I had an interesting conversation with a physician a while back, one who spends a lot of time giving advice to pre-medical students. He wanted to know what should be said to pre-meds who were worried about how expensive going to medical school is these days. I told him those pre-meds were right to worry. That's not because EVERY physician is going to be in trouble. Most are not given current physician incomes and current tuition levels. But the number of physicians in trouble due to a terrible debt to income ratio is is definitely climbing. I would guess the number was <5% 20 years ago, but now is probably in the 10-25% range. The percentage is far higher for some of the other high income professionals such as dentists, veterinarians, and attorneys. However, the average physician is making something in the low 200s and the average debt of students leaving medical school this year is also in the low 200s. Even by the time that average doc finishes residency, her debt should still be less than $300K, which is only 1.5X gross income and should be manageable with some smart financial decision-making.
Does Medical School Still Make Financial Sense?
The problem is that is an average. On one side is the guy whose dad paid a bunch of his tuition and whose wife worked while he was in school and so he got out only owing $50K. On the other side is the lady who took her stay-at-home husband and two kids to New York City to attend Columbia and paid for all of it with borrowed money. She may very well finish residency owing $600K. If she chooses family practice or pediatrics, and especially if she stays in New York to practice, she is in serious trouble with a debt to income ratio of more than 3X.
Try to Get Out of Undergrad Debt Free
The physician made two other comments I found interesting. The first was a comment referring to undergraduate debt. It reminded me that not everyone is aware that you can get a good undergraduate education without any debt at all. Since you can do it without debt, why would you do it with debt? If you're going to rack up $200K+ just going to medical school, you certainly don't want to start with $100K+ from undergraduate.
Dragging Out Student Loans?
The second comment was basically “What's wrong with just paying your student loans off over 30 years?” Wow! Can you imagine being 60 years old and STILL owing student loans? How depressing would that be? It's so depressing that I actually recently refused to announce to my readers that one of my advertisers had a new 20 year student loan refinancing product. If medicine does not pay well enough to pay off your loans before you qualify for Social Security, maybe it is time for a different career choice. Student loans don't go away in bankruptcy and if you go into retirement with them, you will discover that your Social Security checks will be garnished to pay them. Don't believe me? Would you believe the Social Security Administration Handbook?
“If you have any unpaid Federal taxes, the Internal Revenue Service can levy your Social Security benefits. Your benefits can also be garnished in order to collect unpaid child support and or alimony. Your benefits may also be garnished in response to Court Ordered Victims Restitution. SSI payments cannot be levied or garnished. Treasury’s Financial Management Service can also offset, or reduce, your Social Security benefits to collect delinquent debts owed to other Federal agencies, such as student loans owed to the Department of Education.”
Now, if you graduated in 2003 with me and refinanced your loans at 0.9%, then fine, drag them out over 30 years. I don't care. Mathematically you'll almost surely come out ahead given that you're borrowing at less than the targeted rate of inflation. But ask current medical students and residents and young attendings what their rate is. The answer is likely something between 5.5% and 10%. There's a good chance paying that down is their best available investment, at least on a guaranteed basis. Even most people with a good debt to income ratio and credit who have refinanced their student loans are only getting into the 3-4% range for a five year fixed loan. Given that the best guaranteed investment out there is only paying something like 2% these days, 3-4% isn't too bad.
Beware of “Future You”
But the main problem with borrowing money for 30 years is that it limits your freedom. In reality, you're not borrowing from a bank or even the federal government or its taxpayers. You are borrowing from a nice fellow that I like to call “Future You.” He seems really nice when you're 25. He'll lend you all kinds of money. Then at 35, he seems a little grumpy. By 45 he's an angry neighbor throwing bits of hamburger stuffed with acetaminophen and warfarin over your fence. Do you really want to see what he's like at 55?
You're really not done with your medical education until you've paid for it. I assure you that you WILL regret borrowing more than you had to as a medical student. There is a good chance you will want to take a less lucrative job, go part-time, or even retire early at some point and a huge student loan burden would prevent that. So do yourself a favor and pay off that debt within 5 years of graduation. Barring some extreme situation (which will require an extreme solution) there is no reason the vast majority of doctors cannot do that if they'll live like a resident for a few years after residency. Here's what the numbers look like with some basic assumptions (living on $50K a year until debt is gone, effective tax rate of 25%, 3% refinanced student loan rate.)
