Do you have fond memories of college? I love thinking back to those days and letting a sense nostalgic bliss take me over. I remember building great relationships with friends and classmates all while working towards a brighter future for myself. Education is a great thing, from developing relationships to career enhancement. For some professions it’s an absolute necessity. I believe the healthcare field to be one of these professions. I work with healthcare professionals who are trying to figure out what to do financially before, during, and after school. Student loans are often the center of conversation when discussing financial goals. This conversation informs my recommendations in developing a sound strategy to pay them off and juggle other financial obligations.
I’ve found that healthcare professionals are increasingly worried about student loans and debt management. I believe this is due to the increase in demand for the profession and opportunities available. There are also many advanced degrees for the career, such as an MSN and DNP, with various specialties in each program. These degrees can provide you with a great career in healthcare. The job availability, autonomy, and pay all support the cost of tuition in my opinion. That said, one still needs to understand their student loans and have a debt management plan in place to payoff the loans sooner rather than later. Sit down, get yourself organized, and run through the items below relating to student loans and personal finance.
Scholarships and Repayment Programs
Typically schools offer financial aid and federal loans when enrolling in their programs. There may be scholarships, repayment, or forgiveness programs available to you. Programs can be contingent on working in certain areas or workplaces, like underserved parts of the community, or conducting certain types of research, for example. Understanding these things before you enroll could potentially save you thousands of dollars.
Scholarships and financial aid can be applied for by filling out a FAFSA form (Free Application for Federal Student Aid) at www.FAFSA.com and using the school’s FAFSA code. Do your research and see what internal and external scholarships are out there. Listed below are searchable websites for external scholarships that I got from Vanderbilt’s website. They also list repayment programs that are available.
External scholarships resources:
As of right now, federal student loans have interest rates of approximately 4.45% for undergraduate and 6% for graduate programs for federal direct unsubsidized loans. These are fixed rates determined by congress that don’t change for the life of the loan. Because of the relatively low interest rates, when juggling multiple financial goals, I’m not always in a hurry to commit EVERY dollar to payoff student loans. That said, you should have a debt management strategy in place to pay them off.
Consider your other financial goals, such as savings and retirement, when looking at your debt and interest rates. Financially speaking, the expected rate of return is potentially higher when investing in your retirement accounts, and an employer match is great to take advantage of, but that’s another conversation. Look at the interest rates for your student loans. You can determine the amount of money you’ll save in interest and how early you’ll payoff your loans by examining the numbers. Click here to access an online calculator to see how making extra payments can impact you.
Loan Consolidation and Refinancing: Federal Vs. Private
Federal loans are a great way to get funding for school. They have various repayment programs and loan forgiveness options. In certain circumstances you can apply for deferment or forbearance of payments. Private loans obtained through a bank or credit union don’t have these attributes.
Federal loans don’t take into account your credit score, which could be good or bad depending on your situation. If you have good credit you may be able to qualify for a lower interest rate with a private loan. When considering private student loan debt consolidation or refinancing shop a few different lenders. If you’re approved for a favorable interest rate then it could make sense to move forward with a private lender.
Cash Flow: Savings Capacity for Debt Management
This is where the rubber hits the road. Step one in creating a plan begins with cash flow. Ask yourself the following questions:
- How much am I bringing in on a monthly basis?
- How much are my basic living expenses on monthly basis?
- What does my discretionary spending look like at the moment?
- Do I need to adjust my discretionary spending?
Figure these questions out. How much can you realistically commit to your financial goals? For example, can you contribute 15% of your income to retirement and commit an extra 5% or 10% to student loan debt? Use the financial calculator to see the impact of allocating more of your income to your debt.
This is the conversation I typically have with clients when creating a financial plan. As with most things in life, there are usually trade offs with financial goals. It’s best to think about what’s most important to you, since the answer isn’t always black and white. Understand your available options and make an informed decision.
If you’d like an objective second opinion about your finances, please contact Michael Shea, a CERTIFIED FINANCIAL PLANNER™ at Applied Capital. Email him at email@example.com
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