With takehome pay of around $2600-2900/mo, do interns start repaying 200k loans?

[bulldog]

So as an intern, I estimate I'll be making around $2600-2900/mo takehome. I have 200k in debt, around 5%. Do "deferring repayment" I've heard tossed around just pile up the interest? Do most residents/interns start repaying once july comes around?

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[dc2md]

what about consolidating and then just paying off the interest during residency? can we do that?

 

[dutchman]

I think it is actually about $2000-$2100 take home.

 

[Gucio]

Hey,

Bulldog your questions are the same ones my wife and I are asking!!!

the other thread what's typical takehome pay for interns after taxes/deductions/etc per month? was good.

If you start chipping away at the principle early it does help...at
5% for 200 000 you will pay 833.33 per month in interest (=200 000 *0.05/12) so if you make 2600, minus 1100 in living expenses a month you have 1500$ to pay interest and principle You would pay off approximatly $7000 of your priniciple in the first year of residency

The faster you start paying off the principle the faster you become free from debt...I miss those days.

 

[deleted87716]

I deferred my loans until after residency. My wife insisted that we have money for, like, groceries and stuff.

 

[Faebinder]

I deferred my loans until after residency. My wife insisted that we have money for, like, groceries and stuff.

Ya... food.. electricity... stuff like that is important.

 

[deleted4401]

If you go to a good financial planner, they will explain to you exactly how you should pay your debt.

If you are in a good situation: i.e. current PGY-2s should not pay debt any faster than the minimum, as long as you consolidated (the interest rate is lower than what you could get through investing, meaning >3%). It is quite dynamic, and I'd recommend talking to someone that is proficient in managing financial aid debt, rather than just a typical financial planner.

-S

 

[bulldog]

Hey,

Bulldog your questions are the same ones my wife and I are asking!!!

the other thread what's typical takehome pay for interns after taxes/deductions/etc per month? was good.

If you start chipping away at the principle early it does help...at
5% for 200 000 you will pay 833.33 per month in interest (=200 000 *0.05/12) so if you make 2600, minus 1100 in living expenses a month you have 1500$ to pay interest and principle You would pay off approximatly $7000 of your priniciple in the first year of residency

The faster you start paying off the principle the faster you become free from debt...I miss those days.

nice calculations. I went to a finaid site via google and it was saying that for 200k paid over 10 yrs, u'd have to dish out like 2k/mo. the $833 in interest makes more sense now.

to person who says that typical takehome is 2100, can you provide source, or is it what u've heard? i think some posters are reluctant to post their salaries, but it's pretty standard numbers out there.

So 2500 - 800 = $1700/mo. Take like $1200 for rent in big cities and u've got like $500/mo for food/bills/expenses...yikes.

 

[bulldog]

I deferred my loans until after residency. My wife insisted that we have money for, like, groceries and stuff.

so how much is deferring adding up to ur loans vs if u paid interest during the same amount of time (i.e. 3 years)? i don't know much about financial math/compound interests/etc.

i.e. for 200k in loans at 5%, how much loans will u have in 3 years to pay off if u deferred vs. if u paid the $833/mo in interest?

 

[deleted87716]

for 200k in loans at 5%, how much loans will u have in 3 years to pay off if u deferred vs. if u paid the $833/mo in interest?

Ow...my head just exploded! I married a banker so I wouldn't have to think about that kind of stuff.

 

[f_w]

One thing to consider is that once you are done with residency, you won't get a tax deduction on the student loan interest (over 110k p.a. student loan interest deduction phases out). You will however still get a mortgage interest deduction (until you run into alternative minimum tax). So, if you are thinking about buying property during residency, it might make sense to get some screwy interest only or potentially even a negative amortizing mortgage and rather pay student loan interest. Now, during residency, your tax load is going to be minimal in the first place so this might or might not make sense. Your mileage will vary depending on family and income situation (and if you can't put food on the table, all this is moot). As noted, a good financial planner or CPA is going to be more helpful than an internet bulletin board.

