When you’re a nursing student, thinking about your finances seems almost like a pointless task. With the immediacy of paying for school and the almost universal need for student loans that you pay back after graduation, thoughts of your future financial plans stay where they are – way in the future.
Believe it or not, this is actually a great time to think about your future and your finances, which includes retirement but also might include big-ticket things like a car, a house, travel, or additional educational costs. When you start working right after graduation, you’ll want to develop good financial habits right from the outset. If you can begin planning for your future early, you’ll be much better prepared.
You may not be able to set aside money when you’re still taking courses and during clinicals, but you can learn how to make good financial choices.
Set a Budget
As a nursing student, get comfortable with the funds you have, the funds you earn, and the amounts you owe. Don’t guess at how much your food costs are each month—add them up so you know. Use an online budget app like Mint (it’s free!) to calculate that in with your rent or mortgage, any insurance costs, student loan payments, transportation, and costs for entertainment, pets, or clothes.
Balance that with what you take home each month and you’ll get a good idea of your cash flow. If you get comfortable doing that early on, you’ll have an easier time making sure you make solid, financially stable decisions in the future.
Learn Where to Save
When you have a budget, you’ll know what you have and don’t have. You can figure out if you can cut back on one thing to make some extra money for something you want. Eliminating a take-out lunch once a week and you can easily save another $50 to $70 a month. Add that to an emergency fund until you have enough to cover three to six months of expenses. Then start putting it in a retirement fund. You’ll never notice the difference.
Pay Your Loans
This one is simple, but can be difficult. If you have student loans pay them on time every single time they are due. Defaulting on your student loans or being late on payments can wreak havoc with your credit score. And you’ll need good credit to secure a car loan, a loan for a home, or even future student loans if you return to school. Don’t let a mistake limit your life that much.
Plan Your Next Steps
Set some financial goals. Do you want to save $1,000 this year? Do you want to commit to saving 15 percent of your income? Figure out how much that breaks down to save each week and then do that. Either have it automatically withdrawn and placed in a different account or fund or do it yourself each payday. Setting concrete goals complete with amounts and the steps you have to take to reach your goal is half the battle.
Start implementing steps toward setting good financial behaviors now and you’ll be thankful years down the road.
Repaying nursing school loans can be a daunting task, especially if you have several loans carrying large balances. If you add in additional debt such as credit card debt and car loans, it gets even more complicated. Which loans should you pay off first? What’s the fastest way to become debt-free?
There are two popular methods for debt repayment – the debt snowball and the debt avalanche, and they both come with pros and cons.
Let’s say you have three outstanding debts – two student loans, plus a credit card. We’ll call them A, B, and C. With both the debt snowball and debt avalanche, you would:
make the minimum payments on all three loans each month
cut back and/or eliminate discretionary expenses (e.g. cable TV, eating out) so that you have extra money to pay towards your debt
use any extra money in your budget to pay down your loans
For example, when you pay off loan A you would roll that payment into your payment for loan B until it’s paid off. Once loan B is paid off you would roll your payments for both A and B to pay off C. Eventually you will build a huge snowball or create an avalanche in loan repayments.
But the two methods differ in their approach in one key way: the order you repay your debts. Let’s take a look at examples of how each strategy works.
The debt snowball strategy was made popular by personal finance radio personality Dave Ramsey. With the snowball, you would list your debts from the smallest to largest balance and then pay them off in that order, one-by-one until all debts are paid.
For example, if loan A is $3,000, loan B is $5,000, and loan C is $12,000, you would pay them in that order, regardless of the interest rates. So even if loan C has a higher interest rate than loan A, you would still aggressively pay loan A until it’s paid off before focusing on loan C.
The theory of the snowball method is that by paying off the smallest loan first, you will gain momentum and experience success along the way. How awesome would it feel to pay off a student loan? With the snowball method you get to experience paying off the $3,000 loan much quicker than you would pay off the $12,000.
Many people have successfully paid off their loans using the debt snowball. But many others think the debt avalanche is the smarter way. Here’s how it works.
