One of the most popular topics that senior level PT students and New PT grads want to talk about is Loan Repayment. This is a fear, and a worry, and a stressor for a lot of people.
Rightly so!
You’ve just spent the past 3-4 years earning yourself a Doctorate Degree. During that time, you likely took out a LOT of loans, you were not working, you were not earning or saving money, and now you are being asked to make payments, BIG payments.
Not to mention, getting that first job. But that is a story for another blog!
So, where do you start? How do you make payments? How much do you put toward loans? How can you get rid of those loans quickly?
There is actually a lot that goes into Loan Repayment. There are a lot of things to consider.
Income. Personal factors. Total Debt. Interest Rates.
How much money you are earning plays a role. Higher salaries may allow you to pay more toward loans compared to lower salaries.
Your own personal circumstances play a role. Are you married with a family or are you single? A single person, who does not have to pay for childcare or living expenses for a family of 4, may be able to contribute more toward repayment.
The total amount of loans that were taken out will play a role. Any other debt, like car payments or a mortgage or credit cards, will play a role. Someone who only has student loan debt, may be able to pay more toward their loans than someone who has other areas of debt as well as high student loan totals.
And probably the most important factor to consider, is current Interest Rates. These play a role, a big role. Because someone with a high interest rate will need to have a different focus than someone with a lower interest rate.
I will talk about all of these things, but first, let me share our loan repayment story.
I am Dr. Jodi Miller PT, DPT. My husband and I are both PTs. We graduated at the same time in 2007. I only had Graduate School debt thanks to some very good planning on my parents part and Florida’s Bright Future’s Scholarship program. My husband, had Grad school AND Undergrad school loans. Together, we had over $150,000 in student loan debt (Federal and Private) at graduation. And very little savings.
Unfortunately, when we graduated, interest rates were somewhat high. Some of our loans were as high at 8%, but a majority of our loans were at 6%.
Our first jobs had low salaries. But we took these jobs because of the STELLAR mentorship, the 4 weeks guaranteed vacation, and the 1-on-1 patient care that the job offered. (And this was absolutely the right decision!)
Our repayment plan was a 30 year fixed plan. This plan gave us the lowest possible minimal monthly payment which provided us the most flexibility to make extra payments when able and not be bound by a restrictively high monthly payment.
We knew, that we would ALWAYS make more money than what we were making at that point in time. We knew that we would get raises and eventually find jobs that offered higher salaries as we gained more experience.
So, we knew that we would NEVER pay less toward our monthly payment than we did at that first payment.
Because, if we could afford it then…with a low salary and no savings…then we could always afford that monthly payment.
***One month later, we bought our first house***
Our mortgage payment was LESS than our total monthly payments for our student loans! OOOF!
As we started to get paid (YESSSS!), we figured out how much money we would put directly into our interest earning savings account each pay period. This was money we never saw, because it went straight to savings (we never missed it!)
Eventually, we had enough in savings to make an extra payment toward our loans. Any extra payment we made (with the words “principal only”), ALWAYS went to the loan with the highest interest rate.
Eventually, a $10,000 loan was paid off!
Even after a loan was paid off, and the minimum required monthly payment dropped, we continued to pay the SAME amount toward our loans. So the amount of money that was going to that first loan, was now being paid as “Extra” (principal only) toward another loan each month. Targeting the loan with the next highest interest rate.
We also continued to take a chunk of savings a couple times a year, to make 1-2 additional “Extra” payments toward the loan with the highest interest rate.
NINE years later, we made our final student loan payment!!!
In that 9 years, we each had 3 different jobs (one of which was Traveling PT), bought 2 houses, sold 1 house, bought 2 cars, and had 2 kiddos.
The secret, FOR US, was sticking to our plan! The plan to always pay the same amount each month as we did that first month.
We lived modestly, but enjoyed ourselves. We took vacations each year and dined out for 1-2 meals each week. The only big purchases we made were necessary ones. We contributed to our IRAs, and our employee retirement plans, and our savings accounts. We had 1 credit card and paid it off each month.
But, this is OUR story.
Your story will be different. Because interest rates are different now. The PT employment market is different now. The world is different now.
So, there are some things to think about.
Now, interest rates are lower than they were 14 years ago. Now, it may be smarter to put more money into an interest earning IRA to EARN more money each month and pay less toward student loans.
If you have a loan at, say 2%, don’t rush to pay this one down. You’d only need to make a few extra payments for this to become an “interest free loan.”
Instead, pay extra toward a loan with an interest rate of 6% OR put any extra money toward an IRA.
There are also some government assistance opportunities. Like, the Public Service Loan Forgiveness program. This program states that your federal student loans may be forgiven if you work for a Not-For-Profit employer for ten years and make the minimal monthly payments toward your loan. This can be tricky, has a lot of requirements, and has recently been found to deny many requests. Do some research to see what else is out there.
Now, I am not a financial planner! I just know my story and what worked for us, given our circumstances.
When setting up your Loan Repayment Plan, you have to consider your circumstances. You have to consider the current student loan interest rates, your current income, your other debt, and your own life circumstances.
Create a Plan and stick to it! It is possible!
If you have any questions related to Loan Repayment, PT school in general, study habits, or PT Mentoring, send me an email at JodiMillerDPT@gmail.com or visit Clinical Connections Tutoring and Mentoring to learn more!
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