How long does it take to repay medical school loans?

Discussion forum for all medical education issues, including residency programs, medical schools, etc.
Ryan

How long does it take to repay medical school loans?

Post by Ryan » Thu Jun 02, 2011 11:16 pm

Hey Dr. Dave, I was wondering how long it took you to pay off your loans from medical school as a psychiatrist?
Ryan


User avatar
DrDave
Administrator
Posts: 861
Joined: Sun May 18, 2008 11:10 am

Re: How long does it take to repay medical school loans?

Post by DrDave » Fri Jun 03, 2011 11:17 pm

Ryan,

There are two main factors in how long it takes to repay medical school loans. 1 - how much are the loans and 2 - how much money are you earning

I think most people will have loans from college as well as medical school. The amount you need to borrow can vary quite a bit depending on where you go to school and whether you qualify for various scholarships and/or grants. You can often get several lower interest loans as well as the usual federally funded student loans. I'm guessing that medical school now is probably going to be between $200k and $300k including tuition and room and board. You wind up paying little if any of the loans back during residency and you really start to repay them after that time. Some of the loans will have a 10 year repayment term and others will have a 20 year repayment term. Depending on how much money you are earning, some people pay of the loans earlier. It is basically the same as having an additional mortgage to any home you plan on purchasing.

I think most people underestimate the financial burden of medical school. Everyone assumes that doctors make a ton of money and so the loans aren't a big deal. That's just not the case for most doctors.

Medical School Confidant

Re: How long does it take to repay medical school loans?

Post by Medical School Confidant » Mon Jun 06, 2011 12:34 pm

Ryan

I'm hoping you let me offer another answer to this question. Everything that DrDave said is absolutely right (with the only exception being that an extended term for paying off school is 30 years, not 20 but that is insignificant because lenders will pretty much let you set up any term you want). And his advice is sound. What I'd like to help with though are some ideas that will help you to realize how important it is to dramatically decrease the first part of DrDave's equation (how much loans you take out).

Let's assume for a minute that you take out around 300K in loans between medical school and undergraduate school. This is pretty common for private medical schools. Please remember your interest will be accruing during residency so at 7% (low side) interest rate after 4 years of a psychiatry residency you will be 400K in debt. Then comes repayment. Your monthly payment on a 10 year plan is $4645, and on a 30 year plan is $2661.

Now let's assume you can half that debt (this is extremely doable) to 150K on graduation. That is 200K at end of residency and 10 year payment is $2322 and 30 year is $1330.

If you want to be wealthy in your life (most doctors do not retire millionaires even though the median income of millionaires is 130K a year and doctors median income is 190K a year), so if you want to be out of the norm for doctors and retire wealthy, a 30 year plan is just plain out. That big a payment for that long will kill you. So 10 years is what you should shoot for. On a psychiatry pay (160K a year on average), a 10 year plan with 300K after graduation is very VERY difficult. But a 10 year plan with 150K at graduation is very doable, and you should even be able to pay that off more quickly (5 years or less in some cases depending on your income). That will open the door for you to get the debt monkey off your back and start becoming wealthy.

assenav

Re: How long does it take to repay medical school loans? h

Post by assenav » Mon Aug 25, 2014 12:05 am

How can you half the debt?

User avatar
DrDave
Administrator
Posts: 861
Joined: Sun May 18, 2008 11:10 am

Re: How long does it take to repay medical school loans?

Post by DrDave » Thu Mar 02, 2017 11:38 pm

2.5 years later and I'd still love to have the answer to that question.


Post Reply