The average medical school graduate of the class of 2013 left school with nearly $170,000 in debt, according to the Association of American Medical Colleges (AAMC). For many, it’s even higher. Manage your education loans after graduation with five tips shared by Chris Long, financial representative with Consolidated Planning, Inc., during the 2014 AMA Annual Meeting.
- Know your take-home pay. Once you leave school, you’ll start earning income, rather than borrowing money. Search for a paycheck calculator for your state, enter your salary and determine your actual take-home pay each month. The amount after taxes may surprise you.
- Create a budget. “Because income is going up, there’s a tendency to buy cars or buy a house, and sometimes there’s not enough left over for the loans,” Long said. “Budget your loan payments first, then see what’s left over.” Use a tool such as the AAMC’s Residency Calculator to determine how much you’ll have left after loan payments, housing costs and other essential costs of living.
- Explore loan forgiveness programs. For example, the Public Service Loan Forgiveness Program encourages recent graduates to work full-time in public service jobs, and in return, borrowers may qualify for forgiveness of the remaining balance due on their eligible federal student loans after 10 years of payments. If you’re working at a government or non-profit organization, you may be eligible, Long said.
- Determine the best repayment approach for your loans. “There are two sides of the coin: the principal and interest side, and the time value of money side,” Long said, adding that many recent graduates only focus on how much they have borrowed and how much they will pay back but don’t consider how payment schedules over time can increase or decrease the amount they owe. Investigate the difference between income-driven payments and pay-as-you-earn options as they apply to your individual loans.
- Don’t ignore your loans. The worst thing to do is allow your loans to default. If you can’t make your scheduled loan payments and have exhausted other options, investigate deferment or forbearance. However, remember that if your loan servicer grants you a forbearance, you may be able to stop making loan payments but interest will continue to accrue.
“Most people don’t understand how these things work,” Long said. “As soon as you match, get your benefits information and know what you’ll have access to [as a resident]. Start putting the numbers on a budget form, start thinking through your lifestyle and make sure you don’t go further into debt with credit cards.”
Learn more about loan repayment and other information on the AMA Medical Student Section’s financial aid resources Web page.
