My financial situation...$200k+ of debt?

[grahambranchno9]

Hello,

Im currently a Junior at a private university. I spent my first two years at another private university but was on a full scholarship, so had no debt.

This is my first semester at my new college, and I'm not on a scholarship. I've also decided to apply to medical school, so I will have to spend more time as an undergraduate to complete the prerequisite courses.

I have this year, this summer, next year, next summer, and probably a semester after that.

My parents are not willing to pay more than my room/board, despite the financial aid counselor saying they could pay more than double that amount. As a result, I've taken out a large private loan with citibank (CitiAssist Undergraduate). Here's what I've done for this year:

Received a Grant
Took out a $5,500 stafford loan at 6.8% (are these fixed or variable?)
Took out a %13,660 citiassist loan at 8.5% (pretty sure this is variable) co signed with my father.

So I'm almost $20k in debt, and will probably be in $60k total debt after my undergraduate years. Then comes medical school, which will obviously involve ALOT of loans. I could end up with $200k+ of student loans. How can I manage this?

Am I in too deep a hole already?

My parents give me $1,500 a month, and I earn a small amount more (but nothing substantial...). This is for room, board, gas, and everything else. If I have any excess left over, should I save it or invest it, or just pay of my loan early (can I do this?). I would think I should invest it in an index mutual fund within a Roth IRA, as I can probably average a larger percent gain than my loan is costing me...but this is not guarunteed. Also, will this investment hurt me next year when I am reapplying for financial aid? What would be a good mutual fund/investment?

I don't have a FICO score.

Any help would be appreciated!

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[Catayst]

Never invest while you are still in debt. I would save the extra money and use that to prevent taking out additional loans since most will charge you a fee off the top to get the loan.

 

[grahambranchno9]

Never invest while you are still in

What if the loan's interest was 2% and the investment yielded a guarunteed 15%? It would obviously be better to invest the money.

This is similar to the logic of prioritizing a company matched 401k over paying off high interest credit card debt.

 

[mshheaddoc]

Don't worry about med school, once you get in you will be able to pay off your debt after you finish residency in the 20 yrs allowed. There are many people that end up with that much debt and find ways to pay it off. If you want to go to medical school, don't worry about the financial implications.

 

[LADoc00]

Don't worry about med school, once you get in you will be able to pay off your debt after you finish residency in the 20 yrs allowed. There are many people that end up with that much debt and find ways to pay it off. If you want to go to medical school, don't worry about the financial implications.

I cant disagree more with this short sighted advice. It is dangerous and very irresponsible as we move into an era of interest rates that will surge upward, perhaps to levels unheard of in years past.

1.) Read all your loan material carefully and if neccessary with a financial expert who can explain the terms. Interest rates could rise to their highest level EVER if the economy goes into a recession. Taking out 200K in loans if the rates go double digit on your student loans is a total catastrophe. Seriously, we are talking over 2-2.5K month for 30 years with NO tax deductions. That is INSANE. Even if you are making 150K+ a year you could be too deep underwater to ever make it worthwhile. Unless we are talking fixed, low interest rates, aside from that SCREW IT, med school isnt worth it. Get an employer-financed MBA and call it a day.

2.) I would play hardball with financial aid departments at the med school you get into. Ask for university backed fixed interest rate loans.

3.) Live like a BUM. Go into homeless person mode. Get foodstamps, welfare, government assistance housing, get religious charities involved. Be a BUM, that might be your only way to financially survive.

4.) Dump your SO ASAP. You cant afford one. Steal KY packets from the clinic and begin a 4-year relationship with rosey palms.

5.) Loan repayment options like Indian Health or the Military are a SCAM. Their goal is to get labor cheaper from you than they would have to purchase it on the open market. Never do either of those things for the money, it is never worth it.

6.) Look carefully at the 4-5 top income earning specialities. Rich people can AFFORD to do peds, but not you. You have your sights on a select few: derm, optho, rads, ortho, plastics and the like. Become a goal oriented machine.

 

[t33sg1rl]

I cant disagree more with this short sighted advice. It is dangerous and very irresponsible as we move into an era of interest rates that will surge upward, perhaps to levels unheard of in years past.

