EM Student Loan Repayment

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Kaiv Man

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Do most newly graduated EM attendings spend the first couple of years trying to chip away at their student loan debt (lets say dedicating 25% to 50% of their income to loan repayment) or do they just make minimum payments and draw out their loan repayment for 10/20/30 years? I would think the 3 year residency would compel new EM attendings to spend the first 1 or 2 years tackling down their student loan debt since it seems that they make great income (200K+) and have a relatively shorter residency...why not live like a resident for another 1-2 years (which you'd have to anyway if you had picked most any other specialty) to significantly lessen the weight of student loans?....just curious :shrug:

I'm just about to embark on the path towards becoming a physician, and as you can probably tell, am quite worried about student loan debt....
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Good question. I am curious about what people do now since the interest rate is 6.8% (as opposed to like 2% in early 2000)
 
I went to a talk recently where the guy said basically you want to do whatever is going to maximize your return on investment. So if there is a stock portfolio that should return 4% on your investment and your loans are 2% you want to pay the minimum on your debt and most of the rest of your cash towards those stocks. On the other hand if your loans are 8% you would put all your profits towards paying down the loan.

Complicating matters is that fact that most people have a combination of loans, federal, private etc. with different interest rates.

You didn't mention option three (the first two being live like a resident or take 30 years to pay off the loan) which is move somewhere you might not love for two or three years where they are willing to pay you $350,000 a year. You can live better than a resident and pay off a good chunk of your loans.

I'm still in med school but I think you need to find some sort of happy medium between trying to pay stuff off so interest doest accumulate and being happy at the time. When you are 65 and look back on your career you don't want to say "man, I was miserable for 5 years in my 30s because I wanted to pay off my debt 3 years early." There is some kind of happy balance.

I'm no expect, but there are professional financial planners to help, as well as financial aid people at your school. Also keep in mind what it'll cost to repay loans and minimize how much extra borrowing you have to do during med school. Not to live like a miser but worth remembering that every dollar you take out in loans will cost you about $2 in the long run. So if you can hold back on financing that european vacation during second year it'll be good in the long run.
 
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In an stable situation, it wouldn't be a bad thing to pay minimums if you are going to make more with investing. However, I don't know that anyone on these forums are likely to say that medicine is currently in a stable situation.

I personally plan on paying off my loans within 2 years of residency. This may be more difficult for some people (especially if they have kids or other expenses.) I can't see keeping all that debt around when I'm not terribly sure what my salary may be in 5 years (or 10 years.) If in 10 years, our median salary may have gone from 250,000 to 150,000 (which I don't think is unlikely given the current rate at which they are chipping away at reimbursement). If that occurs, then those 200K (or insert number here) of loans that you put off paying will be a substantially larger percentage of your income. In that case you will have little income to invest (and get those higher interest rates...) as you will be spending most of your disposable income on your loan payments.

If you buckle down and take care of it early, however, you've got a lot more freedom with which to work. You can live pretty comfortably on 150K if you've got few other payments.

Also, with the way the market is going, I don't think many people are going to average 10% return for the next few years (which would be necessary to make not paying off your 7% loans worthwhile.)


Just my 2 cents.
 
Kaiv Man said:
I'm just about to embark on the path towards becoming a physician, and as you can probably tell, am quite worried about student loan debt....
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Do you have any interest in the military? I've never recommended that before to anyone (as I think now you make off better in the end going through on your own and then choosing private practice.) My best friend is doing IM at the Naval Medical Center in San Diego and he seems to be enjoying it (but he wanted to go military medicine.)

However, as I stated in my above post, if you're just going to school now, I worry that medicine will be a vastly different place by the time you finish residency. If you're interested (or in the other tuition year for year programs) that may be an option.
 
ccfccp said:
In an stable situation, it wouldn't be a bad thing to pay minimums if you are going to make more with investing. However, I don't know that anyone on these forums are likely to say that medicine is currently in a stable situation.

I personally plan on paying off my loans within 2 years of residency. This may be more difficult for some people (especially if they have kids or other expenses.)
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Unless your debt burden is significantly lower than the current average, it's going to be very difficult to pay off your loans in two years Even if you are single with no dependents, by the time taxes, mortgage/rent, insurance, +/- car payment take their toll you are probably looking at 3-4 years to pay them off.

Also, you best first move as an attending is to accumulate at least 3 and preferably 6 months of operating expenses in some liquid form. This cushion allows you to not have to take out more loans for unexpected expenses. After that work on paying off the loans that have a higher interest than you can expect to get from investing.
 
