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If you’re facing a financial squeeze, you may be able to get a temporary break on repaying a student loan with student loan forbearance. The catch is you could end up owing more.

That’s because interest accrues on nearly all federal student loans in forbearance and on all private student loans, if the private lender offers such a program. (Note: Previously, this accrued interest would be added to the loan principal following the period of forbearance — a process known as interest capitalization — but new rules issued by the Department of Education in July 2023 eliminated capitalization in this scenario.)

Even though a payment reprieve through forbearance can bring short-term relief, it might be worth exploring alternatives. Read on to learn how student loan forbearance works — and other options you may want to consider.

What Does Student Loan Forbearance Mean?

What is forbearance? It’s an approved period during which a borrower is allowed to temporarily suspend loan payments.

There are two main types of federal student loan forbearance: general and mandatory.

General Forbearance

With general forbearance, sometimes called discretionary forbearance, your loan servicer will decide whether or not to grant your request for forbearance if you are unable to afford your loan payments.

General forbearance is available for Direct Loans, Federal Family Education Loan (FFEL) Program loans, and Perkins Loans for up to 12 months at a time. Borrowers still experiencing hardship when the forbearance period expires can reapply and request another general forbearance.

Mandatory Forbearance

Your loan servicer is required to grant you forbearance if you meet certain criteria including:

•   You are serving in a medical or dental internship or residency program, and you meet certain requirements.

•   The total amount you owe each month for all federal student loans is 20% or more of your total monthly gross income, for up to three years.

•   You are serving in an AmeriCorps position for which you received a national service award.

•   You are performing a teaching service that would qualify you for teacher loan forgiveness.

•   You qualify for partial repayment of your loans under the Department of Defense Student Loan Repayment Program.

•   You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.

Direct and FFEL loans qualify for mandatory forbearance for any of the above reasons. Perkins Loans also qualify if a borrower has a heavy student loan debt burden.

Mandatory forbearance is to be granted for no more than 12 months at a time, but it can be extended if you continue to meet eligibility requirements.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Private Student Loan Forbearance

What is forbearance for private student loans? Some private lenders offer this option.

If you’re having trouble making private student loans payments, contact your loan holder immediately. They might offer you interest-only payments, interest-free payments, or a change in interest rate. It’s important to get in touch with your loan provider before you miss a payment and risk your loan going into default.

Who Should Use Student Loan Forbearance?

Forbearance on federal student loans may be a good choice if you don’t qualify for deferment or an income-driven repayment plan, and your hardship is temporary.

What is student loan deferment? While both student loan deferment and forbearance offer the opportunity to press pause on your student loan payments, there’s a key difference: During deferment, you may not have to pay the interest that accrues on Direct Subsidized Loans, Federal Perkins Loans, and the subsidized portion of Direct Consolidation Loans or FFEL Consolidation Loans.

With private student loans, borrowers anticipating trouble making payments would be wise to contact their loan servicer to seek a solution. Whether the lender calls it deferment or forbearance, interest typically accrues and it is the borrower’s responsibility.

Is Student Loan Forbearance Bad?

As a stopgap measure, no.

Student loan forbearance certainly beats having late payments or a loan default on your credit reports. Most federal student loans enter default when payments are 270 days past due, but federal Perkins Loans and private student loans can go into default after just one missed payment.

If you default on a student loan, the entire balance of a federal student loan (principal and interest) becomes immediately due. (Note that federal borrowers are protected from default during the on-ramp period from October 2023 to September 2024.)

If your federal student loan is in collections, and you do not enter into a repayment agreement or you renege on the agreement, the collection agency can garnish your wages — up to 15% of your disposable pay.

As if that weren’t enough of a deterrent, borrowers in default can expect to have part or all of their tax refund taken and applied automatically to federal student loan debt.

Private student loans typically go into default after 90 days. The lender may hire a collection agency or file a lawsuit. Any collection fees are stated in the loan agreement.

Recommended: Private Student Loans Guide

Pros and Cons of Student Loan Forbearance

Postponing your student loan payments has its advantages and disadvantages.

