5 student loan mistakes that can cost you thousands

These Top 5 Student Loan Mistakes Are Made In Residency

5 student loan mistakes that can cost you thousands

Don’t let a high-stressful experience be an excuse for making these student loan mistakes in residency.

When a physician starts residency, the workload makes it difficult to prioritize responsibilities. As a result, social relationships and personal health tend to be the first casualties. Even in an industry that facilitates a higher quality of life for others, young doctors can often find themselves less healthy and less happy than the patients they treat.

Unfortunately, those aren’t the only things that fall by the wayside.

Under stress and distracted residents often make mistakes with their student loan repayment strategy that cost them thousands – or in the case of Public Service Loan Forgiveness eligibility, tens or even hundreds of thousands. During a time where most physicians are just starting to get their financial life in order, that’s money most can’t afford to give up.

It’s understandable, but these missteps are often easily avoided with a little foresight. If you’re a physician in residency, here are some of the most common mistakes you or your peers might be making – and how to avoid them.

Mistake #1: Not consolidating medical school loans

Not all student loans are eligible for PSLF. Private loans are never eligible, and not all federal loans qualify automatically.

Direct federal loans instantly count toward PSLF, but Federal Family Education Loan (FFEL) and Perkins loans have to be consolidated in order to count. If you have FFEL loans and work for a non-profit for 10 years, your loans will not be forgiven. You have to consolidate them through the federal government in order for your payments to start counting toward PSLF.

Borrowers often have a mix of FFEL, Direct and Perkins loans. If that applies to your situation, keep your Direct loans separate when you consolidate if you’ve already started making progress on PSLF.

You can only consolidate through the federal government for your loans to be authorized for PSLF. If you consolidate through a company LendKey or SoFi, for example, you’ll have instantly ruined your chances for loan forgiveness.

Log on to your student loan account to see what kind of loans you have. If you see “Direct” next to the name of the loan, you’re already set for PSLF. If you don’t see the word “Direct,” call your student loan servicer and ask them what kind of loan it is.

Mistake #2: Going Into Forbearance

Forbearance is a hall pass given by the federal government to borrowers who are unable to make payments on their student loans. It’s a temporary phase, lasting 12 months at a time, and you have to request it manually.

Many residents opt for forbearance because they feel they can’t afford to make payments while still making ends meet on a resident’s salary. That’s why income-based payment plans are the perfect option.

If you apply for income-based plans before you start working, it’s entirely possible to end up with a $0 monthly payment.

That $0 payment will still count toward PSLF, but your months spent in forbearance won’t.

Income-based repayment plans are recalculated every year family size, location, and adjusted gross income. A resident with an AGI of $50,000 a year in Nevada would pay $266 a month under one of the income-based repayment plans. Even a lowly resident can afford that.

Mistake #3: Not submitting PSLF certification form annually

On the Department of Education website, there’s a place to fill out the PSLF certification form. The form asks for your contact information and where you worked during the past year. Your employer also has to fill out a portion certifying that you’re an employee.

Once you submit the form, the department will notify you if it’s been certified or if they need more information. If they authorize your form, you’ll also find out how many payments you’ve made that count toward PSLF.

Not filling out the form every year is playing Russian Roulette. Sure, you could wait until the 10-year mark, send it on with your record of employment for the past decade and wait for your balance to be forgiven – but waiting that long could lead to some surprising results, discovering that your loans weren’t eligible to be forgiven or that your employer wasn’t actually a non-profit.

This past October, thousands of PSLF hopefuls found themselves in that position as the first round of applicants became eligible for loan forgiveness.

Hordes of borrowers suddenly found out they’d rendered themselves ineligible in one way or another – in some cases, discovering they’d never been eligible in the first place.

In other words, it’s much better to send in the form every year, ensuring that you’re on the right track for PSLF.

Set a calendar reminder to send in the PSLF form once a year. It doesn’t take that long to fill out and can save you from a lot of unnecessary stress.

