Author Topic: How long is the payback period on becoming a doctor?  (Read 6636 times)

ender

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How long is the payback period on becoming a doctor?
« on: August 19, 2016, 06:37:48 AM »
Something I have been considering is for someone planning on living a MMM lifestyle (basically spending well below what they make), I'm curious what the actual financial benefit of becoming a doctor is.

What assumptions should I use? I was thinking of comparing it to engineering, so something like:

  • Spending of $25k/person/year
  • Engineer starts at 60k, with 3% raises per year on average
  • Medical debt of $200k after residency
  • No student loans for undergrad for either
  • 4 years of medical school followed by 4 years residency (making $50k/year)

I'm not sure what all there is reasonable. Ignoring inflation, investment compounding, and taxes for simple math. Also how do most med students pay their way for living expenses in med school? Not really sure how to calculate that. Is it common to take loans for that?

By the end of year 8, the engineer has made a total of around $600k in income. Engineer has spent a total of $200k which results in approximately a MMM $400k pretax net worth. Doctor has made $200k in residency, $200k in medical debt, and another $200k in living expenses, for a total of -$200k pretax net worth.

This puts the doctor/engineer at a $600k difference on Day 1 of the doctors career. Engineer is now making around $75k a year and we can pretend they never get a raise indefinitely. If the doctor makes $175k, using the basic assumptions (now is where ignoring taxes causes a lot of problem... oops), they will tie the engineer after 6 years post-residency, so at around age 35, their net worth will be the same then.

However, engineers net worth is $400k+6*(75k-25k) or around $700k already, which on $25k spending is 28x expenses, so they already could have FIREd.

----

The above is fairly crude math, how can I make it more accurate? One of the main problems is ignoring compounding - not a huge deal for 4-8 years timeline but for 14+ it becomes a bigger factor. Ignoring taxes is fairly minor for the engineer (who with IRA/401k will only have a maximum taxable income of $51.5k, assuming single) but becomes a problem with the doctors much larger income. Clearly making $175k and spending $25k doesn't result in a net savings of $150k :-)

I'm also ignoring the per/hour earnings. I suspect most med students, residents, and doctors work considerably more hours/week on average than most engineers. Inflation can be ignored so long as all other calculations ignore it. I added some raises to the engineer early to signify early career growth (NOT inflation).

My eventual goal would be to convert all those assumptions into a formula you can input those assumptions and then spit out the "break even" age of the doctor/engineer (or whatever other career you prefer).

Mother Fussbudget

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Re: How long is the payback period on becoming a doctor?
« Reply #1 on: August 19, 2016, 11:49:26 AM »
Most who go into medicine are doing it for intangible reasons - a need to give back to the community, and wanting helping other people,  more than looking frankly at economic payback.  If you look at the economics, you're right in that engineering may have a sooner financial payback, AND potentially pay as-well long-term, while providing the ability to work shorter hours.  With either career you may still get the 2am phone calls: "x system is down, come fix it", or "y needs to have their arm stitched on".  But the MD career may involve not only med-school costs, but potentially brutal internship, residency requirements, etc and a feeling of 'your life is not your own' as you work unfathomable hours at a teaching hospital.

In college I moved from pre-med to computer science with these thoughts in mind, and *for me*, I made the right decision.

Cranky

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Re: How long is the payback period on becoming a doctor?
« Reply #2 on: August 19, 2016, 11:54:24 AM »
The physicians I know live a lot better than do the engineers, for whatever that's worth. From my personal observation, I'd say the MDs pull ahead somewhere around the age of 40yo.

patrat

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Re: How long is the payback period on becoming a doctor?
« Reply #3 on: August 19, 2016, 12:06:59 PM »
Your assumptions and acknowledgements of their errors is pretty spot on. I think your total debt is a bit low, because you do not account for interest accrual while in school/residency, which quickly balloons. Assume about 6.5% on interest rate.

