances. YOU ONLY LIVE ONCE.

This is bad advice. No one -- I repeat, no one -- who isn't supporting others needs the max amount. You have this fantasy of attending salary being the end of all your debt problems, except you're not an attending yet and don't know how it compares to your 500K in loans (and growing). You have no idea how much you pay for taxes, insurance, mortgage, costs for children, and all the other things that come with real adulting. By all means, take enough to live in a decent place (you don't need the 5K/month luxury apt) and take care of your needs. Maybe throw in a vacation or two, but no one is entitled to a 6-week backpacking tour through Europe and if you want to do such a thing, do it with your own money that you scrimp and save, not from loan money that you will then ask to be forgiven.

Rule 101 of finances, don't do things you can't afford. As a med student, you can't afford lavish vacations and it's ridiculous to take them, then turn around and enroll in PSLF so you don't have to pay for them.

I think that in the not-to-distant future, when all this money is forgiven, schools will be thoroughly investigated for their outrageous tuition fees and there will be a cap on what students can borrow which probably should have happened long ago.
 
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DV-T

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@RangerBob I appreciate you cautionary advice, but wanted to clear up something. Investing surplus loan money is not illegal. If that was the case, then putting the surplus loan money in a savings account and getting 1% interest would be prohibited.
 
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ACSurgeon

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I’ll echo a couple of things:

- YOLO is a bad mantra for anyone going into medicine. Because, by definition you’re putting your life on hold and making sacrifices for a long time (relative to someone working 8-5 job from college).

- don’t make too many assumptions about how much money you’ll make or how easy it will be to pay off debt. It’s doable. But, if you’re having a hard time being disciplined as a young medical student, it’ll be so much harder when you’re in your late 30’s and see your youthful days fleeting before your eyes!

- find a balance. Don’t be ridiculous on either end of the spectrum. You need some future planning but don’t make it your goal to maximize future net worth at the expense of basic quality of life things.
 
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RangerBob

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@RangerBob I appreciate you cautionary advice, but wanted to clear up something. Investing surplus loan money is not illegal. If that was the case, then putting the surplus loan money in a savings account and getting 1% interest would be prohibited.

There's a difference between actively investing and putting money into a savings account. Regardless of the legality (a quick google search suggests it may not be illegal to invest the funds, so it looks like I was wrong), the risks of being caught are certainly low--I've never heard of anyone being audited to explain their loan expenses. In general, however, investing borrowed (and high interest) money isn't a great idea.

Given the relatively small amount most students will have left over, the high risk of investing borrowing money, and the relatively low amount of profit you can make over 4 years, not to mention the stress of possibly watching your borrowed investments go down in value, I wouldn't recommend anyone ever use their loans to invest in the stock market. Paying off your loans (or avoiding taking them out) is essentially a guaranteed post-tax return of 6-7%.
 
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bananafish94

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I don't go as far as this guy but I really don't fault anyone for taking out a bit more money for a slightly higher standard of living. Maybe this is financially irresponsible for me to say, but an enormous portion of the loans are a fixed number that you can't do anything about. If you go to a private medical school where tuition is $50000 per year, that's already $200K that you have to take out, and there's nothing you can do about it unless you're one of the lucky few to get a significant scholarship. Then there's a baseline standard of living cost that you have to take out, that's also non-negotiable. You have to eat and pay rent. So at this point you're probably already looking at mid $200K in loans. Is it better to have as little loans as possible, but still well over $200K and live with three roommates in a bad apartment cooking cheap food for four years, or is it better to take a few extra thousand per year that will give you a slightly nicer quality of life? It's a very long, very important four years and I don't think it's the end of the world to take out a little bit more money to enjoy your life a lot more. But everyone has different priorities and that's okay.
 
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DV-T

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There's a difference between actively investing and putting money into a savings account. Regardless of the legality (a quick google search suggests it may not be illegal to invest the funds, so it looks like I was wrong), the risks of being caught are certainly low--I've never heard of anyone being audited to explain their loan expenses. In general, however, investing borrowed (and high interest) money isn't a great idea.

Given the relatively small amount most students will have left over, the high risk of investing borrowing money, and the relatively low amount of profit you can make over 4 years, not to mention the stress of possibly watching your borrowed investments go down in value, I wouldn't recommend anyone ever use their loans to invest in the stock market. Paying off your loans (or avoiding taking them out) is essentially a guaranteed post-tax return of 6-7%.

Totally agree that med-students without a background/experience in investing should not be taking out max loans to put $$ into the market.
 
