 What's happening guys? It's Shane. So welcome to another episode of low-effort content This is what happens when I try to do a 30-day challenge I kind of burn myself out a little bit and then I decide to do some easier videos like this So today we're gonna be reacting to one of my favorite youtubers out there. This is gonna be Graham Stefan He's one of the biggest personal finance youtubers around he is gonna be interviewing Jessica who just graduated from medical school and she's got about $500,000 in student loan debt. I'm gonna be really interested in what Graham has to say here He's definitely an expert on a lot of different areas and personal finance I don't know how much he knows about student loan debt specifically because there is a lot to know about it It's different than other types of debt and it'll be interesting to see what he says. So let's jump right into it I have $500,000 in debt Why? Man, Graham's face is classic here like you can see the wheels turning in his head He's probably thinking with that kind of money He could buy a lifetime supply of avocado toast iced coffee and still have room for Down payments on two or three different duplexes. Okay, so let's hear what she went to school for it I just became a doctor Okay, I literally just finished medical school. So I have I have 460 like actually 463 thousand dollars in debt With interest starting my rates start from anywhere from four to seven point six percent and the interest started queuing Day one when the loans were taking out So like medical school costs probably like three three fifty, but now it's up to four sixty Due to the acute interest. Okay, so this is something that I like to tell you guys whenever I get the chance It's something that almost nobody knows about until it's too late So when you take out loans for grad school, this means Masters doctorate sometimes professional degrees anything that's above a bachelor level degree These loans are going to be known as grad plus loans or if you involve your parents they're going to be the parent plus loans and these types are much much worse than the undergraduate variety of student loans and I've gone over this before you can check out my other videos, but Basically, there's a few things first the schooling itself is usually much much more expensive You will routinely see schools that do graduate level programs that charge over $50,000 a year. This isn't like a crazy. Oh my god sort of situation like you know once in a while You'll see an undergraduate private school that charges that much. This is actually extremely common It's almost the rule the grad plus loans are essentially a blank check for schools to charge as much as they want on top of this The interest is extremely high for instance last year. There was a 7.6% interest rate on grad plus loans 7.6% is ridiculously high for an interest rate on top of that there is a 4.2% Servicing fee that gets taken out right away whenever your loans get dispersed and if that's not enough grad plus loans Start accruing interest right away other types of loans undergraduate loans They will start accruing interest after you graduate however the moment you get that grad plus loan It's accruing that 7% plus interest rate right away So this girl took out $350,000 in loans in order to go to medical school and during that time that she was in medical school She accrued an additional $110,000 in interest and did I mention that student loan debt is one of the only types of debt that you can't get rid of in Bankruptcy, okay rant is over. I think you guys get the picture here I always like to tell people about this so that they know what they're getting into if they decide that they want to go To graduate school So let's listen in here and see what kind of doctor that she's gonna become so after five years I'll be a general surgeon and You know, I don't just want to be a general surgeon Of course, I want to go into either plastics or reconstructive surgery. So that's gonna be another One to three years of getting, you know, like 70 to 80,000 but after that finally it will jump up to Minimum 350. Okay, so it looks like she's gonna have to do a residency and she was also referring to I believe a Fellowship that plastic surgeons have to do and that's gonna take a total of eight more years Before she actually becomes a fully fledged doctor But at the end of that eight years, she will be making over $350,000 a year, which is really good now at the end of that time period her loans are probably gonna be closer to like $600-$700,000 so her debt to income ratio is gonna be somewhere around two to one now a general rule of thumb when it comes to Student debt to income ratio is you never want to go above three to one So this means if you're doing research and you see that the career makes on average about a hundred thousand dollars a year You don't want to go any more than $300,000 in student loan debt and that three to one figure is at the very high end like Realistically you probably want to keep it under two to one if possible and there's a lot more to it than that I'll probably make a video about this in the future But basically the more money you make the higher that ratio can be so if you make enough money You can even maybe even go a little bit above a three to one ratio And this is just because of the fact that your lifestyle in terms of how much it costs for you to live doesn't increase That much as your income goes up and so you're able to pay more towards the loans So this is on the high end two to one debt to income ratio. It's kind of bad But honestly, this is still relatively manageable. I've honestly seen a lot worse in this and as long as she's got a really good plan She should be okay now just from the information that she reveals in this video knowing nothing else about her situation Just generally speaking The best bet for her at this point is to either do the pay-as-you-earn or the Revised pay-as-you-earn plan and this basically means that she would pay 10% of her discretionary income for either 20 or 25 years After that period her loan balance would be forgiven However, she would still have to pay income tax on whatever is left now chances are there would be a really Large amount left it would probably be still around $700,000 because she's probably not even touching the interest And so she'd have to save money either in a savings account or maybe an investment account in order to pay off that Income that she'd have to pay whenever she gets that loan forgiven and that would probably be I'm guessing at least 200 to 250 thousand dollars that she'd have to pay now the reason I think that she should go with the pay-as-you-earn model