Pros

•   Forbearance can help you avoid the negative financial impact of going into default, including the risk of having your wages garnished.

•   It does not affect your credit scores because the missed payments are not reported on your credit reports.

•   It can give you a chance to catch your breath when money is tight.

Cons

•   Interest will accrue during forbearance, which means you’ll likely have a larger loan balance waiting for you when you resume repayment.

•   If you’re pursuing federal student loan forgiveness, any period of forbearance probably will not count toward your forgiveness requirements.

•   It’s a short-term solution, typically 12 months, though you can renew if you’re still struggling to pay your loans.

Alternatives to Forbearance

Income-Driven Repayment Plans

If you’re having trouble making student loan payments because of circumstances that may continue for an extended period, or if you’re unsure when you’ll be able to afford to resume payments, one option is an income-based repayment plan.

Monthly payments are determined by your income and family size. After 20 or 25 years on regular, on-time payments, any remaining loan balance may be forgiven depending on the type of loan you have.

The Department of Education recently introduced the SAVE plan, a new income-driven repayment plan. Depending on your financial circumstances, if you qualify, your monthly payments could be as low as $0, and interest does not accrue. If you’re eligible, this is a better option than forbearance.

Student Loan Refinancing

Refinancing student loans with a private lender is another option to consider. You take out one new loan, hopefully with a lower interest rate, to pay off one or more old loans.

One of the other advantages of refinancing student loans is that you may also be able to change the length of the loan.

Borrowers eligible for student loan refinancing typically have a solid financial history, including a good credit score. It’s important to note that if you refinance federal student loans with a private lender, you give up federal benefits like income-driven repayment, loan forgiveness, and federal forbearance.

Recommended: Student Loan Refinancing Calculator

The Takeaway

What is student loan forbearance? Student loan forbearance is an option to temporarily suspend loan payments when you’re struggling to make them. But in almost all cases, interest will accrue and be added to the loan. Student loan deferment, income-driven repayment, or refinancing could make more sense for you.

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.

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.

Staying on top of student loan repayments is an important part of your overall financial health. If you’re concerned about making payments on time, or if you’re just reevaluating your budget, you may be wondering how to lower student loan payments.

Many borrowers may be eligible for options that can lower their student loan payments, from changing your repayment term (which may result in paying more interest over the life of the loan) to signing up for an income-driven repayment plan. Here are some tips you might want to consider if you’re looking to lower your loan repayment costs.

Can I Lower My Student Loan Payments?

While there’s no magic wand that can wipe away your student loans, there are some ways you may be able to lower your monthly payments. The Department of Education offers two income-driven repayment (IDR) plans. With an IDR plan, the amount you pay will be determined by your income, the size of your family, and where you live, and it won’t be more than 10% of your discretionary income.

You may also have the option to refinance your loans at a lower interest rate or with a longer loan term, both which may lower your monthly payments. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.) There are many factors to consider before refinancing, but if you’re struggling with your monthly payments, it’s worth doing the research to see if it works for you.

Understanding Your Current Student Loan Payments

Before you can determine if you can lower your student loan payments, it’s important to know the type of loans you have since this can affect your repayment options.

If you have federal student loans from the U.S. Department of Education, you may be able to apply for federal plans that can help lower your monthly student loan payments. You can find all of your federal student loans and the individual loan servicers, by logging into My Federal Student Aid . If you have private student loans from a bank or another financial institution, there are fewer options available to lower your monthly payments.

Federal loans are placed by default in the Standard Repayment Plan, which sets your monthly payments at a static amount so you will have your loans paid off in 10 years, if not less. Some private loans also follow the 10-year repayment timeline, but it varies depending on your lender.

The next step is to assess how much debt you have in total. By calculating what you owe, you can get a better understanding of your current repayment plan and whether you want to consider changing it.

Once you have all of your loan information, you can use a student loan payoff calculator or contact your servicer to find your current payoff dates for your student loans. The calculator can also help you determine which repayment plans you qualify for. Keep in mind that if you change to a longer term to lower monthly student loan payments, you’ll need to take more time to pay off your loans, and you may end up paying more over the life of the loan, since interest will continue to accumulate.

