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Debt levels with inflation


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Like LOC debt? Usually those you don't have to make payments until you are done med school, which basically means after you graduate, you'll have to be more ascetic but unless someone is extremely in debt, it shouldn't become a problem. The payment term will get extended out but the monthly payment amount shouldn't explode.

If you haven't yet, join some FB groups about FIRE, mustachians etc and there are good stories and tips about how to pay down debt quickly.

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Hyperinflation generally translates into negative real interest rate, which benefits debt holders, i.e. your debts are inflated away even with a high nominal interest rate. The problem is that for physicians our wages do not increase at the nominal interest rate or inflation, so paying back your debt early is still a good idea.

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Well, I was more talking about the cost of living going up substantially causing students to take on more student loan and LOC debt.

And given the inflation piece... with rates going up it seems more of like a vicious cycle about to precipitate.

1 hour ago, shikimate said:

Like LOC debt? Usually those you don't have to make payments until you are done med school, which basically means after you graduate, you'll have to be more ascetic but unless someone is extremely in debt, it shouldn't become a problem. The payment term will get extended out but the monthly payment amount shouldn't explode.

If you haven't yet, join some FB groups about FIRE, mustachians etc and there are good stories and tips about how to pay down debt quickly.

 

33 minutes ago, 1029384756md said:

Hyperinflation generally translates into negative real interest rate, which benefits debt holders, i.e. your debts are inflated away even with a high nominal interest rate. The problem is that for physicians our wages do not increase at the nominal interest rate or inflation, so paying back your debt early is still a good idea.

 

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There is no doubt that the cost of attending medical school have increased at rates that far outpace inflation.

There aren't magic bullets, austerity becomes more necessary. Live like an undergrad, share resources, wait a bit before you splurge.

Biggest cost is often housing, tuition and transportation. Get a few classmates as roommates and share books and rides. 

Take more local trips and be weary of things like wedding invitations in exotic places. A lot of expenses accumulate in 3rd/4th year of medical school so build up some cushion in the first 2 years.

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  • 4 weeks later...

It'll be a hit on all sides. Increased tuition, increased COL, and decreased buying power from your earnings after finishing residency. In most of Canada, physician incomes have been under attack for over a decade. You'll have to live more conservatively in medical school, residency, and to some extent a few years after completing training.

However I doubt anyone will default on their debt while in medical school, as there is a very large amount of LOC debt you can work with. And despite the current increased cost-of-living, modern medical students save 10-15k+ from avoiding visiting electives+interviews. Imagine booking 4-6 AirBNBs x2 weeks for each elective, plus however many you needed for interviews, on top of airline tickets. Peak medical school costs were probably 2018-2020, at least for medical students applying to specialties.

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Can we expect fees and salaries for physicians to go up then too? How often does the government negotiate such fees?

with rising COL and inflation, one would think that those batting for physician remuneration might have some arguments at the negotiating table, for correspondingly increasing physician pay in order to keep up with these other factors.

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1 minute ago, MDee2B said:

Can we expect fees and salaries for physicians to go up then too? How often does the government negotiate such fees?

with rising COL and inflation, one would think that those batting for physician remuneration might have some arguments at the negotiating table, for correspondingly increasing physician pay in order to keep up with these other factors.

No, recent negotiations, such as in NB, have resulted in 0.5-1% yearly increases. In Ontario the government would not budge beyond 2% for other public employees such as nurses and teachers.

The reason is that government actually love inflation because it is almost like a "tax". Provincial and federal government (and actually government of most developed nations for that matter) are heavily indebted. Their debt generally pays very low interest (or negative interest in some European cases).

Let's say you lend the government money and receive 3% interest, but inflation is actually 10%, then that money is actually losing 7% purchasing power. The government loves this because your loss of purchasing power is their gain, unless the central bank raises the interest rate to 10% to match the inflation. 

Of course we've seen again and again central banks find every excuse to not raise interest rates, because they want to protect governments that are heavily indebted. As for ordinary citizens, as long as there is no riot in the streets, it's all fine from the government's perspective.

