Hey, Doc: Keep this in mind when paying down your student loans

As a med student, extra money was a hard thing to come by.

But now that you’ve finished (or are close to finishing) medical school and your residency, the paychecks are about to start rolling in. And not a moment too soon.

Unfortunately, your student loan bills are on the way, too. And they are … something.

Getting control of your student debt is a priority for new doctors. The median student debt for medical school grads is around $200,000; the longer it takes to pay off this debt, the more money you’ll pay in interest over the life of the loan(s).

So, does that mean you should overextend yourself to pay off your student loans as soon as possible?

From strictly a numbers perspective, yes — that makes logical sense. But this isn’t a game where you’re chasing a high score. You’re not out to make decisions that only look good on a spreadsheet; this is your life we’re talking about!

Consider this: Were you super bummed out that medical school kept you from taking awesome trips with your friends? Do you hope that, now that you finally have the time, you can join in on the fun? Then the right thing is to make sure there’s room in the budget to save for these trips so you can fire off the “I’m in!” text in the group chat when someone tosses out the idea of visiting Japan.

That might mean refinancing to a 15-year repayment plan instead of the standard 10-year plan. Will you pay more in interest over the life of the loan? Certainly. But since you’re spreading out your loan balance over five more years, your monthly payments will be lower, which leaves more room in your budget to put money toward all the goals that were on pause for so long.

Extending your repayment plan will mean paying more in interest, but that could be a worthwhile sacrifice if it allows you to travel and do the other fun things you have planned.

Strike a proper balance between paying off your student loans and living your life. Does your 10-year repayment plan work for you? Great! If not, extending your repayment period could make sense. Yes, taking longer to pay off your loans means you’ll pay more interest. But that could be a worthwhile tradeoff if it frees you up to tackle all the awesome things you have on your to-do list.

OK, now for some other financial advice:

Extending how long it takes to repay your loans is one thing. But it’s no reason to willingly pay a higher interest rate when a lower one could be available to you.

Interest rates on federal student loans — whether for undergrad or medical school — are the same for everyone. But when you refinance, your new loan’s interest rate is determined based on your credit score, credit history, and income. Assuming your credit score and credit history are strong, you’d probably be a good candidate to secure a low rate from the lender.

That low interest rate could lower your monthly payments enough that you can keep the standard 10-year repayment plan.

You’ve been a broke student for so long that when your first paycheck lands in your account, it might take some serious pinching to convince yourself it’s no dream. This is what you make now.

Naturally, you might go a little spend crazy to make up for lost time. But once you get that out of your system for a few months, try to exercise some control. Create a budget and follow it. Figure out how much you’ll save each month for all your goals.

Since you’re trying to play catch-up with your finances, a financial advisor could help you get the most out of your money by setting up a plan with you and your goals at the center. That way, you can feel comfortable and confident in your future.

Financial advisors can help you jumpstart your retirement savings and other investments. Time is one of your biggest allies when it comes to retirement and investing, so the sooner you can meet with an advisor and get started, the better.

Family members, friends, and TV talking heads will tell you to pay off your student loans as soon as possible. The reason is they don’t want you spending too much money in interest. While that’s a noble cause and certainly a point worth considering, it doesn’t mean that you must forgo all other goals to do so.

You get one chance at this life. Make it count.

At the end of the day, you need to make the decision that makes most sense for you. Not anyone else. Refinancing to a longer repayment term is just one option to consider.

Want to learn more? The Citizens Education Refinance Loan you could lower your interest rate, fix a variable rate, or lower your monthly payment. It could provide the financial relief you need to pursue the goals that really matter to you.