Family Practice Doc crushed with $555K Student Loan Burden

[lowbudget]

The real problem is education debt...the fact that undergrad and med school are both too expensive (especially the private institutions,which not everyone can void attending).

To me, it's more than that. It's your habits. Warren Buffett spoke at my school once & someone asked, what can I do to be as successful as you, to which he replied that success comes from having good habits & good habits start now.

Good debt & money management started the moment mom & dad gave your first allowance, your first lunch money. It started on that first paycheck you got after you busted your butt to make it.

This poor lady was on the road to 555k debt long before it actually happened. Yes, she was in her 30's when she started med school. Yes, she went to a private Carribean school. Yes, she borrowed a lot of expensive debt. Yes, she picked a well-known underpaid specialty. But, her story goes deeper than that because this is the story of many of us doctors who make the lifelong choice to sacrifice for what we love... medicine.

As anti-SDN as it may be, one of the BEST advice I got as an undergrad was to bust my ass hard so that I could get into my state medical school. What? State school?... uh, yea. Anything less than Stanford or Harvard was just. not. worth. it. My tuition was 5k x 4 yrs (in mid 2000's). Hell, my living expenses (30k x 4 yrs) was more than my tuition. The only reason why I have debt is because I woke up everyday during med school feeling like P Diddy.

Sorry, it's your life & your money. It's therefore your choice when it comes to how you're going to spend your time & your money. No whining allowed.

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[Excelsius]

To me, it's more than that. It's your habits. Warren Buffett spoke at my school once & someone asked, what can I do to be as successful as you, to which he replied that success comes from having good habits & good habits start now.

Good debt & money management started the moment mom & dad gave your first allowance, your first lunch money. It started on that first paycheck you got after you busted your butt to make it.

This poor lady was on the road to 555k debt long before it actually happened. Yes, she was in her 30's when she started med school. Yes, she went to a private Carribean school. Yes, she borrowed a lot of expensive debt. Yes, she picked a well-known underpaid specialty. But, her story goes deeper than that because this is the story of many of us doctors who make the lifelong choice to sacrifice for what we love... medicine.

As anti-SDN as it may be, one of the BEST advice I got as an undergrad was to bust my ass hard so that I could get into my state medical school. What? State school?... uh, yea. Anything less than Stanford or Harvard was just. not. worth. it. My tuition was 5k x 4 yrs (in mid 2000's). Hell, my living expenses (30k x 4 yrs) was more than my tuition. The only reason why I have debt is because I woke up everyday during med school feeling like P Diddy.

Sorry, it's your life & your money. It's therefore your choice when it comes to how you're going to spend your time & your money. No whining allowed.

I agree. The first thing that goes out the door when we discuss income is parsimony. Residents complain that their salary is very low without realizing that they are earning as much money as the average US resident, in many cases even more. The arguments about long hours and long duration of the training are valid, but separate. It's not like resident's salary is permanent. Even on resident's salary it is possible to make some significant contributions toward the loan if the resident lives well below his means. Yet many feel that they must have that house or that car and start their spending spree before even becoming a doctor. Once they do become a doctor, their expenses skyrocket even more. Guys like Buffett are rich mainly because they follow two simple rules 1.they save more than they spend and 2.whatever they save they buy income generating assets which generate more income and assets - an infinite loop. It really doesn't matter if you're grossing $400K a year if your expenses are $380K. That person without a college degree making $20K a year is earning just as much money as you.

I think it is very important to have some financial sense before you enter medical school because afterward there isn't much time to learn anything outside of medicine. Then you become a doc one day and once you marry without having mastered financial acumen, you're pretty much in a deep hole that will last throughout your life. The middle class is not going to exist much longer. You're either going to be rich or poor and we see this happening already.

Looking around this forum you can see how risk averse many residents and attendings are where they have all the resources to make money, but for them even managing a simple rental property is too exacting. Unfortunately, the only way to financial security is through business knowledge. History has proven that there is no other skill or amount of salary that can take you there. Everyone from doctors to sportsmen and celebrities earning several million dollars a year have taken a complete dive to the bottom and lost everything.

 

[medicinesux]

Sallie Mae is one of the most incompetently greedy run companies out there. Here's a video documenting one medical resident's incredibly aggravating struggle with Sallie Mae regarding his private student loans in today's Huffington Post-

http://bit.ly/aPN18o

How many residents have time to spend countless hours and hours year in and year out keeping on top of their loans like this? It is almost as if Sallie Mae does all this on purpose so they can tack on ridiculous late fees and collection fees and drive people into default.

 

[avatarftw]

a

 

[medicinesux]

I'm curious as to whether she had the opportunity to save money during her 20's and 30's before entering medical school. If she graduated college at age 22, she should have been able to save up some cash and invest it. (at least max out her ROTH IRA)

This way she wouldn't have had to borrow as much money for medical school.