If you only need temporary relief, consider contacting your loan servicer to see if you are eligible for student loan deferment or forbearance. Both options let borrowers temporarily pause or lower loan payments for reasons such as unemployment or being enrolled as a student. Depending on the type of loan you have, interest may still accrue during this time.

Recommended: What Student Loan Repayment Plan Should You Choose? Take the Quiz

How to Lower Student Loan Payments

1. Sign up for Automatic Payments to Stay on Time

Some student loan servicers offer incentives if you elect to make automatic payments, such as a 0.25 percent interest rate reduction. Auto payments can also help you incorporate your student loan payments into your budget as a fixed expense that must be accounted for every month. On-time payments may also help your overall credit score.

2. Contact Your Loan Servicer About Your Repayment Plan

If you’re interested in changing federal repayment plans to help lower student loan payments, contact your loan servicer to learn more about your options.

One option is the Graduated Repayment Plan, which can keep your payment timeline to 10 years (depending on how much you owe), but starts out with lower payments and then increases the payment amount over time (usually every two years).

If you have more than $30,000 in eligible outstanding student debt on most loans, you can also ask about the Extended Repayment Plan, which extends your loan repayment timeline to 25 years.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

3. Apply for Income-Driven Repayment for Federal Loans

Most federal student loans are eligible for at least one income-driven repayment plan. If you’re on an income-driven repayment plan, and you need to defer your loans because of economic hardship or if you make so little you qualify to pay nothing toward your loans each month, the months when you’re in deferment or paying $0 still count toward your total repayment period.

On an IDR plan, how much you owe each month is based on your discretionary income, which the federal government defines as “the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.” You can use the Department of Education’s Loan Simulator to get a better sense of how much you would owe with one of these plans and how long it will take you to pay them off.

Both IDR options offer loan forgiveness after borrowers make consistent payments for a certain number of years, ranging from 10 to 25, depending on the type of program you qualify for. You may have to pay income tax on the amount that’s forgiven, though there’s a temporary tax rule that exempts any forgiven debt from federal income taxes through 2025.

Here are the two IDR plans currently accepting new federal borrowers:

•   Income-Based: Payments are generally 10% or 15% of your discretionary income, depending on when you first received your student loans. Any outstanding balance is forgiven after 20 or 25 years, but you may have to pay income tax on the amount that’s forgiven. You must have a high federal student loan debt relative to your income to qualify.

•   Saving on a Valuable Education (SAVE): The SAVE Plan is the new name of the Revised Pay As You Earn (REPAYE) Repayment Plan. Payments are generally 5% of your discretionary income. Outstanding balances may be forgiven after 20 to 25 years, depending on whether the loans were for undergraduate or graduate study. There is no income requirement to qualify for the SAVE plan, and it’s available to all Direct Loan borrowers with eligible loan types.

These plans require borrowers to reapply every year. If you are employed by certain government agencies or a qualifying not-for-profit and are seeking Public Service Loan Forgiveness (PSLF) , you must repay your student loans under one of these income-driven repayment plans (there are other qualifying factors, too). Keep in mind, it’s always free to apply for these federal student loan assistance programs, and they are the easiest and best way to lower your monthly federal loan payments if you qualify.

4. Learn About Loan Repayment Assistance Programs

If you’re eligible, a Loan Repayment Assistance Program (LRAP) can provide funds to help you lower student loan payments. Since private loans are not eligible for the federal income-based repayment plans mentioned above, an LRAP could be helpful for those with private student loans.

LRAPs also often include a requirement that you work in your eligible job for a certain number of years, typically in public service — and the assistance may or may not count as taxable income. If your income after graduation is modest, an LRAP can help to repay loans, whether federal, private, or parent PLUS.

You may want to investigate limitations such as which of your loans are eligible and income caps. You can also research private grants that can help cover the cost of your student loans and lower loan payments after graduation.

5. Refinance Your Student Loans with a Private Lender

Refinancing is an option that may be most helpful if you have student loans with high interest rates or private student loans.

When you refinance a student loan, a lender pays off your existing loans and gives you a new loan with new terms. So you will have one private refinanced loan to pay back.

