Here is the sobering news. Our total student loan debt (just medical school) now has a balance of $300,800.05 - next month it will likely be more. No, we haven't borrowed a dime since medical school but this balance is multiplying like rabbits! Maybe faster than rabbits:-)
In March of 2011 I documented our total student loan balance as $290,707 and growing. In 18 months the balance increased by almost $10,000! We have even made monthly payments of $230 on this loan ($2,760 last year and $2,070 so far this year). All those payments haven't slowed the snowball. If you are familiar with Dave Ramsey, our debt snowball seems to be working in reverse.
What is sobering is the total amount borrowed to attend medical school was only $240,725.31. The other 60,074.74 is all capitalized interest (and we have already paid interest that isn't included in that total). It's probably more like $65,000 over the last 6 1/2 years.
And then I read that you cannot deduct student loan interest payments from your income taxes if your modified adjusted gross income exceeds $150,000 married filing jointly (see IRS Publication). Guess what? For the tax year 2013 our income will exceed that! Or at least it better be so we have a fighting chance to pay back our student loans.
I know you can't deduct interest paid on most sources of debt: vehicles, credit cards, personal loans, etc. It would be a nice gesture if there were some kind of "break" for that portion of our future income that will be diverted to paying down this huge debt.
In the end the amount of "interest" we will pay will probably be around $80-100K depending on how fast we can get it paid.
Luckily, our interest rates are low: 3.375% on the majority of the balance, and 2.75% on about 1/4 of the balance. I know that for many of my friends, and readers, who started later you have much higher interests rates. I am so sorry, because I know your final numbers will look even more dreary.
If you have the ability to make payments on your student loans while in residency, consider doing it. At least you will be able to deduct the interest you pay on your taxes at a much lower rate and possibly increase your tax refund by reducing your taxable income. I know it's already pretty low, but lower is better.
If you can't, then you will deal with it later - like I am. It would have been impossible to start paying back our loans any earlier than we did. (Maybe not impossible, nothing is impossible). The only reason we started paying is because we had to. There was no way around it, and maybe we should have started residency planning on doing it instead of planning on deferring for as long as they would allow.
It will be happy day when I log on to post: WE DID IT- SALLIE MAE HAS BEEN PAID!
What is left to be decided is will we live like this until we do, or are we going to live a little? I know what my husband wants to do, so we will have some compromises to make. What are your plans for tackling student loan debt?
Ignore them!!!! - I know that is not reality, but it helps to ease the pain. I really hope the US government realizes that if they want to attempt to close the gap on the shortage of doctors they will have to provide some relief or incentives for paying the loans off. Someone has to truly love the field of medicine to take the leap these days.
ReplyDeleteI did ignore them in the beginning, but when we started paying them back - every month I was reminded. I agree. If you can't do anything about it no sense in fretting over it. And you are right, they have to love it - or it certainly wouldn't be worth it.
DeleteBetween us we sit around $200,000. Most of that is me from vet school as my husband did an MD/PhD program and part of his loans were paid for by that. Still, it's daunting. We pay about $1000/mo now and have through residency. It's barely making a dent and it's so discouraging. I wish professional loans were handled differently...
ReplyDeleteI know it may seem like an exercise in futility, but I assure you paying even just the interest right now will keep it from ballooning into something that seems entirely unmanageable later. I am glad you are able to do something. I don't think you will regret it.
DeleteVery thankful for the "underserved" areas getting a bit of loan relief. I know when we signed we got a bit of an incentive to be in a rural area (even though we were planning on going there anyways).
ReplyDeleteGood luck in the job hunt and hope they offer equally enticing incentives. I know loans can be incredibly daunting. It is like a whole second mortgage payment once you hit post-training. :(
Our student loan payments will be bigger than our current rent, and very possibly larger than our rent when we finally start practicing. Two mortgages, too bad one isn't someplace you can live in case you can't pay one of the mortgages.
DeleteWhen we meet with our accountant this Spring it will be the first year we won't have to choke back our own vomit as we are reminded we can't deduct our student loan interest paid. Yay, for paying it all off!!! Now we are just paying D1's out of state college tuition out of pocket, and one private school tuition. Next year, it will be two college tuitions and two private school tuitions. It really never ends.
ReplyDeleteMaybe I need to cry to my congressman now that I am a registered voter in the state! It really seems ridiculous to exclude the tax deduction at $150,000 and you can't deduct the capitalized interest as it happens. I am glad to know somebody who has paid all those loans off:-) I am starting to see that the expenses just shift and get more expensive. The amount you really have to live on doesn't change much. Sad, but true.
DeleteI have to agree with the "ignore them" comment! That's at least what we're doing right now. We've been deferring them through residency cause we can't afford to start making payments. I'm hoping we can also defer next year during fellowship! My husband thankfully went to a "cheaper" medical school so we don't have quite as much debt, but it's still overwhelming (in the $200,000 range)! Plus a leftover ~$8,000 from his undergrad :( I figure there's nothing we can do about it right now so I'd rather not know the exact number ;)
ReplyDeleteIgnoring works, but eventually they have to be dealt with. That is where we are now: in our final year of training trying to figure out how we are going to manage starting a job, getting set up, and paying back loans... oh, and maybe buy some new wheels and save for a house. You are free to go back to ignoring - it is exactly what I would be doing:-)
DeleteGood Luck! You will figure it out because you don't have a choice ;)
DeleteThis makes me sick. We are still in school and are locked in at almost 7 and 8%. Absolutely disgusting. We actually regret going into this due to the massive debt we are incurring. How will we ever pay it off? It shouldn't cost this much to get an education. I know we chose this road but it truly is ridiculous.
ReplyDeleteI don't know how medical students graduating now are going to be able to manage the debt. We were trying to figure out how long we will need to live like residents (after 12 years of medical school and residency) to get them paid off. It isn't pretty, and not exactly how we expected to live at this stage in our life. Every dollar spent on interest is money we can't save for our retirement which is non-existent now. And the money we will be using to pay it back with will be taxed heavily. We would eventually like to own a house we can call home and go on vacation before we (and our kids) are too old to enjoy it. I hope some type of relief is offered on a broader scale when it comes time to payback your student loans. The good news is.... money doesn't buy happiness.
DeleteOur student loan bill for hubby's med school isn't quite as high as yours, but it would still buy a house. We're in year 2 of residency & currently making income based payments based off only hubby's salary. We file taxes separately (married filing separately) for now to make our payments less. Plus he has a private loan that we pay on. We pay about $500 a month total right now. We're REALLY hoping to take advantage of the public service 10-year loan forgiveness http://www.finaid.org/loans/publicservice.phtml for all of his federal direct loans, which is the bulk of them. One year down, nine to go. 5 of those he'll still be in residency or fellowship for, so we should have only 4 years or so of making payments once he's an attending...
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ReplyDelete