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According to WebPT’s research—and as depicted in the infographic shown below—one in four PT students will have more than $150,000 in student loan debt at graduation; one in three will owe more than $100,000; and one in two will owe more than $70,000. With starting salaries being significantly lower in the PT field than in other medical career paths, the average DPT grad will take 45 years to pay off $100,000 in student debt (assuming that therapist makes an average salary of $70,000, has a 5% interest rate, and puts 8% of his or her salary toward loan repayment). That’s more time than many professionals plan to be in the active workforce. So, what’s an aspiring—or current—physical therapist to do? Here are eight tips to help you pay off student loans faster (adapted from this resource, this one,this one, and this one):
1. Know the terms of your contract.
This should go without saying, but many students don’t fully understand the terms of their student loan agreements when they sign them—and that can be a problem for those interested in speedy repayment. Be sure that you understand what you’re committing to before you take on a loan. And if you haven’t already, read through all of your contracts now to ensure you know the repayment terms (including any penalties associated with early repayment). If you have questions, the financial advisor at your alma mater may be able to provide you with some guidance.
2. Take advantage of your grace period.
Many loans have a grace period—or deferment period—that enables students to hold off on loan repayment while they’re still in school or before they’re earning an income. If you have a side hustle during school or after graduation, you may want to consider putting some money aside to prepare for your first payment. That way, you’re not blindsided when the first bill is due.
3. Do your research and negotiate for a good salary.
According to WebPT’s annual survey data, most students expect to earn between $60,001 and $80,000 in their first job. But that’s a fairly large range that may or may not map to market value in your region. So, do your research and ensure your first job offer—or any job offer for that matter—is commensurate to the value you provide and appropriate for the location in which you practice. And don’t be afraid to negotiate. Usually, the first offer is a starting point, and employers expect candidates to come back with a counteroffer.
4. Make a plan.
Once you know what you’ll owe each month—as well as what you’ll be earning—you’ll be in a good place to get organized. That means reviewing each of your loans—if you have more than one, of course—and determining which ones you should pay off first based on their interest rates and types. According to this resource, “Mathematically, it makes the most sense to pay off your highest interest rate loans first, as those will cost you the most relative to the loan balance.” You may also want to consider paying down any variable interest rate loans “to avoid the uncertainty.”
5. Prioritize your spending.
As Travis Hornsby shares in this post, he and his wife slashed 10 years off their repayment schedule by making a cash purchase on an inexpensive car to avoid having a car payment; sticking to budget travel; and choosing inexpensive, low-square-footage housing (which also helped the couple save on utility bills). Hornsby—a chartered financial analyst—advises grads to not “nickel and dime [themselves] by trying to eliminate every latte and spin class from [their] spending and focus on the biggest areas of spending in [their] budget.” By doing so, “You’ll have a lot more success in reaching your milestone of debt freedom.”
6. Sign up for automatic payments.
This strategy does double-duty, because it ensures that you’ll always make your payment on time and—in some cases—can result in a reduced interest rate (according to this resource, that discount could be up to .25%). Just be sure that you have a process of checks and balances in place to ensure you always have enough funds in the account you’re using for automatic payments before each payment is drawn.
7. Pay more than the minimum—and more than once a month.
While it might be tempting to pay the lowest amount allowable toward your loans each month, that’s only going to increase your interest burden and prolong your repayment period. Instead, pay whatever you can. According to this resource, “Even if it’s not a huge amount more, it’ll make a difference—and get you in the habit of putting excess funds toward your loans.” In fact, even just rounding up your payments can make a difference. You may also want to pay once every two weeks instead of monthly. That way, you’ll end up putting a full extra payment toward your loan each year (26 half-payments—or 13 full ones—instead of 12). The above-cited resource also suggests putting any “windfalls” you may earn toward your loan payment as well—including “bonuses, tax refunds, and/or any other unexpected sources of income.”
Depending on your financial and credit situation, you may be able to refinance or consolidate some of your higher interest loans to get a lower rate, which could end up saving you a lot of money and repayment time in the long run.
There you have it: eight tips for paying off student loans faster. What’s your experience with student debt as a PT? What strategies did you implement to bring down your debt after graduation?