Following are various ideas to help you minimize debt and recognize its impact on your life, today and in the future.
Keep Expenses Down: Budget carefully and plan your expenses. To budget your money you must know how much you spend for various living costs (e.g., food, clothing, medical, housing, utilities, books, meals out, recreation, car insurance, credit cards, etc.). Keep track of your expenses for a month so you know how much you are spending. Then compare your expenses with your income and/or financial aid. Look for places to cut spending. Avoid unnecessary borrowing.
Apply for Scholarships: Each year we update a listing of scholarships. This information is available for our enrolled students and applicants who have been chosen to interview. Our students have been fairly successful in obtaining scholarships from groups and organizations on this listing. These awards are not always competitive--many are restricted by criteria such as county of permanent residence, age, gender, ethnicity, location of high school attended, willingness to serve in the military, religion, etc. Some examples of searchable scholarship databases can be found on these Web sites: College Board and FinAid.
Know Your Loan Portfolio: Track and manage your federal student loans by accessing the National Student Loan Data System (NSLDS). NSLDS is the Department of Education's central database for student aid records. There you can view your federal Title IV loans (federal Stafford, Direct, or Perkins). You can see which school originated a loan, the lender, guaranty agency and loan servicer. You can also track loan status, loan amounts, outstanding principal balance, etc.
Save Money During Early Residency Years When Payments May Not Be Required: Some loans may not require payments during the early years of medical residency; this would be a good time to pay down loans where interest is not deferred (e.g., private and unsubsidized loans). It would also be a good time to set aside funds in preparation for loan payments that will begin in the later residency years.
Carefully Consider Loan Consolidation: Detailed information on Direct Consolidation Loans can be found on this Web site or by calling (800) 557-7392. Weigh the advantages and disadvantages before choosing consolidation. Will you lose important benefits? One benefit to be aware of applies to students who borrowed their first federal Stafford or Direct Loan prior to 7/1/93 and still have outstanding principal on this "old" debt are eligible for a two-year residency deferment. We do not recommend consolidation of your Loan for Disadvantaged Students, as this loan qualifies for deferment during residency. NOTE: Federal reauthorization may change today's consolidation terms. On July 1, 2006, interest rates were fixed at 6.8% for federal Stafford and Direct Loans; this affects loans consolidated on or after July 1, 2006, and loans borrowed after that date. The benefits of loan consolidation are not the same as they were the last few years.
Consider Loan Repayment Programs: Examples of some loan repayment programs are available through the National Health Service Corps (NHSC), the Indian Health Service (IHS) and the National Institutes of Health (NIH). These programs allow repayment of substantial portions of your education debt in exchange for your commitment to work in federally designated health professional shortage areas. There is typically a minimum service obligation. For additional information visit their Web sites, or call (800) 221-9393 (NHSC), (301) 443-3396 (IHS) or (301) 496-4000 (NIH).
Special Repayment Programs: Most lenders offer discounts on your interest rate if you authorize your loan payment to be automatically deducted from your bank account. Some lenders allow a special interest rate reduction or a partial refund of loan fees if you make your first 24 or 48 payments on time. These interest rate reductions might total as much as 2 1/4%. Ask about these reductions when checking into different loan consolidation programs.
Apply For Deferment: One type of deferment you may qualify for is the economic hardship deferment. Eligibility requirements for this deferment include meeting at least one of these conditions: 1) You have been granted an economic hardship deferment from the federal Family Education Loan Program (FFEL) or the federal Perkins Loan Program for the period of time for which you are now requesting the same deferment for your Direct Loan(s); 2) You receive payments under a federal or state public assistance program such as Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), food stamps, or state general public assistance; 3) You are serving as a Peace Corps volunteer; 4) You work full time and your total monthly gross income from employment is less than the federal poverty guidelines. Guidelines can be obtained from the U.S. Department of Health and Human Services, (877) 696-6775.
Another deferment you may be eligible for is an internship and/or residency deferment. Contact your lender to see whether you qualify. For this deferment program, do not file the request paperwork until just before your grace period expires. Filing your request too early can shorten the length of your grace period. Also, if you borrowed both a Supplemental Loan for Students (SLS) and a Stafford/Direct Loan, you can ask your loan servicer to align the repayment of these loans so that their repayment date begins on the same day. This usually will require the lender to grant six months of forbearance on your SLS since it does not have a grace period like Stafford/Direct Loans.
There are many other deferments. Check your promissory note or contact your lender for a complete list of deferment options. You must apply to your loan servicer for deferment on an annual basis. If your deferment is approved, your subsidized loans remain subsidized during this deferment period. Deferment forms and eligibility requirements are available on the Direct Loan Servicing Web site.
Forbearance: Think long and hard before you consider a loan forbearance. This may not be the best option for you. Forbearance may be granted when a borrower is willing to repay their loan but is financially unable to make payments. Forbearance may be granted for up to two 12-month periods. It allows you to make a lower payment or no payment during the approved period. However the length of your repayment term may or may not be extended. As with a deferment, you must apply to your loan servicer annually for forbearance approval. Interest will continue to accrue on your loan during periods of forbearance.
Forbearance is required to be granted by the loan servicer on Stafford/Direct Loans when the borrower is serving in a medical residency program. It is a loan servicer’s option for all other loan programs. For instance, for all loans serviced by Affiliated Computer Services (ACS)--these include Perkins, Primary Care, Loans for Disadvantaged Students, University Student Loans, or Medical Student Loans borrowed at UC Davis--only the principal portion of the repayment amount might be approved for forbearance. The accruing interest would still require repayment. This portion cannot be put off until the end of the forbearance period. For more information, contact ACS at (866) 575-4517.
Consider working with your loan servicer(s) to arrange for an adjusted monthly payment plan of a reduced principal and interest amount so that you can avoid forbearance. If you continue to make payments towards the principal amount, you are not using up your forbearance option. Each year that you are approved for forbearance, you are shortening the length of time you have left to pay back your loans. For instance, three years of approved forbearance means you only have seven years left to pay off your 10-year loans.
Become Politically Involved: Repayment terms on federal long-term loan programs are determined by state and federal legislation and regulation. All federal programs are reauthorized every five years. During reauthorization, changes can be made to all aspects of the financial aid process. Reauthorization is due July 2016, effective (typically) one year later. Get to know your state and federal representatives. Let them know how important these funding sources are to you to help finance your education. You can also join groups or organizations that are fighting for legislative reform.