160k student loans

**Inkstain82** · 05-14-2009, 11:45 AM

Are you absolutely sure you can live on $150/month? That seems incredibly light to me, even for one person. If you have done it, then by all means continue doing it. But if you haven't, don't assume you can, you are setting yourself up for failure by budgeting that tightly.

With your income vs. debts, I'd recommend looking into the income-contingent repayment plan, where you pay a percentage of your disposable income for 25 years, and at the end any remaining debt is forgiven.

**red92s** · 05-14-2009, 12:05 PM

$160k in educational costs for a field that pays $40k after 8 years of study? I'm guessing most or all of that had to be at private schools or out of state (?). Do you mind me asking what field this is in?

Goal one should be get $1,000 in a savings account ASAP. You have a long road to go with the student loans, and not a comparatively huge income to do it with. I'd continue making the minimum loan payments until you have a comfortable 6 months of living expenses saved before aggressively attacking them.

I also think your budget looks low. As a single 25 year old male, my food costs alone sometimes ran into the $300 range without eating out much, though I was actively trying to gain weight. Even now when I am actively trying to loose weight I run about $40 a week.

**disneysteve** · 05-14-2009, 12:10 PM

What are the minimum monthly payments on each loan?

Will your starting income stay there for a while or are you in a field where you can expect it to climb fairly quickly?

A 42K income is quite low with 160K in loans. My first year out of grad school (in 1993), I earned 65K and owed 102K, plus I was married by then and my wife earned another 20K, so household income was about double what you are making and I owed 58K less. And within 2 years, I was making well over 100K. If your income will grow soon, that's great. If not, that debt is really going hold you back. What field are you in?

**cantaka** · 05-14-2009, 12:29 PM

Thanks for the reply all.

I just graduated medical school and I'm starting residency.
The pricing for the expenses is assuming the hospital covers 3 meals a day for me and that I will be very busy in a small town for the next year working with little play time.

With regards to the loans, I plan on forbearing it and maybe paying any interest to prevent capitalization.

**red92s** · 05-14-2009, 01:05 PM

Had no idea a med school residency paid in the low 40k range.

I'm guessing then, you could reasonably expect to see a fairly large bump in salary within the next . . .4ish years? If so, I'd continue chipping away at them for the time being while accumulating an emergency fund, so that when your income rises you can really twist the throttle on loan repayment right away.

For a second I was worried you had racked up $160k of loans to major in political science or history or something along those lines. Not to knock on those who choose that area of study, but acquiring that much debt for it seems like a really bad return on investment.

**wincrasher** · 05-14-2009, 01:19 PM

Congrats on landing a paid residency. I take it you don't have to buy malpractice insurance or have any further expenses for your profession.

Don't worry about paying down these loans right now. Build savings and pay the minimums for a few years.

Later when your income picks up, pay them down. Once your income goes up, you may want to go out on your own and will need those savings to set up your practice.

**disneysteve** · 05-14-2009, 02:28 PM

Originally posted by cantaka View Post

I just graduated medical school and I'm starting residency.
The pricing for the expenses is assuming the hospital covers 3 meals a day for me and that I will be very busy in a small town for the next year working with little play time.

With regards to the loans, I plan on forbearing it and maybe paying any interest to prevent capitalization.

Congrats on finishing med school. Been there, done that.

Will you be doing residency in an area that will have moonlighting jobs available? You can pick up lots of extra cash that way. Since you say it is a small town, I don't know what your options will be. I trained in Philadelphia and had way more moonlighting offers than I could handle. Back then (1991-1993) most moonlighting jobs were paying $50/hour. I have no idea what they pay now.

As for the loans, most can probably be deferred until after residency. As you said, you can - and should - make the interest payments along the way to avoid capitalization. Doing that will save you thousands over the life of the loans.

Originally posted by red92s View Post

Had no idea a med school residency paid in the low 40k range.

Originally posted by wincrasher View Post

Congrats on landing a paid residency. I take it you don't have to buy malpractice insurance or have any further expenses for your profession.

Medical residencies are paid positions, though not highly paid, especially when you figure it on an hourly basis. You don't have to pay for malpractice. The hospital covers that. There can be some other expenses though. If you don't already have all your medical supplies (stethoscope, otoscope, etc.) you may need to buy those. You may also be responsible for buying your lab coats and some other assorted stuff.

cantaka, having been through the process, the very best advice I can give you is that once you finish residency and start having a real income, DON'T change your lifestyle. Keep living lean. Keep living on that residency income or a little more. Don't allow your lifestyle to inflate to consume the higher income when you are in practice. Save a big chunk of income. Commit yourself to repaying your loans promptly. You'll thank yourself later.

