June 24, 2014
Article by Global Pre-Meds
Hospital doctor shadowing & global health experience programs.
With the cost of higher education increasing, student loan debt for medical students has risen tremendously over the past few years. Making it worse are hectic schedules that can very often cause recent graduates to make expensive mistakes when repaying student loans. It does not have to be like that. Taking the time to understand the options available and taking a strategic approach to managing your debt can help you save thousands in interest on your student loan debt.
Many student loan borrowers make the mistake of treating all of their student loans the same during repayment. Some set up a standard payment plan and use automatic debit whereas others may choose to pay extra, but unless specified, the additional contribution is allocated across all of their loans equally. The inherent flaw in this strategy is that it does not account for the wide range in interest rates that exist across a typical student loan portfolio.
A better alternative is to put in place a targeted repayment plan that reduces the interest cost of your debt portfolio by paying off the higher interest rate loans more quickly. This can be done by directing the majority of the monthly loan payment toward the higher rate debt so that it gets paid off first and only the loans with lower rates are extended, easing off your total debt.
Every year, new changes are made to existing student loan programmes. Unfortunately, not too many students are aware of these changes and how they may impact their financial situation. Staying updated on changes and understanding the details can lead to significant cost savings if implemented properly.
It’s not uncommon for recent graduates to rely on a lender’s advice and support to help them determine how to best manage student loan debt. Unfortunately, the lenders’ interests often conflict with borrowers’ best interests. While lenders may not intentionally try to scam borrowers, their first priority is to minimise their cost structures and prevent loan defaults. This can lead to a direct conflict of interest with those borrowing money, as their main priority is to lower the cost of their debt.
When you are evaluating your situation, it is advisable to do some research on your own or to seek advice from reliable alternative sources to ensure you fully understand your options.
While it would be possible for you to manage your student loan debt independently with some in-depth research and due diligence, as a new health professional graduate you may find that you have neither the time nor the resources to manage it appropriately. Student loans and financial programs are often complex and it can be difficult to get the full benefits without an in-depth understanding of the details. Knowing the finer details such as the correct timing of when to implement the appropriate strategy can affect your ability to obtain the lowest payment and maximum economic benefit. Getting the help of an experienced financial professional, such as a tax accountant will help ensure you make the right decisions not only with regards to student loan repayment but also general financial planning.