In some ways, working your way through residency and fellowship feels like being stuck in limbo for years. You finally have the privilege of wearing that white coat, but you must do a balancing act between the medical students that look up to you, and the more seasoned physicians who still lose patience with you. Although you’re working like there’s no tomorrow, your income hasn’t caught up with your hours yet. The good news is that you will make it through this, and you’re not alone.
Every resident and fellow who has ever scrubbed in before you has been here too, experiencing the same fears and doubts. We’re betting these concerns sound familiar.
1. You’ll Get Hit with Overdraft Fees, Late Fees or Other Annoying Penalties
When you have multiple loan payments all due at different times, in addition to other bills, you’re always worrying about which bill you forgot to pay. (Was it your phone bill? Your car payment?) Using automated payments as much as possible is clearly the way to go, but there’s always the fear that one of your loan payments will post before your paycheck does.
When you have multiple loan payments due at different times, in addition to other bills, you’re always worrying about which bill you forgot to pay. (Was it your phone bill? Your car payment?) Using automated payments as much as possible is clearly the way to go, but there’s always the fear that one of your loan payments will post before your paycheck does.
That’s why it’s critical to stay organized. Keep records of each loan and be sure you know exactly when payments are due. Many financial institutions will send text or email reminders about when your payments are due, so it may be worthwhile to sign up for these programs.
And, if you don’t already have automated payments set up, what are you waiting for? It may take 10 or 15 minutes now, but it will save countless hours and hassle in the long run. Of course, staying on a budget is crucial here. Free budgeting apps like Mint.com make it easy to see how much you’re spending on food, coffee and other purchases that can add up quickly.
One effective way to manage your student loan debt and overcome this fear is to consolidate your student loans. By combining them into a single payment, you’ll simplify your life and avoid being slapped with extra fees.
2. Interest Will Pile Up While You Defer Payments
Deferring loan payments during residency or fellowship can free you up to focus on your training and allow you to maintain a more comfortable standard of living until you reach your full earning potential. But don’t get too comfortable: accruing interest is one of the financial fears residents and fellows must face.
Unless you have federal loans that are subsidized (meaning the government pays the interest during deferment), your interest will accumulate and will be added to the principle of the loan or capitalized. One way to reduce the burden of accumulating interest during deferment is to refinance your loans. By refinancing, you are essentially replacing your existing loans with one new loan at a lower rate. Reducing your interest rate will ultimately save you money in interest costs over the life of the loan.
3. How will I ever be able to save for retirement?
With steep loan balances and modest starting salaries many residents are asking themselves how they will be able to save enough for retirement. For most residents, managing financial priorities on a $64,000 starting salary can be difficult, especially when you are making average monthly loan payments of $400. The answer depends on your unique situation, especially if you are living and working in a high cost of living city. It might be very difficult to tuck away a few dollars for retirement.
One way to free up some extra cash for retirement is to refinance your medical student loan debt. By refinancing your debt to a lower interest rate, you will save money over the life of the loan — money that can be allocated to your workplace retirement plan. If you refinance your loans and reduce your monthly payments, you can invest those “extra” funds into a retirement plan.
There is no doubt that creating a budget and living within your means is imperative to making this happen. But it ultimately comes down to a question of priorities. Would you rather spend money on interest expense or save money for your future?
These fears can be alleviated by staying organized, creating a budget and living by it, and consolidating or refinancing your student debt now while you’re doing your residency and fellowship.
If refinancing sounds like a viable option for you, check out loan options available through Splash Financial.