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Matthew9Thirtyfive

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This is what someone who isn’t supporting a family while paying off debt thinks about taking on debt. Unfortunately, those of us who are on the other side will not be likely to convince people who think this way that this is a terrible idea.
 
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calivianya

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Reading the title, I naively thought for a second we’d get commiseration for the people who live in high cost of living areas. I know I’m taking out the max and I don’t usually have much money left over by the time my next distribution hits. I do live alone, which is my luxury spending I suppose, but I study better without other people in my space. I can’t put a price on maximizing my performance in med school.

If you don’t have to take it out, don’t... but I agree on the eating well, having a decent (not luxury) place to live, and having a reliable car. The last thing I would want to happen in the whole world is to miss a test in med school, or be late for rotations, because the POS beater car broke down for the sixth time. My car is paid off, thankfully, but if it wasn’t I’d have no problem going for something newer with a car payment instead of buying a beater.

Backpacking in Asia on loan money, though? That’s ridiculous.
 
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Magyarzorag

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Because I hope to eventually to PAYE, I will be paying the same amount over 20 years regardless of whether I borrow $1 of $1 million. So for this plan to work out to my benefit, I need to borrow the maximum
 

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1. Taking out loans to invest in the stock market is insane. This year, interest rates for federal loans are between 4.3-5.1% which is as low as it has been in the past 8-9 years. However, trying to invest that money to earn a higher return is a fools errand. Focus on your education, not what the market is doing. We just watched the dow and sp500 lose 25% of its value in a matter of weeks. While the market is volatile now, and has created the potential to earn, it simply is not worth the risk or time.

2. While the fed has announced it is keeping its interest rates low until 2022, that does not mean that federal loan interest rates will remain low that long. Remember, student loans are based on 10 year treasury yields + a certain percent. This does not mean that student loans will remain low for that long. Also, 4.3% as the least expensive federal loan is still quite expensive as far as loans go - much more than a mortgage or auto loan. Student loans are still expensive.

3. Never discount the fact that student loan repayment programs are subject to ever changing legislation. Legislation has a way of catching up to people who think they are beating the game. Taking out more loans than is necessary in order to game the payback system is an unnecessary risk. Also, remember, in many instances, when your loans are forgiven, the amount is counted as income.

4. Do take out money to protect your downside: disability insurance, life insurance if you are married/have a child/family member to support. The worst thing that could happen is on day one of residency you suffer an accident that leaves you without the ability to earn an income in this field.

5. Do spend money to manage your own life: mental and physical health are important and small changes, like a new mattress or change in diet, can go a long ways in decreasing costs down the line.
 

Magyarzorag

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And I consider myself pretty cheap also. I plan on living in one of the cheaper apartments with a roommate (though it’s still nice, it’s only $400 a month). I also plan on getting on Medicaid, getting free electricity from my states Energy assistance program, and I’m currently even on food stamps. I drive a hand me down Toyota Camry from my parents, hunt for the cheapest fuel around town with gas buddy, use coupons at Burger King, and shop at Aldi. I love to travel, but every time I travel, I do as much cost cutting as possible. I was able to even take my family to Europe for $1k a person for 4 weeks. My parents even offered to pay for my med school (or at least loan me money at 0%) but I flat out refused.
I certainly don’t need the extra money. I actually have $80k in my bank account now through work, scholarships, and an inheritance.
But seeing my bank account bloat boosts my self confidence.
 
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And I consider myself pretty cheap also. I plan on living in one of the cheaper apartments with a roommate (though it’s still nice, it’s only $400 a month). I also plan on getting on Medicaid, getting free electricity from my states Energy assistance program, and I’m currently even on food stamps. I drive a hand me down Toyota Camry from my parents, hunt for the cheapest fuel around town with gas buddy, use coupons at Burger King, and shop at Aldi. I love to travel, but every time I travel, I do as much cost cutting as possible. I was able to even take my family to Europe for $1k a person for 4 weeks. My parents even offered to pay for my med school (or at least loan me money at 0%) but I flat out refused.
I certainly don’t need the extra money. I actually have $80k in my bank account now through work, scholarships, and an inheritance.
But seeing my bank account bloat boosts my self confidence.

This sounds like someone making mostly prudent decisions and I commend that. You're not a novice at handling finances. However, this is at stark contrast to your recommendations for others to take out as much as possible because YOLO. Individual circumstances don't apply to everyone.
 
