I am a new nurse and am interested in the possibility of attending medical school in fall of 2021. Medical school is insanely expensive and I want to put myself in a smart financial position for it. I am new to financial concepts and apologize for any misuse of terminology.
The only debt I have is in student loans. Currently, I have $41,000 in federal loans - about $17,500 subsidized and $23,500 unsubsidized. Interest rates are mostly in 3's and 4's with a few thousand in 5's and 6's. I also have $10,000 in Doucette loans with interest about 5%. This give me a total of $51,000 in student loans.
In my RN position with my adjust differentials, I will gross about $85,000 my first year, and expect an increase of a couple thousand each one to follow. I will put 5% into a Roth IRA, which my employer matches. My income after taxes and deductions (claiming 1 personal exemption and not factoring in student loan repayments) is projected to be $63,000. Currently, I basically do everything I want with a take-home budget of $21,500, but I will plan to up it to $26,000 to add more travel. This means I will save/invest about $37,000 a year (minus my Roth contributions) before deciding how much to put towards student loan payments. I have no other assets.
I am interested in replicating Ray Dalio's all-weather portfolio (which had an annualized return just under 10% from 1984 to 2013 with a largest loss of -3.95%) with all $37,000 (minus student loan payments) on Ameritrade sticking with index funds where possible. Calculating interest rate compounding annually and setting contributions for my bi-weekly checks and an interest rate of 9% (below the above average), I could have about $184,000 in my portfolio before medical school. Again, this is not considering payments on student loans, but I believe I can file forbearance while taking the rest of my premed classes.
Between now and fall of 2021, I will need to pay about $12,000 for premed courses. $9,000 of it could come from federal loans, which seems to make sense as my portfolio should grow at a faster rate. In fact, the loans I would take out for medical school itself have lower interest rates than the projected growth of the portfolio, so it seems like taking out all loans possible and keeping my money in my porfolio may put me in the best position (corrections to this assertion would be highly appreciate).
Tuition, fees, insurance and living expenses for the medical schools I'm interested in cost about $70,000 a year. If I took loans out quarterly at the current Direct Stafford Loans for medical school rate of 5.84%, I'm at $312,000 (this is not completely accurate as Direct Stafford Loans currently cap at $224,000 - after that would be GradPLUS Loans currently at 6.89%). Add current loans and premed costs with interest to that and I'm at about $385,000 in loans after medical school. Then comes up to 5 years of loan forbearance (or something else) during residency with a weak salary of about $60,000 (unless I look into moonlighting).
If I left all $184,000 in my portfolio and compound interest 1 time a year at 9%, after a 5 year residency, I would have about $399,000 in my portfolio. From there, it seems like it would make sense to stretch out my loans as long as possible - instead of pay down the loans, put the money in my portfolio where it would grow faster.
This idea seems a bit radical to me as I haven't heard it discussed before. Is there incentive to pay down loans faster? Any comments on this plan would be highly appreciated.
Submitted September 04, 2017 at 12:05PM by womacki http://ift.tt/2vZt2Uk