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Arcan57 said:
Unless your debt burden is significantly lower than the current average, it's going to be very difficult to pay off your loans in two years Even if you are single with no dependents, by the time taxes, mortgage/rent, insurance, +/- car payment take their toll you are probably looking at 3-4 years to pay them off.

Also, you best first move as an attending is to accumulate at least 3 and preferably 6 months of operating expenses in some liquid form. This cushion allows you to not have to take out more loans for unexpected expenses. After that work on paying off the loans that have a higher interest than you can expect to get from investing.
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This may sound naive, but I don't understand why a new single EM attending can't pay off lets say about 200k of student loan debt in 2 years when their total income for that duration would be around 400k+ (200k+/yr) ? That leaves you with 200k of remaining income that can be allocated towards said expenses (taxes, mortgage/rent, insurance, car payment)...this is assuming you're not living like you have 400k in your pocket...you'd have to live like you're making 100k/yr during those 2 years (which isn't shabby at all for a single guy and much better than being a resident)
 
Kaiv Man said:
This may sound naive, but I don't understand why a new single EM attending can't pay off lets say about 200k of student loan debt in 2 years when their total income for that duration would be around 400k+ (200k+/yr) ? That leaves you with 200k of remaining income that can be allocated towards said expenses (taxes, mortgage/rent, insurance, car payment)...this is assuming you're not living like you have 400k in your pocket...you'd have to live like you're making 100k/yr during those 2 years (which isn't shabby at all for a single guy and much better than being a resident)
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Some others on here will have more to add but for arguments sake- Take a single individual living in a tax free state like Texas. A 200k yearly salary after federal income taxes, medicare & of course social security will have a monthly take home of roughly $11,200 or yearly income of $134,400. Thats pretty good but you haven't included your regular cost of living, funding of retirement, licenses etc, etc. If you lived on your resident salary for another 2 years you could definitely put a large dent in your debt burden.

Heaven forbid you live in California or other similar states where you will also have to pay up to 10.55% state income tax, which would give you $9,500 a month take home. Plus there is property tax if you buy a home, sales tax on your purchases and gasoline it all adds up.

I expect to take home 50% of my income, hopefully when that time comes I can find a talented financial planner to help me bring home a little more.:laugh:
 
....and remember that you may make 5% on an investment, pay 5% on a mortgage, or 5% on a student loan...but also take into account two legal situations...

1) If you are sued (depending on state they may/may not go after your home, investments)
2) If you are divorced (home is split, but you keep the loans).

This is discussed in the financial forums...
 
tegs15 said:
Some others on here will have more to add but for arguments sake- Take a single individual living in a tax free state like Texas. A 200k yearly salary after federal income taxes, medicare & of course social security will have a monthly take home of roughly $11,200 or yearly income of $134,400. Thats pretty good but you haven't included your regular cost of living, funding of retirement, licenses etc, etc. If you lived on your resident salary for another 2 years you could definitely put a large dent in your debt burden.

Heaven forbid you live in California or other similar states where you will also have to pay up to 10.55% state income tax, which would give you $9,500 a month take home. Plus there is property tax if you buy a home, sales tax on your purchases and gasoline it all adds up.

I expect to take home 50% of my income, hopefully when that time comes I can find a talented financial planner to help me bring home a little more.:laugh:
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Thanks a lot for the informative reply! :)

Well, I'm starting med school this August and anticipate about 200k of student loan debt that I will face as an attending. I was hoping that since EM (which is something I'm very interested in pursuing) has only a 3 year residency and provides 200K+ salary as an attending, that I would be able to "live like a resident" for an additional 1-2 years in order to significantly tackle my debt....I hate debt ha ha. I'm hoping not to start a family, live a relatively luxurious life, make investments, or consider retirement savings until maybe a couple years post residency. I guess my question is:

Why is it not more commonplace for new EM attendings to "live like a resident" for an additional 1-2 years post residency completion in order to tackle their debt? It seems like a reasonable plan to me....
 
Kaiv Man said:
Thanks a lot for the informative reply! :)

Well, I'm starting med school this August and anticipate about 200k of student loan debt that I will face as an attending. I was hoping that since EM (which is something I'm very interested in pursuing) has only a 3 year residency and provides 200K+ salary as an attending, that I would be able to "live like a resident" for an additional 1-2 years in order to significantly tackle my debt....I hate debt ha ha. I'm hoping not to start a family, live a relatively luxurious life, make investments, or consider retirement savings until maybe a couple years post residency. I guess my question is:

Why is it not more commonplace for new EM attendings to "live like a resident" for an additional 1-2 years post residency completion in order to tackle their debt? It seems like a reasonable plan to me....
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The answer to this question is actually very simple. Current attendings got student loans at around 2% interest. The financially sound move with loans that low is to invest your money and pay off the loans as slowly as possible.

