Heavy Weight of Medical School Debt

[Brokefuturedoctor]

Hello everyone; I am new here and want to get your take on something. I am 22 and about to start medical school in the fall. I have about $2,600 in my Roth and $500 which I have been using to try out Vanguard ETFs. I don't make enough to max out my Roth contributions every year, and I am considering moving that $500 to my Roth before I start med school.

Because I will be starting on my debt filled journey in the fall and beginning accrual of about $270,000 in debt, I am planning to stop contributions to my Roth at that point. My theory is that cutting down on the amount of loans I take out will be more beneficial in the long run. For reference, tuition will be about $44,000 (non-variable) and living expenses will run about $13,000 (somewhat variable). One loan will end up being $206,000 at 5.84%, and the other will be $64,000 at 6.84%.

After some spreadsheeting, I calculated that I could pay off all these loans by 34. This assumes a take-home salary of about $40,000 during residency and $120,000 thereafter (this number is after paying for malpractice insurance) which is on the lowest end for a family medicine physician based on the numbers I looked at from a couple years ago. This number may need to be updated, but if I can survive the worst case scenario then I can survive on better! I also assume that my spending will be at about $40,000 after residency; during residency, I am going to do my best to keep it at around $20,000.

I am planning to start Roth contributions again during residency. I have calculated that I can begin paying back the 6.84% loan while in residency, but I may have to defer/forebear the other loan. There is also the option of refinancing that big loan after residency. I am new to the finance, investing, and loan/debt world, so any advice is welcome! I have been reading MMM for about 2 months, whitecoatinvestor.com for a few weeks, and I just started reading The Intelligent Investor. Thank you!

[former player]

Congratulations on making it into medschool.

Your plan looks about as good as it can get in the circumstances.  Keep the Roth (congratulations also due for having this aged 22) and if you are not spending the $500 it is better off in a tax-advantaged account than not.  It should grow at least somewhat until you are in a position to invest again.

The less you can borrow the better, which means keeping living expenses low.  But don't keep them so low that they impact on your studies. The most crucial thing when taking on this amount of debt is to be qualified and practising at the end of it.  That means keeping up academically and not doing anything stupid which would affect your future licensing.  It probably also means no side-hustles, as you will be too busy studying for the next 7 years.

Once you have stopped taking out new debt, the sooner you can start paying interest on the debt you have the better, even before you can start paying back principal.

Whitecoatinvestor and perhaps Student Doctor Network are good places for you to know about.

[Dee18]

I'm confused.  (44,000+13,000) x 4 = 228,000, not 270,000.  That is still a lot of debt, so take every opportunity to borrow less.  Are there any possible scholarships?  You may not want to make a commitment to the military or public health (which might pay all of your tuition), but there still might be some scholarships available--from civic organizations, etc.  Every $ you get in scholarship is worth the effort. While you do need to put your studies first, be realistic.  Will you actually study Friday, Saturday and Sunday nights?  The answer may be yes. If not, work part time, such as at a restaurant.  Or tutor part time during the week.  I know one med student who tutored for an MCAT prep program online and made $40 an hour.  She also started a note-taking business for her med school, hired note takers, and made several thousand a year. Oddly enough, sometimes if you do a joint degree program, such as public health and med school, you can get significant grant money without making a future work commitment.  Just consider all the possibilities.  This summer you should be able to save several thousand dollars to fund your initial living expenses.  Most importantly, live frugally while in med school. There are tons of tips on this site; probably the key ones are prepare your own food, live car free if possible, find low cost phone and internet, and control housing costs.

[ender]

I have been reading MMM for about 2 months, whitecoatinvestor.com for a few weeks, and I just started reading The Intelligent Investor. Thank you!

You probably just added multiple millions (or years) to your life simply by following good advice sources!

[GetItRight]

Personally there's no way I'd spend that much to only earn $120k. Either go into a more lucrative part of medicine or figure out something else without such high cost of entry.

[Brokefuturedoctor]

I'm confused.  (44,000+13,000) x 4 = 228,000, not 270,000. 

I just looked at my spreadsheet, and I actually calculated it using $14,400 as my spending. Additionally, that $270,000 includes the interest that will accrue while I am in medical school and unable to pay anything back. I greatly appreciate the suggestions for part-time work. Anything I can do to chip away at what I need to borrow will definitely helpful.

Are there any possible scholarships?  You may not want to make a commitment to the military or public health (which might pay all of your tuition), but there still might be some scholarships available--from civic organizations, etc. 

I definitely need to look into possible scholarships more thoroughly. I have also looked into the service contract options. I wasn't too thrilled with the option of going into the military and having less choice over where I end up. The public health route is still in the running for sure, but it is only available for those who want to go into primary care through the National Health Service Corps (NHSC). I am giving myself at least a year before I commit to primary care forever. A service contract would greatly decrease my debt, and I would finish the contract (assuming a 3 year contract) by the time I am 32, maybe 33.

