Forgiveness program

is not all that forgiving.

This is a post for those beyond living on borrowed money as students but have yet gotten to the end-of-the-tunnel where fully realized income potential illuminates. In medicine, this transition between accruing student loan debt and building wealth is called residency and fellowship.
An average doctor’s net worth looks like this,
  • 4 year college:  –$28,400
  • 4 year medical school:  –$170,000
  • Net student debt at graduation: -$198,000
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I did a little experiment with the repayment estimator on https://studentloans.gov.

I added 181,671 additional un-subsidized loan @ 6.8%  to my current loan balance of 16k, which brings me to the average graduating medical student debt quoted above.

 

Then, I ran the different repayment plans as following.
As you can see, most medical residents (non-student trainees) who make 50k annually can’t possibly afford the standard or even graduated repayment plan.
During 3-9 years of residency training where annual income is 50-70k, majority opt for minimal payment (Income-based-repayment or Pay as you Earn)
Repayment Plan Repayment Period Monthly Payment

Initial to Final Amounts
Projected LoanForgiveness More Information Total InterestPaid More Information Total Amount Paid
Standard
More Information
120 months
$2,275
to
$2,275
$0 $74,960 $272,960
Graduated
More Information
120 months
$1,312
to
$3,935
$0 $95,598 $293,598
Extended Fixed
More Information
300 months
$1,369
to
$1,369
$0 $212,828 $410,828
Extended Graduated
More Information
300 months
$1,116
to
$1,961
$0 $247,100 $445,100
Income-Based Repayment (IBR)
More Information
300 months
$406
to
$1,644
$260,866 $271,822 $271,822
IBR for New Borrowers
More Information
240 months
$271
to
$832
$343,624 $122,126 $122,126
Pay As You Earn
More Information
240 months
$271
to
$832
$343,624 $122,126 $122,126
Income-Contingent Repayment (ICR)
More Information
300 months
$639
to
$2,357
$152,856 $335,765 $400,710

If you go for IBR or PAYE, the real loan balance at the end of 240 months is total amount paid + projected loan forgiveness.

 

The -$198,000 a graduating medical student had, would have grown to $122,126 + $343,624, a grand total of $465,750— a handsome sum that could buy mansions (where cost of living is reasonable.)

But only sad thing is, the VECTOR of this magnitude is in the wrong direction! It is not half a million positive net worth that you can utilize in many amazing ways, it is the exact opposite. It is half a million negative net worth. It’s like carrying a mortgage without a house when it is paid off.

 

Is your education worth

half a million (at least) to you?

 

Learn to manage your debt so that you can go for higher education and won’t regret doing so! 

 

Do it right; so you need No forgiveness-Part I

Share Your Questions & Insights.

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