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As a resident, Dr. Saira Z. worked in one of the most expensive places in the country—the New York City area. Besides managing the high cost of living on a residency budget, Saira was also paying back loans from medical school.

Figuring out how to stretch her $65,000 a year medical resident’s salary wasn’t easy, even after she got married. She and her husband tried to be as frugal as possible. When they took stock of their spending, however, they found places to cut back.

The couple drew up a budget to help them stay the course through Saira’s three-year residency and when her medical fellowship salary dipped. It also allowed them to set good habits that still serve them well. Saira and her husband now have twins, and she’s in a private practice.

As Saira learned, residency can test your finances. While you’re finally drawing an income—the average annual salary of a first-year resident is less than $63,000, according to 2023 data from the Association of American Medical Colleges—a residency budget needs to cover a lot. Your medical school finances likely include considerable student loan debt. The median medical school debt for the class of 2023 is $200,000, according to the Association of American Medical Colleges, which doesn’t include undergraduate student loans, credit card balances or other debt.

Having a financial plan is a way to make the most of your income and set up for the future. These tips for budgeting for residents may help you get started.

Identify Your Biggest Budget Busters

A budget can serve a variety of purposes. It can help you make progress toward your savings goals, adopt healthier spending habits, and pay down debt. It can even allow you to spot the biggest drains on your money so you can look for ways to curb spending.

For Saira and her husband, meals out with friends were a top budget buster. But they had no idea that was the case until they reviewed their finances. “You don’t realize eating out is such a huge expense until after the fact,” Saira says. As a result, the couple decided to temporarily stop going to restaurants, which allowed them to put that money into their savings.

Build Your Financial Foundation

Budgeting for medical residents should include working on your financial foundation, says Brian Walsh, CFP, senior manager, financial planning for SoFi. “These foundational pieces are so critical to establish,” Walsh says. “Then, once you get that big paycheck, it will be much easier to sock away 25% or more of your income toward retirement.”

Here are a few steps he recommends:

•  Pay off “bad debt.” Walsh defines “bad debt” as anything that accelerates consumption and comes with a high interest rate (such as credit cards).

•  Build up an emergency fund. This stash of cash should cover three to six months’ worth of your total living expenses and be placed in an easy-to-access place, like money market funds, short-term bonds, CDs or a high-yield savings account.

•  Protect your income. There are two types of protection you may want to consider. Disability insurance covers a portion of your income in the event you’re unable to work due to an injury or illness. Monthly premium amounts vary, but generally, the younger and healthier you are, the less expensive the policy. You may also want to consider purchasing a life insurance policy if other people depend on your income.

Recommended: Short Term vs. Long Term Disability Insurance

Start Saving for the Future

Next, Walsh suggests putting any leftover funds into retirement. Over time, as your emergency fund grows and “bad debt” diminishes, you’ll be able to put more money into retirement.

One simple way to build up savings now is to contribute to your employer’s 401(k) or 403(b) retirement plan, if one is available, and tap into any matching funds program. There’s a limit to how much you can contribute annually to either plan. In 2024, the amount is $23,000; if you’re 50 or older, you can contribute up to an additional $7,000, for a total of $30,500.

There are other investment vehicles Walsh suggests exploring if you have additional money to save, don’t have access to a 401(k) or 403(b), or simply prefer to have more control over your money. These include an individual retirement account (IRA), such as a traditional IRA or Roth IRA, both of which can offer tax advantages.

Contributions made to a traditional IRA are tax deductible, and no taxes are due until you withdraw the money. Contributions to a Roth IRA are made with after-tax dollars; your money grows tax-free and you don’t pay taxes when you withdraw the funds. However, there are limits on how much you can contribute each year and on your income.

Another option is a health savings account (HSA), which may be available if you have a high deductible health plan. HSAs provide a triple tax benefit: Contributions reduce taxable income, earnings are tax-free, and money used for qualified medical expenses is also tax-free.

