Got Debt? Repay the Smart Way

Veterinarian's Money Digest®June 2017
Volume 1
Issue 2

Remove the worry from repaying your student loan debt: Be defensive, plan wisely, allocate accordingly and pay attention.

Paying off hefty student loans can be a struggle for any new grad. For newly minted veterinarians, the struggle can be monumental. According to the most recent data available from the American Veterinary Medical Association (AVMA), the average student loan debt for veterinarians who graduated with debt in 2016 was over $167,000. Nearly 20 percent of graduates had debt in excess of $200,000. Ouch. And that’s on top of the debt that many veterinarians accrued while in undergraduate school. Double ouch. The following tips will help you repay your loans with as few hiccups as possible.

How much do you owe? To whom do you owe it? If you can’t answer these two questions, you’re letting your lender take advantage of you. These questions may be confusing because the ser- vicer of the loan is often not the original lender.

Federal and private student loans each have their own quirks. For federal loans from the Department of Education, you need to set up an online account through the Student Loan Data System to figure out how much you owe and to whom you owe it.

For private loans through a bank or other entity, you’ll need to figure out the institution’s system of reporting loans. If you can’t figure out where your loan information is, you can always check your credit report because lenders almost always report loans to the credit bureaus.

Income-Driven Payments

Income-based payment programs are usually the way to go when paying off loans, but some grads don’t know these programs even exist. With federal loans, you may be eligible for a reduced (or even eliminated) monthly payment based on your income and family size. The big lenders don’t want you to know this, so you need to educate yourself. In order to continue paying off loans at the reduced rate, you need to requalify every year, and this needs to be done manually. Don’t count on your lender to remind you of the deadline — do it yourself.

No Forbearance (If Possible)

If you can’t make your loan payment but don’t qualify for a deferment, your loan servicer will try to offer you something called a forbearance. This is the absolute last thing you want to do with your student loan. A forbearance allows you to reduce or eliminate your payments for a period of time while your interest continues to pile up. Instead, ask your lender about income-driven programs. If you’re dealing with a private lender, the payment plan is unlikely, but you can still ask for an extension of the term of a loan or for lower payments.

Set Up Auto-Payments

Whether your loans are federal or private, you should be able to set up auto-payments. When you instruct the servicer’s online interface to take the loan amount from your bank account on the same date each month, you won’t have to worry about late payments. Some borrowers even offer interest rate discounts if you enroll in an auto-payment plan.

Enrolling in auto-pay also ensures that your bank or servicer is using your payments exactly as you intended. You’re in control and can track what happens with each monthly payment. Don’t use your bank’s bill-pay system because your service may ignore your instructions if you either write on the check or attach a memo. Likewise, sending checks through the mail could result in lost, late, or misplaced payments.

Always stay on top of your credit report, which can help you figure out what your servicer is up to. Your credit report will alert you to any late payments or other potential problems. You can access a free copy of your credit report every year from the three major credit bureaus — Equifax, Experian and TransUnion.

Be the Watchdog

​When it comes to your student loans, you need to know what you owe and have a plan to repay the debt. Don’t be afraid to question your loan servicer, and always be sure to double-check their work. You need to be the watchdog of your own student loans to set yourself up for success.

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