Let’s say you have those same three loans, but the one for $5,000 happens to have the highest interest rate. You would start your avalanche by paying the minimum payments on all three and then throwing any extra money at the $5,000 loan since it carries the highest interest rate.
The debt avalanche is all about the math. You could save thousands of dollars in interest payments using the debt avalanche. But again, you may have to wait quite a while before you experience any repayment victories.
Since personal finance is indeed personal, you should choose the method that you will stick with. If you choose to do a debt snowball you may end up paying higher interest, but if that’s the strategy that will keep you focused, it’s the best one for you.
Conversely, if you’re the type of person who is good at delayed gratification or you’re more motivated by saving money on interest, the debt avalanche would work best for you.
The key is to remember the importance of repaying your student loans and other consumer debts so that you’re free to make career and life decisions without being tied down by debt.
If you have student loan debt as a recent nursing school graduate or if you’ve been in the field for years and have been paying the minimum payments on your loan, it’s a good idea to consider ramping up your payments.
You may have to sacrifice your lifestyle for a while to pay off your loans fast, but it will be worth it. Freeing up the monthly payment will allow you to use those funds for other goals such as saving up to start an advanced degree program or put you in a more stable financial position for large purchases such as buying a house.
Below are some practical steps you can take that will make a huge dent in your student loan.
Avoid Lifestyle Inflation
Once you graduate from nursing school and enter the repayment period on your loan, avoid lifestyle inflation. Instead, continue to live like you’re still in college. While it’s tempting to increase your lifestyle after you start making a full-time nursing income by getting a nicer home and new car, avoiding these lifestyle upgrades and instead focusing on paying off your loans will set you up for long-term financial success.
Cut Expenses
If you have been in the workforce a while, try cutting skimming the fat from your budget and redirecting those funds towards your loan repayment. Budget items for cable TV, cell phone plans, the latest tech gadget and eating out are all great categories to look at squeezing extra money from each month.
Work Overtime
Nurses work in a field where there is often a shortage of qualified professionals to fill the needs of patients. If overtime is offered by your employer, take it with the goal of using the extra money to pay off your loans. If no overtime is available, consider taking a second job until your loan is paid off.
Stay Focused
Paying off a student loan is often a longer-term goal, so it’s important to stay motivated and focused. Have a target date in mind for when you’ll pay off your loan and set some exciting life goals that you can begin working on after they’re paid. Try using an online debt calculator such as Unbury.me to create an optimized debt repayment plan to help minimize interest and keep you motivated throughout the process.
If you follow these tips, you will cut down the repayment period of your loan substantially. Just by delaying some lifestyle upgrades or cutting back your discretionary expenses for a few years, you’ll set yourself up for financial success for the rest of your career.
If you’re applying to schools for a nursing degree, you know that education costs a lot of money. Luckily, schools and the government offer financial aid in the form of student loans, grants, scholarships, or even work study. But all aid is not the same – even loans are actually vastly different. You need to know the difference.
If you have already filled out the Free Application for Federal Student Aid (FAFSA), then you might have already started receiving notification about what kinds of government aid you could receive, some of which is probably a mix of student loans.
A loan is money borrowed that you are agreeing to pay back under certain terms and conditions. Student loans are one of the biggest ways schools can help you out so that you don’t have to pay the entire tuition at once.
All loans aren’t the same, however, so make sure you know exactly what kind of loan you are agreeing to before you sign for it. You want to find out the amount of the loan, the interest rate charged on the loan, the amount of time you have to pay back the loan, where you send the payments, and if you have a grace period before your payments must start after you graduate, leave school, or attend school less than the half-time plan that is usually required.
What does each loan really mean?
According to Federal Student Aid, an office of the U.S. Department of Education, there are many loans available, but each has slightly different borrowing and payback terms, interest rates, and regulations.
You might notice these loans listed on your letter:
Direct Subsidized Loan
These federal loans are for undergraduate students who qualify based on need. A subsidized loan does not charge interest on any of the money you are borrowing while you are in school or during the deferment period which is typically several months after you graduate, leave school, or are considered less than half-time status. That means, if you’re in college for four years, you can continue to borrow and no additional interest will be charged to you during that time.
