this is more or less a question about student loans.
I had an appointment with my doctor but he had a cold, so another doctor covered for him.
The doctor who checked me out looked to be about 45 to 50 years old. During our chat, I mentioned that my SSD may be starting doctorate studies next year. She then started talking about how she was still paying off her medical school student loan. Apparently she’s been practicing cardiology at this large medical center for almost 17 years.(this one is bigger than Mayo Clinic or Cleveland Clinic) I didn’t want to be rude and ask how much she made… but it must be pretty decent.
How much student loan could she possibly have? Or does it just make more sense to pay as little as possible?(for example, much lower interest rates or something?)
Med School debt is the size of a home mortgage. Not everyone buckles down and does everything in their power to pay down the mortgage on their house as quickly as possible, so why would you expect someone to have done that with med school debt? Chances are this doctor is paying off med school, a home loan, and a car note all at once, not to mention all the other expenses in her life.
Note the example debt amounts (which are not the largest possible amounts of debt for medical school plus any undergraduate debt that the person may have) and the example times of repayment.
Yes, medical school was less expensive two decades ago… but still expensive.
Also, not all physicians choose to continue to live a frugal student/resident lifestyle in order to pay off the debt in the first few years after getting the first high paying physician job.
Some doctors have debt from BOTH undergrad and med school. Sometimes the loans were “put on hold” until they got out of residencies…which may be when they were 30ish. So, the loans “grew” during all those years of non-payment.
College and med school costs were lower when this doc went thru, but could have accumulated to $250k or more by the time she was ready to start paying. And, I believe I read somewhere, that some med school loans have a 20 year option.
Many of the doctors buy a large home and put their money in them because it is considered a protected asset from malpractice claims (at least in texas). So they could be carrying their student loan while investing in their homes.
The doctor may be practicing at a major medical center but in fact is not an employee of said medical center. The physician may have had to “buy in” to a practice which is affiliated with the medical center (has office space, privileges, uses some administrative services) but has its own cost center/profit and loss statement.
Many young doctors have to borrow to buy in. They’ve got no equity since during residency and fellowship they aren’t earning enough to sock away cash. So the doc is looking at educational loans and a business loan- and the ed loans usually have a lower interest rate.
So the loan to buy in to the practice gets paid off quickly from earnings. And as the salary goes up, that frees up some cash to begin to tackle the educational loans. Except that also coincides with the family formation years, so costs go up as income goes up.
Not a surprise that a doctor still has loans to pay off. Unless someone does one of the state or federal programs where he/she serves a rural area with poor access to health care (or a poor urban area) where the loans get forgiven, the debt by the time a doc is hitting the peak earning years may still be there, especially if the doctor is not a hospitalist (generally an employee, not a partner in a practice) or doing public health.
My cousin had over $200,000 in loans. He also had a mortgage and two kids by time he was 17 years into his career. Remember they don’t start practicing until their 30s, so they get a late start on earning. His partnership buy in last year was $500,000 cash. So he still has the loans, although now that he is a partner his bonuses go toward them and they’re quickly shrinking.
was chatting with my CPA friend at a BBQ this afternoon… he gave me a different point of view on this subject. he said it would be STUPID for someone to pay off medical school loans that early.(17 years after receiving medical license) apparently the cheapest way is to drag the loan as long as humanly possible and keep working with banks to work out income-based payments. some doctors even deliberately take off 3 to 4 year from their practice to go work in a poor foreign country, if their income starts to go just above the threshold. some loans under this type of repayment can even be forgiven after 25 years… so just a few years before the doctor retires… (this is all to make sure the repayment makes the most financial sense and depends on the loan amount and the servicer) one of his clients actually managed to work it out so that he was essentially paying less than 1% interest on his almost-$200,000 that originated in 1994.
Just because she’s been working there for 17 years doesn’t mean she’s been paid well for 17 years. My nephew has been out of medical school for several years but is still doing low paying fellowships in his specialty. He lives and works in a high cost area (Manhattan) and has a decent place to live only because he lives with investment banker college friends who are essentially subsidizing him. As far as I know, he hasn’t started paying off his loans. He said most new/young doctors he knows whose parents didn’t pay for their educations are either in default or some kind of deferment or modified payment plan on their huge loans. And loans for kids who did it on their own are in fact huge - easily six figures where the first number is not necessarily a 1.
If the doctor had to buy into a practice, that may have been accomplished by having them draw a relatively low income for a few years as they built up their clientele.
My med school loan interest is much lower than any other loans I have–so yeah, we pay them off “last”. Still paying them back faster than required but it takes a long time. And mine all are allowed for income-based repayment.
Also, many cardiologists are not employees of the hospital. Rather, they may be employed by a group that contracts with the hospital. I think it is extremely rare for a cardiologist to be eligible for loan forgiveness (and I’m ok with that too–they make good money).
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Just because she’s been working there for 17 years doesn’t mean she’s been paid well for 17 years. My nephew has been out of medical school for several years but is still doing low paying fellowships in his specialty
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^^^ This
I’m just learning this stuff, but some specialties seem to require a year between med school and starting the specialty which can be several years, and then after specialty, more years of fellowships…all while being lowishly paid
This is typical. I ended up with about 250k in medical school debt as did many of my peers. We are all in our late 40s. There is no rush to pay this off (as noted above) but I have enjoyed the comments I’ve received from mortgage lenders when analyzing my credit reports for home purchases. Yes, physicians can make a good living. But many of us carry a very large educational debt burden I think it is worth it but it can feel daunting at times.
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ended up with about 250k in medical school debt as did many of my peers. We are all in our late 40s.
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Is that because of the compounding interest? I’m guessing that if you’re in your late 40s, you went to med school more than 20 years ago when costs were much lower than they are now. @BearHouse
I finished about 18 years ago but then you have residency, interest accruals, long deferments, low starting income and small starting payments. We also could borrow a lot back then for living expenses, books, etc. I think it topped out in the 240s, but I am not exactly sure because I decided to put it on auto-payments and not let it be a source of anxiety and despair. However, I really don’t mind the debt because I enjoy medicine and the debt was worth it. But I have told both of my kids “no debt for undergrad!”