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Financial expert Michelle Singletary answers questions about personal finance and the economy.
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Treat Debt Like a Disease
Q: I currently have a medical school loan that is $200,000. I went into deferment because I went back to school. While in school, I was paying on the interest. What is the best way to pay on the primary loan now?
A Visitor, Wadsworth, IL
A: I thought I'd share this with the masses.
The average educational debt of graduates in the class of 2008 was $154,607, an increase of 11% over the previous year, according to the Association of American Medical Colleges.
Part of the reason the medical debt is so high is because students defer paying down the debt, which, in turn, means interest keeps getting piled on top of the principle.
So, good for you, for paying at least the interest on your loans while you were in school.
Now comes the really hard part--making a dent in that debt before your retirement years.
First, now that you are out of school, keep living like you were in school. By that I mean keep your expenses and spending low, much like I hope you did while in medical school. Use any extra income you have as a doctor to throw at your debts.
Next, go to Finaid.org. There, you will find a wealth of information on debt forgiveness for those in the medical field. Now, getting some loan debt forgiven might mean working in geographical areas that lack adequate medical care, which often means remote or low-income areas. Finaid.org lists a number of sources to search for loan repayment programs for medical school students.
I also want you to also go to the Federal Student Aid site. This is the portal set up by the federal government with loan repayment information for federally-backed student loans. There is an Income Based Repayment plan that became effective July 1. Under this plan, the required monthly payment is capped at an amount that is intended to be affordable, based on income and family size.
In the end, the best advice I can give you is to treat this debt like it's a disease. Try to get rid of it as soon as possible.