Refinancing could save you money in the long run if you get a lower interest rate, or you could change your term to get more time to pay off your loan and lower the cost of your monthly student loan payments (though you may pay more in interest in the long run).

Keep in mind, however, that if you refinance a federal student loan, you’ll lose access to federal benefits and protections, such as income-driven repayment plans or Public Service Loan Forgiveness.

You can choose to refinance just your private loans while putting your federal loans into an income-based repayment plan to get the best of all options.

What Happens if You Can’t Pay Your Student Loans

With most federal student loans, if you don’t make a payment in more than 270 days, you’ll default on the loan. Private loans are often placed in default as soon as after 90 days.

Defaulting can impact your credit score, and have other negative consequences, including losing eligibility for deferment, forbearance, and other valuable repayment options. Another consequence of default is loan acceleration, when the unpaid balance on your loan immediately comes due.

With the end of the student loan pause, the Department of Education is giving those whose loans are in default a chance at getting back on track with the Fresh Start program. Borrowers in default must apply for the Fresh Start program and then enroll in an income-based repayment plan. Their loans will be removed from “defaulted status” and the record of the default will be removed from their credit report.

Refinancing Student Loans With SoFi

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.

FAQ

Can you negotiate student loans down?

You generally can’t negotiate student loans unless you’ve stopped making payments and your loans are delinquent or in default, a situation which has serious financial consequences, such as potentially damaging your credit score or having your wages garnished. There are other options to lower student loan payments, however. If you only need temporary relief, you can contact your loan servicer to see if you’re eligible for deferment or forbearance. If you have federal loans, you may be able to change your loan term or enroll in an income-driven repayment plan. Borrowers with private loans can explore refinancing student loans with a private lender.

How do I negotiate student loan payoff?

If your student loans are delinquent or in default, you may be able to negotiate a settlement for a lower amount, but this is generally seen as a last resort because of the negative financial consequences. Contact your lender to see what other options may be available to you.

What is average student loan debt?

The average student borrower has $37,338 in student loans to pay off, according to The Education Data Initiative.

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.

College is expensive, and for many families, it’s a group effort to pay tuition, fees, and other expenses. Both parents and children may choose to take out student loans. And in some cases, parents might also help pay off their child’s student loan debt after graduation. But before you take out your checkbook, there are some things to be considered.

Ahead, we look at ways parents can help their children pay off their loans as well as pros and cons of helping with such a big financial expense.

Things to Consider Before Paying Off Your Children’s Student Loans

While there are no rules restricting parents from paying back their children’s student loans, there are a few things to think about before you do.

1. Gift Taxes

If you choose to pay off your child’s student loan in a lump sum, you may need to file a gift tax return and pay any applicable gift tax . The person who makes the payment as a gift pays the tax, not the recipient, according to IRS guidelines. In 2023, a parent may gift their child up to $17,000 before the gift tax comes into play (or two parents could gift one child up to $34,000). Even once that threshold is reached however, a tax is not immediately triggered; rather, the excess gift is added to the lifetime gift tax exclusion, which in 2023 is set at $12.92 million. In other words, paying off your children’s student loans is unlikely to lead to tax liability on its own.

2. Retirement

Parents should consider how helping their child (or children) pay off student loans might affect their retirement plans. Because parents are closer to retirement age than their adult children, it is often difficult for parents to build back up their nest egg if they deplete some or all of it helping pay back their children’s student loans.

3. Home Equity

Some parents decide to avoid using their retirement funds by tapping their home equity line of credit instead. But before you sign on the dotted line, you might want to consider the repercussions. You will want to make sure you have the necessary time to pay back that line of credit. Many borrowers opt for a 10- or 15- year home equity loan, but that may be risky if you are only 10 years from retirement.


💡 Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.

How Parents Can Help Their Children Pay Off Their Student Loans

There’s a lot of factors to consider if you want to help pay off your child’s college loans, especially if you’re nearing retirement. Here are several ways you may want to help your child repay their loan.

1. Making Small Payments During College

Although most student loans don’t need to be repaid until afer your child graduates, making small monthly payments — even as little as $25 a month — while your child is still in college may lower their debt by a few thousand dollars.