In contrast, our generation of doctors will be wise to pay off their student loans as fast as possible since our loans are at 6.8% or greater.

There is no reason for current attendings to live like residents to pay off their loans; the loans don't even out pace inflation!
 
What madman/woman would invest in the stock market today? Seriously. I've put a few thousand in the stock market, but have stopped contributing with the wild market swings. Why not pay down your highest interest loan first, whether that is your mortgage, your private loans, or your student loans. Every dollar saved on interest is essentially earned.

Solid, sure returns on the stock-market right now to the tune of 7%?

Unlikely.

I remember a lecture given to our residency 4 years ago. They said that we should all invest in the stock-market, blah, blah, blah...

I raised my hand and said, "Isn't that risky? It is still not a sure thing right?"

The insurance salesman (after recommending life, disability, umbrella insurance, and even nursing home insurance) said, "The stock market is a sure thing. There has never been a 10 year period where it has depreciated."

One of my fellow residents said, "Yeah, for the stock market to tank, you'd have to see widespread recession, and have banks fail and stuff...that isn't going to happen"
 
So the interest rates have shifted, I agree. And simply letting inflation take care of the loans probably isn't the greatest idea (unless we continue printing money at the rate we are now). At the same time, not investing anything puts you behind on retirement money, and you might never catch up (as we have all seen on the graphs). Plus, with reimbursement likely to decline over the next decade, you won't have as much money then to invest either. So you're stuck. I say pay them off, but don't kill yourself to do it at the expense of a good investment strategy. The stock market is probably not one of those currently. Real estate (in the US anyway) isn't either. Gold seems good, but there are other things that work. You can buy a hotel in Montevideo for around $300K right now if you want to.
So what you really need is a combination of both strategies. Paying over 30 years will double your loan payments. Paying over 5 years will kill your retirement (or simply delay it by 5 years). Pick a happy medium based on the market you end up in, and considering your debt to income ratios.
Also, don't buy a million dollar house.
 
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strongboy2005 said:
The answer to this question is actually very simple. Current attendings got student loans at around 2% interest. The financially sound move with loans that low is to invest your money and pay off the loans as slowly as possible.

In contrast, our generation of doctors will be wise to pay off their student loans as fast as possible since our loans are at 6.8% or greater.

There is no reason for current attendings to live like residents to pay off their loans; the loans don't even out pace inflation!
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I really wanna do medicine, but what a horrible time to go into it...:(
 
As mentioned above, there's more to financial planning then eliminating debt. 6.8% isn't the 2.75% my class was able to lock in. It's still not a 10% rate that you would have no reasonable expectation of being able to better with investments. Paying off 6.8% over 30 yrs doesn't make much sense, but putting nothing into retirement and delaying relationships/family to pay off 6.8% over 3-4 years doesn't seem right either.
 
people paying 6.8 are lucky. my debt is on the larger end of the spectrum and my total consolidated interest will be almost 8%.

and i think it's pretty foolish in this climate (and possibly many future climates to come) to count on any investment even coming close to 6 percent. pay off your debts, put a little into retirement now, and focus on making sizable, committed contributions to your retirement fund 5-7 years from now, when you're debt-free.
 
doctorFred said:
people paying 6.8 are lucky. my debt is on the larger end of the spectrum and my total consolidated interest will be almost 8%.

and i think it's pretty foolish in this climate (and possibly many future climates to come) to count on any investment even coming close to 6 percent. pay off your debts, put a little into retirement now, and focus on making sizable, committed contributions to your retirement fund 5-7 years from now, when you're debt-free.
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We're all guaranteed ~200k at 6.8%, unless you somehow don't qualify for Staffords. (I haven't met anyone who doesn't qualify for those, the criteria are pretty loose)

The Grad+ loans that they offer above the staffords are also often around the same. How are you paying 8%?
 