There are 2 sentences that can summarize this phenomenon:

- "if you owe someone 10 thousand dollars, you are in trouble, if you owe them 10 billion dollars, they are in trouble"

- "too big to fail, small enough to kill"

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7 hours ago, shikimate said:

In Ontario the government would not budge beyond 2% for other public employees such as nurses and teachers.

There will be many public sector strikes in the future.

7 hours ago, shikimate said:

The reason is that government actually love inflation because it is almost like a "tax". Provincial and federal government (and actually government of most developed nations for that matter) are heavily indebted.

There's even more to it. Their sales tax revenue goes up as prices go up, and their income tax revenue goes up when private sector wages go up as well. Some provinces like Alberta and PEI don't index their brackets so you get "bracket creep" and they make even more than they did before.

Meanwhile costs such as physician wages remain stagnant because negotiators settle for marginal increases. That is if doctors are lucky and the government doesn't use the lack of contract to impost unilateral fee cuts like they did in Ontario.

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On 7/13/2022 at 5:13 AM, shikimate said:

Like LOC debt? Usually those you don't have to make payments until you are done med school, which basically means after you graduate, you'll have to be more ascetic but unless someone is extremely in debt, it shouldn't become a problem. The payment term will get extended out but the monthly payment amount shouldn't explode.

 

I pay interest on my LoC monthly, and so do all of the other people I know currently using their LoC to fund medical school. As far as I know, only government student loans do not require payment until school is finished. If someone else has a bank that does not require monthly payments, please let me know otherwise, because I would love to try and switch - With the increased interest rates, I am seriously concerned. I do not have any other resources to help pay for school so am 100% dependent on my LoC..  and can confirm that my monthly payment amount is already pretty insane when combined with the increased cost of living. 99.9% of my stress in medical school is financial - really hoping something gives soon...

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On 8/15/2022 at 10:24 AM, 1D7 said:

It'll be a hit on all sides. Increased tuition, increased COL, and decreased buying power from your earnings after finishing residency. In most of Canada, physician incomes have been under attack for over a decade. You'll have to live more conservatively in medical school, residency, and to some extent a few years after completing training.

However I doubt anyone will default on their debt while in medical school, as there is a very large amount of LOC debt you can work with. And despite the current increased cost-of-living, modern medical students save 10-15k+ from avoiding visiting electives+interviews. Imagine booking 4-6 AirBNBs x2 weeks for each elective, plus however many you needed for interviews, on top of airline tickets. Peak medical school costs were probably 2018-2020, at least for medical students applying to specialties.

 

On 8/17/2022 at 7:16 AM, ChemPetE said:

One thing that is a huge cost savings is the virtual match. I probably spent close to 8-10k on flights and hotels back in 2014

It’s been announced that out-of-province electives are back in 2024 (limited to 8 weeks). No word yet on interviews. Looks like my class will get the best of inflated travel costs at 5-10% interest

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1 hour ago, BCelectrophile said:

It’s been announced that out-of-province electives are back in 2024 (limited to 8 weeks). No word yet on interviews. Looks like my class will get the best of inflated travel costs at 5-10% interest

Not that increased costs are a good thing, but I think that away electives are important.

You want to see what kind of workplace environment you're going to commit yourself up to 5 years to. I got a lot of information out of my electives that ultimately changed where I matched to. Had I not done any away electives, I probably would have done residency at my home institution.

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31 minutes ago, 1D7 said:

Not that increased costs are a good thing, but I think that away electives are important.

You want to see what kind of workplace environment you're going to commit yourself up to 5 years to. I got a lot of information out of my electives that ultimately changed where I matched to. Had I not done any away electives, I probably would have done residency at my home institution.

I agree they’re important and I like how the 8-week limit can establish some balance between the opportunity and the expense. I’m interested to see what they decide to do with interviews.

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  • 2 months later...

Hello, at Scotiabank you don't need to pay monthly minimum payment until 24months after you're done with with the program unless the interest cost increases more than the limit. We have a great package for healthcare students at Scotiabank. You can contact me to get to know more details, I am a Healthcare and Professional Advisor here. You can contact me at sharu.jose@scotiabank.com

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