1.) Read all your loan material carefully and if neccessary with a financial expert who can explain the terms. Interest rates could rise to their highest level EVER if the economy goes into a recession. Taking out 200K in loans if the rates go double digit on your student loans is a total catastrophe. Seriously, we are talking over 2-2.5K month for 30 years with NO tax deductions. That is INSANE. Even if you are making 150K+ a year you could be too deep underwater to ever make it worthwhile. Unless we are talking fixed, low interest rates, aside from that SCREW IT, med school isnt worth it. Get an employer-financed MBA and call it a day.

2.) I would play hardball with financial aid departments at the med school you get into. Ask for university backed fixed interest rate loans.

3.) Live like a BUM. Go into homeless person mode. Get foodstamps, welfare, government assistance housing, get religious charities involved. Be a BUM, that might be your only way to financially survive.

4.) Dump your SO ASAP. You cant afford one. Steal KY packets from the clinic and begin a 4-year relationship with rosey palms.

5.) Loan repayment options like Indian Health or the Military are a SCAM. Their goal is to get labor cheaper from you than they would have to purchase it on the open market. Never do either of those things for the money, it is never worth it.

6.) Look carefully at the 4-5 top income earning specialities. Rich people can AFFORD to do peds, but not you. You have your sights on a select few: derm, optho, rads, ortho, plastics and the like. Become a goal oriented machine.

OK, obviously the advice about not worrying about massive debt was beyond ridiculous... of course you should worry. But LADoc00 made two mistakes.
First of all: having 200K in debt while earning 150K is perfectly doable, even if your interest rate jumps to 10%. You will NOT be starving and you will NOT be bankrupt. Your standard of living will be average-as in, you will be living just like the EMTs, nurses, and various lab techs that you work with. If you absolutely won't be happy without your fancy car, then medicine is a poor choice for you. Most med students and young doctors don't mind living on a shoestring for a minimum of 21 years (undergrad, med school, residency, plus standard 10 year student loan repayment years with 2.5K monthly payements). And that's optimistically allowing just 3 years for residency-five years is a more reasonable average. Can you wait 23 years to buy your Beemer? No? Then med school is not for you.
If you CAN wait 23 years, and would rather drive a Ford anyway so that you can donate at least 10% of your gross income to charity, then fill out that AMCAS and definitely don't dump your SO! Rather, get engaged (not married). This way, your SO will be paying your room and board and perhaps even contributing to your tuition. In exchange for their generosity, they really get nothing from you except empty promises. (Marriage can also hurt your financial aid status, so it's best to wait even if you're sure that they're The One).

And just to reiterate-live like a bum. You imply that your room, board, gas, etc is $1500 monthly. That's a lot! If you're living in an average cost of living area, you should be able to bring your monthly expenses down to about $750. First order of business-roommates. And I DON'T mean housemates, where you each have your own bedroom. I mean roommates, where you have 4 people in a 2 bedroom, 1 bathroom apartment. Most medical students share bedrooms, eat Ramen daily, and can fit their entire wardrobe in three drawers. That's the kind of frugal living necessary. Unfortunately, medical students don't qualify for any type of government assistance like food stamps-those programs have written policies against graduate students, and most schools prohibit students from taking the aid even if you were to qualify.

 

[LADoc00]

Ahh, but being a "grad student" isnt a year round gig. Between UG and Grad you are simply another homeless person in the eyes of the law.

 

[mshheaddoc]

*sigh* I swear, some people need to read things and take generalizations. My point wasn't to say "don't worry about debt", the point was to help the person realize or not if they wanted to go to medical school. Debt is secondary and natural. I wasn't going to sit and lecture someone about what to do with spending loan money, when they are only trying to decide whether to persue medicine or not and if it was even feasible with undergraduate debt.

Of course I'm going to say "I agree with the above posters". One should live like a "student" but when you are an undergraduate and you are already $100K in the hole and about to apply to medical school, the thought of additional debt is daunting. I have personal experience in that and THAT is what I was commenting on. The advice and tips are great but that still doesn't help the OP decide what to do with their money in undergrad and whether its sensible to continue on the pre-medical path.

 

[LADoc00]

I want to add: Student loan debt is THE most dangerous type of debt outside of loan sharking.

