$327,000 in debt, and she doesn’t even own a house
August 12th, 2007 | by mbhunter |That’s huge. A new doctor that posted on the MSN Women in Red message board got the attention of MP Dunleavey, who wrote this article:
Debt a bitter pill for future doctor
About $118k in government student loans (fixed at 4.25%). About $191k in private loans at variable rates, currently between 7.91% and 9.25%. A $12k car loan at 6.09%. And about $6k on a credit card (0% for another 8 months).
No mortgage! The only collateral is her car. At least they can’t repossess her diploma. 
It certainly will take a while to pay this off, to say the least. This is an extreme case of the kind of debt loads that many of today’s twenty- and thirty-somethings are shouldering, which is discussed in more detail in Tamara Draut’s Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead
A journey of a thousand miles begins with but a single step, and I agree with Dunleavey that getting rid of that large variable-rate debt first is wise. Hopefully she’ll do that. That debt is just asking to be reset higher.
Man, those numbers are huge. Crazy huge.
13 Responses to “$327,000 in debt, and she doesn’t even own a house”
By Fabulously Broke on Aug 12, 2007 | Reply
That’s scary huge … I think I’ll print this article to keep me on track to clear my debt (not as big as that), but pretty big…
And can you imagine the years of lost income since she was in school? Someone who graduated 7 years earlier than her, with a job at half her pay is much better off than she is right now, which is scary…
By Chris on Aug 12, 2007 | Reply
If she makes $150k a year, is single without kids, and rents, she should be able to pay that all off within 3 years easy. Just make $150k and live like you make $30k. Then gradually increase your lifestyle while saving the leftovers now that all the debt is gone. The woman could be ridiculously wealthy in less than a decade.
By Mary on Aug 12, 2007 | Reply
I don’t see how she could possibly pay off all of that in three years even if she lives very frugally. First, taxes are going to take a big bite out of here take home pay and she probably makes too much to take a deduction from the student loan interest. A lot of the money she sent towards the payments will be going towards interest as well just slowing the process down. Maybe she could do it in 5 but that would still be very tight.
By Chris on Aug 12, 2007 | Reply
Just pulling ideas out of my head. The point is not to spend like you make $150k until you get out of debt. I know someone who recently completed his residency and after his first month bought a luxury car and a house. I’m pretty sure she could be debt free and in a paid-for house with plenty of savings within a decade though.
By Neely O'Hara on Aug 12, 2007 | Reply
Chris is right — maybe the three figure is a tad optimistic, but she could sell her car, get an apartment with a roommate – in other words, NOT live the way doctors normally live. She may be embarassed in front of her peers, but too bad. It’s temporary.
This is TOTALLY do-able in just a few years. She just needs to get serious about paying it off.
By Pinyo on Aug 12, 2007 | Reply
My dentist owe $250,000. My friend who is a dentist also owe a whole bunch of money (no, I don’t let him work on me). The doctor who interviewed me still owe student loan. This is why I am happy I didn’t go to medical school.
By Dr. T on Aug 12, 2007 | Reply
Her story is very common for young physicians today who didn’t get loans from the bank of mom and dad. I am “ONLY” $130,000 in the hole facing the same prospects.
However, I look at my loans as an investment in a highly specialized, non-outsourceable skill. With this skill I should be able to pay back these loans without too much difficulty.
Many young residents spend too much money initally and I was guilty of the same mistakes. They(we) tend to rationalize bad finaical decsions based upon the premise “We should be able to pay it off when we get a real job.”
You can follow my journey over the next few years if you would like.
By mbhunter on Aug 13, 2007 | Reply
Dr. T, thanks for sharing! I went through six years of grad school but it was for a PhD, not an MD, so I had modest funding along the way. Did you have such funding opportunities available to you?
The numbers are bigger, but the payoff method is the same.
By Dr. T on Aug 13, 2007 | Reply
Unfortunately there are not very many good opportunities to “work your way” through medical school. As you can imagine, most of the students are very bright and are very hard workers. The shear volume of material prohibits most from even attempting to work. The competitive “premed” stereotype doesn’t fade away when they get to med school, so it can be a bit over the edge to earn a Residency spot in the competitive specialties.
The few funding sources I have seen are:
1. bank of mom and dad, still a fair amount of nepotism around
2. student loans(majority of my class)
3. have the military pay your tuition(a few in my class)
4. combination of part time jobs like MCAT test prep instructors, selling plasma, being human guinea pigs for research studies, etc…
The problem is you are in class/lab all day and have to study all night.
that being said, I had more fun in medical school. Work hard/play hard. The good days were better but the bad days were worse compared to undergrad.
By Anitra on Aug 13, 2007 | Reply
I know people who have almost $100k in debt just from their Bachelor’s degree, so this story doesn’t surprise me in the slightest.
I no longer look down on kids who go to community college or choose not to go to college at all. It’s not worth the price to go to an expensive private school – it’s better to go to a community college or public university and simply work hard.
By e on Aug 13, 2007 | Reply
One important thing to keep in mind when trying to imagine how a resident should be cutting costs to pay back loans is the professional demands.
Having lived it both ways, I can say it’s sure a lot easier to live frugally (find an out of the way apartment with cheaper rent, bus to work, cook your own food, shop sales, wear used cloths) when you have a bit of time and a flexible work environment. As soon as you’re working 80 hour weeks with 2 weeks of not very flexible vacation time a year and strange hours (can’t take the bus home at 3am post-call), in an environment where you have to maintain a professional appearance, it gets much, MUCH harder.
Even if you did have the time to cook food at home to bring for the 2-3 meals a day you eat at work, you don’t have a space to store it or much time to eat it.
Just… keeping that on the table! If nothing else, perhaps it’s a useful reminder to those with the freedom to be frugal to appreciate it!
By Minimum Wage on Aug 21, 2007 | Reply
No mortgage! The only collateral is her car. At least they can’t repossess her diploma.
I *wish* they could repossess MY degree! Because I have a degree, I am ineligible for Pell Grants even though I earn minimum wage. If I didn’t have a degree, I would have been able to get one.
I have $30,000 in debt’; on minimum wage, it’s gonna be a loooooong and hard road to pay it off.
By Jerry on Nov 24, 2007 | Reply
Yes, that amount of debt is shocking. But, she is going to be a physician and her salary will lead to a significant reduction in her student loan debt. Her income potential is much greater than someone racking up $200,000 in loans and they have a Ph,d in the Fine Arts. A medical degree isn’t insurance she’ll be debt free (I know many doctors who are quite the opposite) but she has a better chance than most at getting those numbers down.
Jerry
http://www.leads4insurance.com