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5 Steps to Retire Student Debt Faster

Posted on: October 24, 2019

Gail Clifford Headshot1

written by

Gail Clifford, MD

Student Debt Intext

Since you’re reading this, you’ve likely made the decisions to take on the debt. The lenders assured you, you’d have the resources to pay it back. If you were lucky, and smart, you kept your debt to a minimum. You had scholarships, roommates, or parents that were able to help with some part of your expenses.

But the debt is real. According to the Association of American Colleges, in 2016 the average medical student graduated with $190,000 in student loans. And 74% of new graduates had education debt.

As a soon-to-be physician, I had borrowed $250,000, too much at 20%. It was closer to $400,000 when I finished residency. That first year out in private practice, it was horrible to have paid $50,000 towards my loan, after taxes. And the principal increased by $2,000!

It was time for drastic measures. I re-enrolled in community college to get my student loans back in deferment. For Stafford and Perkins loans, you may need only six units to keep your loan interest in forbearance. I took golf, community speaking, health, medical transcription and real estate classes. I put every dollar I could to the Sallie Mae loans at 20%. The classes were cheap – a couple hundred dollars. Compared even to 5-12% on the guaranteed loans, it was worth it.

Making your last student loan payment is a glorious thing. You’ll feel lighter. Unencumbered. Less pressured about just about everything. So, how do you get there faster?

1. Make a budget and stick to it.

List every single one of your expenses and compare it to your take home pay. If you've included your student loans, you'll be net negative. Reduce each expense as much as possible. Yes, you have good income, but you don't want to be indebted forever.

2. Stay out of consumer debt.

If you only learn one thing from the nightmare that is student debt, learn that no debt is “good.” Your income may be too high to write off mortgage debt. Plan to get debt free and stay that way. With credit cards and student loans, pay more than your minimum payment every month. This can drastically diminish the total interest paid.

3. Pay your highest percentage loan first.

It may feel better to have “smaller loans” paid off. But you’ll pay less in the long run if you pay off the highest interest rate first. When that’s retired, pay off the next highest one, and so on. If you have to make a monthly payment on multiple loans, you may consider having them combined. Only do that with loans at the same interest rate.

Pay off private loans first. And never combine private and government loans. You want to rid yourself of any loan for which your estate would be responsible.

Pay off government guaranteed loans last. Stafford and Perkins loans have low interest rates. Make the minimum payment until you retire your other loans. Then make sure your emergency fund is sufficient. That way, if you die or can suddenly no longer work, your family will have resources. When you’ve got a 6-month emergency fund in hand, go ahead and pay these off.

4. If you’re married, and your spouse doesn’t have student debt, try living on one income. (Preferably theirs.)

Having a two-income household is fortunate. Depending on your circumstances, see if you can both work but only spend one income. If you’re able to “throw” your entire income at your student loan debt, you should have it paid off completely in two or three years.

Better still, if you can do this comfortably, continue this practice after the debt is paid off. Whether you’re saving for retirement, trips, or your children’s education, you will quickly feather your nest egg.

5. And of course, make more money!

When you’re in debt and already working, you have a unique opportunity. As a locum tenens provider, pick up additional shifts and can even be paid more than you would in a permanent position. Your recruiter will work with you to get the best rates for your services. If you're able to work evenings, nights, or weekends, there may be a shift differential. Every little bit helps.

With locums positions, you have more flexibility with your schedule and shifts. Whether you’re making an extra loan payment or building your emergency fund, take advantage of it. As a locum, you really can write your own ticket. You get to choose the dates that you work and shifts with a better rate. Be willing to give up a little to get the big return of early medical student debt retirement.

You will feel such a sense of relief and accomplishment for paying off your student loans. When you've made your final payment, go out and celebrate! You’ve got your financial house in order and you’re ready to rock it.

Ready to pay down your student loans with locum tenens? Contact a Barton recruiter today to get started!

Gail Clifford, MD
About Gail Clifford, MD

Gail Clifford, MD, a physician for more than 25 years, has traveled to five continents and all 50 United States. An avid adventurer, she works hard and plays hard. She enjoys travel that immerse her in local culture, just like locum tenens work.

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