Realize:
1.) It CANNOT be discharged through bankruptcy.
2.) It CANNOT be used as a state or federal income tax deduction if you make over 70K/year.
3.) It is typically does NOT have an interest rate cap. HEAL loans have been as high as 18+%, credit card APR level.
4.) It CAN cause your wages to be garnished, even if you move abroad.
5.) It CAN cause international bail bondsmen to arrest you abroad in the event of non-payment unless you reside in a non-treaty country.
6.) Loan money does NOT guarantee you will finish medical school sucessfully, get into a residency, fellowship or have a paying job in medicine. It is a RISK, not a secure investment. For many with borderline academic skills, putting 30K on black in Vegas would be a better use of your money.
7.) Student loans also MUST be paid even in the event you are permenantly disabled. Therefore you MUST carry premium professional disability insurance for the remainder of the term.
8.) It can significantly LIMIT your ability to pre-qualify for home loans. So much so in fact, you wont be able to reside in high cost of living areas within the US.
9.) Missed payments can have marked effects on your credit rating. Even if you are moving between addresses for residency, fellowship or your first job, a failure to make payments can be devasting on your FICO.
10.) Many Medical Schools do NOT care at all about your financial health or future job prospects. No more than Cheney cares about the well beings of Iraqis, dont fool yourself people!

 

[LADoc00]

OK, obviously the advice about not worrying about massive debt was beyond ridiculous... of course you should worry. But LADoc00 made two mistakes.
First of all: having 200K in debt while earning 150K is perfectly doable, even if your interest rate jumps to 10%. You will NOT be starving and you will NOT be bankrupt. Your standard of living will be average-as in, you will be living just like the EMTs, nurses, and various lab techs that you work with. If you absolutely won't be happy without your fancy car, then medicine is a poor choice for you. Most med students and young doctors don't mind living on a shoestring for a minimum of 21 years (undergrad, med school, residency, plus standard 10 year student loan repayment years with 2.5K monthly payements). And that's optimistically allowing just 3 years for residency-five years is a more reasonable average. Can you wait 23 years to buy your Beemer?

.

I really really hate these types of arguments because frankly I dont think you have enough experience to adequately comment. YES, maybe you are right if you are in Gasden, Alabama, but the cost of living varies so dramatically across the nation you are trying to generalize across places that might as well be different nations. In my area, an AVERAGE 3-bedroom home is around 700-900K. With 200K loans at 10% over 30years and an income of only 150K, you would need to save for 5-6 years to barely make enough to save on a down to be able to qualify to get an AVERAGE home.

Stop throwing beemers and other such garbage out there like anyone who actually has analyzed the finances of medicine is some greedy a-hole. Im not, Im just smart. Im make well over 150 and still drive a beater car. So there.

 

[Wallachia]

I cant disagree more with this short sighted advice. It is dangerous and very irresponsible as we move into an era of interest rates that will surge upward, perhaps to levels unheard of in years past.

1.) Read all your loan material carefully and if neccessary with a financial expert who can explain the terms. Interest rates could rise to their highest level EVER if the economy goes into a recession. Taking out 200K in loans if the rates go double digit on your student loans is a total catastrophe. Seriously, we are talking over 2-2.5K month for 30 years with NO tax deductions. That is INSANE. Even if you are making 150K+ a year you could be too deep underwater to ever make it worthwhile. Unless we are talking fixed, low interest rates, aside from that SCREW IT, med school isnt worth it. Get an employer-financed MBA and call it a day.

2.) I would play hardball with financial aid departments at the med school you get into. Ask for university backed fixed interest rate loans.

3.) Live like a BUM. Go into homeless person mode. Get foodstamps, welfare, government assistance housing, get religious charities involved. Be a BUM, that might be your only way to financially survive.

4.) Dump your SO ASAP. You cant afford one. Steal KY packets from the clinic and begin a 4-year relationship with rosey palms.

5.) Loan repayment options like Indian Health or the Military are a SCAM. Their goal is to get labor cheaper from you than they would have to purchase it on the open market. Never do either of those things for the money, it is never worth it.