Mistake #4: Picking the wrong repayment option to maximize PSLF

While pursuing PSLF, borrowers have the option of choosing any repayment plan available. But to maximize savings, you should choose an income-based plan, which is calculated by taking your annual income, family size, and location into account.

The income-based plans all differ, with some only counting your spouse’s income if you file taxes jointly.

Discretionary income under Income-Based Repayment, Pay As You Earn and Revised Pay As You Earn is defined as the difference between your adjusted gross income and 150% of the poverty guidelines.

Income-Contingent Repayment counts discretionary income as the difference between your adjusted gross income and 100% of the poverty guidelines.

Choosing the right repayment method is key, as picking the wrong one could lead to unnecessarily overpaying on your student loans. A resident making $47,000 a year in Louisiana with $250,000 in debt would pay the least under the REPAYE, PAYE or IBR plans – $42,746 in total.

Under the ICR plan, that figure would more than double to $98,921. Unsure which plan is best for you? Check out the student loan repayment estimator from the Department of Education and call your loan servicer if you have any questions.

Mistake #5: Refinancing during residency

Student loan refinancing companies have skyrocketed in the past year, and more borrowers are refinancing their student loans and saving thousands on interest.

Doctors are normally great candidates for refinancing, even those just beginning residency. Lenders their high-income potential and job stability, even if they often carry a heavy student loan burden.

But refinancing is only available through private, not public companies. When you refinance your federal student loans, they’re no longer eligible for PSLF. Refinancing is irreversible, so going this route would essentially end any hopes of using PSLF to pay off your loans.

Before you get distracted by the cost savings of refinancing, do the math on how much you’ll save by choosing PSLF and sticking with your original loans. Sure, your interest rate will be higher – but isn’t that worth it to save hundreds of thousands of dollars?

A resident making $50,000 a year with $400,000 in student loans at 10% interest would pay $42,746 total under the REPAYE plan. After 120 months of payments, their loan balance of $523,730 would be forgiven.

If they chose to refinance their loan for a 10-year term at 4.5% interest, they would pay $497,520 total. They would save $136,859 on interest but pay over $450,000 more than if they had chosen the PSLF route.

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Did you enjoy this blog? You’ll really this one: Everything You Need To Know About Income Based Repayment

Источник: https://financialresidency.com/these-top-5-student-loan-mistakes-are-made-in-residency/


5 student loan mistakes that can cost you thousands
1. I can keep track of my spending in my head, but there's another overdraft notice. What do I do?
1. The credit card booth is right here, and they're going to give me a card! I’ll just look at the paperwork and interest rates later.
2. The credit card limit means spend all the way up to that point, right?

Does it matter if I'm late making payments?
4. How can I keep track of my credit score?
1. What is Financial Literacy?
2. Why should I care to learn about financial literacy?
3. I don't have much money right now – how will learning about managing money help me?

“I've got tons of income – student loans, financial aid, a high credit limit, parental support. I don't have to think about money!”
5. What are the most common mistakes college students make when it comes to their finances?
6. What mindsets do you think might contribute to those mistakes?
7. Any other mistakes you've seen?

How can students become smart financial planners? Any suggested resources?
1. “All student loans are the same – and if they're offering to loan me that much, I should take it. Easy money!”
2. “I'm poor now, but I'll have plenty of money when I graduate. I'll just pay back my loans then!”

Saving is hard, especially when I'm not really making much money. How am I supposed to save and make the most of my college experience?


1. I can keep track of my spending in my head, but there's another overdraft notice. What do I do?
No one can keep track of spending this way. Even if you could, why would you want to? Overdraft fees these days are usually a result of two prime culprits: debit card over-usage and recurring online purchasing.

Using a debit card and purchasing online services and publications is not a bad thing. It's just the reality of our new world. Everything is electronic. However, keeping a check registry with you at all times and for all purchases would save you a lot of worry and grief. You actually need to feel the pain of giving your money away.

