12 Tips Every Nurse Should Know About Paying Off Student Loans
When you graduate from nursing school, you start a career of helping people. You’re often working long hours giving patients the care they need.
However, despite the monetary and emotional rewards that come with being a nurse, getting there isn’t cheap. Nursing students are likely to accumulate around the same student loan debt as undergraduate students. For the Class of 2016, that’s $37,712 in student loans.
But here’s the good news: nurses have plenty of options when it comes to lowering the cost of their student loans, including specific student loan forgiveness and repayment plans. There are, of course, pitfalls to avoid when applying for these programs.
Whether you have federal or private student loans, here are a dozen tips every nurse should learn as they’re working toward eliminating their student loan debt.
How to navigate student loan forgiveness for nurses
There are several student loan forgiveness programs for nurses out there. Most are geared toward federal student loans, but you may also find some that offer relief for some or all of your private student loans.
The most well-known program is the Public Service Loan Forgiveness Program (PSLF). It’s exclusive to those who work for the government, 501(c)(3) not-for-profit organizations, and other not-for-profit organizations that offer qualifying services.
If you’re interested in going this route, make sure you do all the right things to qualify. Here are five things to keeps in mind when looking at student loan forgiveness for nurses.
1. Read up on the eligibility requirements
Most forgiveness programs have a long list of requirements, so make sure you understand all the fine print attached to each one.
Also, don’t be afraid to reach out to the program administrator if you have questions. The last thing you want is to think that you’re eligible for a student loan forgiveness program, only to find out when it’s time to get the benefit that you were mistaken.
2. Don’t base your career decision on student loan forgiveness
Many student loan forgiveness programs require that you work in an area with a shortage of healthcare professionals. And in most cases, there’s a reason for it. You may experience low pay and long hours when you enroll in the program.
If you force yourself into a potentially difficult situation that you don’t want to be in, it could lead to added stress and early burnout. Take a look at all your options, but don’t decide where to work solely for the student loan forgiveness program.
3. Keep making your payments
Student loan programs typically require that you stay at a qualifying organization for at least two years.
For example, the NURSE Corps Loan Repayment Program will cover 60 percent of your unpaid student loan debt after you spend two years at an eligible Critical Shortage Facility. You can get another 25 percent paid off if you extend to a third year.
But with PSLF, it’s actually 10 years. So make sure you still budget student loan payments each month as you’re working toward earning forgiveness, especially if it’s for the next decade or so.
4. Don’t bank on student loan forgiveness
Considering economic and political shifts that impact student loans, there’s a chance your student loan forgiveness program may be structured differently by the time you’re eligible to receive it. Plus, there’s no guarantee that you’ll be grandfathered into the old plan you signed up for.
That’s why it’s important to make sure that you’re living on a budget, being mindful of your expenses, and saving for the future.
Also, avoid overloading yourself on other debt. Owning a home and driving a nice car are great goals. But if your student loan forgiveness program doesn’t work out because of eligibility problems or some other reason, you may not be able to manage a mortgage, car loan, and student loan payments all at the same time on your salary.
Consider income-driven repayment plans
During school, you may not have truly understood the financial impact student loans would have on you. But after you graduate, becomes all too real when you see that monthly payment you’re responsible for.
In some situations, your payments may be so high that you simply can’t afford them. But if you have federal student loans, you may be able to lower your payments through an income-driven repayment plan (IDR).
The federal government offers four IDR plans:
- Pay as You Earn Repayment Plan (PAYE)
- Revised Pay as You Earn Repayment Plan (REPAY)
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
Each restricts your monthly payment to a percentage of your income. This low fixed amount can then give you more room to afford other necessities and lifestyle choices. If you’re considering IDR, make sure you understand what you’re getting yourself into.
Although few private student loan providers offer benefits similar to federal IDR, yours might. Reach out to your lender and find out.
Before you sign up for an IDR plan, be sure to consider the following tips.
1. Read the fine print
IDRs are a great way to make student loan repayment affordable, but it’s not a guaranteed way. Each year, you need to submit income and family size information to establish your financial situation and eligibility for lower payments.
Based on the information you send, your monthly payment may increase or decrease, though not below that plan’s lower limit. Also, note that not all federal student loans are eligible for an IDR plan.
Other terms and conditions may apply, so make sure you know how each plan works before choosing one.
2. Don’t do it unless you need to
While you may be able to demonstrate financial need to qualify for an IDR plan, that doesn’t mean you should do it. Federal IDR plans have repayment periods ranging from 20-25 years, much longer than the 10-year Standard Repayment Plan.
Having a lower monthly payment is nice, especially if you need it to survive. But IDR also extends your repayment period, meaning you’ll end up paying more interest over the life of the loan.
