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Top Two Ways to Live Within Your Means: For Medical Residents

March 7, 2017

Medical students, residents, physicians, and anyone looking to save money as they move up or along their prospective career ladder — it is time to heed these four words of advice: “Live like a resident.”

If you are familiar with The White Coat Investor, you’ve probably heard this sound advice repeatedly, but what does it mean? While primarily targeted at medical residents who are about to graduate from residency (and likewise move up substantially in pay scale), it is actually great advice for anyone who wishes to learn how to make a budget and live within it. If you are likely to receive a significant boost in income — whether now or in the near future — you should try to maintain a budget that falls in line with your previous — or lower — income. By learning to live modestly and well below your current earnings on a routine basis, you are more likely to have more money to spend in other ways, such as paying down student loans, paying off other debts, going on vacation, pursuing a hobby, retiring early, investing, and simply doing something just for the fun of it.

Creating a budget and reserving a portion of your earnings for future goals can help individuals, particularly medical residents, make the leap from low to high earnings in a manner that allows them to enjoy some of their hard-earned success both now and in the future.

#1 Live Modestly From the Start

Whether you are in residency or working in a short-term, lower-salary job, living modestly and within your means is an important habit to acquire. For medical residents, this means that you should not live like an attending physician when you are a resident. Do not be tempted to buy things you cannot currently afford  by spending as if you are already earning the wages associated with your future job title. Even though you know that you will likely be earning more in the near future, this style of spending is an easy way to accumulate debt, additional loans (car, home, personal), and possibly lower credit scores. Following this advice early, however, can help you set up great financial planning habits, such as paying off debts, saving for a retirement plan or investments, being able to go on vacation, and any other long-term financial goals that you may desire.

 

#2 Live a Modest Lifestyle After Climbing Your Career Ladder

Once you begin earning higher wage, whether you are now an attending physician or working in some other higher-earning profession, consider maintaining a modest lifestyle. Opting for a smaller house or a less expensive car, or simply continuing to maintain the budget that you followed in residency previous position, can help you achieve this goal. Why you should do this, however, is the best part. With a climbing income and fairly stable expenses, you will have more money coming in that going out, and therefore, more money to pay down student loans, to add to your blossoming retirement account, to invest, or to enjoy with your family. If you want to maintain your modest budget while experiencing more of what you are passionate about, consider setting aside more of your budget for this category. For example, if you want to travel the world, keep everything except travel expenses at your residency-level budget. If you have a growing family and need a bigger house in a nicer neighborhood, consider relocating to an area that is less expensive, or cut back on expenses in other categories so that your mortgage does not consume too much of your extra capital. Regardless of your situation, there is a plan that can work for you.

While you are paying down your student loans in this phase, consider this potentially money-saving strategy — refinancing for a lower rate! Refinancing student loans (and consolidating multiple loans) into one loan, ideally with a lower rate, could help you save countless, hard-earned dollars. If you want to see how much you could save, check out our loan calculator or talk to a representative at Education Loan Finance.

Live for Today. Plan for Tomorrow

Physicians are often already accustomed to experiencing delayed gratification, having trained for years longer than most to ultimately obtain a higher income. Without their early working years to obtain and save wages, physicians who are in residency or just out of residency should take precautions to save and budget their income wisely. The bottom line is, “five times the pay doesn’t equal five times the lifestyle,” and while physicians eventually do typically make more money than many other professions, they also have more professional expenses (CMEs, professional licensing, and more), often higher overhead expenses, and higher student loans. Financially planning for these factors and formulating a well-informed way to maintain a modest budget, at least for the first few years after residency, can go a long way in securing a peaceful financial future.

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Woman smiling at college graduation
2020-09-08
7 Actions to Take Before Your Grace Period Ends

Congratulations! You graduated from college and have hopefully settled into the start of your career. If it has been almost 6 months since your graduation, it’s most likely your student loan grace period is nearing the end if you have federal student loans. Are you prepared for when your grace period ends? Luckily we have some actions you can take to prepare.      If you have federal student loans, there is a six month grace period before you have to begin making payments after you graduate, leave school or drop below a half-time student. Not all federal student loans have a grace period. The loans that do include: direct subsidized and direct unsubsidized. PLUS loans for graduate school have a six month deferment period after graduation where payments are not required. Some private student loans also have a grace period but it may not be six months. Be sure to check with your lender to determine if any grace period exists.   

Actions to Take

Here are a few actions you should take before your grace period ends to ensure you are prepared.  