2. Making an Occasional Loan Payment as a Gift

When holidays and birthdays come around, instead of buying your child tickets to a concert or the shoes they’ve been coveting, consider making an extra payment on their student loan.

You can ask grandparents and aunts and uncles to do the same, if they are so inclined or have no idea what to give your child for their birthday or the holidays.

Any extra payments beyond the minimum monthly payment should be applied to the principal, not to their next monthly payment. By applying the payment to the loan’s principal balance, they may be able to save on interest payments in the long run. Most loan providers will allow you to make extra principal-only payments.

3. Paying Off Private Loans First

If your child has a mix of private and federal loans, you could offer to pay off the private loan while they continue to make monthly payments on their federal loan. Since private loans typically have higher interest rates, paying that loan off first might go a long way to helping your child pay back their loans quicker.

Not sure what your child’s monthly student loan payments will be? You can use our student loan calculator to estimate how much they could be paying each month. You can then decide if you want to give them money each month to go toward their payments, which in turn can help them pay off their student loans faster.

Furthermore, your child’s federal loans come with certain federal benefits such as income-driven repayment plans, deferment, forbearance, and access to certain loan forgiveness programs. Private loans don’t enjoy those same federal benefits, which may be another argument for paying off private loans first.

4. Helping with Other Expenses

If paying off your child’s student loans is too expensive, consider helping them with some of their other monthly expenses that aren’t as steep. Perhaps pay an unexpected medical bill for them, offer to buy a week’s worth of groceries, or maybe surprise them with dinner and a movie once a month.

5. Considering a Parent PLUS Loan

If your child is still in school, and you want to help them with tuition, you may want to consider a Parent PLUS loan, which is a federal student loan that is available to the parents of a dependent undergraduate student. The interest rate is 8.05% for a Parent PLUS loan disbursed between July 1, 2023, and before July 1, 2024.

While credit scores aren’t considered when determining eligibility for federal student loans, parents cannot typically qualify for these loans with “adverse credit history.”


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

6. Applying for a Private Parent Loan

If you don’t qualify for a federal loan for parents, you may want to consider taking out a private loan to help fund your child’s education. Keep in mind that you will be the only borrower. This is very different from having your child named as the borrower, and you named as the cosigner.

Parents who take out loans need to be careful they aren’t taking on more debt than they can pay back in their lifetime.

7. Refinancing the Student Loans

If you have a Federal Parent PLUS loan, you might be able to save money and simplify your payments by refinancing your Parent PLUS loan.

Or you can help your child refinance their student loans by cosigning and potentially save them money over the life of the loan if you qualify for a lower interest rate. (This is usually true provided you do not extend the loan term.) Borrowers should keep in mind that refinancing their federal loans will disqualify them from all federal benefits, including income-based repayment plans and potential forgiveness.

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.

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.

While medical doctors have high earning potential, the first few years of a doctor’s career — known as residency — tend to be defined by long hours and relatively low pay. So if you’ve got a medical career ahead of you — and medical school student loans to pay off — what sort of financial life can you expect? In this article we’ll explore the average pay for medical residents, and what they can do to manage their finances during this time.

How Much Do Medical Residents Make?

So, how much do doctors make during residency? According to the Association of American Medical Colleges, the average medical resident salary was $60,373 as of July 2022 . After federal and state taxes (assuming an average tax rate of 8.9%), this leaves the average medical school resident with $3,797.73 to spend each month.

Medical residents are known to work very long hours. The Accreditation Council for Graduate Medical Education requires hospitals to ensure that residents work no more than 80 hours a week. If you do the math, an annual salary of $60,000 breaks down to just over $14 an hour if a resident puts in a full 80 hours a week.

Making that money stretch can be a challenge — especially in high cost-of-living areas. To help, here are five tips for getting by (and even thriving) while living on an average resident salary.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

How to Get by on a Medical Resident’s Salary

1. Make a Simple Budget

The average resident has little time to keep track of their expenses, but building a simple budget could be the difference between making it work and ending up short. Your first step should be to make a list of all “necessary” spending, such as rent, utilities, transportation, and food.