Raryn said:
We're all guaranteed ~200k at 6.8%, unless you somehow don't qualify for Staffords. (I haven't met anyone who doesn't qualify for those, the criteria are pretty loose)

The Grad+ loans that they offer above the staffords are also often around the same. How are you paying 8%?
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because i happened to go to medical school in the brief time period where grad plus loans were 8.5%. when you add my plus loans to my stafford loans (which maxed out accounting for 160k, not 200k,) the consolidated aggregate interest is about 8%. my total loan burden, including capitalized interest, is probably in the top 5th percentile of all med school graduates.

the people who went to school 10 years ago were lucky. the people who started school the past year are screwed, but should be thankful -- the people who went to expensive medical schools in the previous 4-5 years were very screwed.
 
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The only investments that I have going right now are three retirement type funds, and I wonder about the wisdom of keeping even those, although I still expect that over the long run, 30+ years, I'll accumulate and do at least a little better than a savings account would have.

I think the OP topic is a really interesting one, especially as my own attitude has changed. I consolidated at the lowest interest rate in the past 10 years and initially intended to pay it off over the maximum period. However, my wife and I have been "snowballing" our debt over the past year or so and I fully intend to pay off my student loans as quickly as possible within the context of maintaining retirement savings. The future is just too unpredictable, I hate paying interest, and even if it means I lose some money I look forward to the day that I go to work for me and my family, not because I have to do so to pay off loans.
 
Arcan57 said:
Unless your debt burden is significantly lower than the current average, it's going to be very difficult to pay off your loans in two years.
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I don't know. My debts are currently about 165K. I'm paying some during residency, so I don't anticipate finishing with >175K. I plan on moving back to Texas after residency and most starting salaries run at least 250K (some much higher...) This coupled with no state income tax means that the tax burden will likely be around 40% (200K of the 500K.)

I plan on renting for at least the first year (good advice for any new job...) and property values are good for now. By my calculation that leaves me about 300K to pay of loans and live for 2 years.

Considering I'm supporting my fiance right now and we live pretty comfortably on a 45K resident salary, I don't think it's inconceivable. It's a blessing to have a fiance who is on board with that plan. It may take a little longer (especially if we get pregnant, or sick, or whatever...), but I think that's a good goal to shoot for (at least for me).
 
don't forget to take away 5% more of your income yearly in 2011 when the Bush tax cuts are repealed. very depressing. also your investments/capital gains/dividends will all be taxed much higher as well.

the pain is just starting.

later
 
Jarabacoa said:
What madman/woman would invest in the stock market today?
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I am, for my retirement investments. I'm 30 years old, I don't really care what the market does next month, and I prefer to have aggressive investments that could pay off bigger.

Anyone who said the stock market doesn't involve risk is clueless. You have to take more risk to make more money. If you want a safe investment you can have a CD or a high interest checking account and make 3%, which could be fine for now because inflation is low.

To answer the OP's question, why not start paying your loans even sooner? I just finished residency and I started paying $400 per month the first month of internship while my loans were still in deferment. During all three years I paid at least $400 a month, sometimes up to $600 a month if I had some extra cash. I live in a high cost of living area and made a resident salary of about $45K a year.

Now my loans just went into repayment and on the extended payment plan, I pay $500 a month which is what I was already paying. Instead of $185,000 plus interest, I managed to pay my loans down to about $175,000 (for my loans, part of them were at low interest, and part at high interest, and the monthly interest was probably $400 a month). So I put about $6000 a year in for 3 years to do that.

Now I am in a fellowship and plan to try to put $1000 per month in using moonlighting money. I have to admit that even if all my loans were at 2.75%, I still wouldn't be happy having $185K hanging over my head and would want to pay it off, so sometimes emotions are not completely mathematically sensible.

The reason why most attendings don't live like residents, and don't use common sense in where to put their money, is because it's not very gratifying. After suffering through residency you feel like you deserve a nice house, a nice car, etc. I've seen it happen to lots of people. They know they will pay the loans off eventually and they don't want to live more frugally in the meantime.

Logically it may not make sense but it's everyone's right to do it the way they want to, some people may hate debt like you and me and see the benefit of paying off loans early, other people just want to enjoy life and not worry about it. EM is a good specialty for paying off loans because you get free time during residency that you can moonlight, and you can work really hard if you want to and make crazy money or you can take it easy and still make pretty good money.

What if you get married during residency or decide you want to do academics or fellowship? You can't count on being a single dude making a community salary, that is only going to be a certain percentage of people.
 
Moderation in all things. I lived like a resident for 4 years as a military doc, built a nice portfolio, paid off my undergrad loans, nearly paid off the mortgage on a dumpy townhome, and now I'm 4 years out of residency, in a regular civilian job making good money with nearly zero debt.

