Costs of living never get cheaper year after year, the same goes with tuition. You probably signed up for optometry with the promise of making a 6-7 figure income, though yes you actually can–the thing is, getting there is not as easy as it sounds.
As of now, the amount of student loan debt owed in the United States surpasses $1.76 trillion, and a significant portion of this debt is held by over 42 million people in the country. The federal student loan debt average is $37,787, while the total average balance, including private loans, may reach $40,780. The normal amount borrowed by a bachelor’s degree student at a public university is $32,880.
Pursuing a degree in optometry can result in substantial debt for students. This debt can have an impact on the selection of specialty, practice opportunity, and career decisions. Additionally, the debt accumulated for a healthcare education is in addition to any undergraduate debt.
Managing debt is a common challenge not only for all students in higher education, including those in optometry programs. It is important to develop strategies for handling debt before beginning an optometry program, and to continue implementing them even after graduation. We’ll get into that.
Student Loans in Optometry School
Let’s talk numbers.
In a recent 2022 poll from Women In Optometry, 96 percent of the OD, more than one-third of the respondents, said they graduated optometry school with more than $200,000 in student loan debt and around nearly 24 percent have between $100,000 and $200,000 debt.
The average debt load for graduates was substantial. 36% of graduates reported that their student loan debt exceeded $200,000, with 27% owing between $200,000 and $300,000, and 9% owing more than $300,000. A majority of the respondents, 68% reported graduating with student debt of over $150,000.
To put it simply, by the time you graduate, you have at least $200,000 debt in your name which takes 20+ years to repay. So is debt a drain on dreams for some ODs as they say? It can be but here’s how to navigate the financial aspects if you’re planning to start a career in Optometry.
Understanding Your Debt
As Sun Tzu phrases in the book Art of War, “Know thyself, know thy enemy.” You cannot win against something you don’t understand and that is why as an optometry student, it is important to understand the types of student loans that you may take on and the different repayment options available.
By understanding your debt, you can make informed decisions about how to manage it and plan for your future.
Types of Student Loans
There are two main types of student loans: federal student loans and private student loans. Federal student loans are provided by the government and typically have more favorable terms, such as lower interest rates and income-driven repayment plans. Private student loans are provided by banks and other financial institutions and may have higher interest rates and fewer repayment options.
They differ in terms and conditions so make sure that before you take out a loan, review the interest rate, fees, and repayment terms and compare them with other options.
Importance of Understanding the Terms of Your Loans
Without understanding the terms of your loans, there is no effective debt management. Knowing the interest rate, fees, and repayment terms of your loans can help you make informed decisions about how to manage your debt. This helps you to plan for the future and make sure that you can meet your payments on time.
Moreover, understanding the repayment terms of your loan, such as the length of the repayment period, the minimum monthly payment, and the options for postponing or reducing payments can help you budget accordingly and determine what kind of loan fits your current and future financial situation.
Budgeting and Financial Planning
Importance of creating a budget
Whether you’re managing a debt or just expenses, creating a budget plan is as important. Tracking your income, expenses and being able to identify areas where you can cut back on spending, helps to ensure that you have enough money to cover your bills and make payments on your student loans. Without a budget, it can be easy to overspend and find yourself in a difficult financial situation.
Setting Financial Goals
Setting financial goals is an important part of managing your debt. This can help you stay motivated and focused on your debt management plan.
It is important to make them specific, measurable, attainable, relevant, and time-bound (SMART goals). For example, a specific goal would be paying off a student loan within a specific time frame. Measurable means you will be able to track progress. Attainable means it is realistic for your current financial situation. Relevant means the goal is important to you, and time-bound means you set a deadline for achieving the goal.
Strategies for Reducing Expenses
Reducing expenses is an important part of managing your debt. There are several strategies you can use to cut back on spending and reduce your expenses. Some of these strategies include:
- Creating a budget and sticking to it
- Cutting back on unnecessary expenses, such as eating out or buying expensive clothes
- Shopping around for the best deals on groceries and other necessities
- Negotiating bills and lowering monthly expenses, such as cable or internet service
- Finding ways to earn extra money, such as taking on a part-time job or selling items you no longer need
Repayment Strategies
As an optometry student, you have a variety of repayment options available to you once you begin to repay your student loans. Understanding the pros and cons of each repayment plan can help you choose the option that is best for your financial situation.
Pros and Cons of Different Repayment Plans
- Standard Repayment Plan: This is the default repayment option for most student loans that requires you to pay a fixed amount each month for a period of 10 years. It’s quick and easy but it can be pricey. Good news, this plan allows you to pay off your loans quickly and with the least amount of interest. Bad news, the monthly payments can be high, which can be difficult for borrowers with a low income.
- Graduated Repayment Plan: It starts with lower monthly payments that gradually increase over time. So, if you’re expecting your income to increase over time (fingers crossed!), this could be a good option for you. However, the main disadvantage of this plan is that the total interest paid over the life of the loan will be higher than with the standard repayment plan.
- Extended Repayment Plan: This plan allows you to extend the repayment period of your loans to 25 years. giving you lower monthly payments. This can be a lifesaver if you’re struggling to make ends meet, but keep in mind that the total interest paid over the life of the loan will be much higher than with the standard or graduated repayment plans.
