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Only $200k debt after graduation? Really?
- Thread starter Apoplexy__
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However, do not forget about the insolvency exclusion for debt forgiveness.
In order to prevent individuals from simply filing bankruptcy to avoid huge taxes on large amounts of forgiven debt (ie 100's of thousands), the insolvency exclusion has been part of the tax code for decades. The IRS form is form 982. The bottom line is that when you are forgiven for debt that exceeds your total (declared/taxable) assets at the time, you only pay tax on the forgiveness that reaches the level of your assets.
Example: 25 year loan forgiveness under IBR . If you paid the minimum payments on a large loan, (say 400k principle upon graduation), you end up with around $600k in forgiveness (give or take). Contrary to popular belief (and uninformed opinion), you are not taxed on 600k as if it was earned wage income. If you have 250k in assets at the time (say, some home equity and some retirement money and assuming the individual has minimized assets held under their name during the forgiveness year), you pay tax on 250k of the forgiveness, making your tax liability ~80k on the 600k of forgiveness.
The insolvency exclusion is not going away either, it is a structural feature of debt forgiveness in the tax system that prevents people from simply declaring bankruptcy and throwing a wrench into the legal and tax system. If you think about it, it makes sense. If you're 600k in debt and get forgiveness, you arent exactly expected to be able to suddenly pay 200k in tax. So instead of resulting in bankruptcy, the IRS's idea is that you pay what you can.
TLDR: when you have excessive forgiveness of debt (ie when it exceeds the level of your assets), you are only taxed on the forgiveness up to the level of your assets (to quote the IRS "to the extent to which you are solvent". If this wasnt the case, you would essentially be taxed on money that you didnt have, since you were 'underwater' on your loans in the first place (debt exceeded your assets, ie you were insolvent). See IRS publication 908 and form 982.
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sazerac covered that in the first post here, but the supporting detail is appreciated.
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yes.
Didn't read the forgivageddon post until just now. Thanks for pointing that out.
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forgivageddon, ha, love that term...
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OMG, I am getting PVCs reading this thread! 400k? 585k? Are you f***n kidding me? I would never EVER go to med school to service this mountain of debt. Makes me appreciate my total debt of 75K consolidated at 1.6% for which I am paying $350/month. I hope you all become dermatologists or neurosurgeons. GL
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As long as people keep shelling out whatever it costs to be a doctor there is demand and the price can go up. If it eventually got to be too much and they weren't filling, the price would have to go down. I doubt they would fill if they were charging 150k a year at this point in time.
The point is know your limits. At some point (different for everyone) it's not worth it anymore, no matter what anyone tells you. Know your loan terms and costs going in.
Eyefixer , If I had your interest rate I would never pay that sucker off. Especially with how the markets have been the past few years.
The point is know your limits. At some point (different for everyone) it's not worth it anymore, no matter what anyone tells you. Know your loan terms and costs going in.
Eyefixer , If I had your interest rate I would never pay that sucker off. Especially with how the markets have been the past few years.
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Well, some of us aren't fortunate enough to choose a school based on cost. Some of us only received one acceptance to med school--so it's either forget being a doctor or figure out how to manage the debt.
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Hey, believe it or not I did not come to this thread to gloat. I am 5 years out of fellowship and just wanted to give some perspective. The way future of medicine is looking now, it will be nearly impossible to service this mountain of debt. Let be give you an example. Cataract surgery used to reimburse $3600 per eye in the late 80s. January 1 of this year CMS cut it yet another 10% making it around $600 per eye and more cuts are coming in the future. Doctors salaries have no other place to go but down. Way way down. Honestly, if I had that much debt to service and I didn't get into one of the high paying specialities ( but who knows what they will pay 5, 10 years from now ), I'd seriously consider moving out of country. I am not joking. Ok, now back to dangling cookies in front of diabetics.
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Rather than being dismissive and telling others that they are weak or some such nonsense if they aren't willing to do an SMP or pay 400K+ to attend med school--maybe you should listen and express concern.
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Eyefixer,
Thanks for your input. What do you think is a reasonable amount of debt to have for the typical med school graduate? And by 'typical' I mean someone who matches into IM and practices GIM for a living.
Likewise, for your field--ophtho--what amount of debt would you personally feel comfortable with at graduation from residency?
thanx
D
deleted116380
The average I'm sure includes those that have all their education paid for by their parents. I had quite a few classmates whose parents (usually physicians) footed the bill. So I'm guessing the distribution of debt is mostly bimodal with some in the middle ($160k).
If I was going to leave school with more than $200k of debt, I would have done military route or not even gone in the first place.
If I was going to leave school with more than $200k of debt, I would have done military route or not even gone in the first place.
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Yup, without a doubt. Schools need to post the average debt of people taking out loans for the entire thing. The actual published average is brought down considerably by people who have a military scholarship and people whose parents are footing the entire bill. I brought up my calculated projected debt (500K+) with a dean at my school and his response was: "Well, if you are a plastic surgeon you can pay that off in two years."
Talk about cavalier.
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Eyefixer, when did you graduate?
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I'll probably just make the army pay for all that nonsense
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