Doctor with $180K income
- $100K Debt: 15 months
- $200K Debt: 29 months
- $300K Debt: 44 months
- $400K Debt: 60 months
Doctor with $250K income
- $100K Debt: 9 months
- $200K Debt: 18 months
- $300K Debt: 28 months
- $400K Debt: 38 months
Doctor with $400K income
- $100K Debt: 5 months
- $200K Debt: 10 months
- $300K Debt: 15 months
- $400K Debt: 20 months
None of that looks too bad, right? I mean, the worst case scenario (the doctor with the low income and high debt) is still out of debt within 5 years. So what happens? Why are so many doctors still in debt who are a decade or more out of training? Several reasons and the problem usually isn't that they just did one of these things. They usually did two or more of them.
- Didn't live like a resident. In fact, they often just made the minimum payments on their loans as an attending.
- Never refinanced the student loans.
- Racked up huge debts.
- Chose a low paying specialty.
In addition, given how low the pay-off time is for many of these hypothetical docs (most under 3 years and many under 2 years), some will reasonably choose to slow down the process slightly by giving themselves a little raise after residency, directing some of their wealth building money toward maxing out retirement accounts (which further lowers their tax bill) or saving up a little down payment for a house. As you can see, most doctors can still do all of that stuff and still be done with medical school debt by 5 years out.
So, what advice can be given to the pre-med student? I think it can safely be said that, yes, becoming a doctor, even if you have to borrow to attend medical school, still makes financial sense. BUT, you will have to live like a resident for a few years after residency. The more poor financial decisions you made, the longer you will have to live like a resident.
Quit taking selfies and get on the chairlift!
Math and Behavior
Let me give you a tip if you haven't yet figured this out already. Be assured that I am fully aware that the mathematically correct thing to do is often to borrow at low interest rates and invest the money. But if you want to FEEL wealthy (in addition to being wealthy), I would recommend a different approach. Try to maximize the amount of disposable income you have each month. How do you do that? By eliminating fixed expenses one by one as rapidly as you can. You wouldn't believe how awesome a life you can have while spending just $100K-150K when you have minimized your fixed expenses. No student loan payments. No car payments. No mortgage payments. No time-share payments. No second house payments. No private school payments. Eventually not even life and disability insurance payments. After covering property taxes, paying for some basic utilities and insurance, and putting food in the fridge, you might still have $10K a month to do whatever you want with. You can invest it with some pretty awesome results. You can give it away and make a huge difference in the lives of others. You can spend it and have a very good time. And when the next month rolls around, there's another $10K you get to decide what to do with. It's a pretty good life. And it's yours for the taking. The only cost is living like a resident for a few short years after training when you really don't even know what you're missing yet (but it rhymes with jelly-peeing.)
What do you think? Do you think it's okay to borrow for undergraduate? How much? Do you think borrowing to pay for a medical education still makes sense? Why or why not? Do you think it's okay to drag student loans out for 30 years? Why or why not? Comment below!
Debt-free is a great thing to be. I was on a 25-year repayment plan after consolidation to a very low interest rate in the early 2000s. It wasn’t 0.9%, but it might have been under 2%. The math favored me making those $300 a month payments for the duration, but I didn’t make it ten years before deciding I was ready to be done writing checks.
I wrote one big check to pay off the balance, took care of my wife’s student loan debt shortly thereafter, and the mortgage was next. While it’s true that my net worth could be a percentage of a percent higher if I had continued to leverage that debt and invest more, the feeling of becoming debt free by forty was well worth it.
Cheers!
-PoF
One of smartest desicions I ever made was to go to the “boring” state undergrad on a full ride over the “#1 party” Big Ten School on nothing. Not only is it a financial no brainer but it sets you into a smaller pool that helps entry into medical school. Meanwhile I’ve had plenty of private college friends start medical school with 6figure debt alone. Lots of great points above!