3. Prepay when you can
If you switch over to IDR, try to avoid keeping the loan for the full term. Once you can afford it, consider paying more than minimum monthly payment to pay off your loans sooner.
Prepaying can not only save you money on interest, it can also get you to a zero balance more quickly. This can give you the flexibility you need to use that money each month for more important things.
4. Don’t choose the wrong plan
On the surface, all federal IDR plans sound alike.
But depending on your situation, one may be better than the others. Be sure to research each plan to know the benefits, drawbacks, and other information.
Note that you can switch to a different IDR if the one you choose doesn’t work out, but that would require another application and more paperwork. It’s best if you pick the right one the first time.
Look into refinancing your student loans
If you’re not eligible for student loan forgiveness and an IDR plan isn’t in the cards, refinancing is another way to potentially lower the costs of your student loans. There are many private lenders that offer student loan refinancing, so there are plenty of options you can choose from.
Depending on the lender and your credit situation, you can refinance at a lower interest rate, a lower monthly payment, or both.
Keep in mind that you typically need good or excellent credit to refinance on your own at the best interest rates. If your credit isn’t great, though, you can get a cosigner to apply with you.
But before you agree to student loan refinancing, there are some things to keep in mind.
1. Shop around for rates
Don’t take the first offer you get, even if it’s from the bank you do most of your business with. Even if the bank offers discounts to existing customers, you may get a better interest rate elsewhere.
Also, keep in mind that interest rates can be variable or fixed. If it’s fixed, your interest rate doesn’t change throughout your repayment period. But if it’s variable, the interest rate may go up or down as market rates change.
2. Don’t lose sight of the real goal
Student loan refinancing can lower your interest rate or payments, but the real objective is to pay off your debt.
If you can afford it, choose a shorter repayment period. Although this strategy will mean higher monthly payments, it also means you’re closer to getting rid of your student debt.
Let’s say you can’t afford the higher payment that comes with a shorter repayment period. You can still try to pay more than the minimum due. Even a small amount each month can help you pay down your debt faster and pay less interest over time.
For example, say you have $30,000 in student loans with an average APR of 6.00% and a 10-year repayment period. With a minimum payment of $333, you’ll pay $9,970 in interest over the life of the loan.
If you add just $50 extra to your payment every month, you’d pay off the loans about 20 months early and save $1,805 in interest, according to our student loan prepayment calculator. Use it yourself to see how much you can save by making extra payments.
3. Consider the federal student loan benefits you may lose
If you’re refinancing federal student loans, you may lose certain benefits. For example, you may not be able to access forgiveness, income-driven repayment, or deferment and forbearance options.
Deferment and forbearance can be helpful tools because they allow you to temporarily stop making payments on your student loans. Qualifying events include going back to school or experiencing economic hardship.
Some private student loan refinancing lenders offer deferment and forbearance benefits, but some are more generous than others. Keep these in mind when reviewing a refinancing lender’s terms and conditions.
4. Don’t procrastinate
If you think student loan refinancing may be a good idea, don’t wait to find out. If you do qualify for a lower interest rate or payment, you’re effectively losing money each day that you don’t take advantage of refinancing.
Shop around by reviewing multiple lenders and their features. You can often get rate estimates without a hard credit check to find out what terms you qualify for. Once you’ve narrowed it down to the best offer, go ahead and apply.
Pick the best student loan repayment strategy for you
Whatever strategy you use to pay down your student loans, make sure that it’s ongoing. There are a couple of main debt repayment methods most people utilize when repaying their student loans: the debt avalanche and the debt snowball methods.
Both strategies are similar in that you focus on paying off one loan as quickly as possible while paying the minimum payments on the other loans. Once you pay off the first loan, you’ll apply all the payments you were making to that loan to the next one until it’s paid off, and so on.
The difference between the two methods is how you target your loans. With the debt avalanche method, you focus on paying off your loans in order of the highest interest rate. Whereas with the debt snowball, you prioritize your lowest balances first.
Consider which one works best for you and your lifestyle before committing to one. The best part is you don’t have to follow one forever. As your financial priorities change, so too can your student loan repayment strategy.
Be proactive about paying off your student loans
Prioritizing paying off student loan debt early on won’t be easy. So, take some time now and write down the details about your student loans. Then, start looking into the many options you have to pay them off.
If your student loans have long repayment periods or low monthly payments, for instance, be proactive about paying them off in a timely fashion if you can. While you may qualify for a forgiveness program and go that route, it doesn’t hurt to prepay your loans as well if possible.
Take the time now to educate yourself about your options and to strategize. Trust me; you’ll save a lot of time and money later on.
Written By Andrew Josuweit, CEO, Student Loan Hero
2017-41529 Exp. 5/19