Determine Your Debts

  First, it’s important to understand the types of student loans you have. For example, do you have private or federal loans? If you have federal student loans, you’ll need to determine whether you have subsidized or unsubsidized loans. Subsidized loans mean the U.S. Department of Education will pay the interest on the loan during the grace period for most loans. (Note: If you have a direct subsidized loan that was disbursed between July 1, 2012, and July 1, 2014, you are responsible for the interest during the grace period.) If you have a Direct Unsubsidized loan you will always be responsible for the interest, even the interest accruing during the grace period. This means that if you don’t need the grace period you may want to think about at least paying the interest on the loan.    Be sure to take stock of your other debts, such as a car loan or credit card payments, and their minimum payments.  

Make a Budget

Determine a budget that includes your new student loan payment and all other debt payments. Once you determine your budget, start following it before your grace period ends. The money budgeted for your student loan can be put aside to use as an emergency fund. Or use the money you saved during the grace period to make a principal-only payment to get ahead on your repayment.    

Set Up Auto-Pay 

Another great action to take during your grace period is setting up auto-pay through your loan servicer. Setting up auto-pay will ensure your student loan payment is always made on time. Another great benefit of using the auto-pay feature is that federal student loans are given a 0.25% interest rate reduction. Some private student loan lenders also provide a discount for auto-pay so check with your lender if any discount is available.   

Establish a Debt Repayment Plan

Your grace period is a great time to establish a student loan debt repayment plan. A debt repayment plan will help you decide exactly how you will pay off your debts. There are two main types of student loan debt repayment plans, the snowball method, and the avalanche method. You have to decide which method would work better for your financial situation and motivation. Either method will be helpful if you have multiple student loans or other debts to pay off. Once you decide on your method, you will know how to allocate any extra money you have in your budget for debt repayment. When it comes time for your grace period to end you will be more than ready to start paying down your loans efficiently!   

Research Repayment Options

  1. If you have multiple student loans you can pay each loan, keeping track of each loan individually and their due dates. 
  2. Another option is to consolidate your federal loans into one loan. The average interest rate of the consolidated loans becomes the fixed interest rate on the new consolidated loan. This is consolidating your federal loans into a Direct Consolidation Loan through the U.S. Department of Education.  
  3. Refinance student loans. Once you start getting your finances in order you may realize your student loan payment is not going to fit in your budget or has a much higher interest rate then what is available now. That’s where refinancing your student loans can help. Refinancing your student loans means you will borrow a new private student loan to pay off any previous student loans (including federal and other private student loans). Refinancing can save you money because interest rates can be much lower than for federal loans. A lower interest rate means you are saving money in interest costs monthly and over the life of the loan. To find out how much you could save use our Student Loan Refinance Calculator.*
 

Learn About Borrower Protections and Programs

When you have federal student loans you are provided benefits that are not always provided by private student loan lenders. The grace period of your loans is a good time to find out about any federal borrower protections you may want to use in the future, such as deferment and forbearance for your loans. Also, if you work for a non-profit or government agency, your loans may qualify for forgiveness under the Public Service Loan Forgiveness (PSLF) program. During the grace period, it is helpful to learn about the requirements for the program so when your payments begin you can be sure they qualify under the specific rules of the program.    

Learn About the Repayment Plans

If you are shocked by what your monthly payment will be on the standard repayment plan, check into the other student loan repayment plans provided for by the U.S. Department of Education. Certain loans are eligible for an Income-Driven Repayment Plan, where your payment will be based on your income. Or you can elect to have your loans on the Graduated Repayment Plan that will extend your loan term to provide for a smaller monthly payment. However, keep in mind that you will end up paying more interest over the loan term.   

The Bottom Line

Taking these actions will help you be prepared for the end of your grace period. You are already a step ahead by thinking about this now. This preparation will start you off on a bright financial future knocking out your student loans. Good luck!  
  *Subject to credit approval. Terms and conditions apply.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no­­­ control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
Doctor researching how to pay off medical school debt
2020-08-12
Best Tips for Paying Off Medical School Debt

Working as a healthcare professional can be lucrative, but the cost of your education can be overwhelming. According to the Association of American Medical Colleges, the average cost of medical school at a public university is $243,902, while the average price at a private school is $322,767.    By Kat Tretina   With such expensive totals, most students have to borrow a significant amount of money to pay for school; the median amount of student loan debt for medical school graduates was $200,000 as of 2018.    You could spend 20 to 30 years repaying your debt, and with high-interest rates, pay hundreds of thousands in interest charges. Paying off medical school debt can be challenging, but there are ways to manage your loans more effectively.   