Med students can not earn their keep, financially, during med school. Their options are extra loans, withdraw from savings, or have a spouse/parent/other willing to pay that portion of their expense. They also can not realistically cook their own meals much of the time, so increase living expense. My guess is 30-35k a year in expense for a single med student (resident too); as additional loans.

Undergrad efforts are fairly equivalent, possibly steering toward a 5-10 hour per week greater effort for the engineer. Med School is 70-80 hr a week. No summer break, so no summer income. Residency workload varies from 60-80 hr a week.

Job placement for med is easier, after residency. Some engineers find themselves unable to work in their own field, due to a lack of jobs. Do tack on about 20k in extra expenses 4th year of med school, to pay for travel and lodging while seeking the residency spot.

Account for burnout/failure rates in that ROI somehow. Many prospective docs do not complete their training, but are left with their accrued debt.

An engineer can likely settle down and put down roots about 1 year into their employment, getting a reasonable house on mortgage; thereby starting equity accrual. Although many med students and residents buy houses, it is really a bad move until after residency; as any number of factors are likely to send you moving across the country to finish your training. So, call it 7-8 years of rent instead of the marginal equity you get with a mortgage. Also, add $5k to account for those extra 2 moves.

My take (an Engineer married to a Med Resident) is that if you can cut it at engineering and be happy, do that! Many times already my wife has wished she had gone the house-spouse route, and we would certainly be ahead financially, by about the amount you list or greater.

tonysemail

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Re: How long is the payback period on becoming a doctor?
« Reply #4 on: August 19, 2016, 12:18:37 PM »
salary is only part of total compensation. 
there's also insurance benefits, ESPP, RSU, 401k, pension, etc.

FWIW - I always thought medicine is better for job security.

Dezrah

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Re: How long is the payback period on becoming a doctor?
« Reply #5 on: August 19, 2016, 02:40:17 PM »
Anecdotal evidence:

My dad was a cardiologist, so high paying even among physicians.  We were able to have a VERY nice standard of living growing up.  However, he worked really long, hard hours, much of it being very unsatisfying work like dictation, studying for the board exam, dealing with malpractice suits, etc.  He was often out very late growing up and has to work alternating holidays.  I donít think he regrets it though in large part because the money truly allowed him to live comfortably and spend freely.  Honestly though, he has a very analytical mind and I think he would have been more career happy as an engineer.

By contrast, I saw how much stress and effort and exhaustive work physicians deal with and went down the engineering path instead (plus I was terrible at biology and chemistry anyway).  I was done with school after 4 years, able to find a job in the city of my choice right away, worked just 40 hours per week, and earned more than the median national average.  My job is satisfying and I love the amount of free time I have (construction design rarely has emergency work).  Weíve both changed jobs multiple times in our life and I think it was much easier for me to find promising jobs than him.

I will never be as wealthy as my parents but frankly I donít really want a lot of the stuff they have.  All the really important stuff are things I will be able to save up for and afford anyway.  Iím pretty sure they think weíre poor while Iím certain weíre doing fantastic.  Iím pretty sure theyíve saved up enough to FIR(Eish) but theyíre convinced theyíre far from close.

Hereís another telling story:  We were watching one of those home makeover shows where the homeowners were lottery winners spending their own money.  One couple wanted to take their $30k/month for life annuity to buy a wedding venue farm house and upgrade it to service high-end clientele.  I made the comment that these guys were living their dream and with that income they could go crazy and still never spend it all.  My parents raised an eyebrow and commented that once these guys pay their property and income taxes, thereís not going to be much left over to live a comfortable life so they would do better to knock off their extravagant ambitions now.  Weíre in different worlds for sure.

bacchi

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Re: How long is the payback period on becoming a doctor?
« Reply #6 on: August 19, 2016, 03:48:50 PM »
The physicians I know live a lot better than do the engineers, for whatever that's worth. From my personal observation, I'd say the MDs pull ahead somewhere around the age of 40yo.

Yeah, it's the sloth and rabbit. A 55 year old MD can have a much more expensive lifestyle than a 55 year old engineer. If the goal is an early RE, engineering is the way to go.