I couldn’t agree more. I too went to a “boring” university in my hometown that was still part of the state university system, rather than attending one of the “big three” state campuses that many of my high school classmates attended. Though that decision was made out of financial necessity (or lack thereof). I commuted to school, worked part time, and lived at home (such is the life of a broke undergrad student). In the end, it paid off big time. Looking back now, that was the best happenstance. The kid from a lesser known university seemed more appealing to several medical schools, I received a huge scholarship from the local county, and made it out of medical school with only 60K in debt locked at 1.2% interest (almost paid off now). I like to think it was a series of “fortunate events”.
Great article!
1. Avoid undergraduate debt. Scholarships, family, and work. No one really cares about this when you get out. In fact in my state I alienate half of my patients if I mention where I went to school because of football rivalries.
2. Go to your cheaper state med school. The top of the class will get into a good residency.
3. Since residency actually pays you a salary this is where you need to pad your resume for free.
4. Low cola areas.
5. Avoid credit card debt. Live on your salary.
6. Do not buy a house in residency or within 2 years of starting a new job.
7. Do not get divorced.
8. Avoid running up additional debt if you start your own practice. I would work a while learn how to run a business and establish a patient base then bootstrap it if possible.
These are my tips and observations. I did 7 out of 8 of the above and have been financially free for years. See you in Park City.
I may not agree with everything that Dave Ramsey says, see https://www.facebook.com/daveramsey/videos/10154573088400886 for an example, but Dave Ramsey teaches people to have a healthy respect of debt. $350,000 in debt may be the “new normal” among medical students, but you shouldn’t hold it like a second mortgage. While it might make financial sense to keep the low-interest rate student debt and invest the difference in the stock market, it can be very tempting to instead use the money to inflate your lifestyle.
-WSP
I’m a fresh out of residency EM attending (weird to say) and joined private group where pre-partner average take-home is $330k. I have $300k med school loan debt and my PT wife has $300k of her own ($100k undergrad @ 3%, $100k @ 6.5, $100k @ 7.9%) with, unfortunately, a much lower income potential, albeit a significant contribution. I estimate we will have gross household take-home for first few years around $400k and a nice bonus $40-80k from after partner. Unfortunately we live in a high cost of living area and have $4k mortgage with monthly expenses totalling just north of $7k without student loan payments included. I am planning on refinancing our loans over the next year which could make an additional monthly student loan expense of $4-8k depending on duration/rate. With debt of 1.5x income but with huge chunk going to mortgage, do you recommend using remainder to hammer out student loan debt until paid off in lieu of maxing out 401k and ROTH, or a combo/other strategy?
Thanks!
Everyone struggles with this issue. I would make a plan to be out of student loan debt within 5 years. If you can max out your retirement accounts AND do that, I think you’re okay. Certainly don’t miss out on any match.
Only way I can crunch the numbers to payoff in 5 yrs would be by cutting significant contributions to retirement accts (albeit still taking advantage of match). If I push out to 7 yrs I am more confident that I’ll be able to max retirement accounts during payoff period. Personally, I think I’d bask in the glory of student debt freedom more than I’ll regret not getting more $ working earlier…But, the me 20-30 yrs from now may disagree…What do ya think? Appreciate the advice!
Two points-
First, if it is really true that you can’t max out your retirement accounts and pay off your loans in five years, then yes, I would cut back on retirement account contributions so you can be out of debt in 5 years.
Second, you’re taking home $400K after-tax. You have $600K in student loans. If refinanced at 4%, that’s about $130K a year to pay them off in 5 years. I don’t know how much retirement account space you have, but let’s say $50K between the two of you. That’s $180K a year. That suggests you’re spending $220K a year. That’s more than I spend without any debt and making twice as much and having a heck of a great life. What am I missing? Do you have $200K in available retirement accounts or something? Why can’t you cut spending more?