I don't believe Roth IRA's were around more than ten years ago. She was probably indebted like so many educated people in their 20's with college loans. Hard to save when you have to pay dear Aunt Sallie every month.

 

[jl lin]

The middle class is not going to exist much longer. You're either going to be rich or poor and we see this happening already.

I pray you are wrong about this for everyone's sake. But it's hard to ignore that as things continue to move in this direction. It is one of the main reasons I have huge and serious issues with the current gov't administration.

The thing is, as this becomes the reality, physician slots will become even more difficult to fill.

 

[medicinesux]

inside one on one interview with Dr. Michelle Bisutti. Doesn't really appear that she was living high on the hog like some have been speculating or that she ignored her paperwork and didn't bother to apply for deferments. Sounds like a private student loan that came due in the middle of residency was the preshock that set off this massive 555K quake. As if owing over a half a million isn't enough for these loan sharks, they are trying to add on ANOTHER 32K so they can sell the loan to yet another agency!

http://butidideverythingrightorsoit...0/02/interview-with-500k-doctor-michelle.html

 

[avatarftw]

a

 

[pem8erly]

That interview was great but I still have questions as to how she got to where she is with her loans. When the loans payments came due and she couldn't make the payments, did she call the lender and try to work out a more reasonable payment schedule? Was this flat out denied by the lender? Did she make any payments at all?

Would be nice if we could get her on SDN to answer some questions for us to help figure out how it all happened and how others can avoid the same pitfalls.

 

[Substance]

Sallie Mae is one of the most incompetently greedy run companies out there. Here's a video documenting one medical resident's incredibly aggravating struggle with Sallie Mae regarding his private student loans in today's Huffington Post-

http://bit.ly/aPN18o

How many residents have time to spend countless hours and hours year in and year out keeping on top of their loans like this? It is almost as if Sallie Mae does all this on purpose so they can tack on ridiculous late fees and collection fees and drive people into default.

It makes sense for Salliemae to operate like this. From my understanding, it gets paid no matter what. If a resident cannot pay the loans on time, the government reimburses Salliemae the equivalent amount. However, the resident is still on the hook for the money as well. So Salliemae is potentially repaid twice. Adding on other fees and charges means more money, since not even bankruptcy allows anyone to escape the payback of the loans.

 

[dragonfly99]

I think it is important to find a reputable lender when you take out student loans. From what I have been told, some of the lenders were even more unscrupulous several years ago than they are now (perhaps when this woman was in school). Remember, they are there to make money...so read the fine print on whatever you sign. Personally, my lender has been OK but they did take away the "bonus"/discount for paying on time when this whole banding crisis started a couple of years ago. They used to pay that to us quarterly, but I guess due to their diminishing profits they took it away...it was in the paperwork the whole time that they could do so. I think the most important part to read is what are the terms of the repayment. How much extra interest/late fees can they tack on if you don't pay up on time? Can they jack up the interest a huge amount if you have 1 late payment? Read all the fine print. Hopefully the med schools' financial aid office can help you guys find good lenders. Mine did, I think.

 

[Excelsius]

You should find out if this applies to loans, but the new federal regulations that went into effect this Monday say that: your interest cannot be increased if your payment is late by 30 days. If your payment is late by 60 days, they can increase your rate (might be limits on this too) but will have have to restore your lower rate as soon as you start paying them on time again. This is true except if the rate offered is promotional. That's the key term. Even without regulations though, it is much better to stay away from any promotional offers with very few exceptions.

 

[randomedstudent]

I don't think they are in an UNdesirable situation, they are in a situation which is less desirable than previously, but still overall positive with a bit of planning and frugality.

Really, even someone finishing residency with ~400k in loans could easily pay off the entirety of their debt within 10 years if they did one simple thing--don't change anything about their lifestyle after finishing residency. This assumes they were living within their means during residency (which the doctor this whole thread is about clearly was not.)

I think one of the biggest pitfalls med grads face is that once they graduate, they run out to buy a bmw and a swanky house. Student loans (and credit cards for that matter) are seen as something to pay the minimum possible on, to make room to pay for other stuff. That strategy will ensure they actually pay the maximum possible in the long run.

Delayed gratification is something Americans are not good at. Med grads should have a better concept of it, after all we have waited through many many years of training before actually receiving a decent paycheck (lets face it at least PART of most of our motivation is financial). But it seems like many have the attitude that once residency is over and a real paycheck starts, its time for "doctor lifestyle." If you can put that lifestyle off for 5-7 years, you can still enjoy the highlife without huge debt hanging over your head.

