Need help finding a student loan calculator/mini case study med student

[brandino29]

Can anyone point me in the direction of a good calculator that works with student loans that will help me calculate accruing interest that doesn't capitalize until repayment begins/forbearance ends?  I feel like this should be easier to find than what I'm finding out there. 

Specifically, what I'm trying to do is estimate how much interest will accrue on the current principal I have along with the future loans I'll be taking for tuition for years 3 and 4 of medical school.  I'm trying to create a spreadsheet to calculate the different repayment scenarios based on the different specialties I could potentially go into, their residency lengths, their starting salaries, and certain loan repayment programs I could take advantage of in different specialties. 

Here's an example:
Assuming a loan principal of $200,000 (shoot me now) at 6.5% interest (shoot me again)...

If I go into family medicine, I can potentially qualify for $120,000 in non-taxable student loan repayment over 3 years during residency ($40k/year), in addition to an average residency salary of $50,000 for 3 years, and a starting salary in year 4 of $150,000.

If I go into general surgery, I would qualify for no loan repayment programs during residency, have 5 years of residency earning around $50,000 per year, and a starting salary in year 6 of $250,000.

In scenario 1, I could potentially pay off accrued interest (if all or only some I'm not sure yet because I haven't figured out a good way to calculate it accurately) up front with a lump sum loan repayment of $40k, and then continue paying off accruing interest throughout the year from my salary while waiting on the additional loan repayment disbursements in years 2 and 3 to knock down principal.  In this scenario, I would have potentially no interest ever capitalize and take a hefty whack at principal along the way.

In scenario 2, I would be able to pay towards accruing interest along the way but would be highly unlikely to have paid it all off upfront as in scenario 1, meaning it would possibly continue to accrue at a faster rate than I'm able to keep up with.  Additionally, I'd have an extra 2 years of residency to complete before beginning work at a higher salary.  So I'd finish residency with all $200k of the principal intact along with potentially significant interest remaining that would capitalize to the principal at that point.  Then in year 6 I'd be at a point to start making a legitimate effort to pay down the loans. 

I'm sorry that's so convoluted but I tried to make it as straight-forward as possible.  Really more than anything what I'm trying to figure out right now is the different break points of different specialties, strictly from a financial perspective. 

Most people would think the best thing to do is just to go into the highest paying specialty you can get into, but in most cases that requires additional years of residency and fellowship (e.g. 6 or 7 years post graduate training) and there are limited, if any, loan repayment programs for those specialties.  Whereas primary care has many options for loan repayment assistance, a shorter residency, though a lower median salary as a practicing physician.

[Left]

are you in med school already? It's been growing (mostly out west) where family practice has scholarships for free med school to encourage people to go that route
http://www.cbsnews.com/news/faced-with-too-few-physicians-california-offers-free-medical-school/

I think the east coast has programs like that too.

Also had a co-workers brother become a doctor at a hospital that just paid off their loans. For the cost of them being a hospital doctor for a while (not sure of length of time though) as part of the sign on bonus

You might find this helpful if you haven't seen it yet
http://studentloanhero.com/featured/ultimate-student-loan-repayment-guide-for-doctors/

use this for a calculator though https://www.salliemae.com/plan-for-college/college-planning-toolbox/accrued-interest-calculator/

thought about working at the IHS or VA hospitals, they pay down med school loans as well

[KisKis]

Most people would think the best thing to do is just to go into the highest paying specialty you can get into, but in most cases that requires additional years of residency and fellowship (e.g. 6 or 7 years post graduate training) and there are limited, if any, loan repayment programs for those specialties.

I fall into the "go for the higher paying specialty" camp, if you can make it into the more competitive programs.  $100,000 extra a year even with the added two year delay would allow you to catch up and pass up the general medicine track quickly.

No interest included but:
$50,000(3 years) + $150,000 (x) = $50,000 (5 years) + $250,000 (x-2)
x=4

So you would have caught up by Year 7 starting from the beginning of residency by going with the specialty in your scenario.  If you factor in interest, maybe it would take an additional two or three years, but still you would be well ahead by going with the specialty by mid-career.