100% agree. We don’t have much right now, since we’re a young doc/part time lawyer couple in the mid west, but since we paid off the last student loan last aug life feels awesome! Every month we get $12-13k in income and have only $1900 ish in fixed expenses. That means 10k to do anything with we want. Missing California? We just get on a plane. We can pay to board the dog. Wanna adopt? Sure. Ireland trip? Sounds great. Feel like being generous at diner? Absolutely we’ll pay for everyone. Corvette? Paid cash. Now we don’t have a house, we live in a tiny 1100 sq ft condo, but it’s in a great walkable college town, and if we want a house a down payment would take us, oh… 2 months. And our EM fund is huge. Most of our friends are all about smart debt leveraging/car leasing plans, but we think our options to wipe the slate clean on our income each month is such an incomparable blend of responsible stability and college-esque freedom we wouldnt change it. I feel this is what everyone imagines doing when they are first learning about physician salaries before they get tricked by the supposed “required” costs of the “real world” or “adult life”. Also helps that despite getting into lots of good private schools we both chose top notch public universities all the way through and owed maybe $2k for undergrad.
*I should clarify this freedom each month means take home income after savings goals are met. Don’t want to sound like we spend everything we make.
I have a little bit of a bizarre question.
Background: The average salary in our region for my spouse’s chosen specialty is $450,000. They are 2 years from becoming an attending so we’re not pulling in that kind of money yet. Right now our total income is $110,000 with a debt of $150,000.
Dilemma: I am contemplating going back to dental school. The total cost for our local state school (the only place I will apply) is ~$200,000 in tuition and fees. Anticipated starting salary would be ~$135,000.
In total, our anticipated debt would be $350,00 with a salary projection over $500,000. Although this isn’t entirely true because we would almost certainly pay dental tuition out of pocket once they become an attending in order to avoid origination fees and the higher interest rate on professional school loans. The net result is still pretty close in the aggregate.
Question: Does the math change at all when talking about two (relatively) high income earners? Do you just take your examples and divide everything by 2?
So for us we would be 500 income:350 debt/2–> 250 income: 175 debt? So somewhere around 15-18 month payoff. Or does the situation grow more/less complicated with multiple earners?
Further Dilemma: From a purely economic standpoint, the $200,000 in loans to earn $135,000 doesn’t satisfy the 1:1 debt:income ratio when looking at a school. However, I wonder if the long-term freedom it would provide my spouse may be worthwhile. If we paid off the loans within 3 years of my graduation, we would both be ~35-36. I worry about my spouse’s desire to work into their late 50s or 60s and a career that allows me to earn 6 figures would give them more options for an early retirement/part-time. The current paradigm really wouldn’t allow that as I have no intention of keeping my office job for $55,000 once they become an attending.
Any thought on this would be appreciated. Particularly from those who took out loans slightly later (27-30) and those in two high income households.
-TC34
You are in a great position and it will be worth it! Cash flow the dental school tuition with your spouse’s salary like you said and specialize in a high paying specialty. As a partner/owner – you can be easily earning 400-700k easy working 3-4 days a week. Solo owners of well run practices has even higher earning potential working 4 days a week.
Are specialties worth it? I know dentists have to pay to specialize and those added years of tuition without a salary definitely concern me.
I have heard that Ortho is saturated. but I haven’t really looked into any specialties too closely as I don’t want to go in with too strong of a focus on it being “specialize or bust.”
Yes, dental specialties are worth it. However, there are plenty of general dentists who have very high earnings. In any field, there will always be fairly high differentials in earnings. Most people will tell you that you must consider ownership. I agree with this. I specialized, am an owner, and pay taxes on just shy of $1M. I work 3.5 days per week.
Is that before or after costs? What specialty are you in?
That is after overhead is paid. My partner and I have 2 pediatric practices with a 39% overhead. We each pay taxes on a similar amount. We own our 2 buildings as well.
I think a 500/350 ratio is just fine. You guys should be able to pay that off rapidly. Obviously this assumes you both keep working!
I’m not seeing something stupid if this is what you guys want to do. Limiting dental school debt to $200K is pretty darn good these days.
Thanks for commenting. I can rest a lot easier knowing that 500/350 isn’t totally bonkers. Being debt averse my inclination is to over-accentuate that 350k number.
As far as the 200k thing, that’s a straight tuition number since my spouse can cover living expenses while I am in school. I really can’t imagine how anyone does dental school in a high COL area without family support. The numbers are off the wall some places.
