An estimated 79% of psychologists have student loans from graduate school and 69% of early career psychologists were not taking part in a loan forgiveness or repayment program. With their current payment plans, it would take nearly half of them (46%) more than 17 years to pay off their loans (Doran et al., 2016).
The Debt Shrink’s Story
I did not follow the payment plan. I also did not participate in a loan forgiveness or repayment plan. I got ANGRY every month when the loan bill came and made it a LIFE GOAL TO DESTROY IT in less time than it took to accrue it. It seemed like an unattainable goal at first, but once I saw the balance going down, I felt empowered. I was going to kick Sallie Mae out of my house!
During post-doc before the first payment was even due, I scraped together every cent I could get my hands on and threw it at the debt. I continued to live like a student (I had debt and negative net worth, so I was in fact poor) and budgeted my post-doc income (which seemed like a fortune compared to my internship stipend). By avoiding lifestyle inflation and with laser focus, I aggressively paid down my debt while being the sole provider for my family. Within three years of graduating, I was debt-free!
The Debt Balloon’s Story
While I advocate for paying off your debt as quickly and aggressively as possible (remember to specify that extra payments go toward the principle), it is always good to base your repayment strategy on the numbers.
Consider using a student loan calculator student loan calculator. You’ll likely see that with a loan repayment program, you will not only be paying for years, but you will be paying a staggering amount in interest.
I like this graphic from the APAGS’s 2014 Debt Study. It illustrates how at 6.5% interest on a 10-year plan:
- A median PhD debt of $75,000 will pay $863 a month and for a total of $104,000.
- A median PsyD debt of $200,000 will pay $2,302 a month and for a total of $276,000!!!
- If you think those numbers are big, just look at what happens to the total costs when it’s spread out over a longer period of time!
Many people (especially those with six-figures of student loan debt and a $77,000 salary) are asking about loan forgiveness programs. If your employer will repay your loan, definitely look into that option. These days fewer employers offer loan repayment for psychologist (with the exception of rural areas or hard to fill positions).
The Public Service Loan Forgiveness Program (PSFL) forgives the remaining balance on Direct Loans after 120 qualifying monthly payments while working full-time for a qualifying employer. If you’re considering this program, first consider the following:
- Read the fine print
- It is only available for Direct Loans
- You have to be enrolled in income-based repayment
- Know the details before making your first payment
- This takes 10 years of qualified, on-time payments!
- Any payments made before you’re enrolled in the program do not count
- You’re assuming that life will go as planned (e.g., you will be working for a qualified employer for 10 years)
- You are paying interest over the 10 years!
- Considering interest, how much will you save after 10 years of payments versus if you paid the loan off sooner
- You will pay income tax on debt that is forgiven!
- Consider this in your calculations
- Don’t take a lower paying position in the public sector just for this program
Other Debt Repayment Programs
- The APA Monitor on Psychology, April 2016 compiled a list of loan repayment programs, including:
- Income-Based Repayment Programs: https://studentloans.gov/myDirectLoan/index.action
- Public Service Loan Forgiveness (PSLF): https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service
- National Health Service Corps Loan Repayment Program: https://nhsc.hrsa.gov/loanrepayment/
- NIH Loan Repayment Programs: https://www.lrp.nih.gov/
- Student Loan Hero also complied their Ultimate Guide to Student Loan Payment and Forgiveness for Psychologists (updated May 2017)
For more from this series on saving money on higher education costs, see
What is your student loan payment strategy? How long will it take, and how much will it cost you?