You need to see your bank balance dwindle before your eyes so you can appreciate your purchase. You ask yourself “Do I really need this?,” “Maybe I can get it next month when I have more money,” “You know I'm only going to use this a couple of times anyway, then it will get buried in my closet.

” Not having the stress of overdrafts is a great thing and frees your mind to concentrate on other things in your life. You don't have to be rich for money not to be an issue or a concern; you just have to be wise.


Credit Cards

1. The credit card booth is right here, and they're going to give me a card! I’ll just look at the paperwork and interest rates later.

RUN! Don't look back! RUN! If you are not pulling in an income (or are pulling in limited income), you have no business even talking to a credit card company. If your parents want to set up a credit account, then that’' fine. They can help you be responsible with it.

However, getting a credit card on your own while you are a college student with limited or no income is simply a bad idea and will end up costing you more in the long run – that TV on sale at Wal-Mart for $200 could end up costing $400 or even more! Six months later, you could easily be struggling to make payments and your credit has crashed and burned. You can buy an expensive HDTV and Blu-Ray Player and be the entertainment hub of your hall, but you will be paying for it for months if not years later.

2. The credit card limit means spend all the way up to that point, right?
Your credit score considers many factors, but one that is not well known is the amount of your credit limit that you use. Yes, that means if you have a $1,000 credit limit and you have used $800 of it, then you have a knock on your credit score.

Large credit limits are great for just-in-case situations, acts of God, the unforeseeable unfortunate mishap, etc. They are not for shopping sprees. Use only what you need and not a penny more, and pay it off each month. If you can't pay it off by the next month, you don't need to be charging it. Also, try not to charge your groceries, restaurant bill, or fast food.

You don't want to be paying interest on food you've long ago digested.

3. Does it matter if I'm late making payments?
Another part of your credit score includes making payments on time. While missing a payment is far worse, being late is a big knock against your credit, as well.

No matter how well you do after that, it stays on your credit report for months if not years. This is another reason to avoid credit cards and unnecessary loans.

Until you fully grasp the impact they have on your life, you should stay clear of them.

4. How can I keep track of my credit score?
Students need to sign up to view their free credit scores. There are several, but FreeCreditReport.com is one of the more prominent ones.

Students should keep track of their credit score, stay up-to-date with their credit cards and loans, make on-time payments, keep a check registry even for debit card and online purchases, and communicate with their credit card companies and/or lenders if they run into any difficulties making a payment.


Financial Literacy

1. What is Financial Literacy?
Financial literacy is the ability to understand and properly apply financial management skills. The primary principles of financial literacy include learning how to budget, track spending, effectively pay off debt, and properly plan for retirement.

2. Why should I care to learn about financial literacy?
Financial literacy helps individuals become self-sufficient so that they can achieve financial stability. Being financially illiterate can cause you to make poor choices when it comes to taking on loans, spending outside of your means, racking up credit card debt, and other negative outcomes.

3. I don't have much money right now – how will learning about managing money help me?
While it's true that many students may not have much income during college, the skills you learn now will help ease the transition once you do graduate and start earning a full-time salary.

4. “I've got tons of income – student loans, financial aid, a high credit limit, parental support. I don't have to think about money!”
While some students may not have a ton of income throughout college, others may be blessed with more than enough.

However, past economic crises have taught us that nothing is for certain – the wealthiest person can be living large one month, and bankrupt the next. Count yourself lucky that you have the opportunity to build a solid financial foundation. Save. Limit your loan usage.

If you don't need it, don't buy it, but if you do need it, buy with the money you have – not money you borrowed.

5. What are the most common mistakes college students make when it comes to their finances?
The most common mistakes are procrastination, not updating information, and probably the most common mistake of all is not creating and sticking to a budget.

6. What mindsets do you think might contribute to those mistakes?
Part of this comes with youth and inexperience, and the simple fact that dealing with finances is not as fun as hanging out with your friends.

Many adults feel the same way about dealing with finances so you can't blame students for their natural aversion to these issues, but these are still important matters students must undertake with care and attention.