Next you’ll want to look how much you bring home each month, including your resident’s salary and any additional income from your partner or family support. Then look at how much money you have left over. That’s how much you have to spend on “extras” each month, like dining out, travel, or clothing. You might decide to set spending limits for each category (for example, $100 for eating out) or monitor your spending as the month progresses. Or, you can do both.

2. Consider Personal Preferences and Trade-Offs

A budget can feel like a hassle, but if you set it up right, it can also be freeing. By knowing exactly how much you can spend, you can then decide what’s important for you to prioritize and what you don’t mind cutting out.

Maybe you’ll decide that you want to cut cable, but you don’t want to stop meeting up with friends at your local wine bar. Or perhaps you’ll give up eating out so you can spend more on rent. Making a budget is just analyzing each trade-off. Ask yourself, “Do I want this, or something else?”

3. Focus on Fixed Costs

One substantial way you can make an impact on your budget is by making “big wins” on fixed costs, such as housing, car payments, or utilities. For example, lowering a bill by $20 each month is going to have a bigger effect than saving a few dollars on small purchases. Looking at your own fixed spending, where could you ask for better rates? Or cut back entirely?

While you’re at it, look at your subscription services and other memberships. Though not often considered a “fixed cost,” they can add up quickly to become a significant expense. When you put them on autopay, it’s easy to forget about them and miss the chance to cancel them each month or year. Take time to go through your credit card statement to make sure you’re not paying for a service that you’re not able to use because you’re so busy. Try to eliminate one or two for automatic monthly savings.

4. Share a Living Space

When you’re trying to save money, there’s usually no financial win that’s bigger than saving on your housing costs. To do this, you can move into a more affordable place, live with roommates, or rent out a room in your place. Not only can a roommate help you save on rent, but on utilities like water, electric, and cable.

Some folks don’t like the idea of having roommates because they lose some privacy. But if you’re a busy resident who’s not home very much and is trying to eke by on a small salary, it can be a great way to save money.

5. Choose Less Expensive Transportation

Transportation may be your second biggest expense after housing, especially if you’ve got car payments. But even if you’ve already paid off the vehicle, you’ll need to cover the cost of car insurance, as well as maintenance and sometimes parking. It can add up.

If you’re living in an area with good public transportation, or you’re able to live within walking distance of the hospital, you might want to get rid of your car to save money. In some areas, Uber or Lyft offer a flat-rate, monthly pass option that can be less expensive than owning and maintaining a car.

If you’re not ready to sell your car quite yet, simply try using it less. Even this small act may save you money each month. For example, if you’re spending $120 per month on gas but could ride public transportation for $30 per month, you may save over $1,000 on transportation in a year.

It might be a difficult transition at first, but you may find that you appreciate the time you aren’t behind the wheel. Another potential way to save money on transportation is by shopping around for car insurance. If you haven’t done so in the last several years, it could be well worth it — especially if you have a good driving record.

6. Cook at Home

You’re likely overworked and want to rest during your off hours, and it’s hard to find the time and energy to cook. But eating out is expensive. While it may be unreasonable to think that a medical resident will cook every meal, it may be worth taking a few hours each week to make a batch of meals that you can eat throughout the week. Preparing meals and eating at home could potentially save residents hundreds of dollars a month.

Another Option: Refinance Medical School Loans

Like most people who attended medical school, there’s a very likely chance you took out student loans. Managing these loans while you’re living on an average resident salary may be important for your financial success. It is important to understand your loan repayment options as a medical resident. One of the first decisions you may want to make is whether you want your loans to go into forbearance or to make payments on your loans during residency.

Student loan forbearance may seem like an ideal option for a person on a medical resident salary, but that might not always be the case: Federal medical school student loans accrue interest during that time, and that interest is added to your balance at the end of your forbearance period. This is called compounding, or capitalization, and means that you’re paying interest on top of interest.

You may want to consider refinancing your medical resident student loans with a company like SoFi that offers programs designed for medical school residents. Refinancing is the process of paying off one loan (or many loans) with another, generally to lower your overall interest rate or to change the terms of your loan.

