Terrified about debt

[mmcnam]

So I'm not sure how many of us are looking ahead financially, but I've been accepted to a private med school and am most likely getting no financial aid. My father makes decent money, which tells schools not to be generous but my parents will not be contributing to med school. They have lots of other kids to pay for and this is simply the way it is. I'll most likely be 200k in debt in 2012 and this is terrifying. Simple math tells me that with 6% interest, I'll probably be paying an additional 12k/year in interest on top of the meager salary I hope to make as a pediatrician. I have no idea if I want to specialize in something, but I'm leaning towards primary care. So for those of us who've actually thought about it or even been through it, how does this work? How do I buy a house and support a family by the age of 35 (I'm 22 now) if 12% of my income simply goes to paying off interest for my med school debt?

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[nevercold]

So I'm not sure how many of us are looking ahead financially, but I've been accepted to a private med school and am most likely getting no financial aid. My father makes decent money, which tells schools not to be generous but my parents will not be contributing to med school. They have lots of other kids to pay for and this is simply the way it is. I'll most likely be 200k in debt in 2012 and this is terrifying. Simple math tells me that with 6% interest, I'll probably be paying an additional 12k/year in interest on top of the meager salary I hope to make as a pediatrician. I have no idea if I want to specialize in something, but I'm leaning towards primary care. So for those of us who've actually thought about it or even been through it, how does this work? How do I buy a house and support a family by the age of 35 (I'm 22 now) if 12% of my income simply goes to paying off interest for my med school debt?

So, as a potential primary care doc, you can think about this in a few ways:

(1) There are primary healthcare scholarships that offer substantial or complete debt reduction in exchange for practicing in an underserved area for a certain amount of time.

If that's not an option, then consider:

(2) At current rates, a $200,000 debt paid off on a 10-year loan would cost $2300/month. As a pediatrician, you can theoretically expect to make about $150,000/yr if you put in the time to have a full practice. On the high side of the tax brackets, you could take home about $90,000, or $7500/month. After loans you are living on $5200/month or a total of $62,400. The debt seems scary, but it is manageable if you live within your means.

If that is not what you prefer, then consider:

(3) After graduating, you can consolidate your loans and in some cases get a 30-year loan. Assuming this loan at a 10% interest rate (way too high), you'd reduce your payment to $1750/month. Assuming this loan at a more reasonable 7% interest rate, you'd reduce your payment to $1330/month.

The profession of a physician is still an exclusive club that offers a supply for which there is a huge demand. Many physicians are extremely active in politics. As a result of these two facts, it is likely that salaries will be protected to make medical school remain a liveable investment. Anyone who tries to convince you otherwise is likely just fear-mongering.

 

[mdgator]

I'm right there with you. My parents don't make great money, but enough, I think, that I won't be getting spectacular financial aid. So far all of my interviews have been private, OOS schools. Although I'm not sure, I'm also pretty interested in primary care. I don't mind living modestly at all, but I would like to know that I'll be able to put a roof over my family's heads and food on the table on, say, a peds income. I'd also like to eventually not be in debt.
The funny thing is, people like us are worrying about just getting by after med school, while parents are trying to introduce me to their daughters b/c they think I'm going to be a rich doctor. They don't get it. (But until I catch one of those pretty daughters, my lips are sealed )

 

[dienekes88]

So, as a potential primary care doc, you can think about this in a few ways:

(1) There are primary healthcare scholarships that offer substantial or complete debt reduction in exchange for practicing in an underserved area for a certain amount of time.

If that's not an option, then consider:

(2) At current rates, a $200,000 debt paid off on a 10-year loan would cost $2300/month. As a pediatrician, you can theoretically expect to make about $150,000/yr if you put in the time to have a full practice. On the high side of the tax brackets, you could take home about $90,000, or $7500/month. After loans you are living on $5200/month or a total of $62,400. The debt seems scary, but it is manageable if you live within your means.

If that is not what you prefer, then consider:

(3) After graduating, you can consolidate your loans and in some cases get a 30-year loan. Assuming this loan at a 10% interest rate (way too high), you'd reduce your payment to $1750/month. Assuming this loan at a more reasonable 7% interest rate, you'd reduce your payment to $1330/month.

The profession of a physician is still an exclusive club that offers a supply for which there is a huge demand. Many physicians are extremely active in politics. As a result of these two facts, it is likely that salaries will be protected to make medical school remain a liveable investment. Anyone who tries to convince you otherwise is likely just fear-mongering.

Well said.

