6 Ways to Potentially Save $49,552 on Your Optometry Student Loans

Now that people are officially calling you doctor, you need to live up to their standards. Which means you need to run out immediately, purchase some flashy items, and travel to exotic destinations so you can post photos to your Facebook album entitled “Life as an Optometrist”, right? Not exactly…

The trick is to continue delayed gratification and pay off your debt first in order to take advantage of “compounding interest”! – Quy Nguyen O.D.

I have a hard time dealing with this. Of course, we all want a big house and a nice car. While that is true, I don’t want to be in debt. Instead, I want to have a CHOICE later on in my life – a choice to live where I want, who I work for, and not have that decision be dictated by the fact that I have a lot of student debt. As such, I don’t want to stay up at night thinking about how I will pay off my loans. After some research, I’ve discovered some things you can do to pay off your student loans quickly:

Consolidateoptometry loans

Consolidate your loans. Six months after you graduate, your federal loans will go into repayment. At this point, you can consolidate your loans and combine them into one. It will simplify your loans and will allow you to change the terms, such as adjusting the repayment period or even lowering the overall interest rate. Be careful though – you never want to consolidate private loans with federal loans. You’ll lose all of the protections and flexible repayment options associated with the federal loans (i.e. income-based repayment). Consolidation is tricky and not always worth it, you should read up on optometry student loan consolidation at this link. 

Bi-Monthly Payments

Making bimonthly payments, instead of monthly payments can save you a lot of money on your optometry student debt. This is a well-known mortgage trick. Typically, loan banks require monthly payments. If you pay twice a month instead, you could save thousands of dollars and years off your loans. How?

  1. Let’s say you have the option to make a $1,000 payment once a month or $500 payments every 2 weeks.  Well, paying $1,000/month x 12 months = $12,000.  Making a $500/every 2 weeks x 52 weeks a year = $13,000.  You’re effectively paying an extra month of loans every year.
  2. The second reason why this works is assuming that your student loans are calculated DAILY, then making payments at a greater frequency will help you save on interest that is accruing every day. I’ve called the financial aid office at the Department of Education, along with different loan providers and they all suggested I contact my loan servicer about this assumption. After reaching out to my servicer, My Great Lakes, they did in fact verify that my student loans were calculated DAILY.

Here’s how this breaks down:

  • Let’s say you graduate with $150,000 in debt and it’s financed over 30 years at a fixed rate of 6.8%. Your monthly payments are about $978. If you make payments of $489 every 2 weeks, you’ll save close to $49,552 over the life of your loans.
  • Again, depending on what types of loans you took out, make sure to call your loan servicer and ask them if your student interest rates are calculated DAILY as it seems to vary.  I then used this website to calculate biweekly loan payments.

Here’s an example showing the number of payments in both scenarios. You can find this loan calculator at http://www.calculatorsoup.com/

Scenario 1 – Pay $978 / month @ 12 payments per year

Interest Compounded Daily

Thats 362 Payments

Total Payments: $353,395.73

Total Interest: $203,395.73

Screen Shot 2014-09-04 at 1.36.26 PM

Scenario 2 – Pay $489 / Biweekly at 26 payments per year

Interest Compounded Daily

Thats 594 Payments

Total Payments: $303,873.73

Total Interest: $153,873.73

Screen Shot 2014-09-04 at 1.56.04 PM

At the end of the day, if you pay your loans bi-weekly instead of monthly, you will save a total of $49,552. This is because of COMPOUNDING INTEREST. It is remarkable that such a small changes in the way you pay your loans can drastically change the course of your financial future. Give this thought before you make decisions, think about your life, your learn term goals, and your other investment options. Consider talking to a family member or financial advisor. Or just comment below and we will work with you!

Use Form 1098-E to Write Off Interest

Write off your student loans when you do your taxes by using form 1098-E – here is how.

Employer Assistance

Sometimes your employer will help you with your loans, especially if you work in a high demand area. Your employer may also offer to help with student loans if you relocate.

