Borrow Less, Save More

Posted on March 11, 2007
Filed Under Finance

Save More - Borrow Less(We’re republishing some of our articles from early 2007, before we modified our content format. This article was originally published Jan 7.)

According to the Association of American Medical Colleges (AAMC), the cost of private medical schools has risen 165 percent and the cost of public medical schools has gone up 312 percent over the last 20 years.

Unless you were born with a silver spoon in your mouth, chances are you’re going to have to take out a loan or loans to get through medical school. And you’re not alone–according to the AAMC, the average educational debt of graduates of the class of 2006 (including pre-med borrowing) was $130,500, with 86.6 percent of graduating medical students carry outstanding loans, and 33 percent of students with educational debt reporting principle in excess of $150,000 and a significant minority reporting debt as high as $350,000.

If the thought of over $100,000 in debt isn’t hard enough to swallow, consider that accumulating loan debt can push back many of life’s milestones, this according to a 2002 survey for Nellie Mae, a major student lender. The report indicated that 38 percent of graduates held off buying their first house because of student loans, 14 percent put off marriage, and 21 percent delayed having children.

Luckily, there are ways to alleviate the debt you’re bound to have when you graduate. And one of the easiest ways to do so is to borrow less and save more, because when interest is factored into the equation, even a small change in the amount you borrow can result in big savings in the total cost of your loan.

First, decide how much loan you really need. Remember, the award letter indicates the most you can get, but you don’t have to take out the loan for that entire amount. Take a look at what you really need versus what you want. The difference might surprise you.

There are other options, including working while in school or on vacations to save money for school, or getting scholarships or other forms of need-based or performance-based aid that don’t have to be repaid. Now is also the time to tap into any savings or bonds that you may have accumulated over the years, because every little bit will help.

Experts agree that your end loan payments should never exceed 10 percent of your expected monthly gross income after graduation. There are several loan calculators available on the Internet that will help you estimate how much debt you can manage in relation to your expected starting salary.

The most important thing to remember is that anything you borrow now will have to be paid back eventually. It may seem like a basic concept to grasp, but it’s easy to forget when you’re still focusing on day to day life, not years (or decades) down the road.

Comments

One Response to “Borrow Less, Save More”

  1. Student Doctor Network on April 3rd, 2007 2:54 pm

    Continue discussion here:

    http://forums.studentdoctor.net/showthread.php?t=387141

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