[tobitonic]

Personally there's no way I'd spend that much to only earn $120k. Either go into a more lucrative part of medicine or figure out something else without such high cost of entry.

I don't know...270k debt for 120k in annual dividends after insurance and before taxes (with the dividends rising each year at or above inflation rates) is a phenomenally ridiculous rate of return.

[NoStacheOhio]

Personally there's no way I'd spend that much to only earn $120k. Either go into a more lucrative part of medicine or figure out something else without such high cost of entry.

That's a double-edged sword, you're often looking at additional fellowship training at a minimum. On the upshot, it's not uncommon for doctors to practice a few years after residency, then go back for subspecialty training as a more attractive fellowship candidate.

[abhe8]

Or look for a less expensive medical school. Many states offer a very good instate tuition discount after the first year.

[cchrissyy]

I don't know...270k debt for 120k in annual dividends after insurance and before taxes (with the dividends rising each year at or above inflation rates) is a phenomenally ridiculous rate of return.

What a funny way to look at it! 

But, if you want to put it like that, you should subtract from the income side whatever the difference is between 120k and the income s/he can earn without this degree, and you need to add to the cost side whatever income would have been earned in the schooling years instead of going to work right now.

Plus, figure somehow to account for the fact that it's not "dividends" it's only income as long as s/he puts in full time working hours to get it.


FWIW I completely agree this is a very large debt for the earning potential in question. Either go into a higher-paying part of medicine or choose a different career that pays this much without the massive loan debt.

[ender]

Personally there's no way I'd spend that much to only earn $120k. Either go into a more lucrative part of medicine or figure out something else without such high cost of entry.

I don't know...270k debt for 120k in annual dividends after insurance and before taxes (with the dividends rising each year at or above inflation rates) is a phenomenally ridiculous rate of return.

How about 270k in debt and eight additional years of your life?

[tobitonic]

Personally there's no way I'd spend that much to only earn $120k. Either go into a more lucrative part of medicine or figure out something else without such high cost of entry.

I don't know...270k debt for 120k in annual dividends after insurance and before taxes (with the dividends rising each year at or above inflation rates) is a phenomenally ridiculous rate of return.

How about 270k in debt and eight additional years of your life?

It depends on what you'd have been doing with those eight years (or seven in the case of family practice from the start of med school to the end of residency), and what your long term goals are. I spent most of those years in grad school and working, and am finally in a 50k job with a pair of master's degrees and no debt. Right now, I'm ahead, but in the long term, the 120k salary eliminates said debt and pulls ahead for most people. I'm glad I chose to become a preschool teacher over a pediatrician (I considered that path too in undergrad) because I don't like debt, but if you aren't debt-averse, like medicine, and are financially savvy, med school's a solid financial investment.

[Erica]

First of all, you DO NOT need to be of Indian Decent to get involved in this but there are incentives and additional oportunities if you are Native American. And there is a GREAT chance of staying on permanently

ALOT of $$ IS now flowing thru this avenue, meaning two income streams per Indian. I've been following it being Native American wondering if My medical plan ever went kapoot, would I be covered? More than covered. Native Americans have it made now.

My Native American health clinic has NOT ONE Native American Doctor on staff. So see below their opportunities to avoid student debt, you do not need to be native american and 90% of those that partcipate, are not indians.

90% of their staff are not native american BUT the MONIES are there. The funding stream is incredible now with the 100% FMAP so American Indians can get Medi-Cal and additional healthcare money thru the Indian Health Service.

So I'd look into their programs FIRST. Simply because treating an Indian is better than treating a senior citizen on Mediare. The 100% Federal Matching Monies mean that even the NON POOR indians are 100% covered at Medicare like rates (though most indians are poor)

Here are some alternatives to taking out loans- I know a few folks who went this route and are very happy with it. Don't know them really well, acquaintences from just around town but both say they'd never consider leaving the Clinic they work at. And expect to work there forever.

https://www.ihs.gov/careeropps/loanrepayment/

https://www.ihs.gov/careeropps/careerpaths/directtribalhire/

If you can prove native american descent, that is even better.

[Erica]

You would be "An Indian Health Professional" But like most, not of Indian Descent.

Disclaimer: FYI. Indians are "rougher" than most, you need to boss them around and have tough skin. Doing things you cannot do with white people or you'd be sued. Also lots of programs for alcoholism.

They have lost more weight and excelled in reversing diabeetes compared to the whites, a grant given to both whites and indians showed the indians blowing the whites out of the water. They have much less heart disease now too. But the Indian Clinics are very bossy, and threaten their Indians too if they don't show up for their medical appointments. Kick them out. There are two security guards on staff at our Indian clinic. The Indians are better patients in a sense that they are not picky at all. And don't "sue" as a rule like the whites do.