Recommended: Budgeting as a New Doctor

Come Up With a Plan to Pay Student Loan Debt

As a resident, you have several priorities competing for a piece of your paycheck: lifestyle expenses, long-term savings goals, and medical student loan debt. Loan repayment typically starts six months after graduation, and options vary based on the type of loan you have.

If you have federal student loans and need extra help making payments, for example, you can explore a loan forgiveness program or an income-driven repayment (IDR) plan, which can lower monthly payments for eligible borrowers based on their income and household size. You also have the option to postpone payments during residency, but the interest will continue to accrue and add to your total balance.

Your medical student loan debt may feel overwhelming, but there are a couple of ways to consider tackling it. With the avalanche approach, you prioritize debt repayment based on interest rate, from highest to lowest. With the snowball approach, you pay off the smallest balance first and then work your way up to the highest balance.

While the right approach is the one you’ll stick with, Walsh often sees greater success with the snowball approach. “Most people should start with paying off the smallest balance first because then they’ll see progress, and progress leads to persistence,” he says.

Find Out If Refinancing Is Right for You

You may want to consider refinancing your student loans as part of your repayment strategy. When you refinance, your existing loans are paid off and you get one new loan. You may be able to get a lower interest rate, which could potentially reduce your monthly payments. Some lenders, including SoFi, also provide benefits for residents and other medical professionals.

Though the refinancing process is fairly straightforward, “People overestimate the amount of work it takes to refinance and underestimate the benefits,” Wash says. A quarter of a percentage point difference in an interest rate might seem small, but if you have a big loan balance, it could save you quite a bit.

However, refinancing may not be right for everyone. By refinancing federal student loans, you could lose access to benefits and protections, such as income-driven repayment and student loan deferment. Your best bet is to weigh all of your options and decide what makes the most sense for your situation.

The Takeaway

After years of medical school, you’re finally starting to make some money. But you also likely have a lot of student loan debt that you need to start paying back during your residency. Having a solid plan for repaying your loans, and using a few key strategies to start saving money for your future, can help position you for long-term financial success.

If part of that plan includes refinancing your student loans, SoFi can help. With our medical professional refinancing, you may qualify for a special competitive rate if you have a loan balance of more than $150,000. You can also reduce your monthly payments to as low as $100 during residency, for up to seven years.

Photo credit: iStock/Andrei Orlov

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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If you’re a new dentist, you have plenty of reasons to smile about your profession. You can start practicing soon after completing dental school, and you stand to earn a healthy salary right off the bat. The average entry-level dentist in the U.S. earns $189,979 a year, according to ZipRecruiter.

At the same time, you also need to figure out how to pay off your student loans. According to the American Dental Association (ADA), the average dental school graduate leaves school with nearly $300,000 in education debt. By comparison, medical school graduates owe an average of $243,483 in total educational debt, according to the Education Data Initiative. That’s where budgeting for dentists comes into the equation.

How Budgeting Helps

Starting a career with a six-figure loan debt may feel overwhelming, but budgeting for dentists can help. In fact, now is an ideal time to establish your saving and investing strategies, says Brian Walsh, CFP®, Head of Advice and Planning for SoFi. “When you’re right out of school and your lifestyle is already lean, you can more easily build a pay-yourself-first mentality without making any drastic adjustments,” he explains. “It’s significantly easier to do it at this point instead of when you have a house, a car, and a family and then need to start making cuts.”

Here are some strategies to help you create your budget and plan for the future.

Protect Your Income

With its repetitive motions and constrained work area, dentistry can be physically taxing work, especially on the back and joints. According to the ADA, dentists have a one in four chance of becoming disabled. To mitigate your risk, you may want to consider disability insurance, which covers a percentage of your income if you become unable to work due to an illness or injury.

