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How long does it take to pay off loans?

SHS_SpartanSHS_Spartan Registered User Posts: 943 Member
edited December 2008 in Pre-Med Topics
On average, how long does it take to pay off loans?

I'm thinking it depends on specialty, so let's say we were pediatricians.

Post edited by SHS_Spartan on

Replies to: How long does it take to pay off loans?

  • astrophysicsmomastrophysicsmom Registered User Posts: 4,326 Senior Member
    It depends on how much $$, for starters.
  • BigredmedBigredmed Registered User Posts: 3,731 Senior Member
    You're given 10 years to pay them off. Some of the loans give a 6 month grace period after graduation, others the clock starts ticking right away.

    Not only does it depend on specialty but also general position in life, what your spouse does, if you have a family, etc.
  • bluedevilmikebluedevilmike Registered User Posts: 11,964 Senior Member
    You're given 10 years to pay them off.

    Well, this doesn't mean that all people have them paid off within ten years. You can always take out another loan to cover the first one.
  • BigredmedBigredmed Registered User Posts: 3,731 Senior Member
    true...(10 char)
  • california_love8california_love8 Registered User Posts: 1,097 Senior Member
    sorry to partially highjack, but lets say you go to UMich for undergrad (with OOS tuition of course) and then UMich's Med School (which has nothing to do with what I want to do of course :)), then how long can you expect to pay it off? Lets say, in case speciality matters as well, that you become a neurologist.
  • bluedevilmikebluedevilmike Registered User Posts: 11,964 Senior Member
    Let's construct this scenario, shall we?

    Say your parents do not pay any tuition and you do not get any financial aid, but that they do cover your living expenses. Or some combination which gives you the right result.

    Michigan OOS is $30K/yr undergrad, for $120K. Michigan OOS for medical school is $40K/yr, for $160K. You now owe $280K.

    Your residency pays you about $43K for, I believe, five years. You end up paying about $13K in taxes. If you live in the same lifestyle as your average medical student, then it'll cost you around $26K. http://www.med.umich.edu/medschool/financialaid/guideline.htm

    So you have $4K per year to spend. You can try to buy a car, a wedding ring, Christmas presents, tickets home to see your parents, etc. Whatever. You clearly can't pay your loans off during this time period.

    So your loans have now accumulated five years' worth of interest. At 5% per year -- a pretty low rate for student loans -- that's $360K worth of debt.

    So now you're a neurologist, making -- according to salary.com -- about $208K. Let's assume you're not married. You still have no kids, no car, no computers, no wedding rings, no trips home. You do not have health insurance, life insurance, car insurance, or own your own home. Your living expenses are still $26K. You pay about $92K in taxes and about $20K in malpractice insurance premiums if you're the average doctor. Neurosurgeons, for example, pay about $140K per year in malpractice premiums, and I suspect neurologists are closer to that figure than to the national figure. But we'll say $20K just for peace of mind.

    So that leaves you with $70,000 dollars with which to try to pay off your debt. Still assuming the 5% interest rate, if you pay it all off as fast as possible, then it takes you longer because it's still accruing interest. That takes you six years to pay off your loans.

    This is an optimistic scenario, because it assumes you immediately start making the average amount. In actuality, you'd probably start off lower and have to work your way up. And I think it underestimates your malpractice premiums.

    You are now 37 years old. You have never bought a house, gotten married, had children, owned a car, gone on a traveling vacation, visited your parents, flown overseas, bought a computer, owned a pet, turned on your air conditioning, been insured, or had an expensive hobby. You have spent four years in college as a premed, four years in medical school (the toughest type of graduate school), five years as a resident/fellow at 80 hours a week, and then five years working, again probably around 60 hours a week.

    And you're broke.

    But at least your debt is paid off.
  • bluedevilmikebluedevilmike Registered User Posts: 11,964 Senior Member
    1.) I underestimated payroll taxes. Actual tax rates will leave you with $65,000 in post-residency income.

    You thus take seven years to pay off your loans and are 38 when you're done.

    2.) Confirm that 5% is low: http://www.studentloan.com/

    3.) Tax references. http://www.irs.gov/formspubs/article/0,,id=150856,00.html
    http://en.wikipedia.org/wiki/Payroll_tax (remember you're self-employed)

    4.) Also, I assumed you've come straight through college and medical school, when most people take time off.