I had a ton of dental work done and was told if I didn't keep my teeth perfect for now on, they would send me to a psychiatrist to see what my problem is. It was worded nicely, that I needed "Someone to talk to which is on the premesis about why my teeth are suddenly so bad" It was bad water, I had no clue... and it cleared up when we moved. So I haven't had a cavity or anything bad for a few years, perfect healthy gums and teeth.  No bleeding but being referred to the medical dept showed failing tests with regards to the blood tests. That is how we learned to test our well water. So these clinics truly try to fix you, and suggested getting our well tested. The choice NOT to see a shrink was not there, I would've been forced into it. Since it is free (dental/medica) beggers cannot be choosers. My medical insurance doesn't cover dental

https://www.ihs.gov/careeropps/loanrepayment/
Loan Repayment
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Indian health professionals have a number of loan repayment program options through which they can receive financial support. The Indian Health Service (IHS) and the National Health Service Corps (NHSC) support two such programs for health professionals interested in a career in Indian health. Nurses are also eligible for loan repayment through the Health Resources and Services Administration (HRSA) Nursing Education Loan Repayment Program.
IHS Loan Repayment Program (LRP)

Many health professionals seek the financial freedom that comes with an IHS Loan Repayment Program (LRP) award. The IHS LRP was created to support the mission of IHS while providing dedicated Indian health professionals with the financial support to pursue an uncommon path.

An LRP award provides $20,000 per year toward the repayment of health profession education loans. In exchange for this support, IHS LRP award recipients agree to serve at an Indian health facility identified as having a staffing need. Your initial two-year commitment can start you on a path to achieving your career goals sooner than you thought possible.

Visit the IHS Loan Repayment Program website for more information on the program and how to apply for an award.
IHS Supplemental Loan Repayment Program (SLRP)

The Supplemental Loan Repayment Program (SLRP) is an innovative loan repayment vehicle available through IHS and is designed to attract health professionals to facilities that otherwise wouldn't be able to offer loan repayment as an incentive.

This program is supported by specific Area offices and individual facilities and aids in the recruitment and retention of valuable health professionals across a number of disciplines.

Contact the IHS LRP branch office at (301) 443-3396 for more information about SLRP opportunities.

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NHSC Loan Repayment Program
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The National Health Service Corps (NHSC) offers loan repayment support to qualified health care professionals dedicated to practicing in medically underserved areas. NHSC Loan Repayment Program (LRP) participants also earn competitive salaries from their site and other benefits in addition to loan repayment. The NHSC LRP offers an initial award of up to $50,000 for two years of full-time service when you select a service site with a Health Professional Shortage Area (HPSA) score of 14 or higher or up to $30,000 for sites with a score of 13 and below. Half-time service options are also available.

Visit the NHSC Exit Disclaimer: You Are Leaving www.ihs.gov website for additional information.
HRSA Nursing Education Loan Repayment
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The Nursing Education Loan Repayment Program, offered through the Health Resources and Services Administration (HRSA) helps alleviate the critical shortage of nurses by offering loan repayment assistance. Registered nurses and advanced practice registered nurses (nurse practitioners) are eligible for financial assistance in return for working in a Critical Shortage Facility, which includes all Indian health facilities.

Visit the HRSA Nursing Education Exit Disclaimer: You Are Leaving www.ihs.gov website for additional information.

[PhysicianOnFIRE]

Hello everyone; I am new here and want to get your take on something. I am 22 and about to start medical school in the fall. I have about $2,600 in my Roth and $500 which I have been using to try out Vanguard ETFs. I don't make enough to max out my Roth contributions every year, and I am considering moving that $500 to my Roth before I start med school.

Because I will be starting on my debt filled journey in the fall and beginning accrual of about $270,000 in debt, I am planning to stop contributions to my Roth at that point. My theory is that cutting down on the amount of loans I take out will be more beneficial in the long run. For reference, tuition will be about $44,000 (non-variable) and living expenses will run about $13,000 (somewhat variable). One loan will end up being $206,000 at 5.84%, and the other will be $64,000 at 6.84%.

After some spreadsheeting, I calculated that I could pay off all these loans by 34. This assumes a take-home salary of about $40,000 during residency and $120,000 thereafter (this number is after paying for malpractice insurance) which is on the lowest end for a family medicine physician based on the numbers I looked at from a couple years ago. This number may need to be updated, but if I can survive the worst case scenario then I can survive on better! I also assume that my spending will be at about $40,000 after residency; during residency, I am going to do my best to keep it at around $20,000.