Another thing is... I think you can ask for forbearance or deferment while you're a resident. That'll freeze the interest for a time and allow you to hold off on paying 'til you actually make money.

mmcnam, there was another thread (one that I was way too active in) that got a little ridiculous. At the end of the day, doctors live pretty comfortably while paying off their debt, and that's why people offer medical students so much money in the form of loans. I think it was the financial aid guy at Mount Sinai who told us something along the lines of: "Doctors are one of the lowest risk populations for people looking to loan money."

It's not the place to make your millions (that's finance), and you can't be in medicine for the money (it doesn't sound like you are). However, you'll be able to buy your Camry, pay off your loans over 30 years, and send your kids to college without their having to worry about debt.

 

[Samus Aran]

hopefully the finance forum regulars can help answer your questions

 

[LADoc00]

So, as a potential primary care doc, you can think about this in a few ways:

(1) There are primary healthcare scholarships that offer substantial or complete debt reduction in exchange for practicing in an underserved area for a certain amount of time.

If that's not an option, then consider:

(2) At current rates, a $200,000 debt paid off on a 10-year loan would cost $2300/month. As a pediatrician, you can theoretically expect to make about $150,000/yr if you put in the time to have a full practice. On the high side of the tax brackets, you could take home about $90,000, or $7500/month. After loans you are living on $5200/month or a total of $62,400. The debt seems scary, but it is manageable if you live within your means.

If that is not what you prefer, then consider:

(3) After graduating, you can consolidate your loans and in some cases get a 30-year loan. Assuming this loan at a 10% interest rate (way too high), you'd reduce your payment to $1750/month. Assuming this loan at a more reasonable 7% interest rate, you'd reduce your payment to $1330/month.

The profession of a physician is still an exclusive club that offers a supply for which there is a huge demand. Many physicians are extremely active in politics. As a result of these two facts, it is likely that salaries will be protected to make medical school remain a liveable investment. Anyone who tries to convince you otherwise is likely just fear-mongering.

IMO, medical school investments of >200 warrant doing only a few specialities and frankly Peds is NOT one of them.

Interests will climb and if historical barometers are any measure student loan rates could easily go double digits. The above calculations are very very rosey.

I would think long and hard about your situation before jumping into it. Another might be to try to bargain med school tuition down, argue with them. I personally saved myself around 50K doing that.

Military is also an option...I guess.

 

[etf]

Another might be to try to bargain med school tuition down, argue with them. I personally saved myself around 50K doing that.

really? how do you pull that off, just by negotiating with the school? who would you talk to?

 

[TMP-SMX]

really? how do you pull that off, just by negotiating with the school? who would you talk to?

Interesting. I'm thinking this is something that would be a little more common if all of us knew about it.

 

[yadayadadude]

Another thing is ... I think you can ask for forbearance or deferment while you're a resident. That'll freeze the interest for a time and allow you to hold off on paying 'til you actually make money.

Unfortunately, this is wrong.

Here are the various situations:

1. In-school deferral: no interest accrues in subsidized loans; interest does accrue on unsubsidized loans. Remember, most medical students are eligible for a maximum of $8500 in subsidized loans per year. The rest will be unsubsidized. So, for most medical students, the bulk of your loans will accrue interest while you are in school.
2. Economic hardship deferral: no interest accrues in subsidized loans; interest does accrue on unsubsidized loans. This is the pathway traditionally utilized by residents. There has recently been legislation passed that threatened the economic hardship deferral pathway, and as things stand, it's not clear if deferral will exist as an option for residents in the future.
3. Forbearance: interest accrues on the whole kaboodle. This *may* be the only option for residents who can't afford even income-based payments in the future.

Sorry to be the bearer of bad news.

 

[The White Coat Investor]

So for those of us who've actually thought about it or even been through it, how does this work? How do I buy a house and support a family by the age of 35 (I'm 22 now) if 12% of my income simply goes to paying off interest for my med school debt?

Let's see....$100K salary....$7K to social security, $10K for income tax, $10K to charity, $12K to student loans $26K for retirement....leaves you a total of $35K/year to live on. That's how you do it. I recommend you don't try to live in NYC. You may get a job that pays $150K, which will make things a lot easier, but your lifestyle will be far from lavish, not because of the debt, but because you chose peds.

I'm in the military and my finances look pretty similar:
$125K salary....$5K to SS, $3K for income tax, $9K for charity, $0K to student loans, $30-50K to retirement, leaves me $58-$78K/year to live on. I'm 1.5 years out of residency, own a large townhome in a relatively inexpensive part of the country, we drive two inexpensive cars, and we travel across the country 3 or 4 times a year to vacation. It is a nice, but in no way lavish, lifestyle. It should markedly improve when I get out of the military. Incidentally, pediatricians in the military make about $14K/year less than I do and they do deploy, although less often than many other specialties.

