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In this video, we’ll talk about how we paid off $385,258 in student loans in 75 months with REAL numbers and stats while we were making resident/fellow salaries in pharmacy and medicine over 72 of those months. Later on, we’ll talk about how we increased our income to pay off this extreme student loan debt as FAST AS POSSIBLE while living in the high-cost of living city of Los Angeles, CA.
Hi, I’m Jessica and I love talking about financial freedom after experiencing burnout early in my pharmacist career. We talk passive income and simplifying on this channel to combat stress and burnout.
STEP 1 – Face the facts
When we graduated in 2013 and 2014, we were hit with our student loan debt bills. I had known the amount of my student loan debt and already had a plan in place. My husband was in a lot my shock about his student loan bill at graduation time. Thinking that he had taken out $180,000 during medical school, it was a shock to learn the number was actually much higher… $217,778 in medical school. Before we get into more of the numbers and breakdown, let’s talk about our story.
I spent 7 years training for my progression – 3 years for undergraduate degree and 4 years for doctor of pharmacy degree, both from USC. My husband spent 8 years training, 4 years undergraduate degree from a UC school and 4 years for doctor of allopathic medicine, MD, from USC. I went onto a 2-year residency to become a board-certified critical care pharmacist. He went on to pursue a 5 year residency and 1 year fellowship in his medical specialty.
We both had taken out loans for our undergraduate degrees and our graduate school degrees. Now, as high-income earners today, I understand the privilege we have. BUT, please note that in residency and fellowship training in medicine, incomes are much lower. The typical salary for a resident or fellow is about 20-30% of the income of a full-time pharmacist or full-time attending physician. Thus, over the 75 months we paid off our student loans, 72 months of that was spent in lower income brackets as residents/fellows making between $40,000 to $70,000 per year.
First step was facing the facts and deciding our best approach. Now you can use studentaid.gov to help you with the best options. At that time, we made a calculated decision – pay off debt as fast as possible and keep finances separated and marriage off the table while doing so. We wanted to go debt-free before a marriage commitment, before buying a home together or before having kids. We didn’t want to rely on anyone during the process. The motivation to go debt-free and achieve financial freedom was what drove us to this outcome. Along the way, we found new passions and entrepreneurship as well. You’ll hear more about later.
Now many of you may think, why didn’t you pursue PSLF or public service loan forgiveness? My husband would have had 6 years into this program and I would have had 2 years into the program from our post-graduate training programs. We opted not to go this route because we did not want to rely on anyone else, even the government, to put our financial well-being in their hands. Remember, this was back in 2015 when we made this decision and there was little known about the outcome of a PSLF program.
When facing the facts, it’s important to know what you have. List out every loan, interest rate, servicer of the loan in a table. We used a simple Excel file to keep track. If you don’t know where all of your information is, you can pull a free Credit Report to help you get started or reach out to all universities you attended and make sure you include any private loans you may have. We were fortunate not to have any private student loans.
Here are our ACTUAL NUMBERS! When my husband thought he took out $180,000 in student loans, he actually had a total bill for $236,538 at graduation. I had a bill for $50,005 at graduation. In total, our combined bill was $286,543. Did we pay this or more over the next 75 months. Find out in a few minutes.
Step 2: LIST OUT GOALS
using 4 categories to track from Kakeibo Method. You can watch a separate video on the Kakeibo Method and tracking below. It was really important we focused on survival.
- Survival
- Optional
- Cultural
- Extra
In order to focus most of our expenses on the survival category, our next step was DON’T FALL INTO LIFESTYLE INFLATION TRAP – Decreased expenses – starting with big 3 in SURVIVAL
- Housing
- Transportation
- Food
How did we do this living in a high-cost of living city of Los Angeles, CA? First, we tackled housing. To decrease costs, we didn’t live on our own. We rented a bedroom from my sister and brother-in-law who had house hacked and bought a very nice 4-bed, 2.5 bath home in Los Angeles – within 12 miles of the Los Angeles hospitals we worked at. We paid rent but it was $1500 or less per month versus a $2500-3500 monthly bill we could have had. Next, we both kept our cars. Mine is 2000 Camry and I still own it today. His was a 2007 Civic.
We had no car payments and kept insurance costs low with no collision coverage. For food, we learned how to cook at home. We found simple recipes we loved and started to rotate about 15 simple meals. We packed lunches from leftovers or residency provided him lunch. We ate breakfast at home. When going to restaurants, we focused on ordering only the main meal and no alcohol, beverages or desserts to keep costs lower.
After applying the Kakeibo Method and decreasing our big 3 expenses, it was time to tackle increasing our income. This is important because there is only so far you can reduce expenses without feeling deprived, especially in a HCOL city. We didn’t increase our income right away. I waited 1 year into my full-time job. He waited almost 3 years into his residency. I outlined 7+ ways to increase income in this video. Mine were passive and entrepreneurial related. His were medicine related with moonlighting in other healthcare institutions during evenings and weekends.
This additional income accounted for over $150,000 – gross income not net income. Over time, this was used for all our extra payments.
Here is a graph of our student loan payments. You can see that at the beginning, it didn’t feel like big changes were happening. We were doing the monthly payments and not much more as we adjusted to full-time work in our residencies. We took a snowball approach and paid off smaller loans and specific service providers first to build momentum. You can watch a separate video approaches to student loan repayment linked below.
Finally, we made sure extra payments went to the principal part of our student loans. Call your loan provider to ensure this is done correctly and track on your statements/online portal. It’s important to take the 5 minutes each month to log this on your own Excel tracking sheet and reach out immediately when you see mistakes – they do happen.
In total, we paid = $385,258
If we had gone a different route and paid for 10 years on Standard Repayment Plans, we would have paid $580,451 in total. We saved $195,193 by paying off faster by 4 years.
PSLF $295,000-$395,000 forgiveness amount. Pay less over 10 years, but work in public sector 4 more years (loss in income vs. private sector) and hope government forgives this amount and does not tax it as income.