I graduated PA School in 2017 with $150,000 in student loans. Yeah, it’s a lot and yes, I was freaking out. Somehow, I still considered myself to be lucky. I had $0 of undergraduate student loans thanks to an in-state school tuition, scholarships and parents. The $150,000 of loans that I accumulated were solely from PA school.
At this point, you’ve probably read at least 1 article on the insanity that is the student debt loan crisis in this country. If not, I’ll give you a TL:DR;
1. The total student loan debt in this country is $ 1.5 trillion, toppling credit card debt.
2. 45 million people in this country have student loans.
3. Of those 45 million, 12% default on their loans.
4. More importantly, before beginning PA school, PA students reported an average of $40,629 of undergraduate student loans.
5. PA students matriculate with an average education debt of between $75,000 - $100,000. Add an additional $54,000, which is the average non educational debt (living, food, transportation, supplies etc.) Read more on how much PA school actually costs.
What does all of this mean?
This obviously has large economic repercussions. On a personal level however, it was an overwhelming sense of anxiety and burden. It was painful to work 60 hours a week and have a negative net worth. It was painful to know that I would not be able to afford an apartment in NYC for another 15 years. It was painful to know despite a six figure salary, I would have to live like a student for the rest of my life to pay back the loans. More importantly, I absolutely hated the feeling of owing anything to anyone. This was my motive to pay my student loans off as soon as possible. Many people with student loan debt refrain from looking at their total value, in denial of the total amount they owe. I looked at it every week as a reminder on how much I still owed. This certainly caused me more anxiety, but that anxiety fueled my motivation and I was able to make a plan.
Make a plan
This is the very first step. Get everything in order. You must know you expenses and income in detail like your Taco Bell order. Know what comes in and what goes out every week and every month. I made an excel sheet from a month-month basis of my expected income every month and what I plan on spending each month. This will give you an idea of the foundation of your finances and what the pitfalls are.
How I did it: I graduated PA school in Long Island (far suburbs of NYC). I certainly knew I wanted to live in New York, as it had been a childhood dream. I knew I wanted to be in the middle of the food mecca of the world. I knew I wanted to travel. Those were the things that were important to me. Everything else became relative and was not a necessity. I created an excel sheet with my expenses that were relatively average for living in Manhattan. Then I slashed everything that was a luxury for me (golf outings, weekly restaurant outings, car). Looking at my income, I knew that in order to pay it as soon as possible, I needed to increase my income. So, I got a second job.
If you want to pay off your loans in a minimal amount of time, you will have to increase your income. There is no hiding behind that. One could cut their expenses as much as possible, but without an increase in income, paying off your loans swiftly becomes difficult. The average PA salary in the country is $106,000, while the average PA student loan debt including non-educational debt is between $125,000 and $150,000. Keeping the math simple, it is evident that one needs to earn far more than $106,000 in order to pay the loans off quickly. In fact, 5 out of 10 millennials have a second job or a side hustle
How I did it: My full time position, which I accepted as I was studying for my boards, offered me a competitive salary with excellent benefits for a new grad. Additionally, I chose to accept this position because it was 3 days/week. This was essential to my plan. I knew that in order to pick up another job, I had to free up days. This allowed me to pick up another position on Mondays and Tuesdays, while I worked Wed-Fri at my full time. Essentially, I was working over 60 hours in a Mon-Fri week, which increased my productivity, my experience, my constant pursuit of knowledge in medicine and more importantly, my income. With my side income, I was fully able to support myself (rent, food, living, transportation), while my full time salary went directly to my student loans. This was the game changer. Additionally, any bonuses that I received went directly to my loans. I was hustling hard.
This depends on where you live. Of course, the cost of living in North Dakota will be far less than the cost of living in an urban coastal city like New York or San Francisco. “Is this a need or a want?” became my mantra as I was paying off my loans. This simple practice deterred me from purchasing unnecessary things. Again, it goes back to self-awareness and what is most important to you. Does spending $15 on a cocktail bring you the same happiness as spending $15 on a yoga class?
How I did it: Like I said above, food is my passion and I wanted to be in a culinary focused city. That didn’t mean that I ate out at Michelin star restaurants everyday. Instead, I would have a strict practice of eating breakfast, lunch and dinner at home on Monday to Friday, while I splurged on the weekends. Keeping my expenses as low as possible allowed me to have more wiggle room and add additional payments if needed.
The very first step you should take is consolidation and refinance. Consolidation, in simple terms, is combining several student loans (private loans, federal loans) into a large loan with one payment. This makes it much easier to conceptualize your true debt. Although consolidating will not help you pay off your loans quicker, this is the foundation of your payment strategy. The next step is refinancing. Current graduate federal student loan rate is at 6.06%, meaning if you borrowed student loans from the government today, you will be charged a 6.06% fixed interest rate per year from the government. Private student loans can be higher or lower depending on your financial situation. However, now that you are employed and your income has increased dramatically, private lenders view you as a stable and reliable person, who is able to pay back their loans. Thus, you are able to receive a lower interest rate. This is refinancing. There are a plethora of student loan refinance companies that have risen in the past decade (SoFi, Laurel Road, etc.) Refinancing your loans will decrease your interest rate, effectively lowering your student loan burden. For example, a $100,000 loan with 6% interest paid over 10 years will total $133,000. If you refinance to 4%, that same loan of 100,000 paid over 10 years equals $121,000. By simply refinancing, which takes 1 hour of your time, you can save $12,000. Not bad for one hour’s work, huh?
How I did it: I borrowed the totality of my student loans through a private lender at a 5.6% interest rate, which was slightly better than the federal rate at that time. I refinanced with Laurel Road immediately after starting both my jobs and because of the high income, I was able to receive an amazing interest rate of 3.75%. Simply by refinancing, I saved over $17,000 in interest.
My strategy in paying my loans was fairly simple. I calculated my necessities, like rent, groceries, utilities, transportation and credit card bill and the money that remained from my income went directly into paying my student loans.I kept only 5%-7% of my total income for myself and that was reserved for my vacations. On average, I paid $7000 a month in student loans, effectively paying around $80,000 per year and wiping out my student loans debt within 2 years!
This plan only works if you have very little responsibilities outside of yourself. If you have to provide for your family, kids, parents or others, this becomes extremely difficult. I was lucky that I was only responsible for myself. That being said, to effectively execute this plan, you must have discipline and motivation. I can recall multiple occasions when my friends would invite me to an outing, which I would have to refuse, but I knew the benefits outweighed the risks. Additionally, it’s extremely easy to become complacent and work 40 hours a week since all of your colleagues and friends are doing so. Ultimately, I knew that I spent life in PA school living like a student and doing so for 2 more years wouldn’t be the worst thing.
Because now, I can genuinely say… I AM FREE!!
Being able to retain all of my income for myself is an incredibly liberating feeling. It is priceless. I finally feel I am free as I have options, I am able to live the NYC lifestyle that I had envisioned and finally feel like I’ve made it. If I had to go back and pay my student loans again, I would do it exactly the same way and this is what I would recommend to all new grads. I would rather eat dirt and grind for 2 years to reap the rewards for the next 50 years. Would you?