Hourly wages aren't all that different. http://www.kevinmd.com/blog/2010/10/specialist-primary-care-pay-hour.html

That said, there are doctors that truly do bill by the hour and even salaried doctors that have steady hours.

Spork

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Re: How long is the payback period on becoming a doctor?
« Reply #7 on: August 19, 2016, 04:02:33 PM »
More anecdotal evidence....

My dad went through med school a long time ago.  I know prices have changed a lot, but so have resident wages.  Random facts:

* Residents earned $25 a month.  Yes, you read that correctly.
* Shifts were 36 hours long
* Dad lived with 4 other residents in a very small house, sleeping 2 to a bed.   And no, not in a nice romantic way.  They could manage 2 to a bed because generally there was always someone at the hospital.
* He took no bank loans during med school.  I kid you not: His little brother bankrolled it with a paper route.
* He literally ate rice and beans for every meal.  They bought 50lb bags of dried beans.
* he lived in a nice house all his life... but did live WELL below his means.  He was still driving his 1985 GMC truck when he died this year.
* he worked very long hours his entire life.  He practiced medicine up until his death at age 86.  As a kid, he was pretty much gone all the time.  If it was a holiday (birthday, Christmas, Thanksgiving, etc) you could almost count on him being called in.  Odds were near 100%.

In short, it can be done cheaply (or at least it could a few generations back).

Abe

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Re: How long is the payback period on becoming a doctor?
« Reply #8 on: August 19, 2016, 05:41:02 PM »
Starting salary for specialists, especially for surgeons is significantly higher than assumed (200k 9; more for medicine, 250-300k for surgeons. If working a normal career length, they will come out significantly ahead. For early retirement its engineers by a long shot. FWIW I have been offered 350k if I worked at a rural location but decided not to because of the rural location. In a larger city 250k is more likely. The training however is very grueling and people doing it for money will probably not complete it.

BJC

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Re: How long is the payback period on becoming a doctor?
« Reply #9 on: August 20, 2016, 03:58:29 PM »
I work with doctors and if you go through medical route,  I'd suggest emergency medicine.  They make 120-225/hour depending on where they  work (supply v demand).

EM gives huge freedom to work wherever you want whenever.  I've had docs who do a year in Australia, China, Venezuela.... Etc. I have some that work 2 days in NYC,  and full-time in Montreal Canada... I have one that works in NYC and North Dakota...  Just an idea of the flexibility that is awesome

Gronnie

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Re: How long is the payback period on becoming a doctor?
« Reply #10 on: August 20, 2016, 05:32:53 PM »
I think both your starting income and raise amount for an early career engineer are both quite low, even for an average cost-of-living area.

Spork

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Re: How long is the payback period on becoming a doctor?
« Reply #11 on: August 20, 2016, 07:59:34 PM »
I think both your starting income and raise amount for an early career engineer are both quite low, even for an average cost-of-living area.

It really depends on the area.... and what constitutes "engineer".   I have a computer science degree... and have been called "software engineer" and "security engineer".  I don't know if that is a reasonable tag or not.  But with those tags and a limited sample size: In a large city/Low COL area, those numbers would have been reasonable.  In a small city/slightly higher COL area, those numbers are really high.  (Yes, the higher COL area paid considerably less.)  Geographically, these areas are only a couple of hours apart.

etselec

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Re: How long is the payback period on becoming a doctor?
« Reply #12 on: August 20, 2016, 08:12:56 PM »
I work with doctors and if you go through medical route,  I'd suggest emergency medicine.  They make 120-225/hour depending on where they  work (supply v demand).

