View Full Version : How Long to Repay LOC
07-09-2003, 12:14 AM
Say someone has borrowed 100,000 by the end of med school, approximately how long will it take them to repay that loan... assuming a five year residency at 45-50,000 and later earning ~200,000 as a physician?
2. Is one required to make payments on the LOC while in medical school?
3. If so, does one need to pay both interest AND payments on the principal?
Thank you in advance, I am very confused about the whole process.
07-09-2003, 12:46 AM
I don't have the answer to that, but here's a sample calculation done in one of the threads in the General Premed forum (which I think I'll move into the Med Students forum, actually...)
2) You generally pay interest-only while in med school, and only on the money that you've actually withdrawn. ie. if you've only used $5000 of your $25,000 in year one, you'd only pay interest on the $5000.
3) Interest plus principal payments will generally start during or after residency. You may be able to delay paying both interest plus principal until the end of a five year residency. Of course, you will still have to pay interest on whatever amount you've borrowed, but at least the banks won't be hounding you for payments on the principal too.
I've talked to a few doctors about how long it takes to repay your loans and they all said it was *possible* to do it fairly quickly (ie. in a couple of years). However, this all depends on what stage of your life you're in and what sort of things you want. If you are a little older and have kids, or want to have them in the near future, you may not have as much money to pay on the loan every month. If you are into buying "toys" or a house etc., and these are your priorities, then it may take longer, as well. Also, when you first start off and if you work where you're paid by fee for service, you can decide to work more and make more. Some of the younger emerg docs here are full time (which = 14 shifts per month) and then work casual at other sites.
07-09-2003, 05:20 AM
My wife was only responsible for repaying interest on money borrowed until she was finished her residency...her LOC was initially with Scotia bank and then she switched over to RBC. Once finished the banks didn't even hound her for principle...It was a several months before her first paycheck from her first locum came in. Although she has been aggressive, it took her a year to pay back the money from her loc...there's a smidgeon left to pay back still...however...she has maxed out her RRSPs...had to pay for the creation of a new family medicine clinic...computers...equipment...staff pay and overhead...disability insurance...etc., etc., etc.
One piece of advice (although I'm not in meds)...get used to having the debt and don't get too hung up about it. Once done, pay it back at a rate which is comfortable for you...while also ensuring you are planning for your future (i.e., ensure you max out your RRSPs)...
07-09-2003, 11:13 PM
Can you explain why and how one would max out his/her RRSPs while taking out a LOC? Fiancial planning isn't my strong side!
07-10-2003, 09:46 AM
Sorry, I may not have communicated that thought properly. There may be a reason to take out RRSPs when in school...because of the way compounding interest works...however this is a question for a financial advisor...not me...
What I was trying to say was that when you finish are working...it's really important to max out your RRSPs as a physician as you have no benefits...no pension, etc. It would be better to max out RRSPs at the expense of having debt a bit longer...while it doesn't seem to make sense in the short term (i.e., everyone wants to get rid of debt) it does in the long term (i.e., paying off debt doesn't provide you as much advantage as the compounding interest over the the years).
I hope this clarifies the above post...
07-11-2003, 10:13 AM
RRSP contributions are also tax deductible. . . I can't remember the actual numbers, but you essentially make the contribution back on your tax return as a physician (decent to more than decent salary = big tax bill.) Combine that with your total lack of a pension in medicine and you'd be ridiculously foolish not to max out your RRSPs right off the bat.
Government student loan repayments are also tax deductible whereas Bank LOCs are not!! But the interest on an OSAP loan (once you're working) is very high - around 8 or 9% I believe. So you have to factor/analyze things on that basis: you might be better rolling some of the OSAP into a bank LOC at lower interest rate. The nice thing about MD Management is that they will do those calculations for you - and I think you just have to be a CMA member, you don't necessarily need to have their LOC.
As far as paying the LOC back, it depends totally on your specialty and how quickly you want to pay it back. There are some specialties where it could be a matter of MONTHS and not years to pay it back. On the other hand, if you want to pay mostly just interest and minimum principal payments you could spend YEARS paying it back. . . I'm looking at $150,000 in loans (OSAP and LOC), if I end up making $50k after tax so decided to pay back only $20,000/yr, $10k of which would be interest, I'd be looking at paying that thing back over 10-15 yrs based on interest rates! If, on the other hand, I decided to live like a student for a few more years (into my 30s) I could have that thing paid back in a few years.
07-11-2003, 12:36 PM
My brother was over $100,000 in debt from OSAP and his LOC and paid his loans back in under 8 months (trained as a GP but works in emerg. outside Toronto).
I find that very heartening!
07-11-2003, 12:50 PM
Wow! That certainly is quick.
Was that 8 months after residency? I thought that after residency you made only about 100,000 until you worked you way up?
8 months certainly isn't that long!
07-11-2003, 04:41 PM
Yeah, that is very heartening. . . especially seeing as I'm interested in doing something similar!
07-11-2003, 06:35 PM
caesarCornelius, UWOMED2005, Toonces,
Toonces, your brother's experience is quite typical...but you have to really work hard to pay it off in this amount of time as a Family Doc.
UWOMED2005, you'll be making significantly more than 50K after taxes even as a family doc...based on our situation...100K after taxes is extremely easy to make...and not that much more work to make significantly more...other specialities would make it even more lucrative.
08-07-2005, 04:29 PM
Floating back to the top.
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