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Author: gapdvm Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Student Debt Date: 7/20/1999 8:23 PM
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Dear Fools -

My husband and I have combined student loan debts of over 70K (medical school) financed at 7.5%. Should we wait to invest until we have paid off all our debt? That would take us a while. Or should we invest now and take advantage of the time value of money (we are in our late 20s)?

We are currently only contributing to a 401K, at the maximum amount.

We are looking for foolish advice. Are their any fools out there who can relate to our predicament???
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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12403 of 75383
Subject: Re: Student Debt Date: 7/20/1999 8:59 PM
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gapdvm writes:

My husband and I have combined student loan debts of over 70K (medical school) financed at 7.5%. Should we wait to invest until we have paid off all our debt? That would take us a while. Or should we invest now and take advantage of the time value of money (we are in our late 20s)?

We are currently only contributing to a 401K, at the maximum amount.


I reply:

From a strictly economic standpoint, the analysis is straightforward. Is the interest on your student loan debts tax-deductible? Whether it is or not, decide what rate of return you would expect on your investments, after taxes. (If you're eligible for a Roth, the tax rate you should expect for your first $4000 is 0%.) If that rate exceeds the after-tax rate of interest you're paying (I suspect it will), then you'll maximize your expected value by investing now. My wife and I still owe about $30,000 in student loans at 8% and 9%, but we're investing every chance we get. Good luck! --Bob

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Author: WilliamLipp Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12404 of 75383
Subject: Re: Student Debt Date: 7/20/1999 9:27 PM
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gapdvm Date: 7/20/99 8:23 PM Number: 12399
My husband and I have combined student loan debts of over 70K (medical school) financed at 7.5%. Should we wait to invest until we have paid off all our debt?

If you only match the long term market growth, you'll make 10.5-11% on your investments - buying S&P500 index funds or Depository Receipts should match that. If you pay attention to the information available at the Fool, you should do even better. You're a Fool, so you are responsible for your own decisions. But investing looks like a good bet.

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12407 of 75383
Subject: Re: Student Debt Date: 7/20/1999 9:47 PM
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I can relate in one aspect, graduate LSUMC-Shreveport, class '91. Fortunately graduated without debt thanks to college scholarship and forethought/savings of parents.

I'm guessing because of your age, you're just starting residency. Good luck. Here's my take, at least invest in a Roth IRA while you can, once you get that first job, chances are you won't qualify anymore. By the time you retire, that Roth money will be a tidy tax-free some. Next, invest in 401(k) to extent of matching funds from employer. The matching part I consider the "guaranteed" return. Then begin whittling down on the loan debt. Debt is a tough master to serve, the sooner it's payed off, the sooner other avenues of opportunity will open.

As a professional aside, it'll be highly tempting to do a ton of moonlighting. Don't. Residency is tough enough as is, try to limit yourself to no more than 2 or 3 shifts a month.

If you need another doctor's opinion later on, feel free to e-mail.

JLC

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Author: jlive1975 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12416 of 75383
Subject: Re: Student Debt Date: 7/21/1999 12:27 PM
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I can definitely relate. Although I am not in as much debt, I think the best route to go is to pay twice what the monthly payment is and invest the rest. You should be able to beat 7'5% a year and by paying twice the monthly payment, you get to cut the time spent on school loans in half.

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Author: Lester77515 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12425 of 75383
Subject: Re: Student Debt Date: 7/21/1999 2:03 PM
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I addition to the previous comments, I think you may find that reading THE MILLIONAIRE NEXT DOOR by Thomas J. Stanley and William D. Danko useful.

They don't tell you where to invest, but how to avoid mistakes that keep you from becoming a millionaire.
This will be especially useful to the Dr.'s in the crowd, since a LOT of them don't become millionaires in proportion to other groups. School teachers beat you guys hands down.

I'm not knocking you (I used to be a volunteer EMT and have great respect for what you do), but it's the truth.

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Author: medgoddess Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12428 of 75383
Subject: Re: Student Debt Date: 7/21/1999 2:32 PM
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In terms of MDs, it might get even worse for those in my generation - I expect to graduate 80K in debt (all from med school). We have higher debt loads than previous generations, thanks to skyrocketing tuition.

I'm not saying that you need to feel sorry for me, I LOVE what I'm doing. Every penny has been worth it so far.

I think a large portion of the differences can be explained by: Many more years of schooling compared to teachers. Not only is there the opportunity cost of not working, but med school tuitions are costly and scholarships are rare. And the equipment/books/required extras add up as well (and books are the only optional item on that list). My equipment will cost me about $1500 (at least that is what the finaid office budgets). Mandatory health insurance (not under parents' anymore) adds ~$3K per year. At least disability insurance is cheap (also mandatory). Family & friends can be astounded when they see these costs. It's no wonder many of us graduate deep in debt...and why I follow the living below your means board...
;)
Kristi


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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12441 of 75383
Subject: Re: Student Debt Date: 7/21/1999 9:04 PM
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<<I addition to the previous comments, I think you may find that reading THE MILLIONAIRE NEXT DOOR by Thomas J. Stanley and William D. Danko useful.

They don't tell you where to invest, but how to avoid mistakes that keep you from becoming a millionaire.
This will be especially useful to the Dr.'s in the crowd, since a LOT of them don't become millionaires in proportion to other groups. School teachers beat you guys hands down.>>

I think the temptation of that first job is too great after "starving and suffering" all those years of school. THE MILLIONAIRE NEXT DOOR is a great read, will hopefully help you keep things in perspective. Appearance and status are not the same, you'll find that out soon enough in treating patients. Don't go trying to live the lifestyle of what society thinks a doctor should live. Be yourself.

JLC


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Author: tonyw44 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12453 of 75383
Subject: Re: Student Debt Date: 7/22/1999 9:34 AM
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I don't like that Millionaire Next Door Book. Look, guys, I don't think it's cool to encourage people to clip coupons for hours on a Sunday when they could be out having fun. And I'm not talking about spending money fun, I'm talking about riding your bike, going out for a walk, sitting by the pool, reading a good book, or whatever.

The people who are highlighted in that book -- well, money have become an obsession with them, and their lives are just plain dull.

My advice is to have some fun, just make sure you can afford it -- and I'm not talking about running up credit cards to afford it.

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