6.) Look carefully at the 4-5 top income earning specialities. Rich people can AFFORD to do peds, but not you. You have your sights on a select few: derm, optho, rads, ortho, plastics and the like. Become a goal oriented machine.

probably not a good idea since is on fast track to be outsourced or used to balance the budget; anyone catch the write up in Wall Street last Monday? . . . 7 billion paid by Medicare for imaging; that's 7 days in Iraq

 

[LADoc00]

Your avatar has boobies, no?

 

[Wallachia]

i think so; i'm a fan

 

[LADoc00]

Nice.

 

[Miami_med]

I want to add: Student loan debt is THE most dangerous type of debt outside of loan sharking.

Realize:
1.) It CANNOT be discharged through bankruptcy.
2.) It CANNOT be used as a state or federal income tax deduction if you make over 70K/year.
3.) It is typically does NOT have an interest rate cap. HEAL loans have been as high as 18+%, credit card APR level.
4.) It CAN cause your wages to be garnished, even if you move abroad.
5.) It CAN cause international bail bondsmen to arrest you abroad in the event of non-payment unless you reside in a non-treaty country.
6.) Loan money does NOT guarantee you will finish medical school sucessfully, get into a residency, fellowship or have a paying job in medicine. It is a RISK, not a secure investment. For many with borderline academic skills, putting 30K on black in Vegas would be a better use of your money.
7.) Student loans also MUST be paid even in the event you are permenantly disabled. Therefore you MUST carry premium professional disability insurance for the remainder of the term.
8.) It can significantly LIMIT your ability to pre-qualify for home loans. So much so in fact, you wont be able to reside in high cost of living areas within the US.
9.) Missed payments can have marked effects on your credit rating. Even if you are moving between addresses for residency, fellowship or your first job, a failure to make payments can be devasting on your FICO.
10.) Many Medical Schools do NOT care at all about your financial health or future job prospects. No more than Cheney cares about the well beings of Iraqis, dont fool yourself people!

LA Doc,

I often agree with some of your assesments, but you have some factually incorrect statements in here. Current Stafford Loans are fixed rate 6.8%. Current Grad Plus Loans (which now cover the difference between Staffords and "official costs") are fixed at 8.5%. I do agree with almost everything else.

To the OP,

There are a lot of financial scams in medicine, and you will find that even in the process of getting accepted to school, that 80% of what you pay has nothing to do with your learning. You have to pay off all of the sharks to have the right to practice medicine in the US. My school is actually better than most in this regard, but everyone has to pay an endless supply of testing and board fees that are heavily regulated by people who want money and know people in congress. If you can deal with it, medicine has a track record of being a good investment. LA Doc is right, in the sense that you CANNOT get rid of student loans without paying them off. They are risky.

If you can think of this as a business investment, you should. You will need to in order to maintain solvency. 60k in debt is not impossible, but you will probably NOT be able to afford to offer primary care services to poor migrant workers. Noble or not, the numbers won't work. Be realistic, and there are many ways you can make a reasonable income in medicine that will pay your loans.

 

[mshheaddoc]

Also with more and more organizations offering to "pay your loans" for commitment dates there are people who leave residency without any debt. It just depends on where you want to go. I know of 3 people who left residency 2 FP and 1 neurosurgery with no or minimal debt since they signed on contracts for repayment.

 

[Miami_med]

Also with more and more organizations offering to "pay your loans" for commitment dates there are people who leave residency without any debt. It just depends on where you want to go. I know of 3 people who left residency 2 FP and 1 neurosurgery with no or minimal debt since they signed on contracts for repayment.

This is definitely a viable option for those that are willing to move to less popular locations and practice in-demand specialties. Unfortunately, you won't get these deal in NY or LA.

 

[Doctor Bagel]

I want to add: Student loan debt is THE most dangerous type of debt outside of loan sharking.