Refinancing student loans won’t be for everyone, as you will lose access to federal loan programs such as Public Service Loan Forgiveness (PSLF). SoFi’s medical school loan refinancing offers monthly payments as low as $100 per month during residency, while no interest capitalizes during that period.

Additionally, with SoFi, you might be able to lower your overall interest rate as well, which could potentially save you thousands of dollars over the life of your loan. Learn more about SoFi’s medical resident loan refinancing rates and terms.

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.

There are several options for teachers seeking to reduce their federal student loan debt, including loan forgiveness and cancellation. For example, teachers may qualify for the Teacher Loan Forgiveness program, Public Service Loan Forgiveness program (PSLF), and/or the Perkins Loan Cancellation for Teachers. Also, there are state and local loan forgiveness, cancellation, and grant programs. We’ll discuss these options in more depth below.

Teacher Loan Forgiveness Program

Amount forgiven:

Up to $5,000 or up to $17,500, depending on the subject area you teach.

Which loans might qualify:

Direct (or Stafford) Loans, both subsidized and unsubsidized, and FFEL Program Loans. For borrowers with Direct Consolidation Loans, the outstanding portion of the consolidation loan that repaid an eligible Direct Subsidized Loan, Direct Unsubsidized Loan, Subsidized Federal Stafford Loan, or Unsubsidized Federal Stafford Loan may qualify as well. Learn more here .

Qualifications:

•   Teaching at a low-income school; you can search for a school in this directory

•   Teaching for five complete and consecutive academic years

•   Existing student loans cannot be in default

Details:

The maximum amount that can be forgiven under this program depends on the role and subject the borrower teaches. Teachers are eligible to receive up to $17,500, if they are considered “highly qualified” as defined by the program and are full-time math or science teachers in an eligible school. Teachers working in special education that meet specific requirements may also qualify to have $17,500 forgiven.

Teachers are eligible to receive up to $5,000 if they are a “highly qualified” full-time elementary teacher or a full-time secondary school teacher in all other subject areas.

What does “highly qualified” mean? That the borrower has a bachelor’s degree, full state certification as a teacher, and their certification or licensure requirements were not waived on an emergency, temporary, or provisional basis.

If you apply for Teacher Loan Forgiveness, you can’t also apply for Public Service Loan Forgiveness (PSLF) for the same period. So if you receive Teacher Loan Forgiveness, the five-year period of service that supported your eligibility will not count toward PSLF.

How to apply:

Teachers are not eligible to apply until they have completed the five years of service. After completing this requirement, borrowers can fill out the Teacher Loan Forgiveness Application. (It may be helpful to get acquainted with the application now, because it clearly explains who qualifies for what amount of forgiveness.)


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Public Service Loan Forgiveness Program

Amount forgiven:

Up to 100% of the remaining loan balance.

Which loans qualify:

Direct Loans, also known as Stafford Loans, and Direct Consolidation Loans.

Qualifications:

•   Must be in certain public sector jobs and employed full-time

•   Must have made 120 qualifying payments (this takes 10 years if the borrower makes them consecutively)

•   Payments must be made as part of an income-driven repayment plan

•   Existing student loans cannot be in default

Details:

Unlike with the Teacher Loan Forgiveness Application , teachers don’t need to teach for a low-income school or within a particular academic subject when applying for the Public Service Loan Forgiveness Program (PSLF).

To be eligible for this program, the borrower must be employed by the local, state, or federal government, or work for certain nonprofit organizations that provide a qualifying public service — such as general education services.

To qualify for PSLF, borrowers must be on an income-driven repayment plan. With an income-driven repayment plan , borrowers are only required to pay a certain percentage (between 10 and 20%) of their discretionary income toward their monthly student loan payments.

Recommended: A Look into the Public Service Loan Forgiveness Program

Sometimes, there is confusion about whether forgiven loan balances are taxed. If a borrower meets the qualifications for PSLF, the forgiven amount will not be taxed. For borrowers who are on an income-driven repayment plan and expect their loans to be forgiven after 20 or 25 years (but are not participating in the PSLF program), it is possible that the forgiven amount will be taxed as income. To understand more about these tax nuances, consult a licensed tax advisor.