What about debt forgiveness programs that kick in 10 years after working at a qualified not-for-profit institution? I have paid off all my private loans in short order but have been holding out on the big Stafford refinanced debt because I thought some of this can be forgiven. Am I wrong?
Thanks
They can be forgiven. Are you going to have anything left to forgive after 120 payments? Are you certifying with PSLF every year (you should, although it can be done retroactively.)?
Isn’t this program on the proposed budget chopping block this year?
It’s been on the proposed chopping block for years, starting in 2013 with the Obama administration. You never know what will happen, but I would expect even if it goes away some will be grandfathered in.
Great article, I would also note that even if you are in a high paying specialty you may not realize that high pay until multiple years in practice, to build up your patient base. For instance, as a starting Ophthalmologist typical salaries are 150k. On top of that once you have built up your practice and want to make more money, you may have to go further into debt to “buy in”. So you have this suffocating debt snowball that will certainly limit your freedom. So is medical school a good financial investment? Probably not. Can you become wealthy? Yes, but it takes sacrifices, like fighting lifestyle inflation, proper savings, and overall delayed gratification. The hardest concept for me to grasp was my debt was making more debt (interest never sleeps), every dollar I made was worth less (progressive taxes), and I had to pay off that debt with after tax money. The only solution is to save and invest vigorously (every dollar saved is almost worth 2 earned) and attack the debt ASAP. The sacrifice I had to make was delaying lifestyle inflation, getting a second job as my own financial advisor/becoming more financially literate. I think the biggest metric for the first 5 years out should be savings rate, with a goal of at least 50%.
Yeeees. Just stop running up the debt, guys. Too many times I’ve seen friends go to grad school because they don’t know what they want to do with their life. Then they graduate, still don’t know what they want to do, and have a lot more debt.
When we got into the working world 6 years ago, our debt to income ratio was >4x. That was owing mainly to mistakes we made when choosing how and where to practice, and not having a “healthy respect” for the debt when we graduated, as WSP put it above.
We’ve scratched and clawed to get it closer to 1:1 now, but it’s been a long haul and it’s not over.
We obviously won’t be done in 5 years like you suggest, but we’re staying focused and have a plan.
Reading this article reminds me of something that I observed while I was in dental school at Columbia about 10 years ago. Two of my class mates started dating each other at the beginning of our first year and the guy started taking out a TON of extra student loans to maintain a nice lifestyle for his gf/classmate/future wife and himself. The guy was an average Joe and the girl was a part time aspiring model (you can see where this is going). They lived on the upper West side in a really nice apartment (I mean NICE!), took exotic caribbean vacations 2x a year (posted on friendster/myspace), and went to the Super Bowl 2 times in 4 years. He proposed to her in Central Park with a Tiffany’s 1.5 carat ring during our last year. They were the envy/wonder of our class but things went down hill from there.
They moved back to Southern CA and struggled to make ends meet (they lived in a high COLA area with low dental income for associates – plus the girl only wanted to work 2 days a week). Less than a year later, the girl met an older divorced cardiologist and bailed out on the guy. She now lives in a multi million dollar mansion with 2 kids and is a SHM. She drives a Tesla Model X and sometimes her husband’s Huracan. The husband just traded his RS7 for a Tesla 100D (cardiologists must be rolling in the big bucks!) On the opposite end – the guy has been living at home with his parents and struggling with debt (he complains often about his 600k of student loans – how do you get 600k in 4 years??). We keep in touch on social media.
I really didn’t think much of their actions back in school. If anything, I wish I lived like them. Looking back though, I am glad I had the sense to keep my expenses low, married well, and did well in school to be in a high paying specialty field. Each to their own I suppose.
Divorce has profound financial consequences, doesn’t it? What a sad story.
As far as the divorced cardiologist goes, appearances may be deceiving at every level. Just because she drives a Tesla, and I have no idea what Huracan, RS7, or 100D are, it doesn’t mean that he has a high net worth. Tessa X might = Tiffany 1.5 carat ring.
Whenever I visited my in-laws in San Antonio (from rural Fort Hood now Fort Cavazos) I was envious of the women my age with beautifully coifed and dyed hairdos driving expensive cars and wearing flashy jewels driving out of the fancy shopping areas (and more so of the awesome homes with well watered gardens). Spouse pointed out that they might well have borrowed to get all those things and I calmed down. Poor folk might be one job loss, divorce, or illness from losing it all; whereas we were set for most anything.