Direct Unsubsidized Loans
Unlike subsidized loans, the unsubsidized loans have an important difference. These federal loans charge interest from the very first signing and they are not based on financial need. If you borrow the money, you’ll be charged interest even while you’re still a full-time student. Your repayment, however, can wait until you graduate.
Direct PLUS Loans
Graduate students and parents of undergraduate students have less access to loans that are as forgiving on interest rates. PLUS loans are like the unsubsidized loans for undergraduates as they start accruing interest charges from the outset.
Direct Consolidation Loans
When you have student loans from a lot of different places, it’s sometimes tough to keep all the terms, conditions, and payback straight. Consolidating your loans, or creating one loan by combining all the smaller loan amounts and terms, can help.
Federal Perkins Loans
This low-interest loan is for students with a demonstrated financial need and is managed by the school. A Perkins Loan doesn’t begin a repayment plan until nine months after you graduate, leave school, or attend less than the required half-time status.
Bank Loans or Private Loans
Bank loans are historically more expensive because they generally charge more interest and the payback often doesn’t take your income level into account. So borrowing $10,000 at a bank loan rate of 18.5 percent is going to be more expensive than paying back that same loan at today’s Direct Loan rate of 4.29 percent or even today’s PLUS Loan rate of 6.84 percent. Some bank loans require repayment plans that begin regardless of whether you’re still a full-time student or are working.
Student loans help many students pay for college, but not all loans are created equally and you have to know what each entails before you agree to the terms. When you’re thinking about how much you can realistically borrow, it helps to know what the total amount plus interest will look like as a monthly payment over a certain number of years. Check out the government’s Repayment Estimator for an idea of what your loan repayment might look like after graduation.
As any student knows, education is expensive. No matter how you do it – part-time, full-time, nights, days – tuition costs money and, quite frequently a lot of it.
Lots of students seek out help for college costs through scholarships, work reimbursements, work study, grants, and loans. Of all these, loans cause the most long-lasting effects on your budget because they have to be paid back. When you’re considering your loan options to finance your education there are a few things you should know.
1. All Loans Are Not the Same
Federal loans (including direct subsidized and unsubsidized, Direct PLUS, and federal Perkins loans) are made by the federal government and generally have a fixed, low-interest loan rate. These loans are paid back over a designated number of years and the interest rate (fixed) remains the same throughout the life of the loan.
Private loans are generally made through a bank or credit union and the rates are generally variable. These loans sometimes require another person to sign the loan (a co-signer) and the interest rate (variable) can change over the life of the loan. Private loans typically start out with a low interest rate, but the rate is almost guaranteed to rise over the life of the loan. If you choose a private lender, ask if there’s any fee if you pay the loan in full before the loan’s designated end date.
2. Nursing Students Benefit from Specialized Loans
Nursing students can seek out loans specifically for their field. The Department of Health and Human Services has loans specifically for those in health professions. There are several nurse loans available through the department’s Nursing Student Loan Program, which is administered through your school’s financial aid department.
3. Loan Repayment Options
Some student loans can be partially paid by working for the Nurse CORPS, in which you agree to work for two years in exchange for paying off up to 60 percent of your loans. Like a service contract, nurses work in poorer communities to better the health of the residents and build strong community ties in the process.
4. Postponing Loan Payments
If you find yourself unable to repay your loan for various reasons, a deferment plan can postpone your payments, and interest will not accrue in the meantime. Another option allows you to defer payments, but interest will continue to accrue. Federal loans are typically more favorable to a deferment, and private lenders are under no legal obligation to offer any kind of deferment. It’s very difficult to get any type of loan forgiven, meaning the loan grantor will absorb your remaining loan, and you won’t have to make additional payments.
5. Defaulting on Loans
Entering into a student loan contract is serious business, so consider everything carefully. Defaulting on a student loan, meaning that you claim an inability to ever repay the loan, is almost never an option. The federal government will pursue repayment in many ways (taking your tax return is one), and although private lenders don’t have quite as many options for getting their money as the federal government, they can still wreak havoc on your credit history and make it difficult for you to get future loans.
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