Student loans are the bane of the existance for every single medical family I know of.
At best, it’s just one more thing to manage among a gazillion tasks that need your attention.
At worse, they make you sick to your stomach knowing that each year goes by, you’re accruing five digits worth in interest.
Regardless of how you feel about them, the consequence of sticking your head in the sand and ignoring it or making a mistake in managing them are big dollar signs.
As a doc wife, you’re likely in charge of managing these loans for your DrSpouse. Or at least, you’re helping your DrSpouse manage it correctly.
Because of the complexity and ever changing facts of student loan management, this is an area where I highly recommend hiring a CFA student loan consultant on a one-time flat fee basis. It will cost a few hundred dollars. It’s money well-spent to know you’re getting it right. Look at my Recommendation page to see good ones I recommend.
In the meanwhile, take a look at these common mistakes and make sure you’re not making any of them.
Mistake #1: You don’t shop around when refinancing
(Let’s pause here for a second before I go any further…
If you’re going to refinance, make sure that it’s the absolute right decision! When you refinance, it’s absolutely irreversible. In most cases, you’re better off not refinancing and going for PSLF.
If you have done the research and are 100% sure refinancing is the right path for you, then read on…)
You know that different gas stations in your town differ by a few cents per gallon.
Well, it’s the same idea for student loan companies. Different companies have different products.
Unlike shopping for the best deal on gas, which saves you just a couple bucks, the best product for your student loans can save you tens of thousands of dollars!
It really behooves you to shop around and look at as many companies as you can.
Make a list of all the companies. Then apply to all of them within a one-month timeframe so that your credit will be pulled only once within 30 days, which will minimize the temporary hit to your credit score.
I have negotiated deals with companies to give my readers great bonuses for refinancing with them. Many other bloggers have done the same, but you may find that my bonuses are more generous. Check them out here.
Mistake #2: You refinance only once
Maybe you have refinanced with the best deal in existence already. But be honest, was THAT the last time you checked rates?
For most people, it is.
Shopping for student loan rates is not fun. And life is C R A Z Y busy when you’re a medical family. But refinancing doesn’t have to be a ONE TIME thing.
In fact, it shouldn’t.
In our competitive market today, companies are trying to come out with better rates and products. New startups try to compete with old companies. Chances are, if it’s been a while that you’ve refinanced, there is likely a better deal for you out there.
Block off a day on your calendar every year to just make a day out of surfing the web for better rates. If you find a lower rate, you have nothing to lose by refinancing again; and everything to gain if you do.
Like I said before, the difference in one product from another can save you tens of thousands.
Mistake #3: You’re in the wrong payment plan
These are only three good income-driven repayment plans:
Which one is best?
As a rule of thumb, assume that the right plan for you is REPAYE unless proven otherwise.
There are exceptions such as if you (as in YOU, the non-doctor spouse) are a sugar mama and make a high income, it may make more sense to go on PAYE and file taxes separately instead of jointly.
Lastly, the only reason you should be on IBR is if you don’t qualify for PAYE and want to go for PSLF, regardless of how you file your taxes.
Mistake #4: You presume you’re stuck in one payment plan
Life changes fast when you’re in your 20s and 30s:
- You go to work or become a SAHM
- Your DrSpouse finishes training and becomes an attending
- You start a family or have more kids
If any of this happens, you need to look at your student loan situation again because you may need to switch from one payment plan to another to reflect your new needs.
Here’s a really good example of how a life change can affect your student loan needs:
As a resident or fellow, you are probably on REPAYE to take advantage of low payments and tax subsidies. Then when an attending, you can switch to IBR to get rid of the payment cap and continue to make the lowest payments possible, maximizing how much you get forgiven by PSLF.
There is a ramification for switching plans, though. Any outstanding interest will be capitalized (as in, added to your principal balance). So if you go this route, take this into account.
Mistake #5: Not filling out the paperwork annually for PSLF
The way PSLF works is that you need to make 120 qualifying payments. To keep accurate count, you are instructed to fill out the paperwork each and every year. This paperwork is your paper trail.
Some medical families wait until they are done with training to even fill out any PSLF paperwork.
OMGosh…don’t do that!
It’s risky because you might find out you had a problem with one of your loans from the beginning and all this time have been making payments that are ineligible. And you may have expected to be on your way to have your loans forgiven when you really aren’t 😳
You can’t rely on your student loan service to count your payments correctly for you, either.
Ryan Inman of Physician Wealth Services used a clever analogy:
“[Not filling out the annual paperwork] is like playing Russian roulette.”
So, starting intern year, fill out all the PSLF paperwork every year.
Even if you’re on the fence about PSLF, still fill it out. You can decide later if you want to go through with PSLF. But do the paperwork and start having your qualified payments counted and on the books.
Mistake #6: You got inpatient and abandoned PSLF when you should have waited
Despite the fact most medical families who are not working for private practice will come out ahead if going for PSLF, some still abandon PSLF because they are nervous about the program still existing for them.
I understand the anxiety that PSLF can cause due to headlines. Here’s an example of a recent anxiety-causing headline:
“PSLF Rejects 99% Of Applicants”
Keep in mind that websites get paid for the number of eyeballs they get on their site. So they are incentivized to be over dramatic.
The reality is that the risk of PSLF going away is very low. It’s also highly likely if any changes do occur, you will be grandfathered into PSLF. That was always done for prior changes to PSLF and it’s expected to continue to be the case.
Don’t just take my word for it. Top student loan consultants like Travis Hornsby of Student Loan Planner agree that PSLF is here to stay.
If the fear of PSLF going away makes you lose sleep, you can save funds in a separate account labeled “In Case PSLF Goes Away” to pay off your loans immediately if it happens. It’s your Plan B route. You would have used such funds to pay off your loans aggressively if you had refinanced anyway. What’s there to lose?
Mistake #7: You don’t refinance your private loans
There are different types of student loans and they’re not equal. Of all the variety of student loans, private student loans are the worse kinds to have 👎🏻 They really suck.
- For one, private student loans aren’t eligible for income-driven repayment plans such as IBR, PAYE, or REPAYE.
- Also, private student loans aren’t eligible for PSLF.
Because of these restrictions, the only way you can improve your situation if you have them is to refinance.
So…if you have private student loans, what are you waiting for!?! Refinance them as soon as you’re an intern!!!
The longer you wait to refinance, the longer you are potentially missing out on a lower interest rate out there for you.
Mistake #8: Not consolidating your loans into direct loans before going for PSLF
The only loans that qualify for PSLF forgiveness are direct loans. These usually have the word “direct” in front of their name.
However, a few medical families have non-direct loans. It would be a total nightmare if you apply for PSLF and get denied because you didn’t have the right loans to begin with 😫
Tip: FELL loans are non-direct.
So what do you do if you have non-direct loans and want to do PSLF??
You need to consolidate your non-direct loans into a single direct loan with the government.
The consequences of not managing student loans correctly could easily cost you in the tens or hundreds of thousands.
Hiring a CFA student loan consultant on a one-time flat fee basis will cost you a couple hundred dollars. But it’s money well-spent.
Once they’re managed, then you don’t ever need to rehire and pay a dime again unless your situation drastically changes and you need to rerun the numbers.
I’m hugging and supporting you, friend ❤️
To strong medical families,
Who manages student loans in your family? What are some tips you have for other families?