It also helped that all the high end pickup trucks I drove by in my base model had carpeted floors. When I drove past those guys with real mud on the side of my truck I could see their envy.
Sage advice man. I am still paying off student debt 5 years out with no real excuse, but I cannot agree more. Lowering fixed expenses and having the freedom to invest and do other things with your money is an amazing feeling. Living like a resident for 18 months is nothing after doing it for 3-6 years, so I am not sure why most of us don’t do it. I guess it is the pent up years of fatigue and desire to “live like a doctor”.
I think it can also be an “in moderation” thing. For people who have the fortitude and willing family to live like a resident for another 3-4 years after a 6 year or longer residency/fellowship track then sure, knock yourself out an be student loan debt free in 10-18 months.
For us, we expanded in some ways and not others even though my loans aren’t completely paid off. We bought a house that is just over 1.2x my annual salary, I bought a new car since the cost to transport my 14 year old Maxima across the country was more than it was worth. And we’ve taken some nice vacations in the 2.5 years since finishing fellowship with the family (Mexico, Chicago, Pacific NW) and the wife (Kauai). In spite of that, my $335k loans will be completely paid off in less than 3.5 years from graduating fellowship, all while maxing out 403b, 457b, Roth IRAs, HSAs, and starting a low 5-figure taxable account. Could we have done it more quickly? Absolutely. Would we have enjoyed life a whole lot less? Probably.
We’ve remained similar in other areas of our life–no expensive memberships, no private school for the kids, no extravagant dining, and even our day to day purchases haven’t really changed since being residents. I can’t remember the last time I bought new clothes that weren’t for work.
I think like WCI has said many times on here, you can some of the things you want but not all of the things you want.
You can have anything you want, but not everything you want.
Nothng like being totally debt free and have your money working for you and not the banks
Next to living beneath your means is to learn how to invest the right way
Mistakes can be deadly long term; If need be hire an advisor or find a fellow mentor
I paid off my student loans within 3 years of finishing residency, and it feels AMAZING. Started with about 175k from a private med school (no grants or anything, just lived modestly and worked part time throughout med school), got married right after residency and we basically lived off my husband’s 80k engineer salary till the loans were gone. Could have done it faster, but we were also saving for a house down payment and I took a hit with 2 months of unpaid maternity leave.
Why is this concept so hard to explain to *some* of my colleagues? I know a few that are approaching 1 Million in DEBT without a care in the world. I’ll be student loan free next month and couldn’t be more excited. We have plans to have the house paid off in 2-5 years too.
??-PRIVATE DENTAL is at or approaching 500K(NYU, TUFTS, BU)
Is there a BREAKING POINT in total school debt where its better to pursue another field?
Ken-
There are great articles on this site you should check out that address this, but usually 1.5X income or less is recommended, with 2X being the upper limit before needing to implement drastic measures to pay down the student loan debt.
As with most complicated questions, I would say “it depends.” Probably the biggest dependent factors are what your income and savings rate will be when you finish. Look at the table above . . . if you can live on $50K then you can see how long it would take to knock out $500K debt (well over 60 months). When do you get to the needle that breaks the camel’s back? That’s a personal decision about how long you are willing to sacrifice and work to get back to zero net worth. Due to uncertainty about family circumstances and future job prospects, $500K would be too high for me.
Yes, and I think many dentists are past it at that price. I think the broke point is 4X. So if your dental salary is $130K, 4X is $520K. 3X requires some pretty extreme maneuvering. That would be $390K, which is pretty common among dentists. My recommendation is to keep student loans to less than 1X, but that’s pretty tough as a dentist with the average salary being less than $150K and the average debt being close to twice that. Still very doable for many MDs though.
jelly-peeing ????????????
That was supposed to be a whole bunch of laughing emoji’s not question marks.
I too am clueless. Reading rest of comments hoping for enlightenment.
Rhymes with heli-skiing, which when he originally posted this article was his recent amazing vacation. Apparently he had a great time.
Some people say you should pee on jelly stings…..