Based on what I hear from my three siblings in medicine plus multiple extended relatives and friends (even though these are all still anecdotal so take what you will from this), specialty doctors have much easier schedules and don't have to deal with as much of the administrative/insurance BS as general practice doctors.  We have one pediatrician in the family, and he loves seeing patients, but hates his job now because of all the accompanying crap.  The specialty doctors (mostly radiologists) all are doing fantastic.  Great money, and lots more free time.  Also, the difference in pay is a lot greater than $100,000.  Oh, also, if you do your specialty residency at a qualifying hospital, then stick with a qualifying hospital for the additional years for a total of 10 years, you still can have 100% of your loan forgiven.  I have one sibling who is taking this route.  Another got a scholarship for free tuition if she practiced at least two years in a rural area.  So there are definitely still options.

Here's some info from AAMC (which you have probably already seen, but just in case): https://www.aamc.org/advocacy/meded/79048/student_loan_repayment.html

[brandino29]

Yes, I'm midway through my second year.  I considered applying for a National Health Service Corps scholarship but they require you to go into primary care and starting school I wasn't 100% sure I would do that (still not completely certain but heavily leaning that way and will know for sure after 3rd year's clinical rotations).

The specific program I'm talking about now is the NHSC Students to Service (http://www.nhsc.hrsa.gov/loanrepayment/studentstoserviceprogram/) -- you apply during your 4th year of med school and commit to a primary care field (I will definitely know my future path by that point) and serving 3 years in an underserved area (there are many available NHSC qualifying positions in my area that I intend to stay and practice in).  In return, you get $120,000 in non-taxable loan repayment assistance during residency ($40k lump sum payment each year, required to go toward student loans and only student loans). 

Problem I'm having right now is that I'm completely inept at calculating the amount of accrued interest I will have upon graduation, and then how much will accrue as I go through residency. 

Here's a very specific example.

My tuition loan from my first year of med school was $20,302 in an unsubsidized federal loan at 6.21%.  Half was disbursed on 8/1/2014, the other half around 1/1/2015.  As of today, 12/4/15, that loan has accrued $1,313 in interest.  That interest will continue to accrue as I continue in school, however it will not capitalize until I begin repayment (or consolidate it, or drop out, or some big change). 

My tuition loan from year two will be $20,320 (unsubsidized federal loan) at 5.84%.  Half was disbursed on 8/1/15, the other half will be disbursed on 1/1/16.  As of today, this loan has accrued $150 in interest (on an outstanding principal of $10,159).
 


What I'm trying to get a grasp of is exactly how much I will owe in outstanding principal and accrued interest on the day that I start residency, which will be July 1st 2018.

From that point, I want to create the spreadsheet scenarios of having loan repayment assistance during residency versus not having it and comparing how much I will owe in principal and accrued interest the last day of my residency based on different specialties.  Finally, from that point I can go further down the road and calculate how many years it would take for a higher paying specialty like general surgery (or radiology or anesthesiology or whatever) to catch up and surpass the Student to Service loan repayment scenario. 

[brandino29]

Thanks KisKis!

One of the reasons I want to thoroughly go through the calculations is that I do want to know exactly (or with a very good idea rather than just guesstimating like I have been doing up until now) what impact that accrued interest and extra years of residency would have.  I have no doubt that a higher paying specialty will pay itself off plus a lot more in the long run -- I'm just trying to get a good grasp on what that long run is because my hunch is that it's a good bit longer than the basic calculations suggest.

The unfortunate truth for me is that I'll be graduating with about $200k in debt plus whatever interest has accrued.  If I can get tax free loan repayment assistance and knock that balance down to $100k in 3 years of residency, that could lead to drastic differences than finishing residency in 5 years with say $250k (guesstimate) in student loan debt once the interest has capitalized and a $250k taxed salary. 

In scenario 2, at current federal and state tax rates, that extra $100k in gross salary would only net an additional $65k or so.  A lot more money no doubt but also a much bigger pile of debt to get over as well. 

[brandino29]

use this for a calculator though https://www.salliemae.com/plan-for-college/college-planning-toolbox/accrued-interest-calculator/

Thank you!  This is definitely the sort of calculator I was looking for.