EM gives huge freedom to work wherever you want whenever.  I've had docs who do a year in Australia, China, Venezuela.... Etc. I have some that work 2 days in NYC,  and full-time in Montreal Canada... I have one that works in NYC and North Dakota...  Just an idea of the flexibility that is awesome

Other major advantage of emergency medicine: the only specialty (in America) where the docs hardly ever have to deal with people's insurance companies. But of course, it's a very particular type of workflow & not a good idea to go into it if you will be miserable...

goatmom

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Re: How long is the payback period on becoming a doctor?
« Reply #13 on: August 20, 2016, 09:40:14 PM »
Don't do medicine for the money.  It just isn't worth it.  If you are smart and don't mind working hard, there are much easier ways to earn a living.  And potentially more profitable.  Medicine is really a calling.  It is all consuming.  Good luck!

ender

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Re: How long is the payback period on becoming a doctor?
« Reply #14 on: November 15, 2020, 08:38:19 AM »
I've been thinking about this topic again (years later) and I think that I dramatically underestimated the early income curve that most engineers have.

A consideration I didn't include is when doing a 1:1 comparison, we really ought to consider the type of person who is capable of doing medical school and all the associated hoops probably would be an above average engineer as far as ambition/etc goes and probably advance in their career somewhat more rapidly than normal.


norajean

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Re: How long is the payback period on becoming a doctor?
« Reply #15 on: November 15, 2020, 08:54:21 AM »
Physican assistant makes great money, works normal hours, manages/administers nothing and skips a lot of expensive schooling and residency.

Kroaler

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Re: How long is the payback period on becoming a doctor?
« Reply #16 on: November 15, 2020, 09:41:46 AM »
Just want to throw this in.  SO you used Engineer for 4 year and doctor for 8 year.  I think law is similar to medicine.

Lets add another hypothetical person.

2 Year technical degree person in a in demand field. - Maybe something "blue collar"

Year 1-2 = Tech School
Year 3 - Start earning income of 65k - No student loans
Year 4 - Raise - Move to 70
Year 5 - Raise - Move to 75k
Year 6 - 85-90k Because you are so in demand overtime is required
Year 7 - 90K +
Year 8 - 90K +
Year 9 - Move into management
Year 10 - Performance raises - On and on until you Fire? 

This is my story. 

*If* the money is invested wisely, I'm not sure the professional occupation will ever catch up due to the net worth delta created by the student loans and 6+ years of missed income? What is everyone's thoughts?
« Last Edit: November 15, 2020, 09:43:26 AM by Kroaler »

iluvzbeach

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Re: How long is the payback period on becoming a doctor?
« Reply #17 on: November 15, 2020, 12:27:12 PM »
@Kroaler - Yes, absolutely! Additionally, in The Millionaire Next Door they write about the spending differences and societal expectations of a lawyer/doctor vs. blue collar worker. Lawyers & doctors are expected to drive fancy cars, wear designer clothing, live in upscale neighborhoods & send their kids to private schools. This sort of lifestyle is very expensive and itís not all that uncommon for these professionals to have $1M++ in debt, without much in savings.

Paper Chaser

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Re: How long is the payback period on becoming a doctor?
« Reply #18 on: November 15, 2020, 06:29:09 PM »
Would the doctor have expenses that the engineer or tradesman wouldn't? Malpractice insurance? Office space/staff? Equipment/supplies?

Bloop Bloop Reloaded

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Re: How long is the payback period on becoming a doctor?
« Reply #19 on: November 15, 2020, 06:54:38 PM »
@Kroaler - Yes, absolutely! Additionally, in The Millionaire Next Door they write about the spending differences and societal expectations of a lawyer/doctor vs. blue collar worker. Lawyers & doctors are expected to drive fancy cars, wear designer clothing, live in upscale neighborhoods & send their kids to private schools. This sort of lifestyle is very expensive and itís not all that uncommon for these professionals to have $1M++ in debt, without much in savings.

This (debt) hasn't been my experience in law, and I work in a pretty high powered field. I dated a few doctors and it wasn't my experience of their social lives either. Yes, a lot of private schools and Porsches, but we all earn $200k - $400k a year and it's easily affordable without going into debt. Amongst my colleagues there's a lot of talk of trust funds and additional investment properties and that's not typically done by people swimming in net debt.