Reduced Rate for Auto-pay

If you decide to set up the auto-pay option to make your life easier, there is a reduced rate (0.25% with My Great Lakes, for example).

Use the Avalanche Methodoptometry loan debt

There are 2 methods to pay off student loan debt – the avalanche and snowball method. The order of which loans are paid off first is either highest-to-lowest interest rate (Avalanche), or lowest-to-highest remaining principle (Snowball). Unbury.me is a loan calculator designed to help you get debt-free as fast as possible. Once your loan information is entered, you may set the total amount you’re able to put towards loans in a month. If this amount is greater than the minimum you’re able to pay on loans, the extra money is put towards one loan every month to eliminate it. Once a loan is paid off, the money that was previously going towards that loan is now put towards the next loan, and so forth. Malpractice insurance is a necessity to not only practice optometry, but practice to your full scope comfortably and confidently. There are many insurance carriers available, the key is to do your due diligence in searching for a carrier that meets your needs and expectations.

The author of the content you just read, put in lots of work to provide you with this article. Even though we try our best, there is no guarantee the article is error free. NewGradOptometry.com, its sponsors, advertisers, staff and writers make no representation, warranty, or guarantee that this article and its contents are error-free and will bear no responsibility or liability for the results or consequences of the information contained within.

 

About Quy Nguyen, O.D.

Quy Nguyen, O.D.

13 comments

  1. Michael Do

    Awesome article. I think the simple act of biweekly payments is definitely overlooked or just not known while we are students.

  2. Great article, Quy! I like seeing how other ODs do things to lower debt. Personally I’ve been using the avalanche/snowball method to pay down the debt my wife and I have. We pay the highest interest loan first, but pay the loan with the highest interest and smallest principle down first. We have been fortunate with out finances and have been most certainly delaying gratification until three years down the line. The incorporation of my practice has provided much needed tax breaks as well, allowing us to pay around $7,500 per month to our loans. Our goal is to be debt free in 3 years.

    It’s certainly a challenge to put that much money to loans and not feel like your life is any different, but like you said, “I want to have a CHOICE later on in my life – a choice to live where I want, who I work for, and not have that decision be dictated by the fact that I have a lot of student debt.” That is what we all need to keep in mind, and remember that life is not a sprint, but a marathon.

    Great work, Quy! Hope all is well.

    Tom

  3. Quy Nguyen, O.D.

    Tom, glad you are doing well and being financially smart. Wish I could put $7,500/month down on my loans!

  4. Haha don’t get too excited fellas. My wife is an OD too so divide that by 2, but we are being aggressive to cut down on the future payments.

  5. @quy – Bi-weekly payments is a brilliant way of paying back loans that I had not thought of. Thanks for writing this article, Quy! That unburyme website has me contemplating cutting off my cable TV and brown bagging my lunches after seeing the sizable difference such a small amount more per month changes my paid-in-full date by years.

    @thomas – Glad to hear Christina and yourself both found nice paying jobs in the same vicinity, Tom! Hope all is well. You’ll be glad to know I’m taking care of your old stomping grounds in Ann Arbor.

  6. Another option is looking into loan repayment programs. I work with Indian Health Services near Albuquerque, New Mexico and gladly enrolled in the loan repayment program after residency.

    If you make a two-year commitment to a Native American health center, the federal government provides you with about 18,100.00 (after taxes) dispersed in one year increments. This provides with a total of about 36,000.00 over a two year span. After the initial two-year commitment, if you still have eligible debt and they have the funding, you can renew your loan repayment contract in one year increments. I’m surprised more students don’t know about this program.

    Check it out at http://www.ihs.gov/loanrepayment/

  7. I have a question regarding the biweekly payments. If you do direct debit to save the 0.25%, how can you break up that payment to become biweekly? Do the loan servicers give the option to do so or do you just adjust the amount that gets taken out?

  8. Rob Brenart

    Consider contacting your lender on bi-monthly payments. Some lenders will hold the money until the full payment is received and then apply it.

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