For the majority percent of medical (and other professional) students, navigating student loans is a part of the effort required for the profession of a doctor. Being careful not to take loans too quickly is the most critical aspect of managing student loans in the school year, but when school closes, there are a few techniques that fourth-year students must be aware of. Don’t be one of the people who waste tens of thousands of dollars without having these essential tips.
#1 File a Tax Return
Each student who graduates with student loans must prepare an income tax return for the year prior. Yes, we all know you likely didn’t have income and didn’t have to make a tax filing. Why should you make a filing? You need to demonstrate your income when you apply for federal loans into the federal Income-Driven Repayment (IDR) program. If you do not make an application IDR, the program will rely on the pay stubs from your internship as proof of income, and your payments will be more outstanding. This will result in a lower cash flow during your residency and, most notably for many, less chance of being granted forgiveness through the public service loan Forgiveness (PSLF) and IDR forgiveness programs.
#2 Consolidate Your Federal Loans
When you can (generally immediately after graduation), you should combine (not refinance) your federal loans. This transforms all your federal loans into a single federal loan and provides you with the average weighted interest rate, which is rounded to 1/8th of a point. This is convenient, but it’s not the reason to consolidate. If you quit school, you automatically get an opportunity to grace yourself for six months. But, you shouldn’t require a grace period of six months unless you’re 100% sure that you won’t be applying for PSLF and IDR forgiveness. If you believe there’s any chance of getting it, you should combine your debts. This will allow you to skip your grace time and begin paying your debts immediately. But don’t worry, these “payments” are likely $0; however, they will be counted towards the 120 monthly minimum payments for PSLF (or 300-240 required monthly payments to qualify for IDR for forgiveness). Make sure that the clock is running as fast as you can.
#3 Take Out Some Extra Money
When you are in your final year in medical school likely, you will likely want to take out a bit more than what your budget estimates you’ll require to cover the school’s expenses. While most residency interviews are now conducted via Zoom with minimal cost, you might still wish to go to a few places. Additionally, you will have to pay for your move, which includes the rent for the first and last month and an initial deposit. Further, your first intern paycheck may not be due in the first week of August. You will likely need to eat something between May and August as the check arrives. Having some extra loan money to spare is the best method to cover all the expenses if you can get it. Does it sound like a fraud since these aren’t school expenses? I’d consider it a gray area, and I’d like to put the gray area in my favor. The interest rate will undoubtedly be higher than you’d expect from a personal credit card or loan.
#4 Refinance Your Private Loans
The majority of students who graduate who have Federal loans are likely to (and should) sign up for an IDR similar to the Revised Pay As You Earn (REPAYE) program and shouldn’t consolidate their Federal loans. However, they must be able to refinance private loans. While putting them in some form of forbearance may seem appealing, the reality is that you’ll be paying more for them later. Refinancing them today, you can have a lower interest rate and save hundreds of dollars during your education. Many are worried about being required to pay for their loans during their residency, but companies that can refinance your loans before you start residency let you make monthly payments of $100. Even the most financially strapped intern could afford this.
#5 Get Advice
The most challenging aspect of managing student loans can be found during the residency period. It’s much easier when you end residency than when you start living. If ever there was the time to invest just a few hundred dollars on expert guidance and advice to help you manage the numbers using your many options, it’s the moment you can begin your residency. You’ll need to be aware of the best IDR to sign up for, refinancing options or file taxes, and what retirement accounts you should use. Although the answers to these questions are simple for single docs or docs married with non-earning spouses (refinance privately-owned loans as well as then enroll in REPAYE), it is a bit more complicated if you’re you’re or are soon to be getting married to someone else who earns. Our recommended resource is StudentLoanAdvice.com. A small investment of $479 today will save you time researching and offers reassurance. It could help you save thousands by avoiding errors in managing student loans.
#6 Get Educated
It is our policy to (try to) offer a free copy of the White Coat Investment Guide to Students (via the WCI Champions Programme) to each first-year medical or dental student in the United States each year; however, and we do not give them out to students in the fourth grade. If you’re still without an edition, we suggest buying one. It’s just $9.99 on Kindle, and the information you’ll gain from it could be worth millions in your career. It’s definitely worth the time to go through it in your fourth year of college, and there’s no better time to be financially knowledgeable.
This isn’t complicated, even if the subject is something you’ve never heard of. Be sure there are thousands of physicians who have walked this road before. They’ve used these “tricks” to properly start on their path to becoming free of student loans. You can too, and we’ll help you all the journey.