[neil]

You are really better off making your own spreadsheets.  You can do what you want and you can later track your progress to see how you are doing against how you expected to progress.  There usually aren't very many good options for what you are proposing - lump sums, changing conditions, etc.  Do a hypothetical on a monthly basis.  The reality is that the amount you plan to sock at your loans in each phase (at 50/150/250k income) is the bigger variable and maybe harder to predict.  Taxes will hit the additional income hard, but with the same lifestyle you are going to easily clear another $60K to throw at whatever you want.

If you look at the short term (no more loans!) being settled into your final full time position is usually a clear winner.  It's not hard to imagine having your loans paid by the end of year 5 in the first scenario with the extra $200k in salary and $120K in assistance.  But the extra $100K income will catch up (slowly at first, because compounding will eat away at the progress and help the first scenario, and taxes will eat a lot of it up as well).  If you look at time to FI, you will probably be looking at similar timeframes (~15 years?) if your requirements are relatively modest.

If you are not really considering early retirement and plan on working 30 years or so, the extra $100K over 25 years will very easily win out.  You'll probably easily be able to fund an inflated lifestyle during and through retirement.  The real reason to take this path is not because it pays the loans off sooner, but because it will pay future expenses without batting an eye.

If you consider both paths adequate and equivalent for your life, the "best" financial decision has a lot more about what you want to be doing 15 years from now than which one pays the bill first now.  But if it were me, I would still pick the career that made me happier.  JMHO.

[brandino29]

Thanks Neil.  You were definitely right, I ended up spending quite a few hours over the weekend putting together a ridiculously convoluted spreadsheet that works perfect for what I was trying to figure out.  It turns out that calculating accrued interest is way simpler than I was making it out to be as well. 

In case any of you were curious, I came up with some pretty surprising results.  The short version is that, in pure financial terms, I'm much better off going into a high paying specialty (e.g. radiology, median annual salary $330,000).  I'm sure it sounds completely unsurprising to anyone with half a brain but I was definitely thinking that the loan repayment programs and lower student loan burden would make a much bigger difference than it does. 

I'm attaching a snapshot of the separate scenarios I ran based on specialty and the pay for my area (according to Salary Wizard, which seemed to fall in line with other info I have been able to find and personal anecdotal information). 

A couple of notes about my scenario questions -- we never intend spending $500k on a house even if we have the means to do so, I simply wanted to create a situation where I could compare each situation apples to apples and get an idea of how much money we would have for different aspects -- home, savings, discretionary.  Fortunately we live in a low COLA and can find a nice house that will fit our needs as a family of 4, possibly 5, in the $200-250 range.  There's also a whole load of specifics I didn't get in to such as mortgage interest deduction, student loan interest deduction, my wife's income, etc.  The good news I found is that regardless of specialty I choose, we'll be living comfortable and should be able to save reasonably, though a higher paying specialty will certainly open the door to cranking up the savings big time and working fewer years or having more money to put it to good use in the world, i.e. donating to preferred charities and non-profits.

[brandino29]

A couple of notes about my scenario questions -- we never intend spending $500k on a house even if we have the means to do so, I simply wanted to create a situation where I could compare each situation apples to apples and get an idea of how much money we would have for different aspects -- home, savings, discretionary.  Fortunately we live in a low COLA and can find a nice house that will fit our needs as a family of 4, possibly 5, in the $200-250 range.  There's also a whole load of specifics I didn't get in to such as mortgage interest deduction, student loan interest deduction, my wife's income, etc.  The good news I found is that regardless of specialty I choose, we'll be living comfortable and should be able to save reasonably, though a higher paying specialty will certainly open the door to cranking up the savings big time and working fewer years or having more money to put it to good use in the world, i.e. donating to preferred charities and non-profits.

Also I have no intention of buying a house in the future with no down payment -- we currently own our home and any equity from the sale of this house would go toward the down payment of a new home, which we will unfortunately need to upgrade in the not so distant future as our family expands from 3 to 4.  But again, this was just an exercise to compare apples to apples.