 

[dc2md]

great points f_w

 

[mig26x]

Ya... food.. electricity... stuff like that is important.

yeah, they are important!!!

 

[dpmd]

so how much is deferring adding up to ur loans vs if u paid interest during the same amount of time (i.e. 3 years)? i don't know much about financial math/compound interests/etc.

i.e. for 200k in loans at 5%, how much loans will u have in 3 years to pay off if u deferred vs. if u paid the $833/mo in interest?

Federal student loans are simple interest (interest is based on loan balance X days since last payment X interest rate factor-your interest rate divided by 365.25 days). The amount of interest that accrues doesn't get added to the principal (except at the end of a forbearance or deferment). This means that at the end of three years you would owe 200K if you paid all the interest as it accrued, or you would owe 200K plus the interest that accrued (about 30K). The problem is that if you defer the loans for that time (assuming it is all unsub, subsidized loans don't accrue interest on deferment) that 30K would capitalize (be added to the loan principal), so now the interest you accrue will be on 230K.

 

[Nerdoscience]

Whoa, who only makes 2000 takehome in residency nowadays? The minimum pay I've seen would still give you something like 2300 takehome, and most make 2500 or more as interns, and more than that in subsequent years.

Oh, and almost EVERYONE defers their big loans through residency.

 

[slim shanie]

If you can get a good investment plan from a bank and continue to feed money into it, I've been advised this is a better way to go than to just pay off your loans. In the long run, you end up making more than if you were just paying off your loans. I'm not a business whiz by any stretch of the imagination but luckily my roommate is

 

[cali-ob]

Federal student loans are simple interest (interest is based on loan balance X days since last payment X interest rate factor-your interest rate divided by 365.25 days). The amount of interest that accrues doesn't get added to the principal (except at the end of a forbearance or deferment). This means that at the end of three years you would owe 200K if you paid all the interest as it accrued, or you would owe 200K plus the interest that accrued (about 30K). The problem is that if you defer the loans for that time (assuming it is all unsub, subsidized loans don't accrue interest on deferment) that 30K would capitalize (be added to the loan principal), so now the interest you accrue will be on 230K.

I'm confused.... are you saying that if you defer loans during residency the interest does or does not capitalize? Above you say "the amount of interest that accures doesn't get added to the principle.... and then you said "the problem is that if you defer the loans...that 30K would capitalize" Which is it? I don't get it....

 

[f_w]

I'm confused.... are you saying that if you defer loans during residency the interest does or does not capitalize? Above you say "

It capitalizes, but at the end of the deferment period. If you had a regular bank loan, it would either capitalize at the end of the year, the month or the day (that is how the credit card companies will turn a 3.9% interest rate into 45% annual percentage rate).

 

[Hernandez]

I really don't see how people can reasonably pay back much if anything during residency. Unless they're single and extremely tight, my minimum budget per month is 1800 and that's with an extremely craptacular apartment. But as someone with a family, I'm having a hard time finding anything that would work to live in that would be less than $1k per month. add in gas, food, utilities, vehicle expensises, car insurance, health insurance, and possibly property taxes and home insurance, that eats up that 2300/month quickly.

 

[TysonCook]

It depends on several factors, but you can pay off your loans (a little bit), only do so if you understand the rates, deferrment, and taxes.

I've been able to pay back $7,000 this year so far, and plan on $10k by the years end.

I have multiple loans, but the rates are low on all of them except for 1 at 7% and accrues interest while in deferrment, so it makes sense to pay it off as I would probably break even with an investment over 3 years if it beat 7% (w/fees and all).

Once I have paid off the 7% loan, my others are around 2-4%, mostly subsidized, and in deferrment, so it makes no sense to pay them off, and instead place the $$$ in a mmf or CD's.