I am planning to start Roth contributions again during residency. I have calculated that I can begin paying back the 6.84% loan while in residency, but I may have to defer/forebear the other loan. There is also the option of refinancing that big loan after residency. I am new to the finance, investing, and loan/debt world, so any advice is welcome! I have been reading MMM for about 2 months, whitecoatinvestor.com for a few weeks, and I just started reading The Intelligent Investor. Thank you!

Welcome to the forum, Brokefuturedoctor!

There are a lot of variables in your plan, and a lot of years for the plan to transmogrify into one that hardly resembles the initial plan.  But it's best to have a modifiable plan than no plan at all.

As far as the debt, some physicians are hoping to have some of their debt forgiven via PSLF.  The main requirement is that your work for a non-profit, but most hospitals are technically non-profit, at least from a tax filing standpoint.  This is something worth looking into.

Your estimate for $120,000 for family medicine is very low.  If you're basing that on lay press articles, they tend to adjust the salary of different professions to match a 40-hour workweek.  In the real world, most family docs make closer to $180k to $200k and malpractice is covered by the group or employer.

Of course, you may not become a family physician.  I thought I might like pediatrics when I started medical school.  Four years later, I started my anesthesiology residency.

It's great to plan on keeping expenses low as long as you can.  "Live like a resident" is a good way to pay off loans quickly after residency.  Understand that your plan could be turned upside down for better or worse. Marriage & kids could enter the picture at some point, and you'll be coming up with a whole new plan.

It's great to try to invest a little while in residency, but you'll have a much easier time doing so with an attending's salary.  If you are unable to do much saving as a resident, you can make up for a few years of missed investments in a few months later on, so don't sweat it too much.

You've got some great resources.  I will selfishly add Physician On FIRE to the list of useful resources for a frugal future physician.

Best of luck and congratulations!
-PoF

[Abe]

That's a lot of debt but the financials make sense. I agree your estimate on family medicine salary is low. Starting out the median salary is around $160k based on 2015 data, and malpractice usually gets paid by the group. A lot of groups in high demand, under-served areas will pay a significant fraction of your debt coming out of residency for a 3-5 year contract. This is a good move since it reduces your W2 income while functionally serving the same purpose as debt pay-down from salary. Many of thee places are state run and provide additional tax deferred accounts also that greatly reduce income tax.

Anyway, don't worry about the debt too much. As you've shown it is payable in a reasonable time period after residency, regardless of specialty. I wouldn't recommend working part time in Med school the first two years unless 1) you learn well on your own rather than lectures 2) your work is directly related to improving your residency qualifications (usually research, esp public health for FM residency) and 3) it doesn't burn you out. The small amount of money you will earn in the 5-10 hours a week is not worth the added stress. Also you will not be able to work outside of Med school after the first two years anyway.

[Brokefuturedoctor]

Thank you all for the advice; I greatly appreciate it!

[steviesterno]

i might be the only one to say it, but I think med school is worth it. If i wasn't a doctor, I couldn't have my dream job (which i DO have!). it was expensive, and I wish I was smarter when I graduated and didn't let it rise with deferment and minimal payments. but I'll survive.

work on minimizing your expenses, and if you can make any money while you go to school (not always possible) that's better. I worked almost full time through school and that helped me end up way less in debt than my peers.

It's an investment in yourself. I make probably twice what I would if I didn't get my degree, but I truly like what I do. I get to teach, I work like 4 days a week, 46 weeks a year. I have the job many people want when they FIRE. that's worth the 1000 a month it's costing me to pay back loans.... but in a few more years my loans go away since I'm in a non profit. that helps, too ;)

[justajane]

I think the ROI debate with medicine is valid but only goes so far. One thing to consider with family medicine and many branches of medicine is that it can be a calling. For something that  the OP is likely passionate about (else why would you undergo that much rigor for so long?), this is a great ROI. To be well-nigh guaranteed 120K a year, plus pretty much lifelong job security, I'd say that's a pretty good ROI for something you love. How many of the rest of us can say that we make so much doing something we love? Or have that kind of long term job security in our field? Business, sales, technology...all those fields might or might not contract. But it's hard to argue that someone who has a medical degree will ever be struggling to find a job.

The ones I feel sorry for are those who you sometimes read about who realize later in med school that they aren't happy doing it. Then you're kinda stuck, since you need a high paying career to pay off the loans.

OP, you sound like you have considered all the variables and are going about this the right way.

[Abe]

I agree with Jane. My training in surgery will take a total of 13 years after college, (9 of those paid a reasonable middle-class salary, though). I'd say it's worth it because the job is super awesome, is contributing to society, pays very well and is stable. If you end up not liking clinical medicine, there are opportunities in consulting for biotech companies. Definitely more limited, but still present.

[The Happy Philosopher]

Being a physician will have a good ROI eventually, but in my opinion it is a poor choice for early retirement because of the delayed income production and amount of training involved. The nice thing is if you pick a higher paying specialty you can generate lots of income in a short time.

