Student Loan Tips for New Grads (Part 2)

1. Pay Your Loans on Time

Whatever you do, do NOT ignore your student loans! If you are struggling financially to pay your loan, contact your lender. There are many options available to delay or postpone payments. Delinquency and defaulting on your student loans has serious consequences that can last many, many years. This WILL affect you when wanting to purchase a practice or home in the future. For federal loans, default kicks in after 9 months of non-payment. When you default, your total loan balance becomes due, your credit score is ruined, the total amount you owe will increase dramatically, and the government can garnish your wages and seize any tax refunds. For private loans, default can happen much more quickly, and you can even put anyone else who may have co-signed for your loans at risk as well.  Not paying your loans is just not worth it!

2. Pay More if You Can 

If you can afford to pay more than your minimum payment, I would highly recommend doing so. You’d be surprised that paying even just a small amount extra per month can take months, and even years of the length of your loan! And if you can only pay more every few months, that is better than none! Just make sure that you let your lender know that you would like that extra amount to be applied to your loan balance, and continue making payments each month. Otherwise, your prepayment may automatically be credited to a future payment and you may not be billed for the next month. 

3. Pay Off the Larger Loans First

If you are considering making a large payment on a loan, or even paying off one or more of your loans ahead of schedule, start with the one with the highest interest rate. Some people feel more accomplished when they pay off small loans first, but this is not the best option financially. If you have private loans in addition to federal loans, pay off the private loans first since they almost always have a higher interest rate and they lack the flexible repayment options that federal loans have. 

4. Consider Loan Consolidation

A consolidation loan combines multiple loans into one for a single monthly payment and often fixed interest rate. You can consolidate your federal student loans through Direct Loan program. Private consolidation loans may seem appealing; however, you will want to make sure that you read all of the fine print. The interest rates may seem low but can be variable, and you’ll lose the repayment options and borrower benefits (unemployment benefits and loan forgiveness programs) that come with federal loans.

5. Know Loan Forgiveness Options

There are various programs that will forgive all or some of your federal student loans if you work for certain types of employers. Public Student Loan Forgiveness (PSLF) is a federal program that forgives any student debt remaining after 10 years of qualifying payments for people in government, nonprofit, and other public service jobs. Check out this link for more information http://www.ibrinfo.org/what.vp.html#pslf. 

Although the thought of student loan payments for the next couple of decades can be daunting, following our tips should ease the pain as much as possible! Good luck in your careers, new ODs!

-Dr. Dexter