Keep in mind that many (most?) military doctors wish they had just taken the loan money due to the hassle factor. Being too debt averse can lead one to make bad decisions. There are worse things than paying $1 grand in interest on student loans every month (tax deductible if you don't make too much.)

So how do you do it? You keep living like a resident for the first 5 or 10 years out of residency and you SLOWLY increase your lifestyle. Most doctors get into trouble because the sense of entitlement they have after 11-14 years in school/training leads them to try to go from resident lifestyle to attending lifestyle in one fell swoop after (or even before thanks to credit) finishing residency.

 

[deleted126335]

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[elderjack21]

Yup. That's it. I took the loans. Lived like a resident for 5 years. Less than 50% salary. Small house. Little or inherited furniture. Paid off the school loans. My wife and I and fought about this for the first few years. Saved well. Invested wisely. Now kids in private school. no debts. Significant coin in the bank.

If you don't mind me asking, about how much debt did you have when you finished and did you have a family while in med school? What is your specialty?

I am just about to start medical school this summer, have a family and my wife and I are debating our options. Thanks

 

[deleted126335]

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[elderjack21]

Finished residency in 1992. Anesthesiology. $85,000 in loans. First baby during 1st year out of residency. I imagine that it would have been harder to save nearly so well if we had kids in med school. Then again there is no good time to have kids.

But there are worse times than others We have two kids already, but they are wonderful.

Anywho...82k in debt would be wonderful, even 160k, but my situation is shaping up to be somewhere in the neighborhood of 250K+ once interest is figured in at the end of 4 years at a private school with family.

 

[The White Coat Investor]

But there are worse times than others We have two kids already, but they are wonderful.

Anywho...82k in debt would be wonderful, even 160k, but my situation is shaping up to be somewhere in the neighborhood of 250K+ once interest is figured in at the end of 4 years at a private school with family.

Perhaps your spouse can work, at least part time. You could also make a little money, at least during the summer between 1st and 2nd year, and probably throughout your first and second year. I found a job as a 4th year for $20/hour doing H&Ps for an outpatient surgical center. Another option is to work this year saving up as much as you can and try to get into a cheaper school next year. Obviously, this could backfire.

Are graduate/professional students eligible for Pell grants? I can't remember. Also keep your ears open for scholarships. They're rare, but they do exist.

Good luck. $250K is a lot for a pediatrician. It is like having a second mortgage. But it is certainly doable, as long as you are willing to delay gratification for some time after graduating from residency. Also, keep in mind your parents. Even if they can help out with a couple of hundred bucks a month, it makes a difference. You and your spouse can donate plasma, that's good for $2-$300 a month. You can donate sperm too, but I have no idea what it pays!

 

[deleted126335]

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[elderjack21]

Perhaps your spouse can work, at least part time. You could also make a little money, at least during the summer between 1st and 2nd year, and probably throughout your first and second year. I found a job as a 4th year for $20/hour doing H&Ps for an outpatient surgical center. Another option is to work this year saving up as much as you can and try to get into a cheaper school next year. Obviously, this could backfire.

Are graduate/professional students eligible for Pell grants? I can't remember. Also keep your ears open for scholarships. They're rare, but they do exist.

Good luck. $250K is a lot for a pediatrician. It is like having a second mortgage. But it is certainly doable, as long as you are willing to delay gratification for some time after graduating from residency. Also, keep in mind your parents. Even if they can help out with a couple of hundred bucks a month, it makes a difference. You and your spouse can donate plasma, that's good for $2-$300 a month. You can donate sperm too, but I have no idea what it pays!

My wife will likely work a couple days a week...although once childcare is subtracted for times I can't watch the kids...that may be a complete wash. There also has to be some kind of balance though for family time...I am not planning on sacraficing my family for my own professional goals in medicine. Plasma is on the list of things to earn money (already have nice scars from the plasma trips during college....)...haven't looked into the sperm donor thing...

I am working now full-time and saving about 1500 a month (not much I know...but it is the best I can do living in a big city), saved another 30k while on active duty (just got out two months ago), have absolutely no debt...that said none of that will last very long.

Other "cheaper" schools (state schools) for me are off-set by a much higher cost of living than where the private school is at...and I am not getting any younger. I noticed that you didn't mention getting the military to pay for it, is that something you wouldn't do again if given the chance? (yes...I have read all the posts in the milmed section...haha)

 

[elderjack21]

Don't forget what 16 years of inflation did to that 85K. more like 147K of 2008 dollars(inflation figure of 3.5%). The original poster anticipated finishing med school in 2012. 85K in 1992 with 20 years of inflation at 3.5% = 199K in 2012.

Shows just how damaging inflation can be, along with the magic of compound interest.