Also the path to making big bucks in law is shorter than that in medicine, though neither field pays particularly well for how hard it is to get to the top.

No doctor I've met has been particularly money driven. If you are driven by money you would not go into a field where you earn peanuts (in comparison with the hours and your level of talent) till your early to mid 30s.

The main advantage of medicine, besides the intrinsic virtue, is that the job security is relatively good - but even then, to get into a competitive training program is quite difficult. But if you just want to be a bog average doctor then I doubt you'll ever have difficulty finding a job. The same can't be said of engineers, lawyers, etc - the lower part of the cohort can experience a lot of job insecurity.

use2betrix

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Re: How long is the payback period on becoming a doctor?
« Reply #20 on: November 15, 2020, 07:43:09 PM »
One of my closest friends wife is a specialty doctor, as are the majority of their friends. They live in a higher cost of living area and are speciality doctors vs family practice, but within a few years of finishing residency they are mostly in the low $200k range to mid $300k. That will continue to grow. I know my friends wife paid off her couple hundred grand in loans within a couple years of working.

In any career field, there are people at the top, the bottom, and the middle. Itís much different for someone to get $250k in student loans then be a mediocre family doctor making $125k-$150k/yr vs a specialty doctor making $400k+ Early on.

The same goes for engineers. I work in Power/Oil & Gas and know engineers at $60k and engineers well over $200k.

Depending on spending levels and how long someone intends to work, the doctor will likely come out ahead in the long run.

Zamboni

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Re: How long is the payback period on becoming a doctor?
« Reply #21 on: November 15, 2020, 08:00:58 PM »
I know multiple people who have gone to medical or dental school courtesy of the US government. In fact, if you can get into the military medical school in Bethesda, not only is med school free, but they will pay you a starting salary of $65K while you are in school. Pretty good deal (if you can get in . . . it is very competitive.)

I know one guy who had is dental school at Columbia University 100% paid for by the Navy. He was never in ROTC or anything like that . . . he didn't even apply for the program until his senior year of college. Now that he is a DDS (Normal dental school at a normal school, he just didn't pay the tuition), he has to be navy dentist for 6 years (I think) to pay them back, but I can't imagine that is very high risk and he'll get tons of job experience doing that while he has a steady military salary. Then he'll be set up to make bank in the private sector.

I'm just saying it's difficult to make these comparisons. What if your parents are footing your med school bill? I know people in that situation as well . . . so nothing's ever apples to apples.

ender

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Re: How long is the payback period on becoming a doctor?
« Reply #22 on: November 15, 2020, 08:02:43 PM »
I think in that case though your actual income is reasonably low while working for the military for some time afterwards too, so it's not a free lunch.

Zamboni

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Re: How long is the payback period on becoming a doctor?
« Reply #23 on: November 15, 2020, 08:13:53 PM »
Maybe. I know the person who got into the military medical school is getting a $65K salary during her first year of medical school . . . and I think it just gradually goes up every year after that. That's a pretty healthy salary to be pulling in as a tuition and fees free student considering she also doesn't have any living expenses at all.

I do agree that being in the military (especially as a doctor!) is not a free lunch. I grew up watching M*A*S*H, and there is not a single thing about the medical profession that I find attractive or glamorous.

Unfortunately I do know several engineers who've suffered from tremendous job instability and layoffs . . . this rarely happens for MD's. In fact, you can be a complete screw up and still travel around the country always finding work whenever you want if you have an MD, as long as you don't lose your license and you're willing to be a "doc-in-a-box" at urgent cares in underserved communities. Dorian Paskowitz proved that. On the flip side, the MD shortage means that the pressure to work extremely long hours is very high, as others noted, so you have to be pretty good at saying "no" as a doctor or you will be suffocated by the work-a-holic culture and peer pressure of medicine.

