Repaying student loan debt can be tough for those who close up their books and don a lab coat for a grueling 3+ year residency or fellowship program. The average non-specialized medical school graduate comes out with nearly $200K in student loan debt. That graduate is immediately required to begin making payments, opt for deferment, or extend their repayment term through an income-driven repayment plan.
Making payments in full is hardly an option considering residents make about $9.50 – $12/hour when you break their $50K salaries into 80-hour work weeks. Deferment is great for not having monthly payments, but not so great for accruing interest while you put off the inevitable. Extending the repayment term 20-25 years isn’t the worst thing, but you’re going to end up paying significantly more than your original loan balance, often up to $20K/year.
Public Service Loan Forgiveness
There is, of course, the Public Service Loan Forgiveness (PSLF) program, but it’s crucial that you understand the requirements and stay on top of things. Staying on top of anything during an 80-hour work week is easier said than done, but that’s for you to decide.
If you are pursuing public service student loan forgiveness for doctors, educate yourself on these common (and costly) mistakes doctors make during residency. Be aware that hundreds of thousands come to the end of their 120 payments on an IBR plan with heightened blood pressure and a horrifying question – “What do you mean I’m not qualified?” Let’s be honest, what could be worse than trudging through making 120 payments on an IBR plan to find out you still have to repay your student loan debt in full? If PSLF is your end-game, check… Then re-check every few months.
The truth is – you didn’t sign up to become a doctor because you thought it’d be easy. Residency is the most financially trying time of your career. You’ll have no problem making payments at the conclusion of your program, but it can be incredibly frustrating putting in those 80 hours a week for just above minimum wage, while your student loans are compounding every year.
Ways you can save money during your residency:
- Get a roommate. Save on housing cost by sharing a place with a friend. This will help to keep costs low while you’re within your residency.
- Get a side gig. With the birth of Instagram and blogging, there is no excuse why you can’t get a side gig. If you get enough followers companies will pay you to share information about their product.
- If your hospital provides you with a meal card, use it! If you don’t get a meal card be sure to pack your own food for additional savings that are better served towards your student loan debt.
- Live close to transit or where you’ll be working. This will cut out the cost of owning a car.
- Cut the cord! Since your busy working and side hustling, there is no need to pay for cable. Try a subscription to Netflix or Hulu. With a subscription-based service it’s guaranteed you can watch it on your cell phone from anywhere at any time you want.
- Buy secondhand clothes or furniture if you can. If you live in an area with consignment stores or garage sales be sure to check them out for additional savings.
- Make plans with friends that are free or low cost. Look at the surrounding areas and see if there are local concerts or activities.
- Use your local library. If you want to watch a movie or play a video game to get your mind off work, your library has them for free. Some libraries even offer streaming services, where you don’t even have to leave your couch!
In addition to the daily activities that can save you money, consider refinancing – which consolidates your multiple loans into a single, easy-to-remember monthly payment. If your credit is good, you’ll have access to low-interest rates, and the flexibility to choose your terms to find a repayment method that fits your current budget. If your credit is not good, a cosigner may help you to access the same low rates.
Manage Student Loan Debt
Reputable lenders like Education Loan Finance even consider your future salary potential when determining your interest rates. This allows you to start making affordable payments now and manage your student debt without compounding interest running circles through your already tired brain.
ELFI borrowers on average have reported saving $309/month*, which goes a long way on a medical resident’s salary. That’s money you could be stashing away into an investment fund or high-interest savings account. Look at that, by refinancing your student loans, interest is now working for you instead of against you. When your residency ends, you’ll already be way ahead of your colleagues and you can use that hefty first paycheck to start aggressively attacking your student loan debt. Just don’t forget to take some time (and money) to celebrate. You earned it.
*Average savings calculations are based on information provided by SouthEast Bank/ELFI customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.
