Tag: debt

Should doctors worry about medical school debt?

Should doctors worry about medical school debt?

There is a wide range of debt among medical school graduates.  Family situation, school selection, and geographical location are some of the more common variables that impact the ultimate cost of “M.D.” (or D.O.) after your name.  How quickly one eliminates the debt subsequently depends on I/O’s–your earning firepower subtracted by expenditures.  There are quite a number of financially efficient doctors who opt for lower cost schools in low cost of living areas who end up choosing highly compensated specialties with very short training periods (read: emergency medicine) who emerge from their decade of school rocking enviable salaries.  These groups will be able to repay their loans without much difficulty.

The rest of us without the financial foresight and fortune will fare differently.  Most of us likely made our career decisions mostly by choosing what interested us.  Frankly, that is how we should decide to choose our careers anyway, but unfortunately money doesn’t necessarily follow passion.  If any of you graduated from a medical school with annual fees of $70,000 and are now $300,000 in the hole with a family medicine degree, you are at a financial disadvantage from your peers.

You might also like: How I paid off $148,260 in student loan debt my first year in practice

The average medical school graduate in 2018 will finish with roughly $200,000 in debt.  This essentially amounts to a first mortgage, or a second mortgage if you got suckered into buying a home during medical school or residency.  No matter how you spin it, that is a hefty chunk of change when the investment in your medical knowledge needs to be converted into practical financial firepower.

Basic strategies to repay student loan debt

There are plenty of resources from financially savvy graduates to optimize your student loan debt. Consolidating your high interest loans into a lower one is helpful.  Making sure you are repaying the highest interest loans first is another fundamental principle. Those who are creative can also create a system for public student loan forgiveness (PSLF) while working for governmental type positions.

The premise with PSLF is that you have to be employed by qualified employers while making minimum repayments for a total of 120 months, or a decade. Some doctors have clearly made use of this program, but ten years is gamble to have your loans forgiven.  The ideal scenario for PSLF borrowers include:

  • Extended training schedule such as neurosurgery (7-10 years) or advanced cardiology (7-8 years) where you are in residency or fellowship with “low” pay. Make sure you match into a qualifying program first.
  • Family with dependents but non-working spouse so that expense burden is high but income is low.
  • All loans have to qualify for PSLF.
  • High debt burden.  Like $500,000 in debt.
  • This is a close second to the real thing, but is it really a justifiable purchase?

In these situations, doctors could find a means to stay on faculty for several years after training to complete the PSLF process.  There is a calculator on the governmental student loans website to estimate the amount that you’d save.

Why PSLF isn’t for everyone

There are quite a few contingencies that make PSLF a viable option. If you fall under the ideal demographic, go for it.  You deserve all that you have worked hard for. Unfortunately, most doctors don’t.

The biggest issues with this program is that you are tied to working for certain hospital systems that receive certain funding from the government.  It’s great if you plan on working there anyway, but there is a good chance that there are more lucrative options elsewhere. Sometimes it’s not possible to predict what’s going to happen nine years down the road.

Even with debt burden, you might be saving less than you’d think with PSLF. Maybe 30-40% of your loans will get forgiven. This might amount to $100,000 out of a $300,000 loan over the course of ten years. It sure feels great beating the system, but $100,000 in ten years amounts to roughly $833 a month.  Compare that to repayment the old-fashioned way with aggressive repayment, the difference would be even less when you are limiting interest growth.

Why student loans are only a bump in the road for doctors

Fortunately doctors have good financial firepower.  All of us ought to be able to repay our loans relatively quickly with the appropriate discipline.  You might have to extend your delayed gratification briefly but it will pay off.

Suppose that Doctor A finishes with $200,000 in student loan debt, but he is starting his new job that pays $200,000.  Assuming a very generous buffer that the first $100,000 of that income will go towards taxes and tax-deferred retirement savings, he will still have $100,000 to live from.  Not long ago, Doctor A only had maybe $40,000 of living income from his $60,000 residency salary. If he continued with living expenditures of $40,000 annually, he’d still have $60,000 of that post-tax attending income to put towards loans.  At this rate, he’d be student loan free a little more than three years out of training!

Some of us will earn less but also have less debt.  The converse could be true.  Most doctors ought to be able to repay their student loans within the first five years into medical practice regardless of their income.  It all depends on how motivated you are in eliminating this debt.  Five years of controlled financial prudence is a small price to pay for what could amount to a thirty year medical career.

We should all pay attention to our medical school debt, but don’t let it consume your life.

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Physician Savings Rates are Atrocious

I recently read a summary on a study on physician savings published by Fidelity.  One of the conclusions was that 45% of physician felt they were unable to maximize their workplace savings plans! This includes the typical 401k and 403b accounts. There was no mention whether any of these accounts included the profit sharing components.