Go into medical school with an open mind and choose a specialty based on enjoyment and passion, not money. Trust me on this.

You are likely better off having fun in medical school during your free time rather than trying to make money through a side hustle, but everyone is different. There may be opportunities in residency or fellowship to moonlight, but don't burn yourself out. Burnout is much more financially destructive than than a few thousand dollars of moonlighting money.

You can't contribute to Roth unless you have taxable income, so unless you do you cannot contribute in medical school. Personally I would do the Roth over taking out less in loans as you will never be in such a low tax bracket again. Even if the growth and interest would zero out you have the added flexibility and asset protection of an IRA. Once you are in practice you won't be able to do Roth (technically you could do backdoor Roth if the law is not changed), or you will be losing out on tax savings if you do.

[pumpkinlantern]

Congrats on getting into medical school! 

1. First off, good for you for thinking about long-term financial planning this early.  It's okay to have a few guilty pleasures along the way, but keep them reasonable and make sure you stay more-or-less on track - I think it's easy somewhere along the lines to think "WTF, I've got so much debt already, what's another $50, $100, $1000, $10,000 bucks?".  Don't do that!  It's a very slippery slope and is the scary difference between $250,000 vs. $500,000 worth of debt when you finish residency.  I've seen it happen.

2. Training will probably take longer than you think.  You might decide to pursue a specialty...and then a fellowship...  And then finding a decent job (especially as a specialist) can take a bit of time.

3. There are a lot of hidden costs along the way (expensive exam fees, licensing fees, applications/interviews for residencies, etc.).  Make sure you have low cost debt easily available to fund these, so you don't end up charging high-cost (ie. credit card) debt.

3. Shop around for your loans - get the best possible interest rates for your loans.  This will make a big difference in the long-run since you'll be carrying a lot of debt over a long period of time.  Are you sure 5.84% and 6.84% is the lowest you can get?  Mine is at 2.70% (but this is in canada).  Also, make sure you max out any government incentives or school loans that might have lower interest rates (or even the rare grants/bursaries) that you might be eligible for.

4. Keeping your expenses in check is probably easier than trying to make money on the side.  In pre-clerkship, you'll have a bit more time, so you can probably do some tutoring, etc.  You can work during the summers after first and second years.  But otherwise, unless you have something highly marketable from undergrad (eg. pharmacy license) that allows you to take on high-paying, highly-flexible shifts, it is unlikely that you will find a part-time job on a consistent basis that will pay you a decent wage that will be flexible enough for your schedule.

5.  Medicine is becoming increasingly political and there is more and more pressure on physicians from hospitals/insurance companies/governments.  This affects salaries and working conditions.  Although you will likely never be unemployed, you may find that you are presented with job conditions that are highly undesirable (ie. work ridiculous hours or have crushing work loads or a bad bureaucratic environment).  If you don't put yourself in a financially vulnerable position, you'll be able to choose the type of medicine you want to practice, rather than the type of medicine that your creditors want you to practice.  As others on this forum have said, I think $100k-$120k is a bit low for a practicing family physician's salary (although that might be what it is in the first few years as you build your practice), but it's a good idea to keep expectations in check and to be prepared to weather worst-case scenarios.

[Gevans17]

current MD income by specialty can be found at Businessinsider.com. search "2016 Physician income"

[forummm]

BFD, I would only do this if you really want to be a doctor in the US. And you should get a good look at the medical profession and what day-to-day life will be. I personally would not want to be a doctor in the US, and especially not with the huge debt burden and years of training required. If it's what you love and want to do and want to do it until you're 50 or older, then it's a good course of action. If you want to retire pretty early, then many other career options will better facilitate that.

I spent a lot of time in school and got a lot of degrees (never getting a penny from my parents) and have never made 6 figures. But I also was able to accrue a significant NW by the age at which you hope to get to $0 owed, and could retire in the next few years if I wanted to.

Good luck with everything!

[Dee18]

I have two very close friends who are physicians.  One is now FIRE, but for much of his career he worked locum tenens, filling in for doctors on vacation in ER departments.  He would work a couple weeks at a time and make about $15,000 (this was 15 years ago) plus all expenses.  Then he could travel or go back to his home in a beautiful, low cost part of the country where he hiked and skied.  My other friend is a pediatrician who lives in a high cost city in S. California.  She has thoroughly enjoyed working part time her whole career.  She now chooses to work two days a week, because she enjoys it, although she has been FI a long time.  Along the way to becoming a doctor you will have lots of choices to make as you discover your interests and evaluate how much money you want to earn and how much free time you want.

[Calvawt]

We start new FP MD grads at $200k.  That includes paying for their malpractice, license, $2k per year CME.  They also get a 10% retirement contribution and healthy production/quality incentives.