Income-Driven Repayment Plans
- Income-Based Repayment (IBR): This plan calculates your monthly payments based on your income, family size, and the total amount of your student loans. The best part? You only gotta shell out 10-15% of your discretionary income, so you can still afford your avocado toast and fancy lattes. But, there’s always a catch. The downside is that you’ll end up paying more in interest over time than if you went with the standard repayment plan.
- Pay As You Earn (PAYE): This plan takes a more considerate approach in terms of how much cash you can offer for the monthly payments based on your income, family size, and the total amount of your student loans. This plan does not usually ask for more than 10% of your discretionary income. The downside is that you might end up paying a boatload in interest over the long haul.
Importance of paying more than the minimum payment
The importance of paying more than the minimum payment is that by doing so, it can help you pay off your student loans faster and reduce the amount of interest you pay over the life of the loan. When you only make the minimum payment, a larger portion of your payment goes towards paying interest, which means it takes longer to pay off the principal amount of the loan.
By paying more than the minimum payment, you can pay off the principal faster, which reduces the amount of interest you pay over time. Additionally, paying more than the minimum payment can also help you save money on interest charges and reduce the total amount you will pay for your loans.
Just make sure you don’t go all Rambo on your loans by making extra payments before confirming with your loan servicer. You don’t want to shoot yourself in the foot by accidentally paying for future payments instead of hitting the principal balance bullseye.
Managing Credit Card Debt
Risks of Credit Card Debt
Using credit cards can be a convenient way to make purchases and manage your finances, but it is important to be aware of the risks of credit card debt. If you carry a balance on your card (aka don’t pay it off in full each month), that interest rate can pile up faster than a kid’s stack of pancakes at IHOP. Before you know it, you’re drowning in debt and wondering how you’ll ever get out.
And don’t forget about those pesky late fees and penalties. If you miss a payment or don’t pay the minimum amount due, you can kiss your money goodbye faster than you can say “I shouldn’t have bought that thing I didn’t need on Amazon.”
So, if you want to avoid the headache and heartache of credit card debt, make sure to pay off your balance in full each month, set up automatic payments, and try to keep your spending in check.
Now, here are strategies when paying off credit card debt.
Strategies for Paying Off Credit Card Debt
- Prioritize high-interest cards: If you have multiple credit cards, prioritize paying off the ones with the highest interest rates first. This will help you save money on interest charges in the long run.
- Use a balance transfer card: A balance transfer card allows you to transfer the balance from one or more credit cards to a new card with a lower interest rate. This can help you save money on interest charges and make it easier to pay off your debt.
- Seek help: If you are struggling to pay off your credit card debt, consider seeking help from a credit counselor. They can provide you with a personalized plan for paying off your debt and help you navigate the process.
Lastly, Managing Debt After Optometry Grad
Strategies for managing student loan debt during residency
- Consolidate your loans: What is consolidation? It’s like combining all your debts into one giant monster, but a friendly one. Consolidating your student loans can simplify your repayment process and give you lower monthly payments. Plus, you can extend the repayment period, to help ease the burden of your loan payments during residency.
- Deferment or Forbearance: If you’re really struggling to make ends meet during residency, you might want to consider deferment or forbearance. Think of them like a pause button for your loans. You can temporarily postpone payments or reduce them for a set amount of time. It’s like getting a hall pass, but for your finances.
- Income-driven repayment plans: Another option to explore is income-driven repayment plans. These plans are based on your income and family size, so they can be a great way to make your loan payments more manageable during residency. We’re talking about plans like REPAYE, PAYE, and IBR. Think of it like a subscription service for your loans, but instead of getting movies or music, you get lower payments.
- Income-driven repayment plans are based on your income and family size, and they can help make your loan payments more affordable during residency. These plans include REPAYE, PAYE, and IBR plans.
- Apply for loan forgiveness: Last but not least, let’s talk about loan forgiveness. Yes, it’s a real thing! You may qualify for programs like Public Service Loan Forgiveness or National Health Service Corps loan repayment program.
Strategies for managing student loan debt after starting a practice
After making it through optometry school and residency, either you landed a job or started running your own clinic. It’s time to deal with student loans.
- Refinancing: Think of it as getting a makeover for your loans. You can lower your interest rate, reduce your monthly payments, and even save some cash on interest over time.
- Pay off high-interest loans first: Prioritize paying off the loans with the highest interest rates first. This can help you save money on interest charges and pay off your debt faster.
- Increase your income: Consider increasing your income through additional work to pay loans faster.
- Seek professional tax advice: A tax professional can help you maximize deductions and credits that can help you reduce your tax bill, and leave you enough for savings, necessities and a bit of luxury in life.
[Related Article: Proven Strategies for Growing Your Optometry Practice’s Patient Base]
Importance of seeking professional financial advice
Seeking professional financial advice is important when it comes to managing student loan debt as it can help you navigate the complex process and find the best options for your situation. A financial advisor can help you evaluate your options and develop a plan for paying off your student loans.
They can also provide guidance on how to use your income to pay off loans while also saving for other financial goals that includes helping you through various loan forgiveness programs that are available and the paperwork that goes with it.
Think of it as having a personal financial Yoda.
The First Step to Debt-Freedom
We know the struggle is real when it comes to loan repayments, job hunting, and finding the perfect opportunity. The path towards your dream career shouldn’t be something dreadful for you. We can help you find the opportunities that can assist you with your loan repayment and the icing on the cake- we offer sign on bonuses!
Here’s to crushing financial fears and finding the perfect match.