To qualify for PSLF, the 120 qualifying monthly payments do not need to be consecutive. For example, if a borrower has a period of employment with a non-qualifying employer, they will not lose credit for any prior qualifying payments made with a PSLF-approved employer.

While it is possible to partake in both the Teacher Loan Forgiveness Program and PSLF, it’s not possible to do so concurrently. Your five years of service under the Teacher Loan Forgiveness Program does not count toward your qualification for PSLF — you will have to qualify for PSLF under a different period of teaching service. Furthermore, payments made when working toward the Teacher Loan Cancellation Program will not qualify for PSLF — you will have to make 120 additional qualifying payments for the PSLF program.

To apply:

Borrowers may want to fill out the Public Service Loan Forgiveness (PSLF) form with the PSLF Help Tool to be certain that their employment qualifies for the program. Once received by the Department of Education, the borrower will receive a response telling them whether or not they qualify, and if they don’t, what needs to be done to qualify. If the borrower does qualify, the DoE will tell them how many qualifying payments have already been made and how many need to be made.

Every time a borrower changes jobs, they’ll need to send in an updated Employment Certification form. Otherwise, borrowers will be required to submit an Employment Certification form for each of their previous employers when they apply for forgiveness.

Once a borrower has received notification that their PSLF Employment Certification has been approved, they’ll need to continue making those on-time student loan payments. After making 120 payments, they can apply for forgiveness.

Perkins Loans Cancellation for Teachers

Amount forgiven:

Up to 100% of the loan, done in increments over a five-year period.

Which loans qualify:

Federal Perkins Loans (The Federal Perkins Loan program expired in September 2017, but loans disbursed through the program may still qualify.)

Qualifications:

A minimum one year of teaching and at least one of the following requirements:

•   Teaching at a low-income school; search for a school in this directory

•   Teaching science, math, foreign languages, bilingual studies, or special education

•   Teaching a subject that has a shortage of qualified teachers in your state

•   Teaching in a school operated by the Bureau of Indian Affairs or on a qualifying Indian reservation

Details:

Those who are eligible for the Perkins Loans Cancellation for Teachers may have all of their Perkins Loans forgiven. Cancellation happens in stair-step increments over five years. Here’s how the incremental forgiveness system works:

•   15% of the original Perkins loan balance is canceled per year for the first and second years of service

•   20% is canceled in both the third and fourth years

•   30% is canceled in the fifth year

In order to qualify for this program, an employee must work directly for the school system — qualifying is entirely contingent on position duties.

To apply:

Each school has its own process, so borrowers should contact the school that administered the Perkins Loan.

State and Local Student Loan Forgiveness Programs

Some states offer loan forgiveness programs for teachers, especially for those who work in subject areas in high demand. One place to start your search for a state and local teacher loan forgiveness program is through this database created by the American Federation of Teachers.

What About My Other Student Loans?

So far, all of the programs we’ve discussed only apply to federal loans. What can be done if a borrower has other loans (like private loans) that don’t qualify for federal teacher loan forgiveness?

One option is to look into refinancing the student loans. When a borrower refinances a student loan or multiple loans, they are essentially paying those loans off with a new loan from a new lender. Ideally, the new loan has a more competitive interest rate than the existing loan(s), which could potentially save the borrower money over the life of the loan.

Borrowers can refinance both private and federal student loans, so it is an option for teachers who don’t have loans that qualify for one of the federal forgiveness or cancellation programs.

If you refinance your federal loans, you will lose access to federal loan benefits such as access to the PSLF program and the Teacher Loan Cancellation Program. There’s always the option to refinance your private loans while keeping your federal loans separate.

The Takeaway

Teachers with federal student loans may be able to pursue loan forgiveness through programs like Teacher Loan Forgiveness or Public Service Loan Forgiveness programs. Borrowers who hold Perkins Loans may also be able to pursue Perkins Loan Cancellation for Teachers. If you also have private loans, refinancing may be a good option, though as stated above, refinancing federal loans disqualifies borrowers from government forgiveness programs.

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.

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.