If you purchased a policy during dental school, you have the option to increase your coverage now that you’re making more. If you don’t have a policy, you can buy one as part of a group plan or as an individual. Find out if your employer offers it as part of your benefits package; some do. Monthly premium amounts vary, but in general, the younger and healthier you are, the cheaper the policy.

Recommended: Budgeting as a New Doctor

Don’t Overspend

Dropping a bundle on meals out? Clicking “add to cart” more frequently? Enjoy your hard-earned income, but don’t go overboard on splurges.

To help you focus on where you put your money, consider prioritizing your financial goals — saving for a home, for example, or paying off your debt. This is an important strategy in budgeting for dentists. Walsh also recommends that early-career professionals use cash or debit cards for purchases to build up good spending habits, and automate their finances whenever possible. For example, pre-schedule your bill payments and set up automatic contributions to your retirement account.

Kick-Start a Savings Plan

Tackling student loans is likely a top priority for you right now, but just as important is creating a savings plan.

Walsh recommends early-career dentists set aside 30% of their income for savings. Of that, 25% should be for retirement and 5% for other savings, like building an emergency fund that can tide you over for three to six months. The remaining 70% of your income should go toward expenses, including monthly dental school loan payments.

The sooner you start saving and investing, the sooner you can enjoy compound growth, which is when your money grows faster over time. That’s because the interest you earn on what you save or invest increases your principal, which earns you even more interest.

You may even want to consider buying a dental practice at some point, so that’s another reason budgeting for dentists makes sense.

Explore Different Ways to Invest

As a high earner, you may need to do more with your money than max out your 401(k) or 403(b), though you should do that, too. Walsh suggests new dentists leverage a combination of different investments. This strategy, called diversification, can help shield you from risk. Here are some types of investments to consider:

•  A health savings account (HSA), which provides a triple tax benefit. Contributions reduce taxable income, earnings are tax-free, and money used for qualified medical expenses is also tax-free.

•  An individual retirement account (IRA), like a traditional IRA or Roth IRA, can offer tax advantages. Contributions made to a traditional IRA are tax deductible, and no taxes are due until you withdraw the money. Contributions to a Roth IRA are made with after-tax dollars; your money grows tax-free and you don’t pay taxes when you withdraw the funds, provided certain requirements are met. However, there are limits on how much you can contribute to an IRA each year.

•  A Simplified Employee Pension IRA (SEP IRA) can be a good option if you’re a solo practitioner. “Total contributions can be just like those with an employer-sponsored plan, but you control how much to contribute, up to a limit,” Walsh says. Contributions are tax-deductible, and you don’t pay taxes on growth until you withdraw the money when you retire.

•  After-tax brokerage accounts offer no tax benefits but give you the flexibility to withdraw money at any time without being taxed or penalized.

Two investments to consider bypassing are variable annuities and whole life insurance. Neither is a suitable way to build wealth, Walsh says.

Whatever your strategy, keep in mind that there may be fees associated with investing in certain funds. Those can add up over time, Walsh points out.

Determine a Student Loan Repayment Strategy

Since new dentists tend to start earning money more quickly than other health care professionals, they are often better positioned to tackle loan repayments more aggressively.

But your repayment strategy will depend on a number of factors. To start, consider the types of student loans you have. Federal loans have safety nets you can explore, like loan forgiveness and income-driven repayment (IDR) plans, which can lower monthly payments for eligible borrowers based on their income and household size.

Once you’ve assessed the programs and plans you’re eligible for, figure out your goals for your loans. Do you need to keep monthly payments low, even if that means paying more in interest over time? Or are you able to make higher monthly payments now so that you pay less in the long run?

If you have multiple loans and/or other debts, there are two approaches you might consider for paying them down. With the avalanche approach, you prioritize debt repayment based on interest rate, from highest to lowest. With the snowball method approach, you pay off the smallest balance first and work your way up to the highest balance.

