Medical school can be extremely expensive, and many students find themselves taking out loans to finance their education. When it comes time to repay those loans, it’s important to have a plan in place.
1- Consolidate Your Loans
If you have multiple loans, it might be to your advantage to consolidate them. By combining all of your loans into one big loan, you only deal with one payment instead of many small payments. Plus, you’ll usually get a lower interest rate when the combined balance comes due. Consolidating works best if you hold all of your loans from the same lender.
2- Use a Loan Refinancing Service
Medical school loans are typically lengthy, so it may be beneficial to refinance them. Loan refinancing services allow you to pay off your current loan with a new one at an interest rate of your choosing. When you sign up for this service, you also get the option to lock in that interest rate for years or even decades. Refinancing is great for people with good credit because they can secure a better interest rate than their original loan.
3- Opt for Graduated Repayment
It can take several decades to pay back your medical school loans. If you feel that the high monthly payments are too much for your current lifestyle, consider opting for graduated repayment. This means that instead of having to make consistent payments over 20-25 years or more, you’ll pay less each month but stay in debt longer. Graduated repayment helps you avoid defaulting on your loan, and it can even help you in the long run by ensuring that you don’t overpay.
4- Pay More Than the Minimum
Many borrowers default on their loans because they only pay the minimum amount due each month. If you can afford to increase your payment, make sure to do so. Paying more interest now may seem like a bad thing, but it will save you money in the long run. Plus, not having a ton of debt hanging over your head is liberating. Paying more than the minimum monthly payment can also help you build a positive credit history, which will come in handy when you attempt to borrow money for other investments later on.
5- Ramp Up Your Payments Gradually
While it seems like it would be best to pay off your loans sooner rather than later, that’s not always the case. If you plan to use extra money in your budget to pay down debt early, then you might end up paying more in interest in the long run. For example, if you have $3,000 to put toward your medical school loans, try doing so over a few months instead of paying it all at once.
6- Take Advantage of Student Repayment Loans
Not all of your loans need to be paid off when you finish medical school. You can still take advantage of various repayment options for the ten months after graduation. For example, income-based repayment plans give you more time to repay your debt without making too large a monthly payment.
Medical school is expensive, but you can pay off your student loans promptly with a bit of financial planning. By combining loans into one big loan, opting for graduated repayment and finding a refinancing service, you can avoid a long-term debt hangover after graduation.