Right! Med students that I have asked all tell me not to worry about this now, but I feel its important to be aware. It honestly stresses me out more to not know. I also know so many people that have done biomed masters, and I can't rack my brain on why they don't care about their debt situation (assuming they took out loans)..
The loan calculator above is a great tool. Let's examine your situation. If you put in a 8% interest rate (likely higher than what you'll actually have) and assume you won't be paying loans back as a resident for 4 years with a 10 year repayment plan once you're an attending, you'll end up paying back $3,397/mo ($40,764/year) for a total of $407,660 in loan repayments.
Now, that number sounds really scary, and for most Americans should be terrifying, but lets break things down from an attending's standpoint. Chances are, you'll be able to pull in around 200k/yr coming out of residency regardless of what field you enter with the potential to earn A LOT more if you enter one of the more lucrative fields. Making 200k, you'll pay around 44k in federal income tax (this is assuming no deductions, dependents, etc), so that comes down to 156k. Depending on what state you live in, state taxes, malpractice, and other expenses can bring that down a lot more (California for example will suck you dry) or not much more at all (some states like WA or TX pay no income taxes). So we'll say your total take-home will be $135k.
So now that we've got an estimate on take-home after expenses that are mostly out of your control, we can start talking about your decisions and repayment. Many docs will decide they're tired of living like a resident and choose that 10 year plan. That way they're taking home around $95k/year, which is about twice what they were taking home as a resident after taxes are accounted for. They choose to carry the debt because they feel like living a little after killing themselves through med school and residency. On the other hand, let's say you decide to not start a family yet, not buy a house or a nice car, and decide you want to live like a resident for a few more years and pay off your debt aggressively. So you set aside 50k/year for living expenses (still living pretty well since this is about what the average American makes before taxes) and throw the rest of that $85k you're making at your debt. By doing this, you'll not only cut down on the time needed to pay off that debt, you're cutting down on the total amount you owe by paying off your interest sooner. With this plan, you'd pay off 400k in debt (it will end up being much, much less than that) in 5 years easily. If you go on that loan calculator and change the loan term to 5 years, your total debt will be $340,643, which actually only comes out to paying back 68k/year. Using all 85K, you could pay off your loans in 4 years. So while those gigantic numbers seem terrifying, when you put it in perspective it's not nearly as scary.
Note: I should say these are all estimates meant to give a general idea. This isn't accounting for investments, retirement funds, or those trying to support a family. Either way, it's still not as terrifying to someone who understands the finances as it is to someone in their early 20's just trying to figure out how to be financially independent. I'll also add that many docs choose to use their money for investments or other funds instead of paying down the debt because they'll make more money than the interest they'll owe. If your hospital offers to match what you put into a 401k, or you want to invest in certain funds (stealth IRAs, Roth/back-door Roth IRAs, etc), you'll make more than you'll lose in interest, making it a better investment in the long run.
Yes it is a huge amount, and the grad plus climbed interest from 6.7% to 7% in just one year so expect that to keep getting higher.
There was a chart on medscape that showed that many physicians are still paying down student loans into their 40's. I think that is a bad strategy and I will be aggressively paying down my debts post residency. During residency, however, my primary goal is to pay off the interest (at 7% on around 300k we are talking about 21k from a 50-58k salary). It is an astronomical sum, however paying off even 16k a year is a big help for when you finish residency. I'll then try to tackle my loans in 3-4 years of aggressive debt payment post-residency.
Anyway, that is my strategy. The loans are freaking huge and they do freak me out. I would advise that if there is any way you can take a "loan" from a family member for any amount that you do so. 5k here or 5k there is a huge help so long as they understand it will be paid back in 8 years. You can even pay them interest at 5% and it would still save you a lot of money in the long run
To each their own, but there are reasons (as stated above), to delay paying off debt in favor of starting to build a retirement account earlier. Additionally, I don't think attempting to pay back too much during residency is the best idea. If you can pay some back, great! Do it. However, before you start trying to cut into your debt too much, build up a bit of a financial safety net (the more the better, but somewhere between 5-10k is a good start) before dumping your money into loan repayment. Crazy stuff can come up in life, and having some money socked away so you aren't financially screwed can go a long way to alleviate some of that stress.
To the family loan statement, maybe. A good general rule for life is that you don't borrow money from family or close friends. However, if someone is willing to help then there are some ground rules everyone should set before any money is ever exchanged:
1. Never borrow more than they are capable of providing. This may seem like common sense, but if another person has to go into debt in order to provide your loan, don't do it. Anything you borrow should be money that they are able to produce readily and easily. Preferably, it shouldn't be more than they'd be willing to completely lose. If something happens (medical illness, failure from school, etc) and you somehow become unable to pay back the loan, the last thing you want is to not only screw yourself over, but the people you love. Additionally, if you were to die or have something terrible happen, most fed loans will forgive the debt (unless your parents were co-signers) and they'll foot the bill. If that happens after you borrowed from parents, guess who's stuck with the bill. Also, if you're borrowing from people you know, it puts the added pressure on you to not drop out and to potentially push yourself further down a path you may end up hating. It's a lot easier to walk away when you're screwing over Uncle Sam than when you'd be screwing over family.
2. Don't be completely reliant on those loans. This is the other side of the coin mentioned in the first point. If that is your only source of finance, and they somehow become unable to provide it, you're screwed. Schools aren't going to say "Oh, your parents can't pay for this semester, that sucks, here's a free semester." They're going to say "Oh, your parents can't pay for this semester, that sucks, how are you going to pay?" When you can't, they'll say see ya. That goes for landlords, car payments, and really anyone you'd owe money to. So if your loaner ends up being unreliable, you'll end up owing them whatever you borrowed with no means to actually pay it back. With fed loans, this isn't an issue. Maybe your loans will get disbursed a little late, but schools expect this and understand this.
3. By far the most important point is to MAKE A CONTRACT with anyone you borrow from. It doesn't matter if it's the gov, loan sharks inc., your rich uncle Donald, or even your parents. You need to have a written agreement that outlines as many possible aspects of the loan as you can think of before any money exchanges hands. On the borrowing side, this should outline how much you're borrowing, when you'll get each disbursement, what you're using the money for, what happens if you need more money for some reason, what the interest rate will be if there is one, and a total amount for the loan or at least a general formula for determining this. On the repayment side, it should include when repayment will start, how often you'll be making payments, how much each of those repayments will be, how many years are expected to pay off the loan, what will happen if you cannot continue with your career/education and if there are certain circumstances where they'll forgive all or part of your loan, conditions for grace periods, what happens if you miss payment(s), as well as what happens if there is a breach of contract and what the results of that breach will be (ie if lender decides to stop lending or the borrower refuses to repay the loan). If there is a spouse or family involved with the borrower, they also need to be included. If you were to die, would your spouse be responsible for paying your family back? If so, how much? If you can't pay it back for some other reason, can the lender go after your spouse for repayment? Etc.
A lot of this may sound like overkill when borrowing from family, but you want to have everything laid out as well as possible in case something does happen. You don't want there to be misunderstandings or any gray areas that will lead to unnecessary conflict. If something happens, you should be able to point out exactly what the result will be. By doing so it both creates clear expectations and makes everyone aware of the outcome to cut down on animosity or problems with the actual relationship outside the loan. Family loans should also only be taken from people who you feel are reasonable and mature as people and with money. If you've got a rocky relationship with the person you're borrowing from, you're just setting yourself up for more stress and problems than you need to in terms of the loan.