Realize:
1.) It CANNOT be discharged through bankruptcy.
2.) It CANNOT be used as a state or federal income tax deduction if you make over 70K/year.
3.) It is typically does NOT have an interest rate cap. HEAL loans have been as high as 18+%, credit card APR level.
4.) It CAN cause your wages to be garnished, even if you move abroad.
5.) It CAN cause international bail bondsmen to arrest you abroad in the event of non-payment unless you reside in a non-treaty country.
6.) Loan money does NOT guarantee you will finish medical school sucessfully, get into a residency, fellowship or have a paying job in medicine. It is a RISK, not a secure investment. For many with borderline academic skills, putting 30K on black in Vegas would be a better use of your money.
7.) Student loans also MUST be paid even in the event you are permenantly disabled. Therefore you MUST carry premium professional disability insurance for the remainder of the term.
8.) It can significantly LIMIT your ability to pre-qualify for home loans. So much so in fact, you wont be able to reside in high cost of living areas within the US.
9.) Missed payments can have marked effects on your credit rating. Even if you are moving between addresses for residency, fellowship or your first job, a failure to make payments can be devasting on your FICO.
10.) Many Medical Schools do NOT care at all about your financial health or future job prospects. No more than Cheney cares about the well beings of Iraqis, dont fool yourself people!

A couple of thoughts. With the new GradPlus loans, you don't have to worry about jacked up interest rates. The rates are fixed as opposed to private loans, so you know what you'll be paying.

Second, federal loans can be discharged because of disability. Again, with the GradPlus loans, you can arrange it so all your loans are federal loans.

As for the high cost area, you don't have to live in LA, NYC or San Francisco. Yes, the cost of living across the country is variable, but there are very few places where the average house costs $700k.

 

[curious1]

Housing costs are expensive almost everywhere outside of the midwest. If you want to live within 100 miles of any coastline (or any nice metro area), a decent starter house will run you 500k. 200k and 300k buys you a condo now. I went out and looked in the MD and VA suburbs last weekend and it is depressing. A lot of buyers get money from their parents and bid up prices. It's almost a requirement to be dual income (SO working even after kids are born) too.

 

[Doctor Bagel]

Housing costs are expensive almost everywhere outside of the midwest. If you want to live within 100 miles of any coastline (or any nice metro area), a decent starter house will run you 500k. 200k and 300k buys you a condo now. I went out and looked in the MD and VA suburbs last weekend and it is depressing. A lot of buyers get money from their parents and bid up prices. It's almost a requirement to be dual income (SO working even after kids are born) too.

I spend the last four years of my life living within 100 miles of the Pacific Coast in a fanstastic, desirable city (Portland, OR), and you could buy a small/cute/somewhat fixer upper home in a nice area for $300k. Prices in that market are stagnating, too, instead of increasing. I don't know about the east coast, but those $500k plus prices for starter homes in the West are California deals only. I agree, though -- it's depressing.

 

[curious1]

I spend the last four years of my life living within 100 miles of the Pacific Coast in a fanstastic, desirable city (Portland, OR), and you could buy a small/cute/somewhat fixer upper home in a nice area for $300k. Prices in that market are stagnating, too, instead of increasing. I don't know about the east coast, but those $500k plus prices for starter homes in the West are California deals only. I agree, though -- it's depressing.

It's nice to hear that Portland may still be somewhat affordable. I wonder how many sq ft qualifies as small, though. A 1500 sq ft 2 bedroom + den/1.5 bath cookie cutter home may not really work for someone in their 30s with 2 little kids and a SO who put up with many years of apartment dwelling. It would be nice to have a yard and a guest room and be in a great school district. I guess you can't have everything.

 

[Kuba]

Housing costs are expensive almost everywhere outside of the midwest. If you want to live within 100 miles of any coastline (or any nice metro area), a decent starter house will run you 500k. 200k and 300k buys you a condo now. I went out and looked in the MD and VA suburbs last weekend and it is depressing. A lot of buyers get money from their parents and bid up prices. It's almost a requirement to be dual income (SO working even after kids are born) too.

I dont know where you are getting your facts. 500k will buy you a very NICE 2500 sq ft or more house in CT where the COL is high. In case you aren't from the NE and did poor in geography, CT is on the coastline in between 2 major metropolitan areas of NY and Boston.

 

[curious1]

I dont know where you are getting your facts. 500k will buy you a very NICE 2500 sq ft or more house in CT where the COL is high. In case you aren't from the NE and did poor in geography, CT is on the coastline in between 2 major metropolitan areas of NY and Boston.

I'd be interested to see a link to an MLS sheet for the kind of property you describe. I have looked and I doubt it exists. Maybe in dumpy New Haven or some rural part of CT.