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Assuming that these do not include profit-sharing, how almost half of doctors don’t/can’t contribute $18,000 per year in pre-tax earnings is beyond me. The Fidelity survey states that the mean salary for the doctors surveyed was $300,000. That’s actually more than what many internists, pediatricians, family practitioners make. This is also almost three times what many early retirement bloggers made each year before they retired at age 35! Surely by maximizing your 401k, you’ve already saved 6% of your income.

Fidelity states that the doctors they surveyed saved an average of 9% of their income! Again, this is shocking to guys like Mr. Tako Escapes, MMM, or [insert your favorite finance blogger]. Where does this money go? I’ll tell you where it goes:

  1. House mortgage or rent. Times two. Doctors have to live in nice houses. Period. Nice houses are usually not cheap. Many doctors I know actually have two mortgages since they’ve moved onto a second job without being able to sell their first home. Ouch. In these situations, one whole paycheck could go towards two mortgages easily.
  2. Food consumption. A busier lifestyle with meetings can translate into more restaurant meals. I have several coworkers who drop at least $1,000 a month on alcohol, bar tabs, and various restaurant expenditures. Many of my coworkers (and spouses) end up shopping at Whole Foods for their groceries. Organic health foods are not cheap.
  3. Discretionary spending. This category is huge. Think about car leases, impulse purchases, subscription services, and repairs. The busier your main job is, the more likely you are going to drop money to solve your problems.
  4. Student loans. I came out of my training with a solid six-figure debt. There are doctors who come out with $300,000 in debt. Many of us just pay the minimum amounts due, whether by choice or if you’re going after PSLF. If you are paying only the minimum amount, I hope that you either have a low interest rate or are waiting for Uncle Sam to write off your debt.
  5. Divorce and alimony. While the dreaded D isn’t as common as multi-home mortgages, it can set you back financially a very long time (sometimes payments can last up to half the duration that you were married).

It is depressing to see many in my profession not save enough for retirement.  It should never happen. Becoming a rich doctor is not a mystery, but you must have discipline. Grow your value, stay healthy, and hustle.

What percentage of your income are you saving?

Doctors Are Still In Financial Despair

I recently came across a post on Sermo written by a family medicine doctor who claims to earn slightly more than a manager at Starbucks and is over half a million dollars in debt (not including the house mortgage and car payments). His wife apparently is going back to school and incurring additional debt. The rest of his post essentially consisted of contemplating what options he has to get out of his predicament.


Is this guy for real? Last I checked, I don’t believe a store manager at Starbucks earns more than $75k a year. A family medicine doctor should earn at least a six figure salary, which is still a pittance for the level of education needed and debt incurred.  Many physician’s assistants command salaries similar to that of some family medicine physicians.  Unfortunately, this type of story is common on Sermo, which seems to have become an online venue for doctors to vent. While it’s not possible to verify the validity of his situation, it still does confirm my suspicion that physician debt is alive and well. I truly feel sorry for the guy and hope that he figures how to bail himself out.

He clearly has a spending problem.

Mr. Money Mustache calls it a “hair on fire” situation. Even if his family’s spending habits aren’t horrible, he still needs to cut out any lavish spending habits. If the car payments are going toward new cars, he’d better not be driving a Mexican-made German luxury vehicle that gets 15mpg! I see many doctors actually lease cars, stating that they deserve something new every few years. That’s one of the fastest ways to get yourself in financial trouble. His house should not be a McMansion, and he could even consider renting if his work environment is unstable.

Salmon at $28.99/lb at Whole Foods is definitely out of the question. As are Louboutins for the wife, $400 Burton ski jackets for his kids, or a monthly membership to the local car wash.

The spending problem started with educational debt.

While it’s not difficult to dig yourself into serious debt from medical school, it does take some effort to dig yourself half a million dollars in the hole during medical school. You simply combine a non-miserly lifestyle with a non-working spouse and kids. If you’re going to do that, then you need to have a strategy to get yourself out of debt and avoid financial ruin before you even start your career. I was able to pay off almost $150,000 in debt by the end of my first year of practice earning a low six-figure salary. That was without sketchy arbitrage business with loan disbursements either.

If this family medicine doctor were earning $150,000 a year, I’d expect him to take home at least $100,000 after taxes. I would expect him to dedicate at least half of that amount towards his debt for at least a few years until his income situation improves. His kids should not expect an inordinate amount of financial assistance for college either. The wife should consider helping the family diversify their income streams as well when she is able to. This is unfortunately their situation, but there is still hope.

Don’t panic and formulate a plan.

Doctors need to take some of their own medicine. I often have patients who are a nervous wreck for no reason, and fail to listen or take initiative in controlling their diseases. The “more” proactive ones ask for a magic pill to cure everything while others simply don’t attempt to do anything. Likewise, a debt problem isn’t the worse thing in the world. As long as you have income potential, you can still take control of it. Just formulate a plan, stick with it, and adjust as needed. Rinse and repeat.

What strategies have you implemented to get out of debt or avoid getting into debt?

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Should I marry my partner if he has debt?

Does your partner have debt?I am always surprised when I hear this question. Yes, there is something inherent wrong about asking this question with a straight face but apparently this is a serious question for many.