7. Any other mistakes you've seen?
Living “the high life,” students will borrow up to their Cost of Attendance, which they certainly can do, to help with their living expenses.

However, some students choose to live in the more lavish apartments with higher rent, eat ten, and spend more money than they should on weekends. Suddenly, that extra money they had for the fall semester is gone. They lose their scholarship or grant and can't get their loan increased.

Therefore, students don't get back as much in the spring as they had in the fall, and they don't know how they are going to pay their rent for the semester. If you have a credit balance, use it sparingly and save as much of it as you can.

You can use it to create a small savings account for yourself to use for living expenses throughout your college years, or you can send some of it to your lender to reduce your loan debt.

8. How can students become smart financial planners? Any suggested resources?Baylor's Student Financial Literacy is a great place to start.

We not only provide information on budgeting and debt management, but our website offers online resources that students, alumni, faculty, staff, and parents can access from anywhere.

On our site, students can create an account in “Financial Literacy 101” and access tons of tools calculators for estimating financial costs and a Loan Snapshot where you can upload your federal loans.

For additional one-on-one expertise, connecting with a financial literacy coach or financial aid counselor is an excellent way to get the details of your awards and to help you manage your loans.

More Information: https://www.baylor.edu/sfl/index.php?id=967219



1. “All student loans are the same – and if they're offering to loan me that much, I should take it. Easy money!”
All loans are not the same. Not by a long shot. Federal education loans are still the best loans out there for students.

They do not require a credit-worthy co-signer, they are backed by the federal government, and they have some of the most favorable rates you can find. In the world of alternative education loans, each lender will offer different interest rates, repayment options, interest rate reduction incentives, origination fees, processing feed, etc.

It's best to start with lenders with which you are comfortable. From there you compare their loan options to each other and find the one that works best for you both presently and for the future. Looking at a loan as easy money is a trap. Students need to remember that it's not free money. It's a loan.

Someone is letting you use “their money,” and you can rest assured that they will be calling on you to get it back with some extra (interest) just for the privilege of having used “their money.”

2. “I'm poor now, but I'll have plenty of money when I graduate. I'll just pay back my loans then!”
This is a fairly true statement, but you should still be careful with all your loans.

Students are advised to create a worksheet to determine just how much they will need to take out in loans to not only help them pay their university charges but also whatever they may need for their living expenses.

Students should also always keep in mind that life can change direction on dime. At 18 or 20 you may have plans to be a corporate attorney making hundreds of thousands of dollars a year, then find you have a passion for social work or pro bono litigation.

All three of these are great career paths, but students should bear in mind that their earning potential can change. Consequently, accruing the smallest amount possible in loans is a wise choice.



1. Saving is hard, especially when I'm not really making much money. How am I supposed to save and make the most of my college experience?
It is hard to save while in college because most college students live month to month on finite budgets.

But here is a suggestion that can help you save and make the most of your college experience: work as much as you can in the summer and save as much of that money as you can. If finances are an issue, going home for the summer allows you an opportunity to have your room, food, and living expenses covered.

You can take the summer to work, save, and limit your expenditures. Divide what you have saved by nine months to use during the academic year. Now, not only have you saved some money, but you have added some more work experience to your resume and prospective future employers will be impressed.

In some cases, attending summer classes is also financially beneficial. Take advantage of the discounted summer tuition rates and possibly accelerate your degree plan and graduate a little early.


Источник: https://www.baylor.edu/sfl/index.php?id=967220

Don’t Make These 7 Student Loan Mistakes

5 student loan mistakes that can cost you thousands

Often students and their parents get caught up in the whirlwind of excitement and prospects for the future when it’s time to figure out what their college situation will look .

It certainly is exciting, and there’s no downplaying that. It’s the cumulation of years of hard work and dedication, getting into a good school, especially if it’s one of your top choices. And if you’re one of the 45 million borrowers in the U.S., you’re ly to have a few concerns about financial aid.