7 best ways to pay off medical school student debt

Follow these tips to save money, reduce your monthly payments, or pay off your medical school loans early.   

1. Make payments during your residency

Many medical school students opt to defer their payments during residency so they can focus on this grueling stage of their education without worrying about their loan payments. However, deferring your payments can cause more interest to accrue on your loans, adding to your overall cost.    If possible, make partial payments during your residency. The American Medical Association reported that the average first-year resident makes around $60,000, so you’ll have some income coming in that you can use. If you can’t afford to make full principal and interest payments, even making interest-only payments or flat $25 monthly payments can reduce charges and help you save money over the long run.   

2. Pursue Public Service Loan Forgiveness (PSLF)

As a medical school graduate, you may qualify for loan forgiveness through PSLF if you work for a non-profit hospital, medical facility, or government agency. If you have federal student loans and work for a qualifying employer full-time for ten years while making 120 monthly payments, your remaining loan balance will be forgiven tax-free. The following loan types are eligible for PSLF: 
  • Direct Subsidized Loans
  • Unsubsidized Loans
  • PLUS Loans
  • Direct Consolidation Loans 
 

3. Apply for an income-driven repayment plan

If you have federal loans and cannot afford your monthly payment under a 10-year Standard Repayment Plan, apply for an income-driven repayment (IDR) plan. Under an IDR plan, your payment is based on your income and family size.   During your residency and while establishing your career — while your income is relatively low — an IDR plan will reduce your monthly payments.    Plus, if you still have a balance after 20 to 25 years of making payments, the remaining loan balance is forgiven. However, the discharged amount is taxable as income.   

4. Use your physician signing bonus to make a lump sum payment

To recruit healthcare professionals, some hospitals and healthcare facilities offer signing bonuses. According to the American Medical Association, the average physician signing bonus is $32,692. If you’re eligible for a signing bonus, use it to make a lump sum payment against your student loan debt. It can make a significant impact on your balance and repayment term.    For example, let’s say you left medical school with $200,000 in student loan debt at 6% interest with a 10-year repayment term. If you received a signing bonus of $32,692 and applied the entire amount toward your student loans, you’d pay off your loans 25 months ahead of schedule. Plus, you’d save $23,274 in interest charges.   

5. Research loan repayment assistance programs

If you’re willing to work in an underserved or rural area as a healthcare practitioner, you may qualify for loan repayment assistance and get some or all of your student loans repaid. There are national and state programs. For example, the National Health Service Corps Loan Repayment Program provides primary care clinicians who serve for at least two years at approved sites with up to $50,000 in loan repayment assistance.    For a list of potential loan repayment programs, check out the Association of American Medical Colleges’ database  

6. Refinance your student loans

If you’re wondering how to pay off medical school debt faster, student loan refinancing* is one of the most effective techniques. When you refinance, you work with a private lender like Education Loan Finance to take out a new loan for the amount of your existing debt. If you have private loans or a mix of private and federal loans, you can consolidate them together and qualify for a new interest rate and loan term.    If you have good credit, you may qualify for a lower interest rate, allowing you to save a substantial amount of money. How much could you save? Consider this example.    If you had $200,000 in loans at 6% interest and a 10-year repayment term, you’d pay $66,449 in interest charges by the end of your repayment term.    However, let’s say you refinanced your debt and qualified for a 10-year loan at 4.25% interest. Your monthly payment would drop, but you’d still repay just $45,850 in interest charges. By refinancing your loans, you’d save $20,599 in interest.   

Original Loan

Balance: $200,000 Loan Term: 10 Years Interest Rate: 6% Minimum Monthly Payment: $2,220 Total Interest Paid: $66,449 Total Repaid: $266,449  

Refinanced Loan

Balance: $200,000 Loan Term: 10 Years Interest Rate: 4.25% Minimum Monthly Payment: $2,049 Total Interest Paid: $45,850 Total Repaid: $245,850   Use the student loan refinance calculator to find out refinancing could help you cut down on interest charges.*   

7. Make extra payments

Instead of making only the minimum payments, pay extra each month to reduce the interest that accrues. Over time, paying extra will help you save money and pay off your debt ahead of schedule. Increasing your payment by just $100 per month can make a difference, even if you have six-figures of student loan debt.    With $200,000 of student loans at 6% interest and a 10-year term, your minimum monthly payment would be $2,220. If you increase your monthly payments by $100 — paying $2,320 toward your debt each month — you’d pay off your loans six months early. And, you’d save $4,147 in interest charges.  