There is some merit in addressing the practical side of this question, however. I think the logical approach would be to explore the issue more thoroughly and determine if there is a solution:


How did you acquire this debt? 

There is difference between consumer debt and educational debt. Consumer debt typically comes in the form of credit card debt, layaway items, and other means of borrowing money to for recreational items or vacations. I would be more forgiving of educational debt since most consumer debt is not intended to further your future self. After all, education debt is supposed to be an investment into your future, right? 😉

It also makes a difference if your educational debt was acquired from a degree in web design at a for-profit online “universities” or a medical degree at a reputable school. That helps us figure out how  to eliminate debt. This brings us to our next question.


Do you have a plan to eliminate this debt?

If your six-figure debt was from medical school, then logically you should have relatively easy (albeit disciplined) means to get rid of it, because hopefully you will have a decent income. It would also be nice if you have thought out how you plan to eliminate this debt (i.e. which loans to repay first, how quickly you can repay them, and approximate time frame to do so.


Are you willing to eliminate this debt? 

This is more important than the previous question. As long as you are willing to ask for help and modify your lifestyle as needed to cut the debt, you are salvageable! Are you also willing to prevent acquiring similar debt in the future?


Do you have habits that can contribute towards debt, and can you modify your lifestyle without sacrificing your happiness? 

Loaded question, but if you had to ask the first one, you might as well ask this one.

Comments or suggestions? Comment below!

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How I paid off $148,260 in student loan debt my first year in practice

How I paid off $148260 loan debt my first year in practiceIt can be done. I did not think it could be accomplished. My net worth looked horrible during my first year of medical school.  It looked even worse after 3 years of accrued interest during fourth year medical school when I was burning through my loans for my residency interviews. During residency and fellowship my mid 5-figure salary tempered the immediate pain of debt, but my net worth was still decidedly negative.  At this time, I decided to take control of my debt and kick its ass. By the end of my first year of medical practice, that debt was gone.


Like many other aspiring doctors, I did not consider the price tag involved with getting a medical degree. I worked hard, and went to the best medical school that accepted me to become a super doctor. I had about $230 in my bank account when I enrolled, and my mother gave me $50 of “emergency money” in case I got into trouble. The tuition alone per year was around $50,000. With room and board, annual expenses were beyond $60,000. I even received a solid 5-figure scholarship to attend medical school. The rest of my expenses came out of governmental and private loans.


According to my loan statements, I had the following principal loan amounts:

  • Federal Subsidized Stafford Loans: $17,000 @ 6.8%
  • Federal Unsubsidized Stafford Loans: $89,260. The majority was at 6.8%, with some at 4.75%, and about $10,000 at 2.8%
  • Federal Perkins loan: $23,000 @ 5%
  • University private loan: $19,000 @ 10%

The total principal loan debt amounted to $148,260. Including the years of interest accruing, I paid close to $190,000 in total.

Smart Money Tips to destroy your loans (simple in principle but challenging in practice):

  1. Track how much is going in and leaving your bank account. You must spend less than you earn. Only then will you be able to take control of your debt. This means no credit card debt, pawn shop dealings, and no payday loans.
  2. Live way below your means. With six-figure debts, you really have to make frugal decisions. MMM calls it “hair on fire debt”. For me, that meant limiting $5 lattes, excessive restaurant and bar expenses, and frivolous materialistic purchases. No yachts, new cars, fancy clothing, or accessories. I kept a respectable appearance for a physician but did not have any sign of wealth to flaunt. I brought my lunch to work, and ate dinner at home. I bought discount groceries and chose to eat what I considered inexpensive yet still healthy.
  3. Funnel what you have left over to your loans, high interest loans first. Dave Ramsey refers to debt snowballing and eliminating the smallest debt first to achieve a psychological victory–B.S. With turbocharged debt elimination for doctors and professionals, we want to pay the least amount of interest. Period.

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That’s it. Three fundamental principles. In my five years of training, I commanded a $50,000 annual stipend. After taxes and living expenses, I was able to fund about $15,000-$17,000 annually toward my debt. I lived quite comfortably, although I was fortunate that I did not have extra mouths to feed. You can still sustain a family of four easily on that income, although you may have less leftover to contribute to loans. When I became an attending physician, my housing expenses decreased slightly since I moved to a lower cost of living area. I maintained a similar quality of living and chipped away the rest of the debt. By the end of my first year in practice, all of my student debt was paid off!

Bonus Tip:

  1. Contribute to your Roth IRA fully if you can. I only funded it two out of five years. In retrospect, I wished that I contributed every year. There is a fine line between paying down a loan versus investing, but having a tax-drag free vehicle that you carry throughout your entire working career vs chipping away at a relatively low interest loan is a no brainer. For a simple interest loan at 5%, 6.8%, or even 10%, funding the Roth IRA is the better option if you know that your income will increase significantly within the next few years.

Good luck to those who were in my shoes! If you have any questions, sound out below!