Very few if any are living on 50k/yr as a married couple in any urban area
That’s not true. It is very doable in many urban areas. I am personally living on less (including mortgage) than 50 k/yr married with 1 young child in Salt Lake City. Without a mortgage I would be way under 50k/yr.
Man this post is making me want to pay off my balance 100k @ 2.6%. I have been paying 2500 per month, the minimum is 730. Maxing out 403b+ voluntary retirement plan @ 54k per year, IRA and Spousal IRA, and sticking 5500 per month in a taxable. I know math says pay off those loans slowly, but I am getting pretty tired of Navient… This post may push me over the edge, thanks!
Have you thought about creating a separate “loan pay-off account” in a taxable investment account? You would then have the option to use the funds from that account whenever you felt like to pay off your loans. You can track the account gains vs. the 2.6% of your loans while you watch it.
I have enough to pay it off now in the taxable. I worry about the gains and year in taxes I guess.
But at least you have the choice! That’s worth something, even if you don’t liquidate the taxable and pay it off.
With the horror stories I hear about Navient, I’m surprised anyone carries those student loans longer than they have to. Imagine having those folks out of your life. That’s worth something.
After talking over with the spouse who is equally tired of the student loans we are going to pay them off. Instead of withdrawing from taxable with are going to stop future taxable contributions for the next few month. Should take us about 10 months with a bit of money we already have in savings. Thanks for the motivation!
debt will lead to a collapse. It just can’t go on forever.
http://www.zerohedge.com/news/2017-07-14/we-do-these-things-because-theyre-easy-our-all-consuming-dependence-debt
FWIW I just refinanced my wife’s student loans with ELFI. 5 years term, variable rate, 2.39% at the moment. This beat SoFi, which was her previous financier, and LendKey.
(Mine are still Federal–a few years left until PSLF makes them disappear.)
Thanks for posting. I hadnt heard of them until now.
I agree with this post. I used some “good debt” over the years – but carefully. I did state schools all the way. My family was broke and I wasn’t bright enough to get a full ride. I worked and took out some student loans in undergrad – despite working.
I then did something I haven’t seen listed here: I took a year off after college. I lived like a poor student, paid off a lot of undergrad loans and saved 10K for med school. I got some work experience and matured a bit before becoming a doctor, so that wasn’t all that bad. My wife and I lived like medical students for the first 2 years of practice. I paid off all loans in 2 years.
Those gap years may be necessary for some people, but when you considered you traded a year of attending salary for the opportunity to pay off a little debt and save up $10K you have to wonder if it maybe wasn’t such a hot choice, at least from an economic perspective.
My total debt from med school was $278,000 (no undergrad debt). After 4 years of making the minimum payments during residency, the debt increased to $389,000. I refinanced with sofi and dropped my rate from 7.3% to 3.3% with a 5 year payment plan. My attending salary is $500,000. I am putting 20% to retirement and 10% to charity. We just made a 5% down payment on a $370,000 house for a 15 year doctor’s loan at 3.5%. I also just opened a 529 plan for each of my 3 kids and will save $1,000 each month per child. Our projected living expenses this year are between $60,000 to $80,000. If there’s anything extra left over (it doesn’t look like there will be), we’ll use it to make extra payments on the student loans. All of this new found attending money disappears pretty quickly. While we are living a nice life, it’s definitely not the overly idolized “glamorous life of a physician.”
But if you keep doing what you are doing for 5 years it will be the glamorous life of a physician. That’s the point. The student loans go away. The mortgage goes away. The old beaters are replaced with fancy new cars that’ll last a decade or more. The kids’ college accounts are eventually funded (especially at $1000 a month). Retirement is eventually funded. And at the end…you’re still making $500K (or you can cut back, at which point you pay much less in taxes and tithing.)
Living on 4k/month!!!!!!!!!!!!!!!!!! Incredulous. 40 yrs ago I told my buddy who is a hi roller that I could live on 50k and he laughed
mortgage, food, kids, insurances, ent’t, cars, vacation-gotta give you credit
Well, it is POSSIBLE Ken.
After all the average American household gets by on $4,500 / month. I spend about twice that and don’t feel deprived at all.