No problem. I'm glad to help
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1) I'm not sure how to calculate it correctly, but my understanding is that med school loans start accruing interest from the first semester. So by the time you graduate, you're looking at considerably more than the actual COA x 4. Is this correct?
Let's take the average tuition of attending a public medical school = $49,298
Add in fees + books + supplies + living expenses + transportation + licensure fees = $20,000 (rough estimate).
Total cost = $70,000/year * 4years = $280,000 borrowed.
Then lets say you choose the Forbearance option on the loan, meaning you do not have to pay into the loan during your residency since you will only be making around $45,000/year and can't afford to pay into it. If you're doing a 3-year IM residency, that's another 3 years of interest accrued. Using the current interest rate, which is fixed at 6.8%, and using the federal StudentAid website interest calculator, total interest accrued over the 7 years will be approximately $133,280.
Total debt after residency = $413,280
Now you're an Attending and can make payments on your loan. However, keep in mind, the loan will still accrue interest even as you pay into it. Let's say you chose the 15-year payment option. That means you must make 180 monthly payments for the next 15 years. With interest accumulating concurrently as you pay off the loan, you must pay the minimum $3,670 every month for next 15 years, and will have accrued a total of $246,890 as you did so.
Over the 15 year period, total repayment would have been = $660,200. That's $44,000 a year for 15 years spent on just paying back your loan!
2) I know that only certain parts of military pay is taxable, but I'm curious if anyone has done the math to see how much that saves you. The 275k your civilian buddy makes on the outside looks a lot smaller after Uncle Sam gets his ~35% and he writes a loan check for 3k a month. Has anyone done the math to see how much the post-tax salaries actually stack up?
According to MedScape's 2013 Compensation Report, average salary of IM Attending is $185,000/year. Assume you're single. You fall into the 33% tax bracket. After federal income tax, your income will be approximately $123,950/year. Disregard state taxes as you can live in one of the few states without state income tax. Then, subtract avg malpractice insurance cost ($6000/year) and avg healthcare premium cost ($2000/year) and you're left with $116,000. And then here's the kicker, subtract the loan debt payment you made that year of $44,000. You're left with a net income of $72,000/year.
In the military, only your Basic Pay is taxed. BAH, BAS, and all other special pays are NOT taxed. So as an IM Attending who went Straight-Through to residency, assuming you were a good boy/girl and were promoted every 5-6 years, you should be an O-6 within 12 years after residency. Adding up the yearly salary from O-4 to O-6 over the 15 year period, including adjusting the numbers for basic pay as well as special pay for each year served, and adjusting each basic pay with its respective tax bracket, you will have made a mean salary of: $134,040/year after taxes.
15 year average IM Attending net salary, after taxes, over a 15-year period after residency:
Civilian = $72,000; after 15 years when you fully pay off your loan, your net salary will return too approximately $120,000.
Military = $134,040
For
Primary Care fields, military seems to be just as good, if not, better than the civilian sector when it comes to salary.
HOWEVER, if you are planning on specializing (i.e. Neurosurgery, Heme/Onc, Cardiothoracic Surgery, Ortho), your salary in the civilian sector can range from $300,000 to $500,000+/year. This is SIGNIFICANTLY more than you will make in the military in that specialty, even after malpractice+health insurance+loan costs you will still be netting $150,000+ after it all.
Although I never recommend anyone to join the military purely for salary/expense purposes, the moral of the story when it comes to basing your decision on
salary:
**If you are going to be a Primary Care provider, military is a great option all around. Maybe even better than the civilian sector.
**If you are going to specialize, but feel the need to serve at least for a little bit in the military because its just gushing through your veins, either opt to do GMO tours and get out as soon as you fulfill your HPSP commitment, or do your Straight-Through residency, fulfill your commitment time as an attending, and get out into the civilian sector.
**If you plan to specialize and don't care about serving in the military at all, but are looking into the HPSP for medical school financial assistance, DON'T DO IT, just take out loans, you'll be making plenty to cover your loans as a specialist.