[Editor’s Note: Today’s guest post was submitted by financial planner, Ben Offit, CFP. We have no financial relationship. Managing student loans can be a tricky business with a lot of money at stake. Check out the additional resources from the blog (and podcast) included throughout the post for more answers to your questions. In many cases, it is also wise to seek professional help with managing student loans. Visit with our WCI Recommended Student Loan Advisors to get good advice at a fair price.]
As many doctors start to practice, they are eager to get going after having such an extended period of training. They have a lot to look forward to: good incomes, a respected profession, specialized knowledge to use, and a career that can truly impact others for good. However, they also have a lot of financial concerns to account for: high student loan debt, many years of being underpaid, trying to make up for lost time, and how to manage their finances accordingly.
Listed here are several tips and financial planning strategies that are specific for doctors to help them manage their student loans.
7 Tips and Strategies for Managing Your Student Loans
#1 Negotiate Compensation with For-Profit Hospitals
Many regular hospitals are trying to compete with nonprofit hospitals for good physicians. Due to the benefit of loan forgiveness that nonprofit hospitals intrinsically offer, for-profit hospitals are willing to offer their own loan payoff incentives. When interviewing or talking with potential or even current employers, ask them about what they can offer to help with the burden of your loans.
#2 Always Shop for Better Interest Rates on Your Student Loans!
Student loan lenders (and all lenders, really) love doctors and many times have special rates not marketed to the public. Ask your current lender if your rate can be reduced or let them know you received a lower offer with a competitor. Most are willing to fight to get or keep your business.
[Editor’s Note: Student loan refinancing rates keep dropping so if you have private student loans and not going for PSLF or getting a REPAYE subsidy, it worth it to see if you can save even more money by refinancing those again. Go through our links for the best refinancing deals on the internet including cashback bonuses.]
#3 Be Careful How You Are Reporting Incomes for IBR Plans
If you are on an income-based plan (IBR), be careful how you are reporting your income. Many times a physician’s tax return can reflect a much higher income than you consistently see throughout the year (bonuses, RVU payouts, side income through teaching, etc.). You can opt-out of using tax returns to verify income and submit a regular paystub instead, which could potentially save you thousands of dollars in interest and payments.
#4 Estate Planning for Your Student Loans
Many private student loan providers do not have a cancellation feature upon death, and thus your loans will go to your estate and become a burden to your beneficiaries. Make sure to ask if your lender offers this and, if not, be sure to account for that in your life insurance planning.
#5 Disability Planning with Student Loans
Many student loans have deferment options due to disability but interest may still accrue despite being on disability. Most disability insurance providers have riders that will cover your student loan payments if you are disabled. You may want to obtain a policy that covers your student loans in addition to your income.
#6 Breathe In, Budget Out
Due to the size of the average physician’s student loan, the interest owed is often overwhelming and can often cost more than $100K over what you borrowed! Make every effort in your budget to pay the monthly interest accrual in addition to your regular payment. This will minimize the amount of interest paid over the life of the loan and save several years of payments.
#7 Don’t Forget About Your Life!
Two things are almost certain for physicians in the first several years of their career: 1) high student loan debt and 2) not much free time. Be sure to allocate some of your budget to enjoy your life in addition to focusing on paying down your debt.
There are many things to consider with respect to your professional career, and, hopefully, these tips can help take at least some of your financial concerns away. If you take this advice and heed it accordingly, I am confident it will benefit your financial play both today and in the future.
What tips have helped you manage your student loans? Comment below!