You might wonder if it’s a good idea at all, or if it’s worth the investment. You might be panicking at the thought of owing thousands of dollars and interest. You’re not wrong to be worried. Federal student debt has reached an all-time high, at nearly $1.56 trillion.

There are a few crucial choices and practices to avoid when taking on and repaying student loans. Albeit common and often avoidable, you’d be surprised to learn how often people end up making these mistakes:

1.     Not Researching Scholarships and Grants

While a loan is intended to help you finance your education, living, and other expenses for the duration of your degree, it’s important to look into grants, scholarships, and funding that might help finance part of your education.

Look at external and internal scholarships that will give you a ride into the school of your choice—another factor that’s important to consider. Choosing a college the short-term benefits, such as the party scene or travel opportunity, can cost you in the long-run.

2.     Borrowing Too Much

This is another major mistake that you’re making without realizing it. Just because your lender allows you a certain amount, doesn’t mean you need to take all of it. Remember that you have to pay it back in its entirety and then some. For every $1 you take, you give back $2.

When you start thinking of it that, you’ll be more careful about how much you take. Work on a budget before college starts, factoring tuition, textbooks, food, and living costs, and stick to that.

This is part of thinking long-term; right now, it might feel great to take on extra because it gives you a chance to indulge, or have more than you need, but the greater the amount, the more the interest too.

3.     Using Your Loan for Recreation

Don’t be the person that uses their loan money to spend a weekend or spring break partying in Miami. People end up using their loan amount to vacation, party, indulge, and enjoy their time in college, which is more often than not a violation of their loan agreement and an added burden for their future selves.

That trip with your friends might seem a great idea right now, but when you’re paying off twice that amount after college, it’s not something you’ll look back on fondly.

Yes, your loan is intended to help cover basic living costs, which do include food and clothing, but indulging in fancy dinners and shopping sprees is not only a bad idea, it’s unethical. Treating yourself isn’t entirely off the table; you can and should work part-time if possible to save up for travel because that is an important part of the college experience.

4.     Not Saving and Managing

Building good financial habits is important before, during, and after college too. You need to be able to save wherever possible, instead of treating this as an afterthought.

Auto-debit might result in lowered interest rates, if your vendor allows, and help you avoid delayed payments and penalties on them.

You should also file your loan payments and interest as part of your taxes to help reduce the amount of taxable income.

Another way to save in the long-term is to pay off interest during college. Working and saving can help you accrue a small amount of the interest you’ll be paying throughout your repayment plan. Speak to your lender about this option, because they can have varying policies.

5.     Deferring Payments Unnecessarily

You might think it’s okay to skip your installment for the month by making up for it next month, or paying a larger sum a couple of months in. But this can end up reflecting poorly on your record and still lead to interest accruing.

If there is a legitimate reason for not paying, contact your lender and let them know. However, if you can afford it, don’t defer or delay payments for any reason. It’s not worth the long-term effects.

If you’re going on to grad-school or post-grad, for instance, some lenders offer you the chance to freeze your loan for that duration; however, interest rates are ly to remain.

6.     Choosing the Wrong Repayment Plan

Another mistake that a lot of people end up making is choosing the wrong repayment plan. The smaller monthly payments might seem a good idea because you can focus on paying for other expenses and luxuries.

However, you should consider the fact that smaller payments make for a longer repayment period and more interest.

If you choose to pay off your loan sooner, paying larger installments at the start, you can focus on a debt-free future within a few years. The more you pay off from the principal amount, the smaller your interest gets and adds up to, and the faster your payments are cleared.

7.     Not Refinancing Your Loan When You Can

Taking another loan to pay off your first one doesn’t sound the best idea at first. But refinancing is a practical and effective solution to clearing off major loans. Consolidating and clearing out multiple loans, smaller payments, older loans, and choosing lower interest rates will help you work toward a debt-free tomorrow.

A lot of lenders provide student loan refinancing options that give borrowers a chance to get their finances in order and focus on one loan, as opposed to multiple others. However, it’s important to speak to your lender in detail, tallying out the pros and cons of refinancing your current schedules and monthly payments.

