Attending Medical School is easily the most expensive decision a young adult could make. Cost of attendance can easily double the mortgage of a nice house. Student loans are nearly impossible to default on, and will follow medical students for decades to come. Minimizing student loan debt can save you hundreds of thousands of dollars over the repayment of the loan
The financial departments of most medical schools make taking out loans far too easy. They are willing to hand over hundreds of thousands of dollars to students with no income and typically a negative net worth. Never again will money be so easy to acquire, and so hard to pay back. At a time of historically low interest rates federal student loans still charge an absurdly high interest rate of 6.8%.
Compound interest is an incredibly powerful concept, that you need to understand before signing your promissory notes. Lets take two examples. Student A takes out a loan to cover $30,000 in yearly tuition plus $2000 dollars a month in living expenses. Student B decides to spend $2500. Over the course of 4 years, student B will owe $24,000 more than student A. But this is just the start. Assuming both students defer payment during a 4 year residency, Student A will owe a total of $283,000. Student B will owe $315,000 at graduation. If they use a 10 year repayment plan, student B will pay an additional $13,000 dollars in interest over the life of the loan
In summary, an additional cost of $6000 dollars a year will add around $37,000 dollars to the total amount repaid. If student A invests the difference of $37,000 after 20 years it will grow to close to $85,0000.
Keep this in mind when you are choosing between [...]