    5.) Neurology programs vary in length. Hopkins seems to offer one at four years while Harvard and Mayo both have three-year long residencies (presumably after internal medicine) for a total of six residency years.

    6.) Also, you've had a roommate the whole time, since the UMich budget "assumes double occupancy".
  • BigredmedBigredmed Registered User Posts: 3,731 Senior Member
    Are parents still covering living expenses during medical school in you're scenario, Mike?

    If not, you need to bump that medical school loan amount to ~$246k for the four years...
  • bluedevilmikebluedevilmike Registered User Posts: 11,964 Senior Member
    Are parents still covering living expenses during medical school in your scenario, Mike?

    Yup. If they stop after undergrad, then your medical school loans become $250K. (See Michigan website given above.)

    Your total principal is thus $370K and by the time you're done with your five-year residency you owe $470K. It takes you ten post-residency years and you are 41 years old when your debt is paid off.

    Assuming you live a bare-bones existence, the Democratic Congress votes to lower taxes, malpractice premiums for neurologists are no higher than average, and that you immediately start making as much as your average neurologist. These are all silly assumptions, and in fact you would probably take an extra couple of years to really pay off those loans.
  • imranimran Registered User Posts: 835 Member
    jesus christ....
  • jnm123jnm123 Registered User Posts: 743 Member
    Hey Mike---

    Thanks for the nuts & bolts view of undergrad & med school costs. It's a wakeup for me as a parent. I have to think a lot of parents of med schoolers assume their child will automatically be financially flush once they begin residency or shortly thereafter.

    D is sophomore at (damngood) Out-of-State U, with Top 30 ranked med school, which will be her #1 choice. She carries a 3.7, and is waiting for admittance (hopefully) into her Integrative Physiology major. Volunteers at the University Med Center, worked over winter break in the hospital back home, and has a med job waiting for this summer. So she appears to have her ducks in a row for the time being.

    I was amazed when she told me that she'll be taking the MCAT summer of '08, only 15-16 months away. Things are happening fast.

    After seeing your assessment, I feel first order of business is to get her in-state tuition in case this is the med school she attends, in that there's a difference of $18K/year in tuition cost. Fortunately I think she can do this by attending school in summer '08, so she'll be in school for 12 consecutive months, which should allow her to declare residency.

    If this is accomplished and she does NOT get into med school OOS, then there are still 3 or 4 in-state medical schools she can attend, still good, that have 'reasonable' costs.

    She's still only 19 and doesn't 'get' the financials just yet. I imagine tho, it will become evident shortly.

    One more thing--is there that much of an advantage to attend the medical school that the student does her undergrad work?
  • bluedevilmikebluedevilmike Registered User Posts: 11,964 Senior Member
    first order of business is to get her in-state tuition in case this is the med school she attends

    1.) Remember, getting InState there gives up InState status in your home state -- this may or may not be worth it, depending on what the medical schools in your home state are. This will have both admissions and tuition ramifications.

    2.) Different states have different residency rules. North Carolina requires 12 months of full-time work. Texas requires 12 months of owning property. California is insanely complicated. Etc. So check to see what this particular state's requirements are.

    is there that much of an advantage to attend the medical school that the student does her undergrad work?
    It depends exactly on what you mean. Let me try to answer as completely as I know how.

    A.) For admissions purposes, different schools vary. Many schools openly claim to favor their own -- Northwestern, Chicago, and Emory come to mind. They prefer their own undergraduates. Many schools make no claims, but examining their admissions statistics reveals a preference. Washington University in St. Louis is one of these. Many schools have at least a reputation -- which I personally believe to be well-earned -- for penalizing their own (motivation for this follows later). Columbia and Stanford are the two that come to mind now. I believe Penn and Hopkins may also fall into this group.

    I spent a long time believing that Duke fell into the last category but have since changed my mind. There's clearly something complicated going on there involving waitlists, but I'm not really sure what it is. Bottom line is that I do think Duke students get an advantage there in the end, but I'd be hard pressed to explain what it is.