Wow, I'm pretty conservative (from a financial standpoint) and my husband and I who are both current residents are managing to make payments on our loans (payments based on 30-yr payoff that is), but I think it's a little unreasonable/naive to suggest that doctors who have sacrificed for 10+ years in med school and residency financially and emotionally to "just keep living like a resident for 10 more years." I have absolutely zero interest in owning a fancy car and would never buy any car new. Similarly I have no need for a giant McMansion. However, my husband and I would like to have a family sometime before all my eggs are spent (would prefer not to wait until I'm 41 as you suggest.) And we do like to travel and look forward to having more time for this when finished with residency. We are not extravagant people by any stretch, but I think after the sacrifices we've made we do deserve to reap some reward.

Now all that said, we do def. plan to have our loans paid off within 10 years after residency (probably more like 5 - we are very debt averse).

 

[MOHS_01]

...

Really, even someone finishing residency with ~400k in loans could easily pay off the entirety of their debt within 10 years if they did one simple thing--don't change anything about their lifestyle after finishing residency. This assumes they were living within their means during residency (which the doctor this whole thread is about clearly was not.)

Sounds like someone is in for an unpleasant surprise when he/she runs into the financial wall that is the tax man...

 

[Impromptu]

I was surprised at the sheer number of fellow-medical students and residents whose parents paid for their entire medical school, housing, and new car. Add to that the military and MD/PhDs and you are going to drive down the average debt owed by graduating medical students, like was mentioned above. I don't begrudge them, because, God willing, that will be my own children someday. I just want to reiterate that the statistics on average student loans are skewed. Those faced with the full onslaught of medical school debt and interest are in a much different situation.

 

[odieoh]

Wow, I'm pretty conservative (from a financial standpoint) and my husband and I who are both current residents are managing to make payments on our loans (payments based on 30-yr payoff that is), but I think it's a little unreasonable/naive to suggest that doctors who have sacrificed for 10+ years in med school and residency financially and emotionally to "just keep living like a resident for 10 more years." I have absolutely zero interest in owning a fancy car and would never buy any car new. Similarly I have no need for a giant McMansion. However, my husband and I would like to have a family sometime before all my eggs are spent (would prefer not to wait until I'm 41 as you suggest.) And we do like to travel and look forward to having more time for this when finished with residency. We are not extravagant people by any stretch, but I think after the sacrifices we've made we do deserve to reap some reward.

Now all that said, we do def. plan to have our loans paid off within 10 years after residency (probably more like 5 - we are very debt averse).

First of all, most of us don't have $400,000 in debt or anywhere close to that. And most people don't necessarily plan on paying off all of their loans in 10 years (although I am also very debt averse and plan on doing so.) The example I gave was just to illustrate that it COULD be done. The people who are just now starting their medical training and will be facing much higher total costs should plan accordingly and realize that in order to pay off that much debt they will be much better off living pretty conservatively for a few years. Not necessarily 10 years, I agree, but if you can live on the cheap for even 3 or 4 and make some big lump payments toward your loans, that goes a long ways. By the time you are 3 or 4 years out most physician salaries increase and you can still make more than the minimum payment on loans and live comfortably. At the end of the 10 years you can then live VERY comfortably and debt free.

Obviously being a female and having fertility concerns changes things a bit and I wasn't "suggesting" that you wait until 41 to have kids. . . only suggesting that someone with a very high debt load COULD still pay it off in 10 years by living very conservatively.

 

[odieoh]

Sounds like someone is in for an unpleasant surprise when he/she runs into the financial wall that is the tax man...

I'm well aware of the tax man.

 

[lipomas]

It all becomes amplified when you are a two-physician family. You end up with that much debt when you factor in both incomes. And then one or both of you wants to go part time to have children. And neither wants to take much call or work beyond normal business hours (all of which likely reduces salary). Two-physician couples need to seriously discuss financial issues before they get married just because they liked hanging around together in med school. Many end up not very compatible once school (including residency) ends.

 

[md2010sgu]

+ 1.

Furthermore, as an FP, there are resources to help pay for your loans. Federal loan repayment programs, state loan repayment programs....even some hospitals offer to help repay your loans. If she couldn't figure a way to avoid that much debt, she really has only herself to blame.

Hells yeah..... when I saw this article, I knew right off the bat... poor money management... wanting to live the lifestyle of someone who earns 6 figures, but starting off being a quarter mil in debt! I mean come on... anyone with any sense of how INTEREST works would have lived like a resident for another 5 years, and paid off a HUGE portion of their loan, by foregoing luxuries. I mean seriously I live off of $300/month for food and going out, $800-1000 for rent, car insurance, gas, bills... I use up maybe $20,000 tops PER YEAR on bare essentials. If I were earning the average $150,000 a FM practitioner could earn/ yr do that math. Loan paid off in 5 years.

That said, I feel very bad for her predicament.

 

[md2010sgu]

. . . only suggesting that someone with a very high debt load COULD still pay it off in 10 years by living very conservatively.

Totally agree