A new year often comes with new goals. One of them, for many medical residents, may be to get their finances in order, and the February slump is the best time to reconsider this vital issue.
Alyssa Schaefer is the Managing Director and Chief Experience Officer at Laurel Road, a preferred financial services provider for AMA members. She looked at some of the financial goals and barriers that medical residents face during an episode of the “Making the Rounds” podcast.
What you earn as a resident will likely only be a fraction of your salary. Yet your loans are due. Laurel Road takes this into account and offers products that can ease the burden, Schaefer said.
Laurel Road offers a “student loan [refinancing] for residents where you can actually pay $100 a month in residence, while setting a very low rate so that when you move out of residence you already have that rate locked in – which of course is a great time to do it, since the rates are so good right now,” Schaefer said.
“The biggest needs we hear from our physician members are, ‘Help me with my loans. I have $150,000, $200,000, $300,000 in debt now. I didn’t have to worry about paying it back, but now I do. Help me.’ And then we have a number of things that are really meant to guide and help physicians along this journey. And of course doctors don’t have the same background, but often they have similar debt levels.
“So we know what they want. You are savvy people at the end of the day and smart people. …I talked about it being personalized for doctors, but also helping to meet needs along the way. Not just when you are a participant, but through all stages of residency, fellowship, and ultimately being a participant.
AMA Member Benefits PLUS makes it easy to navigate your financial future. Whether it’s a home, student, resident or personal loan or insurance, AMA provides the information needed to align your finances and prepare for your future in the medical profession.
During the pandemic, federal student loan repayments were suspended for more than two years. Repayment of federal student loans is expected to resume on May 1. During the loan repayment holiday period, about two-thirds of borrowers who were able to take advantage of the break used the money to save and meet their financial goals, according to Laurel Road research.
“A lot of people have been able to build up their savings. It’s definitely something I would encourage more,” Schaefer said.
She advocated an approach in which residents build toward financial goals, such as buying a home, and chart a clear path and plan to achieve them.
Discover the four keys to buying a home during residency.
When the loan repayment suspension ends, rates will likely be lower on private loans than on public loans. Does that mean you have to refinance? How should this influence your repayment strategy? The answers to both questions are very personal.
“From a financial perspective, if you’re just looking for what makes the most sense to do with my money and you have all the job security in the world…what makes the most sense is is to get the lowest possible rate on your student loans, so in many cases that will involve refinancing and then paying off that student loan as quickly as possible,” Schaefer said.
Saving money that you could use to pay off loans probably isn’t a prudent strategy, she noted. But investing wisely can pay off more than paying off debt immediately. You can subscribe to “Making the Rounds” at Apple podcast, Spotify or any service you listen to podcasts.