Now that people are officially calling you doctor, you need to live up to their standards. Which means you need to run out immediately, purchase some flashy items, and travel to exotic destinations so you can post photos to your Facebook album entitled "Life as an Optometrist", right? Not exactly...
The trick is to continue delayed gratification and pay off your debt first in order to take advantage of "compounding interest"! - Quy Nguyen O.D.
I have a hard time dealing with this. Of course, we all want a big house and a nice car. While that is true, I don't want to be in debt. Instead, I want to have a CHOICE later on in my life - a choice to live where I want, who I work for, and not have that decision be dictated by the fact that I have a lot of student debt. As such, I don't want to stay up at night thinking about how I will pay off my loans. After some research, I've discovered some things you can do to pay off your student loans quickly:
Consolidate
Consolidate your loans. Six months after you graduate, your federal loans will go into repayment. At this point, you can consolidate your loans and combine them into one. It will simplify your loans and will allow you to change the terms, such as adjusting the repayment period or even lowering the overall interest rate. Be careful though - you never want to consolidate private loans with federal loans. You'll lose all of the protections and flexible repayment options associated with the federal loans (i.e. income-based repayment). Consolidation is tricky and not always worth it, you should read up on optometry student loan consolidation at this link.
Bi-Monthly Payments
Making bimonthly payments, instead of monthly payments can save you a lot of money on your optometry student debt. This is a well-known mortgage trick. Typically, loan banks require monthly payments. If you pay twice a month instead, you could save thousands of dollars and years off your loans. How?
- Let's say you have the option to make a $1,000 payment once a month or $500 payments every 2 weeks. Well, paying $1,000/month x 12 months = $12,000. Making a $500/every 2 weeks x 52 weeks a year = $13,000. You're effectively paying an extra month of loans every year.
- The second reason why this works is assuming that your student loans are calculated DAILY, then making payments at a greater frequency will help you save on interest that is accruing every day. I've called the financial aid office at the Department of Education, along with different loan providers and they all suggested I contact my loan servicer about this assumption. After reaching out to my servicer, My Great Lakes, they did in fact verify that my student loans were calculated DAILY.
Here's how this breaks down:
- Let’s say you graduate with $150,000 in debt and it’s financed over 30 years at a fixed rate of 6.8%. Your monthly payments are about $978. If you make payments of $489 every 2 weeks, you’ll save close to $49,552 over the life of your loans.
- Again, depending on what types of loans you took out, make sure to call your loan servicer and ask them if your student interest rates are calculated DAILY as it seems to vary. I then used this website to calculate biweekly loan payments.
Here's an example showing the number of payments in both scenarios. You can find this loan calculator at http://www.calculatorsoup.com/
Scenario 1 - Pay $978 / month @ 12 payments per year
Interest Compounded Daily
Thats 362 Payments
Total Payments: $353,395.73
Total Interest: $203,395.73
Scenario 2 - Pay $489 / Biweekly at 26 payments per year
Interest Compounded Daily
Thats 594 Payments
Total Payments: $303,873.73
Total Interest: $153,873.73
At the end of the day, if you pay your loans bi-weekly instead of monthly, you will save a total of $49,552. This is because of COMPOUNDING INTEREST. It is remarkable that such a small changes in the way you pay your loans can drastically change the course of your financial future. Give this thought before you make decisions, think about your life, your learn term goals, and your other investment options. Consider talking to a family member or financial advisor. Or just comment below and we will work with you!
Use Form 1098-E to Write Off Interest
Write off your student loans when you do your taxes by using form 1098-E - here is how.
Employer Assistance
Sometimes your employer will help you with your loans, especially if you work in a high demand area. Your employer may also offer to help with student loans if you relocate.
Reduced Rate for Auto-pay
If you decide to set up the auto-pay option to make your life easier, there is a reduced rate (0.25% with My Great Lakes, for example).
Use the Avalanche Method
There are 2 methods to pay off student loan debt - the avalanche and snowball method. The order of which loans are paid off first is either highest-to-lowest interest rate (Avalanche), or lowest-to-highest remaining principle (Snowball). Unbury.me is a loan calculator designed to help you get debt-free as fast as possible. Once your loan information is entered, you may set the total amount you're able to put towards loans in a month. If this amount is greater than the minimum you're able to pay on loans, the extra money is put towards one loan every month to eliminate it. Once a loan is paid off, the money that was previously going towards that loan is now put towards the next loan, and so forth. Malpractice insurance is a necessity to not only practice optometry, but practice to your full scope comfortably and confidently. There are many insurance carriers available, the key is to do your due diligence in searching for a carrier that meets your needs and expectations.
The author of the content you just read, put in lots of work to provide you with this article. Even though we try our best, there is no guarantee the article is error free. NewGradOptometry.com, its sponsors, advertisers, staff and writers make no representation, warranty, or guarantee that this article and its contents are error-free and will bear no responsibility or liability for the results or consequences of the information contained within.
Tip #7: Refinancing your student loans can also help you save. Check out this comparison tool from our partners at Credible:
Interested in learning more personal finance basics for optometrists? Check out our video and download our free financial tools!
