October 3rd, 2018
If you needed loans to get you through undergrad and/ or medical school, you are not alone. Over 44 million Americans owe $1.3 trillion in student loan debt. The average debt load is rising by six percent with each graduating class. That’s about $620 billion more than the total U.S. credit card debt. If you have loans, it is easy to procrastinate, but there are important decisions for you to make about your medical student loans now.
1. Your loan balance will likely not shrink while you are in medical training – in fact, it will likely grow. This creates anxiety for many people we speak to and it’s important to have realistic expectations.
2. If you make smart choices about your loans while you are in training, you can save yourself money in the long run and will be in a stronger financial position once you become an attending. So don't get overwhelmed, act like an ostrich, and put your head in the sand!
If you have student loans, chances are at least some of them originated from the US Government – there are many names for these loans, such as Direct, Perkins, Stafford, and Grad Plus. Despite the different names, they have a common set of repayment or deferral options.
This is the main decision you will have to make – whether to delay or repay your student loans while in training.
In a very basic sense, if you have $0 left over at the end of each month, electing to delay (called deferment or forbearance) your loans may be your best option. Going into credit card debt to repay student loans is NOT advisable.
If you have a little bit of cash left over each month, repaying could make sense. There are many repayment options, including Income Based Repayments that are calculated based on your earnings rather than your loan amount. Your loan servicing company can help explain which payments options you are eligible for.
Don’t delay in making an election when it comes to your Student loans in medical training. You can end up saving - or costing - yourself thousands in the long run if you do.
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John Dameron has been a financial planner and partner with Spaugh Dameron Tenny since 2002. With the help of the SDT team, John created a lecture series called Physicians Financial Focus, authored a book entitled The Residents and Fellows Financial Survival Guide, and has coached hundreds of physicians from residency/fellowship into practice. His expertise has also been featured on KevinMD.
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