The right planning and foresight can help you stay clear of debt and manage your finances better, freeing you up for major life changes and investments in the future. From buying a home to moving across the country, starting a family, or switching jobs, all become significantly easier when you’re not worrying about thousands of dollars worth of student debt.

You can reach out to the team at Education Loan Finance (ELFI) to know more about loan repayments and refinancing plans.

DepositPhotos – student loans

Источник: https://tweakyourbiz.com/finance/loans/student-mistakes

5 Student Loan Mistakes That Can Cost You

5 student loan mistakes that can cost you thousands

Borrowing money to pay for your education is a necessary evil for many students, and how quickly you pay it off can determine the true cost of earning a degree.

Even though interest rates for student loans tend to be lower than those associated with other kinds of debt, it still adds up quickly if you’re not careful.

If you’re trying to keep the amount of interest you pay to a minimum, here are five errors to avoid.

1. Borrowing More Than You Need

It may seem a no-brainer, but all too often students fall into the trap of thinking they need to borrow the full amount they’re approved for. They use the extra money to cover their living expenses, or just blow it on mindless spending without thinking about how it’s going to affect their loan payoff or interest rates.

If you have to take out loans to get through school, the best thing you can do for yourself is only borrow what you need to pay for your education costs. Finding a part-time job or taking on a work-study assignment to fill the gap may take up more of your time, but it relieves some of the burden on your wallet once it’s time to start paying the money back.

2. Not Making Interest Payments While You’re in School

For most students, college is an exercise in living on a shoestring, but if you’re able to squeak out a few extra dollars here and there, you should be using them to knock out some of the interest on your loans.

While no payment is required on federal loans when you’re in school or during the grace period after you graduate, the interest continues to capitalize. By the time you’ve completed your degree, your balance may have increased by several thousand dollars just in interest alone.

Paying even $50 a month can make a nice dent in what you owe over the long haul.

3. Using Forbearance Unnecessarily

Forbearance provides student borrowers with temporary relief when they’re not able to make payments towards their loans. In most cases, however, the interest continues to accrue even though no payments are due.

Unless you have a severe financial hardship that prevents you from paying anything at all, putting your loans in forbearance pretty much guarantees that you’ll owe more once payments resume.

If you do have to go into forbearance, though, you should still try to pay something towards the balance each month to minimize the interest charges.

4. Dragging Out Your Loan Payoff

Under the standard, graduated and income-sensitive repayment plans, borrowers can pay off their federal loans in 10 years.

With the standard plan, your monthly payments are higher, but you won’t pay as much in interest over the life of the loan.

The graduated and income-sensitive plans are a little more expensive since the payments can fluctuate, but they’re still less expensive compared to other repayment options.

Opting for income-based repayment, or the “Pay As You Earn” plan, drops your monthly payments, which can give you more breathing room in your budget. But there’s a price.

Under these plans, the repayment period lasts 25 years, so even though you’re not paying as much each month, you’re still going to end up shelling out more in interest.

Even worse, you may have to pay income tax on any amount of the loan that’s forgiven after the 25 years are up.

5. Not Shopping Around for the Best Refinancing Rates

If you’ve taken out multiple federal or private student loans, consolidating them can lower your monthly payment and reduce the total amount of interest you’ll pay. When you’re looking into refinancing, the number one mistake you want to avoid is not doing your homework.

Interest rates can vary greatly from one lender to the next, as some companies only allow you to refinance at a variable rate while others also offer fixed-rate loans. When you’re comparing refinancing options, you need to be clear on what the rates are and how long the repayment period is to determine which one is the least expensive.

If you want more help with this decision and others relating to your financial health, you might want to consider hiring a financial advisor.

 Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with top financial advisors in your area in 5 minutes.

If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.

Photo credit: flickr, ©iStock.com/sturti, ©iStock.com/zimmytws

Источник: https://smartasset.com/student-loans/5-student-loan-mistakes-that-can-cost-you

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