The bottom line

Medical school can be expensive, and if you’re like most students, you had to borrow money to pay for your education.    Paying off medical school debt may seem intimidating, but you likely earn a good income with your degree. You have multiple options for managing your debt, and you are likely a strong candidate for student loan refinancing.    If you decide that refinancing is right for you, you can check your rate online with ELFI.*  
  *Subject to credit approval. Terms and conditions apply.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
Woman negotiating her salary
2020-08-10
Earn What You’re Worth: How to Negotiate Your Salary During the Hiring Process

If you just got that job offer you’ve always wanted – congratulations! That’s great news, but there is still more to do. Now, you enter the salary negotiation process. You want to be paid what you deserve, and you’re going to have to do a little work to ensure that you are. While there is no secret formula for the perfect salary negotiation, there are many ways to make your salary negotiation more successful. Here are 8 tips on how to walk out of a salary negotiation with the salary you want.   

Take Your Time

The first thing you should do after you receive a job offer is to request time to consider the offer. On the most basic level, this allows you time to decide whether to take the job, but it also provides you with time to develop a negotiation strategy based on the offer. Now is the time to think about things like the minimum salary you are willing to accept or possible benefits you would like. Keep these things in mind constantly throughout the negotiation process.   

Know Your Value 

The second step in getting the salary you deserve is knowing what you are worth to an employer. Take into consideration all of your experience, your location, your skills, certifications and leadership experience. All are important in calculating your value to your future employer. List out all these factors that make you valuable to an employer, and make sure that you will be able to clearly explain each of these factors to your potential employer.   

Do Your Research 

Before starting salary negotiations, it’s important to be prepared. You should look at the national average salary for your position, as well as what similar companies in your area pay those in your prospective position. Not only will you be prepared to make a good offer, but you will also look knowledgeable about the industry.   

Explain Your Value 

Now that you’ve done the research and listed what you bring to the table, it is important to use this information in salary negotiations. Clearly explain and justify the salary you are asking for.    Another tip is to ask for slightly more than you expect. That way, if your employer negotiates down, you are still more likely to get a salary you are comfortable with. If they don’t negotiate down, then you’ll get more than you expected. It’s a win either way.     

Be Confident 

When you’re trying to sell a prospective employer on yourself, confidence is key. Confidence can fill any holes in experience or top off an already perfect applicant. It should be clear to both you and your employer that you know how much you are worth. After all, you have done the research and the preparation, and you will bring your value to your prospective employer. If that’s not worth being confident in, then few other things are.   

Be Likable 

While it may seem like a given, it’s worth noting that being likable will get you a long way. Your prospective employer will be far more willing to give you what you ask if you make your case in a likable way. On the flip side, being harsh and confrontational could jeopardize your job offer altogether.   

Consider Alternate Forms of Compensation 

There’s more to compensation than just money, so it’s important to be open to other forms of compensation as well. This is where you bring in the other possible benefits you thought of. You may be able to negotiate for extra vacation days, better stock options, work from home days or any number of other benefits. They may come at the cost of a little pay, but in the long run, they may also make you happier.    Also, consider what you stand to learn. Especially early in your career, it may be worth taking a lower salary to work somewhere where you will be learning new, valuable skills regularly. Overall, the things you learn could prove to be more important than money. Of course, the decision of when to accept less compensation is completely up to you, and you should not be pressured into taking a low offer if you don’t truly feel that it would benefit you.   

If You Have to, Walk Away 

If your negotiations have hit a dead end and you are unable to negotiate an offer that you find suitable, then consider walking away. You should not start a job where you feel that you are not being fairly compensated. Your prospective employer will thank you for it. A disgruntled employee right off the bat is something no company wants. If you do walk away, remember to be gracious about it. As much time as you have spent negotiating, the prospective employer has spent just as much of their own time trying to hire you.    Remember, don’t consider this failed negotiation as a waste of time. These things happen, and it will provide you with more experience for future salary negotiations, a recurring part of any career.   

The Bottom Line 

Salary negotiations can be stressful, but if you do your research, you should have no trouble acing them. Hopefully, you will come out with the salary you are looking for.    With your new job, you may want to consider paying down your student debt, and a great way to do that is through student loan refinancing. Take a look at what it can do for you here.  
  **Subject to credit approval. Terms and conditions apply.      Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.