$270k of debt is well worth it!

[PhysicianOnFIRE]

current MD income by specialty can be found at Businessinsider.com. search "2016 Physician income"

Yes, this graph, borrowed from medscape looks like it represents true average physician salaries.  Unlike some other lists out there, it does not adjust the salary to equal a 40-hour workweek, but represents cash compensation for the typical 50-60 hour a week workload.

[Northwestie]

Personally there's no way I'd spend that much to only earn $120k. Either go into a more lucrative part of medicine or figure out something else without such high cost of entry.

I don't know...270k debt for 120k in annual dividends after insurance and before taxes (with the dividends rising each year at or above inflation rates) is a phenomenally ridiculous rate of return.

It's not all about money.  If you have a passion for the field and want to do some good, have at it.  It will certainly keep you brain working hard, which is a good thing.  A job you like, has social value, and keeps you engaged is worth it.  Good luck, have fun, help heal folks.

[Brokefuturedoctor]

You can't contribute to Roth unless you have taxable income, so unless you do you cannot contribute in medical school. Personally I would do the Roth over taking out less in loans as you will never be in such a low tax bracket again. Even if the growth and interest would zero out you have the added flexibility and asset protection of an IRA. Once you are in practice you won't be able to do Roth (technically you could do backdoor Roth if the law is not changed), or you will be losing out on tax savings if you do.

I was trying to justify why someone like a physician would do the backdoor Roth, but I feel like I would be better off having a Traditional IRA when I am at the height of working/salary. In retirement, I don't really think that I will need the same level as income as when I am actively saving for the future. If someone can justify the Roth for me, please let me know. I suppose it is always possible that taxes in all of the brackets could go up and end up higher once I am in retirement?

We start new FP MD grads at $200k.  That includes paying for their malpractice, license, $2k per year CME.  They also get a 10% retirement contribution and healthy production/quality incentives.

$270k of debt is well worth it!

That is definitely good to know! I realize after reading many of the responses that my estimate was probably too low, even for post-tax money. I still need to educate myself on deductions in regards to loans, eventual kids/dependents, etc.

In response to those talking about the ROI, I am not worried about being unhappy in the medical field. My job experiences have been good so far. I worked in the ED for about a year as a scribe, and I am currently scribing in an orthopedics office. I know I will be happy practicing medicine even with all the politics; I'm just not positive about which specialty. I have a little while to figure that out though. I have plenty of reasons why I want to go into medicine, but I don't really want to rewrite my applications again here. Twice was enough.

I don't think I really talked about my actual monthly expense breakdown, but it is pretty simple for now as far as living expenses go. The two rent amounts are because I don't know if I will have a roommate yet or not. Also, I will most likely be biking or walking once I am in medical school.

Rent - $500 (w/roommate), $800 (w/o roommate)
Food - $250 (what I do now)
Car - $370 (I have help with this though from family, so it is usually less)
Gym membership - $30 (it will be free once I start school)
Gas - $35

Total monthly expenses = $1,185
Total yearly expenses = $14,220

[OlyFish]

I am a doctor in the early days of my post-residency career. I was lucky to be from one of the cheapest states for medical education.

One of my friends, who has a trusting and good relationship with their parent, had their parent take out a home equity loan to pay the medical school debt. So he is effectively paying against a 2% interest rate (for the home loan) instead of a 6% rate.

Another option is to do income based repayment, which if you work for non profit organizations (which many hospitals are now), is forgiven after 10 years. This is especially attractive if you end up doing a fellowship.

I picked a field that I was interested in, but that also had a deficiency of physicians, and intentionally went to a less "cool", smaller city, so that I could live less expensively while getting paid more. I also refinanced to 3%, and I am paying off a bit extra every month.

It is worth it. I joke that my medical school debt was the mortgage on my first , invisible house, But I am now in my early 30s and grossing in the 1% for my age group, while getting to do fulfilling and interesting work.

Good luck with your endeavors.

[PhysicianOnFIRE]

You can't contribute to Roth unless you have taxable income, so unless you do you cannot contribute in medical school. Personally I would do the Roth over taking out less in loans as you will never be in such a low tax bracket again. Even if the growth and interest would zero out you have the added flexibility and asset protection of an IRA. Once you are in practice you won't be able to do Roth (technically you could do backdoor Roth if the law is not changed), or you will be losing out on tax savings if you do.

I was trying to justify why someone like a physician would do the backdoor Roth, but I feel like I would be better off having a Traditional IRA when I am at the height of working/salary. In retirement, I don't really think that I will need the same level as income as when I am actively saving for the future. If someone can justify the Roth for me, please let me know. I suppose it is always possible that taxes in all of the brackets could go up and end up higher once I am in retirement?