Moderation in all things. Minimize the debt you take out. Pay it off relatively quickly if it is a high rate, relatively slowly if it is a low rate. Don't neglect saving for retirement at the same time. It is possible to live somewhere between a resident salary and an attending salary and have a pretty nice time.
 
ActiveDutyMD said:
Moderation in all things. I lived like a resident for 4 years as a military doc, built a nice portfolio, paid off my undergrad loans, nearly paid off the mortgage on a dumpy townhome, and now I'm 4 years out of residency, in a regular civilian job making good money with nearly zero debt.

Moderation in all things. Minimize the debt you take out. Pay it off relatively quickly if it is a high rate, relatively slowly if it is a low rate. Don't neglect saving for retirement at the same time. It is possible to live somewhere between a resident salary and an attending salary and have a pretty nice time.
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Thats sounds awesome! Good job!! Yeah, living in moderation is definitely the key...I can surely have a great time living on a salary thats in between an attending's and a resident's :)
 
The stock market goes up with strong economies and we are not strong right now. I don't believe that the economy will ever be strong unless the following problems are corrected:

1. Massive national debt. The national debt has DOUBLED since 2010
www.youtube.com/watch?v=UjbPZAMked0
You may not believe that is a significant problem as Pete Stark does above. I think you are psychotic if you don't think it is a problem. The market volatility, and lack of confidence in the dollar, combined with potentially severe inflation that awaits us makes for such uncertainty, that I just can't justify the risk.

2. Un-funded liabilities make us unable to pay of the current national deficit in the near future. We have promised American citezens $59,000,000,000,000. Fifty-nine trillion dollars and going up-
http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm

3. The union have promised trillions of dollars worth of underfunded pension plans that the government will have to bail out. http://biggovernment.com/jwilliams/...ans-up-to-1-trillion-in-unfunded-liabilities/

4. The actual jobless rate is approaching 20%. Could things turn around? Possibly, but the unemployment rate is going to go right back up when the census workers are done with the census.


There are better investments- how about the following?
http://www.betterbudgeting.com/articles/investing/stockmarket.htm

As a doctor, you are too busy to accurately predict and proficiently invest. Read the following articles:
http://www.dailyfinance.com/story/i...-invest-in-the-stock-market-in-2010/19294589/
http://www.bargaineering.com/articles/devils-advocate-dont-invest-in-the-stock-market.html
http://www.bargaineering.com/articles/dont-invest-in-the-stock-market.html

My concern is that there is this idea that you can't save for retirement without investing in the market. Why not simply put your money in the bank? It is FDIC insured for $100,000 each account.

If you are debt free and have $200,000 in the bank, you are now prepared to risk your money in the stock-market, until then, why the rush to tie up your assets and put them at risk through the whims of the market?
 
My concern is that there is this idea that you can't save for retirement without investing in the market. Why not simply put your money in the bank? It is FDIC insured for $100,000 each account.
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There's a lot of things wrong with this post, most especially the idea of putting your money into savings accounts. I mean, bonds or something I could understand if you were conservative, but savings accounts are a terrible, terrible idea (especially for retirement). You'd lose 1-2% of those assets due to inflation every year (depending on the interest rate you get, but they're all terrible right now, even if inflation is relatively low).

Also, its FDIC insured up to $250,000 per account right now. They raised it back in '08 or early '09. (Which still doesn't mean you should keep the majority of your assets in one)
 
ActiveDutyMD said:
Moderation in all things. I lived like a resident for 4 years as a military doc, built a nice portfolio, paid off my undergrad loans, nearly paid off the mortgage on a dumpy townhome, and now I'm 4 years out of residency, in a regular civilian job making good money with nearly zero debt.
Click to expand...

Don't get me wrong, but this isn't applicable to everyone. Yes, I think milmed is a viable option for some people. But the vast majority can't or won't take it (military life that is). Also, if you do the math, the amount of "loans paid off" plus salary often is less than simply 4 years salary that you can make in community practice.
And then you didn't mention your 4 more years of IR, and since we are in 2 hostile environments currently your likelihood of getting called back up is slightly more than 0%.
To me is is like not taking out the maximum deductions on your taxes, instead getting a refund from the government. Sure, it helps if you were simply going to spend the money anyway, but if you are able to ration, then you'll come out ahead.

Note that for many, milmed is more than "a way to make your loans go away", and some people have strong convictions about performing a service for their country. To each his own.
 
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