Paying off Student Loans by Age Group
“It is not surprising that the percentage of school debt falls steadily with age. According to the AAMC, medical school debt has increased by 6.3% since 1992 compared with a 2.5% increase in the Consumer Price Index.[5] The AAMC also has reported that the median 4-year cost to attend medical school for the class of 2013 was $278,455 at private schools and $207,868 at public ones.[6] Given these high tuitions, resident debt has risen much more rapidly than inflation or resident compensation. According to the Medscape survey, 20% of physicians 50 and older are still carrying this liability. Even more physicians may owe money on college in mid-life as the current younger group of physicians age, and their higher debt continues into later life.”
In my age group 28-34, 67% of us young docs are still carrying/paying off student loans. Given the traditional medical students usually finish residency training around age 30.
Fortunately, for a multitude of reasons,
I have paid off my student loans completely at age 30.
I just graduated from medical school in 2014 and am only an intern now.
My goal is to help the other 67% who are still carrying (likely massive 200k-500k) student loans to get rid of this monetary noose around their necks ASAP. Paying interest at 6.8% is a pretty bad guaranteed loss… Most residents don’t have the income/debt ratio to qualify for refinancing their student loans to a lower rate. [I wrote this few months ago, but now residents and fellows CAN actually refinance their 7% student loans with DRB to as low as 1.9% loan. More details on refinancing your student loan with DRB here.]
If you do the math, you’d see that the student loan burdens are massive because of the HIGH interest rate combined with LONG TIME the principle is compounding. Students who graduate with 400k debt, only borrowed 330k in the first place. 50-75k of the total debt at graduation are simply interests+ origination fee accrued during school.
4 measures one can take to minimize student debt are:
1) Minimize and delay taking out student loan (be frugal, creative, and live within/below your means). Cost of attendance are generous estimate of how much you need for school each year, your budget should be well below the COA. Borrow well below your budget because when you run out, it’s easy to get more (from my experience, shooting an email to the financial aid office saying “I need 10k.” will get me the money within 3-4 weeks.)
2) DELAY and AVOID debts with high interest rates (take on a debt with lower interest rate such as credit card balance transfers w annual interest rate 2-3%, utilize home equity loans, or better still use 0% APR promotional rate for 18 months on your living expenses/tuition. Then either pay it off when the 0% APR is up with readily available student loan or simply balance transfer another card for another 1-1.5 year @ 2-3% interest/balance transfer fees.)
3) Prioritize your debts; pay the debt with the highest interest rates first.
4) Refinance your student loans to a lower interest rate. As a DFD reader, you can get a $300 bonus when your student loan refinancing closes with DRB. Use this link.
*You can see the full Medscape report here.