    Why would schools penalize their own? Two reasons, one obvious. The obvious reason is that your own students are more likely to apply and more likely to matriculate. If you also favor them in admissions, you end up with a student body that's overrepresented in not just one but three ways. Chicago, for example, accepts a third of all their own premedical undergraduates -- you can imagine that that costs them in terms of diversity for their student body.

    The other reason is a little more subtle and frankly probably less important. See point B immediately below.

    B.) I'm not sure if that was the question you were asking. The other possible way to read your question is, "Is it a good idea to attend the same school?" All things being equal -- and they never are -- the answer is "No, but it's not a huge deal." For branding purposes and making alumni connections, it's better to attend as many different schools in as many different regions as possible.

    Just as an example, I grew up in California, did undergrad in the South, am in the middle of medical school in the Midwest. I hope to do other graduate work in the Northeast and then residency in the Southwest (Texas).

    While this wasn't the reason for it, I've discovered that I have pretty much instantaneous conversation starters with just about anybody I meet. "Oh, yeah, I was pretty far from there, but the West Coast definitely has a feel all its own." "So, I was a California kid, but I got hooked on hush puppies and the other fixin's all y'all got around here." Etc.

    In other words, I get to be a semi-"local" just about everywhere. I get to be an alumnus of that many more universities. I have things in common with that many more people. When I meet a Duke Medical Student, I can still talk about the campus and the basketball team, even though I didn't do medical school there. When I meet a law student from my current institution, I can still talk about the coffee place down the street or the new library on campus, even though I'm not a law student here. I get to branch out in ways that wouldn't happen if I did my different types of schooling all in one place.

    This would be very important if she were in the business world, where this sort of camaraderie can be a crucial advantage in deal-making. (Not least because people like to believe that their university provides a superior education!) It's one of the biggest reasons to get an MBA. It's less important in medicine. But you can imagine that it would help in interviews, branding, etc.

    People -- including people who are reviewing applications for, say, residency -- tend to brand you according to the school that they're most familiar with. I imagine that if I were applying for a residency at Wake Forest, they would label me the "Duke kid", even though I actually went to medical school elsewhere. Having a "local" tag -- or, for that matter, having any "tag" at all -- can matter a great deal, psychologically. (It's what kids on CC refer to as a "hook".)

    Does this matter? Only very marginally, since the prestige of your education doesn't matter an awful lot in general in medicine. But you can imagine that if she wanted to be, say, the President of the Mayo Clinic, or the director of the CDC, or the junior Senator from Iowa, that these things would start to matter.

    Obviously I do not suggest that a Hopkins undergrad turn down med school at Hopkins because the Caribbean will add more diversity to his resume. But all things being equal, attending as many different institutions as possible does add a little bit of a "sparkle" to your resume.

    One last example before I end this entirely-too-long post. The researcher under whom I did some research this past summer did her undergrad at Yale, a master's at Oxford, medical school at Harvard, her residency at Cornell, law school at Columbia, and has held faculty appointments at UVa and Penn. Any one of those schools would have provided her an excellent education had she chosen to stay, for example, at Yale for med, law, residency, etc. But it would just sound less "studly" if she had stayed. "Yale undergrad, Yale med, Yale law." Is Yale any worse than the others? In some cases it's even better. But the diversity helps her resume.

    Plus, her kid is now a legacy at 7 of the very best universities in the world instead of just one.
  • bluedevilmikebluedevilmike Registered User Posts: 11,964 Senior Member
    Oh, and for the OP:
    You can run the scenario again making $147,000 (salary.com) as a pediatrician instead of a neurologist's $208K instead.

    Pediatrics residency is three years instead of our assumed five (debt has less time to build up interest) but takes longer to pay off (debt has more time to build up interest). My guess is that it works out pretty closely -- the smaller per-year payoffs cancel out with the earlier start.
  • bayarea24bayarea24 Registered User Posts: 91 Junior Member
    My uncle graduated with over two hundred thousand dollars in loans (between undergrad and med school) and was able to pay them off within a year and a half of opening his own practice in internal medicine. However, he did receive about 75,000 from a municipality for coming to a small town in NY. In short, it took his entire residency and 1.5 years private practice.
  • Ky-anh TranKy-anh Tran . Posts: 259 Junior Member
    BDM, do you assume that the hypothetical student gets no scholarships or financial aid at all? It would be a pretty dismal case, considering the astronomical tuition in US colleges.
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