is because of the fact that she's gonna be in Residency and then a fellowship for the next eight years and then after that she'd only have about 12 years to go Before she would get that student loan forgiveness now if she becomes an amazing doctor She starts making a ton of money Then she can stop doing the pay-as-you-earn and she can start aggressively paying down the loan at that point If she is making above 350 thousand dollars a year, maybe she lives in New York and she's making more like $400,000 a year She can start aggressively paying it down and probably take it out and around I don't know four to five years somewhere around there But if something happens for whatever reason, she's not able to get a really good job Or maybe she's making less than what she thought she would be making and she can always fall back on the 20-year Loan forgiveness. So in this next part she talks about how she lives in New York and the rent and the cost of living is just like Ridiculously high and this is what Graham has to say about it Figure out what the bare minimum is that you can live off of and like still have like food on the table It doesn't need to be expensive food, but like what's the bare minimum you really need to live? So Graham's giving some great advice here and honestly props to this lady for being a beast because medical school is really hard And after graduating from school It's so easy to fall into the trap of what's known as lifestyle inflation or lifestyle creep And that's basically where when you start making more money you also start spending more money After all you worked so hard to become a doctor and now you want to live that doctor lifestyle, right? Wrong. She's already used to living like a student So she should continue living that frugal lifestyle live like that for as long as she possibly can put away as much Money as she can and pay down that loan great advice by Graham here I 100% agree now something he didn't mention here Which is basically just kind of a psychology lesson I guess you could say is once you're used to a certain standard of living It's really difficult to go back to a lower standard like let's say you're living in a small apartment right now And you're watching this video. It's probably not that big of a deal But let's say you're used to living in a luxurious penthouse or a giant Mansion or something like that if you went from that situation to having to live in a really small apartment It would probably bother you a lot So in terms of lifestyle once you upgrade your lifestyle It's very difficult to downgrade it again. Now. This is related to concepts around hedonic normalization I'm not really gonna get into that very much But basically what I'm trying to say here is you should try to live below your means for as long as you can Especially if you have a lot of debt, you shouldn't be spending a lot of money on stuff that you don't need Do you know anything about public service loan forgiveness? Okay, so at this point she asks about the PSLF program the public service loan forgiveness program This one gets thrown around a lot You'll see it a lot on the internet and basically it's where you make the minimum payment for about 10 years and then the rest of Your loan gets completely forgiven. However, there's a ton of Stipulations that you have to meet you have to be working for either a government agency or a nonprofit for 10 years And you have to meet all these different characteristics and stipulations It's really difficult for you to do it only about 1% of people who apply for PSLF end up qualifying for it So it's definitely not easy to get at all now It's way too much to go over in this video But you have a much better chance of qualifying for it if you graduate with certain degrees and you go into certain careers And depending on the specialty route that she goes into she probably won't be able to get accepted turns out There's not that many government or nonprofit programs that give boob jobs nose jobs and plastic surgery related stuff However, if she went into reconstructive surgery for instance, she'd have a much better chance of getting it But still it's not as good as some of the other college degrees and again I'll probably make a video about that in the future. It's a really long shot to be honest She should probably look into it, but I don't think it's gonna work out. I would not bank on that I would not try to go that route looks like Graham agrees with me here I'm lucky. I don't have any kids. So I mean that would completely throw over the ball game because paying for children is super expensive So this is kind of the heartbreaking part about you know, this whole student loan business Especially when it comes to people that go deep in debt like doctors orthodontists dentists Basically all the types of professions where you're gonna be deep in debt until your late 30s Sometimes even your early 40s some of these people put off having kids until their late 30s And then a lot of them end up just not having them at all. Now, I'm not assuming that she does or doesn't want to have kids I don't think she actually mentioned that in the video thought it's something that I should bring up He's probably going through 16 years of working or studying over 80 hours a week And that's before she even starts making doctor money Then another four to five years of living like a student and just living super frugally and paying down her debt Before she reaches a net worth of zero This is why I personally prefer degrees and careers where you probably don't make as much as a doctor But it also doesn't have that ridiculous amount of time commitment I'd rather be able to enjoy the best years of my life and not live like half of my life with a net worth that is well below zero But that's just me, you know There's some people that are just machines and they're built like that to you know Look way into the future just think long term and yes eventually it will pay off for her But for these people I think they would appreciate a more balanced lifestyle where you have that work life balance Where work doesn't consume basically your entire life and at the very least it's worth it for me to mention it Just so that you guys know what you would be getting yourselves into if you decided to go this route check out grams video I will link it down in the description. He's an awesome youtuber I've been following him for a long time and I kind of just wanted to react to one of his reactions Then check out my videos right here. I made them just for you Go ahead smash the like button hit the subscribe button Ring the notification bell and then comment down below any thoughts comments or criticisms