**arthurb999** · 05-15-2009, 05:47 AM

I would see if there was a hardship deferral or something and just build up an emergency fund and pay minimums until you're done and making good money.

**cantaka** · 05-15-2009, 08:43 AM

Thanks for the advice arthur, steve, wincrasher, red 92s, and inkstain82.

I had further questions on whether my priority should be to build up an emergency fund and also start putting money in retirement saviings, or should I just divert anything left over to student debt?

**disneysteve** · 05-15-2009, 08:55 AM

Originally posted by cantaka View Post

I had further questions on whether my priority should be to build up an emergency fund and also start putting money in retirement saviings, or should I just divert anything left over to student debt?

I think you should do it all. Build an EF, start contributing to retirement and pay extra on the student loans starting with the one with the highest interest rate. Physicians are at a disadvantage when it comes to retirement planning because we are older before we actually have an income so you need to start putting money away as soon as you can.

I made large extra payments on my loans (like over $1,000/month extra) but also funded my Roth every year, funded my wife's Roth, and had other money going to savings. As the loans each got repaid, I boosted what was going into savings.

**savingmama** · 05-19-2009, 12:20 PM

So glad to hear that all that debt is related to college and medical school and not just an expensive graduate program. I was getting a little worried for you, but now not so much.

So my family is actually in a similar situation. My husband is currently finishing his third year of residency (of a five year program). He graduated medical school with about $110,000 in student debt (all government loan, some subsidized, some unsubsidized). He is making very similar salary to what you will make. This is what we have done so far:

The first two years we were able to forbear our student loans (qualified merely because he is doing a residency- so you would qualify also). This last year because we have three kids we qualified for deferment (which means the interest on our subsidized loans is subsidized this year). For our situation, there is no way we could start making payments. However, I do try to pay about $500 in interest each year, and the reason we do is because there are tax benefits to paying interest on student loans that we only qualify for during residency. The money we pay in interest lowers our AGI which decreases our taxes and also helps us qualify for EIC (EIC is something you wouldn't qualify for though). You would still benefit from paying student loan interest and lowering your AGI so your taxes are lower during residency. We just want to take advantage of this benefit now, because for us, once my husband is an attending he will be making too much money for us to qualify for the deduction. Also our rates are really good on our loans (2.77 and 4.25- both locked), so it is not really pressing for us to start repaying.

As far as Emergency Fund-- definitely important. We actually had savings when we started residency, but if you don't have an emergency fund that should be your number one priority. You will have very good job security during residency, but there are still surprise costs along the way, so I definitely see this as more important than loan repayment. (one of the immediate costs coming up--unless program pays for it-- is step 3 and I think I remember it being about $1400).

As far as retirement, you should look into what your residency program offers. We have been so lucky to be apart of a program that does a 403 (b) plan. They are in connection to a educational system and because of that, instead of paying social security, we are required to put 10% of our gross pay into retirement. (That only adds an extra 4% more than we would have paid with SS). Then the residency program matches 13.77% toward our retirement. So luckily we are able to put almost 25% of our gross toward retirement already. Look to see if your program offers any matching or retirement incentives. (we didn't find out about this until my husband started orientation which was in July of his first year). If the program offers no matching incentives, then I would definitely do a Roth. I actually opened up a roth and we contribute as much as we can to it. I just feel we have to take advantage of the opportunity now because when my husband finishes, our AGI will be too high to qualify for a roth. Plus right now our tax bracket is the lowest it will probably ever be, that putting money in post tax is almost like putting money in pre tax (because we barely pay any taxes).

So this is my suggestion in order of importance (for residency): Emergency Fund, Retirement, Student Loan Interest

**cantaka** · 05-20-2009, 07:03 PM

Thank you so much for the advice Mama and Steve!

-Cantaka

**b4freedom** · 05-25-2009, 08:00 PM

Have you looked at consolidating your loans?
Direct Consolidation Loans - Welcome!!!
I have none, but my wife was able to lock hers in a few years ago at 2.25% for 20 years.

If you have extra money, I'd save up as much money as you can into an EF.

**quizbiz** · 05-27-2009, 07:10 PM

wow this is intense and this is exactly what I am getting myself into as a college freshman. Any additional advice would be appreciated!

160k student loans