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Welcome to this session of grand rounds, a collection of posts I have discovered in the blogosphere and have found of interest and hope you do too.
This offering of Grand Rounds looks at articles from around the web that deal with one of the most dreaded 4 letter words: debt.
You studied hard all your life.
While others were outside playing you were pouring over MCAT questions.
And then the day arrives, a fat envelope with an acceptance letter to medical school.
Hate to be the bearer of bad news but you are now well on your way to being broker than broke (for many years the panhandler on the exit ramp will have a higher net worth than you).
Before you go signing any and every loan document placed in front of you, you need to know what is in store.
Ryan Inman of Financial Residency, has done an incredible job putting together the “Definitive Guide To Medical School Debt For New Doctors – What Every Physician Needs To Know Right Now.”
Unless you are one of the very fortunate, most medical school graduates have quite a sizable loan burden, often in the mid six figure range.
When your student loan debt approaches these levels, no matter what specialty you end up going into, it weighs heavily on your shoulders with monthly payments equivalent to or even surpassing most home mortgages.
Public Service Loan Forgiveness Program (PSFL) was not around when I graduated but it is an option for recent graduates.
There can be public outcry when it is perceived that doctors, who are supposed to be rich, are using tax payer money to pay off these loans instead of paying them off themselves.
Riley Adams, of Young And The Invested sheds some light on the situation in, “In Defense Of The Public Service Loan Forgiveness Program.”
I have previously written that one of the major financial mistakes I made in my life was the mishandling of my student loans.
There are so many ways to attack debt.
Dave Ramsey is famous for his “snowball” method, where you pay the lowest balance debt first (and ignore differences in interest rate charges) and once that is wiped out move to the next smallest one.
The method I used was the “avalanche method” which prioritized paying the highest interest rate balance first.
Mathematically that made more sense to me.
David Graham analyzed these methods as well as adding a third one, the “Cash Flow Index” to see which one came out on top and by how much.
You can check out the great analysis he did for a guest post on The Frugal Physician titled, “Evaluating Debt Payoff Strategies.”
One of the great moments in my life was when I broke free from Sallie Mae and paid off my student loans.
It flipped a switch in my mind and I became debt averse.
This snowballed into paying off my mortgage which marked the moment I truly became debt free.
So does that mean everyone should pay off their student loans?
Not so fast.
Ty Roberts shared on Campfire Finance the reasoning why he chooses to hold onto his student loan debt in, “Why I’m Not Paying Off My Student Loan Debt Early.”
Becoming debt free was a truly freeing moment in my life.
You do not know how much weight on your shoulders you carry from debt until it is removed.
So I get the desire for everyone to go ahead and rush out and payoff all your debt as quickly as you can.
I caution you against this (I know FIRE blasphemy!).
You do not want to focus so much on debt payoff that you are sacrificing everything to achieve it.
The ideal method would be a balancing act between debt payoff strategies while still enjoying the present.
High Plains MD has come to a similar conclusion based on his own personal experiences in, “My Psychology Of Debt.”
Hope you enjoyed the reading material.
Have a great rest of the week.
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Great grand rounds! Agree with a lot of these articles. For myself, I think there is still a good feeling to have no debt including housing even though it could be doing well in the market right now. Thanks again.
Thanks VP. Yeah I know I didn’t increase my net worth as much because I chose to pay off my mortgage instead of putting it in the market but no regrets and peace of mind was worth it to me. Appreciate you stopping by and commenting