While both have their benefits, Walsh often sees greater success with the snowball approach. “Most people should start with paying off the smallest balance first because then they’ll see progress, and progress leads to persistence,” he says. But as he points out, the right approach is the one you’ll stick with.

Consider Your Refinancing Options

Paying down debt has long-term benefits, like lowering your debt-to-income ratio and building your credit. In order to help do this, you may want to include refinancing your student loans in your student loan repayment strategy.

When you refinance, a private lender pays off your existing loans and issues you a new loan. This can give you a chance to lock in a lower interest rate than you’re currently paying and combine all of your loans into a single monthly bill, which can be easier to manage. Some lenders, including SoFi, also provide benefits for new dentists.

The refinancing process is straightforward, yet some common misconceptions persist, Walsh says. “People overestimate the amount of work it takes to refinance and underestimate the benefits,” he says. A quarter of a percentage point difference in an interest rate may seem inconsequential, for instance, but if you have a big loan balance, it could save you thousands of dollars.

That said, refinancing may not be right for everyone. If you refinance federal student loans with a private lender, for instance, you lose access to federal benefits and protections, such as forgiveness programs and forbearance. Consider all your options and decide what makes sense for you and your financial goals.

The Takeaway

Dentistry can be a rewarding career with the potential to earn a healthy salary right from the start. However, you’re likely to have a significant loan debt when you graduate from dental school. Fortunately, balancing your goals with some smart saving, investing, and loan repayment strategies can help you get your finances on firm footing.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

Photo credit: iStock/5second

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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After getting approved for a student loan, there is one more step that must be completed before your funds are disbursed: the loan certification process. This step is designed to protect you as a borrower.

Keep reading to find out more about student loan certification, how long it takes, and the process for federal and private student loans.

What Is Student Loan Certification?

Student loan certification is a mandatory step before loan funds can be sent to your school. Your school will verify enrollment details, such as your expected graduation date, your year in the program, and the loan amount.

For private student loans, a Private Education Loan Applicant Self-Certification form is required. This highlights borrower-protection language, informs you of your ability to submit a Free Application for Federal Student Aid (FAFSA®), and explains how a private loan might affect your other financial aid awards. The self-certification step also provides your lender with your enrollment details and financial aid received.

Recommended: FAFSA Guide

Why Do Lenders Need Student Loan Certification?

Student loan lenders require a certification before disbursement under the Higher Education Act of 1965 and the Truth in Lending Act.

Certification ensures that the lender and your school have done their due diligence to inform you about federal financial aid options, confirm that you meet academic enrollment requirements for the loan, and disclose the difference between your school’s cost of attendance (COA) and the financial assistance you’ve received for that period.

Recommended: The Ultimate Student Loan Terminology Cheat Sheet

Do Federal and Private Student Loan Lenders Need the Same Certification?

No, the loan certification process is different for federal vs. private student loans.

For federal aid, your school is responsible for determining the type of student aid you’re eligible for, including federal student loans. If your school finds that you’re eligible for federal loans, it will record its certification of your eligibility into the Common Origination and Disbursement system. This system tracks your loan data throughout your academic career.

The loan certification process for private lenders has a different intent. Your lender can request a completed Self-Certification form from you, which includes a section for your institution to fill out. Alternatively, your lender can communicate directly with your school for its certification sign-off.

Here’s a helpful refresher on how student loans work.

What Is the Process of Student Loan Certification?

After a lender approves your loan application and you accept the loan and its terms, the student loan certification process is automatically initiated. As a student borrower, you may not need to do anything. However, make sure to follow the process, via any emails or notifications from your lender or school, to make sure everything runs smoothly and no additional information is needed from you.

Here is the process of student loan certification:

1. Lender Sends Loan Details to the School

The lender forwards your loan information to your school for certification. This includes details you’ve submitted during your application, like your personal information, enrollment information, and the loan amount requested.