Granted those finishing med school in 2012 will have a much harder time making good incomes than those who came before them.

Both very good points.

 

[The White Coat Investor]

I noticed that you didn't mention getting the military to pay for it, is that something you wouldn't do again if given the chance? (yes...I have read all the posts in the milmed section...haha)

Nope. That was a mistake I made because I was too debt averse. The military doesn't pay for it in exchange for a military commitment. They pay for it in exchange for a military commitment AND paying you less than you're worth later. It is really just a matter of when you receive the money, not how much you receive. You will take out loans either way, money loans vs time loans.

 

[elderjack21]

Nope. That was a mistake I made because I was too debt averse. The military doesn't pay for it in exchange for a military commitment. They pay for it in exchange for a military commitment AND paying you less than you're worth later. It is really just a matter of when you receive the money, not how much you receive. You will take out loans either way, money loans vs time loans.

Agreed.

I have run the numbers...which are always variable and can be debated...but after about 4-7 years post residency everything kind of evens out more or less (if you plan on making in the neighborhood of 200k a year as a civilian). HPSP gives you a higher payout earlier on and allows you to start saving for retirement earlier and living better...if you choose to (less student loans, less student loan interest, higher pay in residency)....but of course you make around 120K a year in the military (if you choose a speciality that will pay you 200K+ on the outside you would get a higher bonus each year from the military) for four years while you would be making (as my baseline) 200K on the outside...I don't want to say much more as it could go south like many of the milmed threads do....everything is a trade off in one way or another and everyone's experience with milmed seems to vary quite a bit.

 

[Founder]

So I'm not sure how many of us are looking ahead financially, but I've been accepted to a private med school and am most likely getting no financial aid. My father makes decent money, which tells schools not to be generous but my parents will not be contributing to med school. They have lots of other kids to pay for and this is simply the way it is. I'll most likely be 200k in debt in 2012 and this is terrifying. Simple math tells me that with 6% interest, I'll probably be paying an additional 12k/year in interest on top of the meager salary I hope to make as a pediatrician. I have no idea if I want to specialize in something, but I'm leaning towards primary care. So for those of us who've actually thought about it or even been through it, how does this work? How do I buy a house and support a family by the age of 35 (I'm 22 now) if 12% of my income simply goes to paying off interest for my med school debt?

You could do Health Professions Scholarship Program. They'll pay the tuition. You will get a $1900 a month stipend and if you go Navy, you get a $20,000 bonus (which is taxable). That is what I did last year.

But I wanted to go into the military since forever ago. And I wanted to be a physician. So I got the best of both worlds. And I believe salaries in the military with their bonuses are about equal to the "lower" salaries of pediatricians.

 

[elderjack21]

You could do Health Professions Scholarship Program. They'll pay the tuition. You will get a $1900 a month stipend and if you go Navy, you get a $20,000 bonus (which is taxable). That is what I did last year.

But I wanted to go into the military since forever ago. And I wanted to be a physician. So I got the best of both worlds. And I believe salaries in the military with their bonuses are about equal to the "lower" salaries of pediatricians.

Army is offering a 20k bonus starting this January as well. There are many pros and cons of taking HPSP, research it out well...not just on SDN either (extremely biased sample

 

[Founder]

*Personally,* the only research you have to do is if you want to be in the military. It's a nice financial bonus if you are planning to go into the military or want that lifestyle. I was debt averse, but this was also my only way to be a military doctor (as I was contracted with ROTC I had to have HPSP or I would have had to commission as a line officer they said).

 

[elderjack21]

You know, it always amazes me at how few people are generally in the Finance and Investmand and Financial Aid forums.

It is almost like paying for schools isn't a concern for most people.

 

[mooredge]

You know, it always amazes me at how few people are generally in the Finance and Investmand and Financial Aid forums.

It is almost like paying for schools isn't a concern for most people.

Agreed.

 

[crewmaster1]

It is a concern for most, but many just sweep it under the carpet until they are out of residency. It is pretty easy....just take out loans, defer in residency, then deal with the mess in the end when you're an attending. Most people dont take the time to plan their financial future because they are too busy living in the here and now. Another great example, on a much larger scale: the retirement of the baby-boomers. Many don't even know what a 401k or IRA are. Still counting on social security, just like many residents think they will rake in bank when they are attendings. They don't think about the higher taxes, etc.

The truth is, we all get through med school and residency just fine and are able to pay off our debts when we are done. It really isn't that bad. Think about how many people living on 50k/yr incomes buy houses over 250k. You and your wife both work (you make 150 she makes 50) you live within your means, refinance student debt into 20-30 years like a home loan, and start paying! Or consider a practice that pays a bit better or sub-spec.