You will want to have Traditional (tax deferred) retirement savings, AND a Backdoor Roth IRA.  Your 401(k) / 403(b) / 457(b) will generally be best left Traditional at higher tax brackets (25% +).  HSA is another avenue to defer / avoid tax.

Once you have filled your tax deferred space, and met your living expenses & debt obligations, if you have money over, that's when you start the Backdoor Roth.  $5500 for you, and another $5500 for a spouse if you've got one. 

The Backdoor Roth doesn't take the place of any tax deferred savings.  It takes the place of taxable investments.  It's like taking a portion of your taxable investments each year and making them tax-free.

I hope that clears it up a bit for you.

Best,
-PoF

[kittenstache]

If you decide to do family medicine, you will probably have more job offers, post-residency, than you can handle!
If you are willing to go to an underserved area, you could negotiate student loan repayments from your employer, as part of you compensation, even if you are not part of the IHS or NHSC. I'm a small town pediatrician and I was able to negotiate this from my employer.

[GetItRight]

If $120k is a low estimate as several have mentioned that might change my tune. $160k.... maybe, but just pulling numbers off a whim, if potential to be earing $250k+ after a few years experience then it may be worth the gamble. Crunch the numbers on savings and time to FI vs a lower income doing something else that interests you and no debt.

Other things to consider getting into medicine these days is the misery of socialist healthcare and what it has done to insurance. I didn't think of it before my first post, but for that reason alone I would not get involved in any career in the medical field these days. There is always the option to join up with a group that does not deal with insurance and offers full disclosure on pricing. There are a few places that operate like that and seem to offer better service and lower costs than traditional providers or groups. If you do your own practice you have the option to go that route as well. We need more cash only places that offer price lists or quotes before you spend a penny with them. I've had a lot of medical expenses lately as a result of someone else injuring me and much prefer to not even deal with insurance, since I've spent literally hundreds of hours in the past year trying to get pricing, dealing with billing issues, trying to get my insurance company to be an advocate for me in regard to pricing, etc. If you ended up just one more doctor outside of the messed up government run medical and insurance racket that would help a lot of people.

[tobitonic]

Personally there's no way I'd spend that much to only earn $120k. Either go into a more lucrative part of medicine or figure out something else without such high cost of entry.

I don't know...270k debt for 120k in annual dividends after insurance and before taxes (with the dividends rising each year at or above inflation rates) is a phenomenally ridiculous rate of return.

It's not all about money.  If you have a passion for the field and want to do some good, have at it.  It will certainly keep you brain working hard, which is a good thing.  A job you like, has social value, and keeps you engaged is worth it.  Good luck, have fun, help heal folks.

Of course; I was just framing it purely in fiscal terms because that's how the previous poster did. I wouldn't get into medicine for money any more than I'd get into teaching (which I am in) for money; there's far too much stress and bureaucracy in either profession to keep most people in if they don't fundamentally like helping people.

[The Happy Philosopher]

You can't contribute to Roth unless you have taxable income, so unless you do you cannot contribute in medical school. Personally I would do the Roth over taking out less in loans as you will never be in such a low tax bracket again. Even if the growth and interest would zero out you have the added flexibility and asset protection of an IRA. Once you are in practice you won't be able to do Roth (technically you could do backdoor Roth if the law is not changed), or you will be losing out on tax savings if you do.

I was trying to justify why someone like a physician would do the backdoor Roth, but I feel like I would be better off having a Traditional IRA when I am at the height of working/salary. In retirement, I don't really think that I will need the same level as income as when I am actively saving for the future. If someone can justify the Roth for me, please let me know. I suppose it is always possible that taxes in all of the brackets could go up and end up higher once I am in retirement?

We start new FP MD grads at $200k.  That includes paying for their malpractice, license, $2k per year CME.  They also get a 10% retirement contribution and healthy production/quality incentives.

$270k of debt is well worth it!

That is definitely good to know! I realize after reading many of the responses that my estimate was probably too low, even for post-tax money. I still need to educate myself on deductions in regards to loans, eventual kids/dependents, etc.

In response to those talking about the ROI, I am not worried about being unhappy in the medical field. My job experiences have been good so far. I worked in the ED for about a year as a scribe, and I am currently scribing in an orthopedics office. I know I will be happy practicing medicine even with all the politics; I'm just not positive about which specialty. I have a little while to figure that out though. I have plenty of reasons why I want to go into medicine, but I don't really want to rewrite my applications again here. Twice was enough.

I don't think I really talked about my actual monthly expense breakdown, but it is pretty simple for now as far as living expenses go. The two rent amounts are because I don't know if I will have a roommate yet or not. Also, I will most likely be biking or walking once I am in medical school.