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TelemarketingEnigma

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This sounds like someone making mostly prudent decisions and I commend that. You're not a novice at handling finances. However, this is at stark contrast to your recommendations for others to take out as much as possible because YOLO. Individual circumstances don't apply to everyone.

except I'm not sure it's the most prudent at all. I absolutely understand not wanting to have your parents shoulder the burden of medical school/seem like you're mooching, but have you seen the interest rate on your loans?? While you technically can't loan family money over a certain amount at 0% (unless you want it taxed), it's a little baffling to me that someone would take on that much debt and interest if they have family ready and willing to support them (assuming there aren't weird strings attached or poor family relationships), or $80K in the bank (it's important to have a nest egg, but that amount can get you pretty far before you need to take out max loans)

Also Europe at $1k/person for four weeks is really impressive, did you swim there??
 
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Magyarzorag

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except I'm not sure it's the most prudent at all. I absolutely understand not wanting to have your parents shoulder the burden of medical school/seem like you're mooching, but have you seen the interest rate on your loans?? While you technically can't loan family money over a certain amount at 0% (unless you want it taxed), it's a little baffling to me that someone would take on that much debt and interest if they have family ready and willing to support them (assuming there aren't weird strings attached or poor family relationships), or $80K in the bank (it's important to have a nest egg, but that amount can get you pretty far before you need to take out max loans)

Also Europe at $1k/person for four weeks is really impressive, did you swim there??

My parents are not investment bankers or celebrities. My father is an engineer and my mother is a hair stylist with her own business. Together, they make $150k a year, mainly through their sweat and tears. Since I know there money doesn't come easy, even though they make a decent, but not extravagant living, I don't want to burden them. Also, in the 0.1% chance I flunk out of medical school, my burden will fall onto the government.

Yes, we did budget pretty well on the trip (there were 4 of us). But we flew there on budget Norwegian Airlines and since they didn't even provide free water, I recommended we drink water from the taps in the bathroom. We also layered up to avoid baggage fees. Funny thing is the airline also weighs carry ons at check in. So what we did was each of us checked in separately. We would leave the contents of the bag with another family member and bring an empty bag for them to tag and weight. Then we would fill that bag back up with its original contents. We also avoided expensive Western Europe and spent most of our time in Central and Eastern Europe, which are considerably cheaper. We managed to stay in city center airbnbs (which allow 4 people instead of 2 like most hotels) for $70-$80 a night. I also had Hilton Honor points we used to stay in free hotels for 5 nights. We also rented a nice blue Skoda Octavia station wagon and found lodgings that offered free parking, which saved considerable money over train tickets for 4 people as well as transport to and from train stations. Lastly, we cooked many meals at our airbnbs (it was interesting shopping at European grocery stores)
 
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except I'm not sure it's the most prudent at all. I absolutely understand not wanting to have your parents shoulder the burden of medical school/seem like you're mooching, but have you seen the interest rate on your loans?? While you technically can't loan family money over a certain amount at 0% (unless you want it taxed), it's a little baffling to me that someone would take on that much debt and interest if they have family ready and willing to support them (assuming there aren't weird strings attached or poor family relationships), or $80K in the bank (it's important to have a nest egg, but that amount can get you pretty far before you need to take out max loans)

Also Europe at $1k/person for four weeks is really impressive, did you swim there??

Which is precisely why I said [mostly] prudent. If I were in OP's shoes I would have absolutely gone for a 0% interest rate loan and take pride in keeping my promise to my parents and paying them back quickly while completely avoiding potentially tens of thousands in extra debt. I don't know what OP's dynamic with their family is so I didn't opine on that.

I would be remiss in not acknowledging what things OP is doing right by saying they're "not at all prudent". Having 80K in the bank for example is not commonplace, especially when most people can't even scrape together an emergency fund.
 
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TelemarketingEnigma

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Which is precisely why I said [mostly] prudent. If I were in OP's shoes I would have absolutely gone for a 0% interest rate loan and take pride in keeping my promise to my parents and paying them back quickly while completely avoiding potentially tens of thousands in extra debt. I don't know what OP's dynamic with their family is so I didn't opine on that.

I would be remiss in not acknowledging what things OP is doing right by saying they're "not at all prudent". Having 80K in the bank for example is not commonplace when most people can't even scrape together an emergency fund.