2. School Reviews Loan Details

During this step, your school will certify that your enrollment details are correct, the estimated COA for the enrollment period, and how much aid you are receiving during the period.

Private student loan amounts can’t exceed a student’s COA, minus existing financial aid. If your loan details are correct and the amount is within the unfunded COA gap, the school can certify your loan with no changes.

Alternatively, the school can certify your loan with changes, either to reduce the loan amount or correct your enrollment information, if needed. It can also deny the loan certification, which might happen if it can’t verify that you’re enrolled or you already have sufficient financial aid to cover your COA.

Recommended: How To Apply for Student Loans

3. Your Lender Provides a Final Loan Disclosure

Your lender will notify you when your student loan certification is complete. At this time, it will provide you and your student loan cosigner, if applicable, with the final loan disclosure.

If your loan amount was lowered by your school, this is where you’ll see the new amount outlined in the updated disclosure agreement.

4. “Right-to-Cancel” Waiting Period

After the borrower has signed the final loan disclosure, lenders are not allowed to disburse funds right away. Federal law requires a waiting period of three business days after the lender sends you the final disclosure.

This is another layer of borrower protection that gives you time to cancel the loan, if desired, with no penalty.

5. Lender Disburses Loan Funds

After the waiting period expires, the lender can send certified student loan disbursements directly to your school, on the date requested by your institution.

How long school certification takes for a loan varies by school. Generally, it can take up to five weeks for schools to complete student loan certification, but sometimes it’s longer.

Additionally, loan certification is often done in the weeks before the start of classes. Enrollment status can change at the last minute, as when a student drops out or reduces their course load. The timing helps schools process certifications based on the most current information.

Can Student Borrowers Hurry Along the Certification Process?

It’s true that the loan certification process can be lengthy, but there’s not much that can be done to hasten it. The best that student borrowers can do is to stay on top of emails and account notifications from their lender, informing them of status updates and next steps.

What Happens if a School Doesn’t Certify That You Are a Student?

If your school doesn’t certify your enrollment status, your lender can’t legally disburse the loan funds to your school. At best, this results in payment delays as you sort things out with your financial aid office. At worst, it halts disbursement entirely, if your school can’t certify that you are, in fact, an enrolled student.

What to Do if It Is the School’s Error

If you believe a mistake has been made on your student loan certification, contact your financial aid department immediately. Find out what the school needs from you to certify your enrollment and loan.

Additionally, ask what will happen to your enrolled courses while you figure out a resolution. The last thing you want is to get dropped from your classes.

What to Do if It Is the Student’s Error

Student loan certification might be in limbo because of an oversight on your part. This can come up, for example, if you forget to enroll in classes.

If you’re in this situation, reach out to your school’s admissions and records department or your degree program’s department for guidance about what you need to do. Make sure to note that you are waiting on private student loan certification needed for disbursement.

The Takeaway

The loan certification process can feel like another hurdle to overcome in financing your education. However, it’s a step that’s meant to protect student borrowers and keep you aware of your rights.

The process and intent of certification are different for private student loans and federal student loans. If you do not get certified, don’t panic. Discuss the issue with your school to find out if the error is yours or the school’s, and take immediate steps to resolve it.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

What is the certification process for student loans?

The certification process for student loans involves the college verifying a student’s enrollment status, academic progress, and loan eligibility. The school confirms the student’s loan amount aligns with federal or institutional limits and tuition costs. Once certified, the lender disburses funds directly to the school to cover education expenses.

How long does it take to get a student loan certified?

It typically takes a few days to several weeks for a student loan to be certified, depending on the school’s processing time and the lender’s requirements. Factors such as enrollment verification, financial aid status, and the school’s workload can influence the certification timeline, potentially causing delays.

What is self-certification for a student loan?

Self-certification for a student loan is often required for private student loans to ensure borrowers understand their financial responsibility and to prevent borrowing more than necessary for educational expenses.

Photo credit: iStock/Ridofranz

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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