Medical Student Debt Avalanche Calculator
Medical School Was Worth It – Yay! Now We Have Crippling Debt – Boo!
TL;DR I share a detailed Medical Student Debt Payoff Calculator (free download!)
Story
“…but what if I don’t make it,” worried my wonderful wife. “What if we borrow hundreds of thousands of dollars and I never graduate medical school!” she sobbed while hugging her knees to her chest on our bedroom floor. “What if I do graduate and we can’t ever pay off the loans!” No amount of positive reinforcement or spousal support can assuage the fears of failure. While I never doubted her ability to finish medical school, I was admittedly concerned about the impending avalanche of medical school debt and how we would pay it off. Fortunately, my method of coping with stress is building spreadsheets!
As a Med Spouse, I found this planning helpful for my non-medical career. It reminded me to think in terms of my own future income potential, rather than just my spouses, and led to some advantageous career planning. We both contribute different amounts (financially) at different times, but ultimately, we are in it together.
Snowball Method
There are plenty of ways to approach paying off significant debt, however two primary methods dominate financial advice columns around the internet. First is the “snowball” method whereby a person focuses on paying off their debt in ascending order of loan balance. The minimum payment is made on all loans, and any extra available funds are used to target the smallest loan first. Once the smallest loan is paid off, it’s minimum payment and the extra available funds are then applied to the second smallest loan, and so on. This creates a “snowball” effect which accelerates the overall payoff schedule. If this sounds familiar, you have Dave Ramsey to thank.
Avalanche Method
The second approach is the “avalanche” method. Similar in all ways to the “snowball” method except it targets the highest interest loan first, rather than the loan with the smallest balance. Comparisons between these two methods are abundant, so I won’t beat the proverbial dead horse. The bottom line is that the avalanche method saves the most interest over the debt lifecycle, and since medical students and residents have way more debt than the average consumer, I focus on this method.
When To Use This Calculator
Technically, anyone could benefit from tackling their debt this way, at any time. You don’t even need to have student debt! However, since this is targeted at those in the medical profession, I wouldn’t recommend that anyone spend significant time worrying about it until they are approaching residency match. You won’t know your final loan balances before your last disbursement, and you should be focused on graduating!
Prep Work for Students
Before diving into the calculator, some preparation is required. You will need all your student loan information, and a decent idea of what your PGY1 life budget will be. This is difficult without knowing where you will match, but resident salaries exist in a narrow tranche, so I personally assumed an average salary of my wife’s rank-eligible programs. Cost of living is much more variable, however working on these calculations in advance can help you back into a budget once the match is settled. Ignorance is not bliss, and budget decisions should be made with debt repayment in mind. You don’t know where you will match yet, but your debt is certain!
This would also be a good time for some light research into what you expect an average attending physician salary to be in your chosen specialty, and to consider any income of a “ride or die” spouse. One budget with two incomes is easier to work on than two budgets each using one income. I’m not giving any relationship advice or passing any judgement here, simply noting the logistical benefit. To each their own!
Prep Work for Residents
For residents who haven’t settled into a debt repayment plan or are looking to maximize the one already in place, this calculator may be equally beneficial. You should have all your student loan debt information, your expenses and your income(s) worked out. I would recommend heavy research into the expected attending physician salary for your specialty and project your budget beyond residency.
Medical Student Debt Avalanche Calculator Notes
(If the demand exists, I am open to recording a podcast episode or screen capture video tutorial dedicated to navigating this calculator – let me know!)
The calculator is pre-populated with realistic sample data demonstrating how $265,000 in student loan debt can be paid off completely in 6.5 years. Yes, the example requires significant monthly payments, however the point is to demonstrate what is possible and to get people thinking about how to attack their debt. Everyone’s situation is unique!
While intended to be used as an “avalanche” calculator, it can be used however you find it helpful. The order in which you list the debts is the order in which the calculator will attack them. If the “snowball” method is more comfortable for you (there is some psychology involved in realizing small wins early) then order your debts accordingly.
There are, of course, other factors to be considered as well. Student loan consolidation and repayment terms could influence the order in which you prioritize the debt, and certainly your minimum payments. That is absolutely fine! This calculator should exist as a living repayment guide, revisited as needs and circumstances change. I recommend dedicating some time to researching the available Federal Student Loan Repayment Plans and playing around with their Loan Simulator to compare options.
Students seeking Public Service Loan Forgiveness (PSLF) will be participating in an Income Driven Repayment (IDR) plan and will have no desire to accelerate the payoff of debts to be eventually forgiven. The calculator can still provide insight and organization into your repayment plans.
The calculator does not contain a template for personal budgeting (although I would be open to creating one and linking it to this spreadsheet if demand exists). The calculator has inputs for “Extra Monthly Payments” by year which can only be arrived at by creating your own personal life budget and deciding on the monthly amount (if any) you can spare. The inputs change yearly, which seemed the most logical interval given the predetermined increase in resident salaries and the evolution into attending physician income.
The calculator is filled with sample data representing a realistic situation. Play around with it! Input varying amounts of “Extra Monthly Payments” to see how fast the debts are paid off. The calculator’s usefulness scales with the accuracy of the information.
The first sheet of the calculator contains instructions as to its use. Don’t skip the instructions! If something is unclear or appears broken, please contact me at hmbennett@substack.com.
*Disclaimer - I’m not a certified financial planner/advisor/analyst or accountant. This information consists of personal anecdotes, methodology and preferences only.
I love this. I can work through the calculator but I think a recording/training is probably necessary.