....long story short, I take home around $2300/mo, and have paid off $7k. Don't forget that if you do your taxes correctly during your first year, you may get anohter $2k+ back in a tax return (different conversation).....and for that matter cost of living, debt, etc.

 

[medmom]

I am a little ******ed about student loans because I don't have any. If you defer during reisidency do you pay anything? THe interst does compound right? So, you would acrue like $800/month in interest that would be added to the loan balance, but not be making a payment? Or do you have to pay that $800/month like you would in an interst only home loan?

 

[dpmd]

Don't forget that if you do your taxes correctly during your first year, you may get anohter $2k+ back in a tax return (different conversation)

As an aside, if you do your W4 correctly you would have that 2K or so in your paycheck instead of giving an interest free loan to the IRS.

Back on topic: During deferment, the interest doesn't compound and you don't have to make any payments. However, at the end of the the deferment period any interest that you don't pay gets added to the principal.

 

[TysonCook]

I agree w/DPMD, it is stupid to let the IRS hold your $ and getting YOUR interest, but most don't know what exemptions to take etc. So after your first 6mo, change your W2 appropriatly.

 

[bkpa2med]

I agree with the above two posters. Put that money to good use now, not later.

Honestly, I guess it's good for people who would spend it if they had it in their paycheck, but most of the times those people tend to spend a BIG refund anyway

 

[NinerNiner999]

Consolidate for 30 years, apply for economic hardship deferment, and capitalize your interest during residency. This will only add a small amount of interest to your debt (it only accrues on the unsub portion of your loans). In the end, this will only be a difference of $30-40 per month after you finish residency. Don't kill yourself to pay loans during residency.

My consolidated payment will be around $550 per month for 30 years. This is a drop in the bucket compared to my post-residency salary and investment potential. Plus, think about how much $550 will actually be worth in even 15 years...

 

[lilnoelle]

How much does the consolidated interest rate vary from the initial loan rate. You guys are tossing around really low interest rates where the current M1 has a fixed loan rate of 6.8%.
In undergrad, when I consolidated, they took a weighted average of my loan rates and added 1/2%. This was a good deal, but only because interest was low at the time (~3%).
Is it different for med school?

 

[dpmd]

People who are talking about the low interest rates probably consolidated around the same time you did (two years ago or so). I recently consolidated the chunk of loans I got after the first consolidation and they gave me a rate that was a little below the grace period rate I had (after the incentives). I consolidated them separately than my consolidation from a few years ago which is currently at 2.8%, because I want to agressively pay down this higher interest rate chunk instead of increasing the rate on the rest of my loans (over the 30 yr life of the loans it would end up the same, but I calculated that if I left the old consolidation alone and paid off the new one in five years or less that I would save a bunch in interest). However, I have a spouse who earns a good amount so it has been easy to pay down my higher interest rate loans on the 1500 a month I have been making in this research fellowship.

One thing I didn't realize, is that if you consolidate a direct loan they add on some rebate they gave at some point (I think when you enter repayment or something). Not a huge deal if you have no choice but to consolidate, but I only had a little bit left of direct loans that I could have paid off instead of consolidating with the rest had I been aware. Note to self: pay better attention to what I sign.

 

[HannahDH]

It depends, it may vary depending on your initial interest.

 

[EctopicFetus]

Consolidate for 30 years, apply for economic hardship deferment, and capitalize your interest during residency. This will only add a small amount of interest to your debt (it only accrues on the unsub portion of your loans). In the end, this will only be a difference of $30-40 per month after you finish residency. Don't kill yourself to pay loans during residency.

My consolidated payment will be around $550 per month for 30 years. This is a drop in the bucket compared to my post-residency salary and investment potential. Plus, think about how much $550 will actually be worth in even 15 years...

If you consolidates at 2.8% which will go to 1.8% after 3 yrs of ontime payments you will then be making money. Assuming inflation (and your salary are at 2%) and you can now get about 5% interest on your money why would you pay off more than the min? Niner knows!