Abe

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Re: How long is the payback period on becoming a doctor?
« Reply #24 on: November 15, 2020, 10:34:19 PM »
Not sure how much engineers make on average (my understanding it varies dramatically). But for my case, total cost of tuition for med school was $80k, cost including living expenses was $140k. This is on the low end since it was a public school (average is ~$200k). During residency & fellowship I was paid $65-75k per year.

With $200k in debt, it is reasonable to pay off the loan in a few years on a single physician salary unless one lives in a high cost-of-living area. NYC and CA can be a stretch. The main cost is in time. I'm much older at the technical start of my career than most of my college friends. This came into very sharp focus when one of my good friends from college died recently. He had lived a full life and had worked for the DOJ 14 years in the time it took me to train for my career. I do have more job security and better pension, though. 

As others have noted, people who look at it from a business/financial perspective only will be crushed. I've seen it happen, especially in certain high-earning fields.
« Last Edit: November 15, 2020, 10:37:40 PM by Abe »

Gone_fishing

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Re: How long is the payback period on becoming a doctor?
« Reply #25 on: November 16, 2020, 09:49:31 AM »
My parents were engineers and Iím a primary care physician.
Some other factors to consider include are:

1. In a lot of specialties it is easy to find a job in whatever location you want, whereas in engineering you may need to live in certain hcol cities.

2.  Cost of schooling varies wildly depending on private vs public, scholarships, financial aid, etc and there are programs where you can have your loans forgiven if you practice in certain underserved areas for a few years.

3.  Job stability

4. The ability to work part time once training is over is a huge plus.  Itís hard to do this as an engineer.  There were times when I worked 4-12 hours a week when my son was young. (This site really helped me do that) I now work 26 hours/3 days a week with a decent salary of $130,000 per year plus incentives.  For sure this not the fastest FIRE path and medicine should only be pursued if it is a passion/calling, but it can be a very sustainable and rewarding career while still giving you a lot of personal and family time.

5. Someone previously mentioned Physician Assistant as an option-similar duties and decent salary.  I would agree- you can cut some cost and save time, not to mention skip residency cuz that part sux no way around it.

duck-duck

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Re: How long is the payback period on becoming a doctor?
« Reply #26 on: November 17, 2020, 03:11:56 PM »
Physican assistant makes great money, works normal hours, manages/administers nothing and skips a lot of expensive schooling and residency.

Everything you mentioned is relative. I'm a PA who graduated with $140 in loans (includes cost of living and private university) which isn't that far off from many med school grads. I completed a 1 year fellowship (which was optional) making $15/hr and working 60 hrs/week. But the reward is that I work in emergency medicine 12 shifts per month and will make 130-140k this year. I work 12 hour shifts which can be pretty grueling and have to deal with a lot of swing and night shifts. But I generally love what I do, have great job security, flexibility of schedule and benefits.

Proud Foot

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Re: How long is the payback period on becoming a doctor?
« Reply #27 on: November 19, 2020, 09:44:52 AM »
Would the doctor have expenses that the engineer or tradesman wouldn't? Malpractice insurance? Office space/staff? Equipment/supplies?

This is one of those questions that the answer is "it depends".

For the doctor there are a lot of options and the biggest thing comes down to whether they are employed by a hospital or physician group, or whether they own and operate their own practice.

For the payback period in the calculations you would also need to look at where they are going to practice, will they work in a rural setting where there may be significant student loan forgiveness/repayment benefits? And if they are employed will they be able to moonlight on the nights/weekends for extra money.

Blackeagle

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Re: How long is the payback period on becoming a doctor?
« Reply #28 on: December 27, 2020, 04:41:30 PM »
Much like with doctorsí fields of specialty, you really need to be specific about what kind of engineering youíre talking about.  There are huge pay variations among engineering disciplines.  Some disciplines are much more cyclical (prone to big pay in boom times and layoffs during a bust) while others are very steady state.  A civil engineer working for the Federal Highway Administration or a state Department of Transportation can count on a very steady paycheck.  An engineer working in the oil and gas field may be in huge demand or have trouble finding work, depending on the price of oil.