Medical Student Loans- Even Doctors Can Get Into Trouble

There was a recent article that appeared in the Washington Post online recently that explained how even doctors can get into financial trouble with student loans.

A 41 year old doctor who borrowed $250,000 in medical student loans now owes about $555,000, and at her current repayment schedule for these medical student loans she will get them paid off when she is 70 years

old. She says her loans are a great source of stress and distraction, and she has put off getting married and having a family because of them.

Where did she go wrong?

Let’s start with her general lack of knowledge about student loans and how they can get a person into big financial trouble. She really didn’t worry about signing up for student debt and just assumed that as a doctor she would have enough income to pay off her medical student loans. This might normally be the case, but after she finished school and was doing her residency she let her loan payments slip. The payments were quite high and there was quite a bit of time before she was making what one would call a regular doctor’s salary (she ended up becoming a family doctor). She obviously didn’t have much financial acumen, and she let her medical student loans slip into default. This was a huge mistake, and it is a mistake no matter what type of profession the student loan borrower is going into. With default comes very large penalties and these were added to the accumulated interest on the medical student loans and the next thing this doctor knew, she now owed more than double the amount she originally borrowed. In her case the charges for collection alone were over $50,000. And for that amount of money she got to deal with the harassment of collection agents. These people can be relentless, and they even called her father every night for over two months because he had co-signed some of his daughter’s medical student loans. On top of that they called her father’s neighbor and told that person about the defaulted loans his neighbor’s daughter had. A spokesperson for Sallie Mae, the company that made the loans, says their collection agents (they probably also own the collection agency that went after the defaulted student loans, although that was not stated in the article) would only call a neighbor to verify that a person actually lived at a particular location. Sure. They had already called the father every night for two months, so they knew where he lived. It has often been documented that collection agents will overstep their rights when trying to collect on student loans.

The next mistake the doctor made when taking out medical student loans is that she borrowed too much money. The rule of thumb is to only borrow as much as what one year’s starting salary is expected to be. As a family doctor this person might well earn $250,000 some day, but that will take a while. She should have looked for ways to lessen the amount of money she borrowed. She also broke another rule of thumb which is to keep loan payments down to no more than 10% of her monthly income. Since she didn’t follow this rule she became overextended financially and couldn’t make her loan payments on time. She tried to defer some of her loans and cut her monthly payments several times, but she didn’t seem to really know her rights or understand the consequences of defaulting on her medical student loans.

This doctor learned the hard way that student loan debt can get a person into a very deep hole. There are millions of Americans who are equally cavalier about their approach to student loan debt and who think they can borrow any amount of money needed and it will be paid off without too much trouble. Up to 20% of borrowers who have borrowed $15,000 or more have defaulted by the 10 year mark. Many of these people are now overwhelmed by their student loan debt. Some have even left the country to escape it, and there are reports that a few borrowers have been so depressed by it that they have resorted to suicide.

Student loan debt cannot be dismissed in bankruptcy proceedings. The Sallie Mae spokesperson in this article was quoted as saying Sallie Mae supports legislation to allow dismissal of student loan debt in bankruptcy after a certain period of time. Sure they do. That’s why they had an army of lobbyists with pocketfuls of money to pressure legislators into changing the laws to make it the way it is in the first place.

Even if you are going into a high paying occupation like becoming a doctor and take out medical student loans, you need to realize that student loans can get you into very big financial trouble.