Rent - $500 (w/roommate), $800 (w/o roommate)
Food - $250 (what I do now)
Car - $370 (I have help with this though from family, so it is usually less)
Gym membership - $30 (it will be free once I start school)
Gas - $35

Total monthly expenses = $1,185
Total yearly expenses = $14,220

There is no downside to a backdoor Roth IRA that I know of. You will likely not be able to deduct a traditional IRA while you are in practice due to income phase out so why not do a non-deductable and convert to a Roth. You get tax free growth and asset protection.

While in residency I would to a Roth. You could do a traditional if in the 25% bracket or higher, but then this will mess up future backdoor Roth due to the pro-rata rule.

[BCBiker]

You (OP) sound exactly like me about 8 years ago.  Bright-eyed, bushy tailed, and ready to go into primary care.  I made similar approximations about total debt etc. However, did not think about salary so much. Most importantly I never considered the potential that I might not like primary care. Interestingly my med school was about the same cost starting in 2008.  I did get quite a few scholarships but they were minor blips agains the barrage of almost $30k per semester loans. There really is not that money for med students. People start seeing you as a potential orthopedic surgeon; no one wants to give money to someone who is going to be making $900k in less than 10 years.

I graduated with around $230k.  I got married and we traveled a fair amount so my pay off plans changed.

Probably most fortunately I could not stand primary care. No offense to those who do it and I applaud the work you do but it was not for me.

Now I plan to graduate from fellowship in 2018 in a highly specialized field and should have a good income. My loans will probably balloon to around $300k before finishing training despite living pretty frugally in as city that got more expensive over the years (without salaries adjusting for it)..

I am really happy overall! I really like what I do and feel I am going to have a huge influence on many people's lives through the clinical and research work I do.  I have literally been all over the world and country doing things I want without worrying about money too much and living purposefully. The mistake I see my colleagues make is that they think well I'm a doctor so I should have a better car, house or cell phone than the technologist or nurse so then they buy stupid things that they really cannot afford given their debt level that don't contribute at all to their lifestyle/happiness.  Don't make too many of those mistakes and you will do fine.  Read WCI, MadFientist and MMM. I also recommend some of the Radical Personal Finance podcasts.

Personally, I should be able to pay off the loans within 5 years of finishing residency. If I have a hard time finding a better interest rate I will pay them off more quickly.  I could have been more aggressive before, but if I had pretended my hair was on fire I would have driven myself and my wife crazy! I'm not saying that debt is not terrible and stressful but you also have to maintain perspective when there is not that much you can do about it and you will be positioning yourself for an income that justifies (at least partially) that level of debt.  Some people mention $270k debt for a $120k income is not a good investment.  I agree with that but you are going to make more than $120k per year and you get additional non-monetary "paychecks" if you enjoy what you do and you feel you are making other people's lives better. 

I hope this is helpful and adds to what others have said.

[BCBiker]

Other things to consider getting into medicine these days is the misery of socialist healthcare and what it has done to insurance. I didn't think of it before my first post, but for that reason alone I would not get involved in any career in the medical field these days.

I am sorry to hear about your issues with your insurance company, but characterizing American health care as socialist is not a very accurate assessment. Also, for most people access to care is dramatically better since ACA launched. Certainly not the best situation as pretty much every industrialized country does health care better than the US but the trajectory is getting better.

For doctors the paperwork has gotten worse but technology is coming around to improve this.  Also, healthcare systems are doing well in most markets and now ACA is fully implemented and its future is mostly assured they will start being more generous with providers (hopefully!).

[EnjoyIt]

Most of the advice here is very solid. You are very lucky looking into the finances of medical training so early in your career. Let me add a few things from my perspective.

1) You will likely be making more than $120K/yr. Especially if you are willing to moonlight a little right out of residency.
2) Do not pick up work that commits your time unless it is work that gives you time to study such as at a library or something like that. Even if you can make $10K but it affects how well you do in med school and limits what residency you get, it just is not worth it. You are way better off getting good grades and kicking ass on your USMLE.
3) Do not be too miserly. Be conscious on what you spend on to minimize waste, but do not forgo all joy in your life being cheap. You will regret it in the future. Spending an extra $50K in loans just to have fan is not worth it. But maybe spending an extra $5K is.
4) Try to live as close as possible to your school. It is bad enough you spend all day studying, the last thing you want to do is spend more time and money commuting. I did not have a car my first 2 years of med school. Saved a ton of money. Even taking uber to the grocery store once a week is cheaper than owning a vehicle. Depending on your personality and location this may minimize dating opportunity and may not be worth it to you.
5) Don't be stuck with the thought of only doing family medicine. Almost everyone changes their choice in med school. I wanted to be a surgeon and now an ED doc. Best decision I ever made in my life.
6) Stay healthy. Cook for yourself healthy foods, and exercise regularly. Both are very good for your mind and body.

Congrats on getting into medical and good luck in your career.