That's fair. I just think it's important to acknowledge that having money in the bank isn't the same as always making prudent decisions or giving good advice. I actually don't think taking out the max is necessarily a bad thing (all dependent on circumstance, and I do believe that living comfortably through school is very important), but advising others to do that because "YOLO" is a bad idea.

on another note, it's also important to recognize that it's not just monopoly money that gets absorbed by the government in all circumstances like OP keeps saying- others in this thread have pointed out that loan repayment programs are not always a safe bet, and some can come with huge tax bombs at the end. Totally okay if it's your plan and you accept that risk/plan for it, but deciding that it doesn't matter how much you rack up in loans because the government's going to take care of it is a dangerous mentality.
 
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That's fair. I just think it's important to acknowledge that having money in the bank isn't the same as always making prudent decisions or giving good advice. I actually don't think taking out the max is necessarily a bad thing (all dependent on circumstance, and I do believe that living comfortably through school is very important), but advising others to do that because "YOLO" is a bad idea.

on another note, it's also important to recognize that it's not just monopoly money that gets absorbed by the government in all circumstances like OP keeps saying- others in this thread have pointed out that loan repayment programs are not always a safe bet, and some can come with huge tax bombs at the end. Totally okay if it's your plan and you accept that risk/plan for it, but deciding that it doesn't matter how much you rack up in loans because the government's going to take care of it is a dangerous mentality.

Agreed, on all points.
 

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Because I hope to eventually to PAYE, I will be paying the same amount over 20 years regardless of whether I borrow $1 of $1 million. So for this plan to work out to my benefit, I need to borrow the maximum


You do know know that if you pay minimum payments, likely your balance will grow, not shrink while you are taking 20 years to pay it. Then your forgiveness is taxable, which means you will pay a percentage (currently top rates are like 35%, but likely go up to at least 39%.

I think it is a really dumb idea to take out loans without the plan to pay it back yourself. If forgiveness happens, then that’s gravy, but depending on the federal government to the tune of several hundred thousand dollars is a mistake.
 
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Also keep in mind that a 20 year payoff period with a ballooning amount of debt will impact your ability to finance a car, house, etc. While you may be in a loan repayment program, some lenders will not accept this since you have to renew it each year.
 

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Also keep in mind that a 20 year payoff period with a ballooning amount of debt will impact your ability to finance a car, house, etc. While you may be in a loan repayment program, some lenders will not accept this since you have to renew it each year.

I was actually hoping to use some of the loan money to make a sizable downpayment (50%+) or outright purchase a house out of med school
 

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And I consider myself pretty cheap also. I plan on living in one of the cheaper apartments with a roommate (though it’s still nice, it’s only $400 a month). I also plan on getting on Medicaid, getting free electricity from my states Energy assistance program, and I’m currently even on food stamps. I drive a hand me down Toyota Camry from my parents, hunt for the cheapest fuel around town with gas buddy, use coupons at Burger King, and shop at Aldi. I love to travel, but every time I travel, I do as much cost cutting as possible. I was able to even take my family to Europe for $1k a person for 4 weeks. My parents even offered to pay for my med school (or at least loan me money at 0%) but I flat out refused.
I certainly don’t need the extra money. I actually have $80k in my bank account now through work, scholarships, and an inheritance.
But seeing my bank account bloat boosts my self confidence.

You're on Medicaid and food stamps and you've got $80K in your bank account and taking your family to Europe?
 
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DrOngoGablogian

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You're on Medicaid and food stamps and you've got $80K in your bank account and taking your family to Europe?

I said the same thing. Definitely goes well with the other admission of cheating the airline's baggage fee. Whenever I see stuff like that on this site it really makes me wonder how many med school applicants herald their altruism on paper but in real life are liars and cheats down to their core. Kinda disappointing.
 
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Magyarzorag

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I said the same thing. Definitely goes well with the other admission of cheating the airline's baggage fee. Whenever I see stuff like that on this site it really makes me wonder how many med school applicants herald their altruism on paper but in real life are liars and cheats down to their core. Kinda disappointing.

It’s 100% legal. I disclosed all my assets to the agencies, followed all the rules, told the truth on every question and they approved me. They only look at income. Nothing cheating or illegal about this.
 

Magyarzorag

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I said the same thing. Definitely goes well with the other admission of cheating the airline's baggage fee. Whenever I see stuff like that on this site it really makes me wonder how many med school applicants herald their altruism on paper but in real life are liars and cheats down to their core. Kinda disappointing.

The baggage fees would have amounted to 20 percent of the ticket prices. I’m sure we’ve all snuck popcorn into a movie theatre, put soda in a water cup, brought food into Disney World, alcohol onto a cruise etc.
 
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