We’ve been covering the TO DO list. Contact your servicer, calculate your debt-to-income ratio, plan for forgiveness…But now, we need to cover the Don’t Do List. These are common mistakes that veterinarians make that can end up costing tens of thousands of dollars. 

Do not…

Don’t Enter Deferral - If you enter advanced education, an internship, a Ph.D., or even a residency, your loan servicer will likely enroll you in deferral. This means your loan payments will be deferred until you start earning more income. This means that you are not making any payments and your interest is accruing. If you have an Income-Driven Payment plan available to you, enroll there! This allows you to make minimal or zero payments and each month counts toward forgiveness. Remember, deferral is the automatic option, the one that the servicer is programmed to use. You have to take proactive steps to enroll in Income Driven Repayment. 

Don’t Enter Forbearance - If you are struggling financially, if you can’t make your payments or are late, your servicer may provide the option of putting your loans into forbearance. This delays your payments, but interest accrues the entire time. And when your loans exit forbearance, the same principal and interest remain. If you are struggling, call your servicer and enter an Income-Driven Repayment Plan. But, again, you have to take the proactive step and not let the servicer drive the conversation. 

Don’t Delay Saving for Forgiveness - If you are on an income-driven repayment plan and are planning on reaching forgiveness, then you know a tax burden is coming! For some, this tax burden can be huge, in the $300,000-$400,000 range. We can’t predict the tax rate 20-25 years from now, but it’s not going to be low! The best time to start saving is Yesterday. The second best time is TODAY! So, immediately set up a tax savings account and start saving and investing money, so when the tax burden comes, you have it covered. The big reason is that saving early allows you to use the power of compounding interest. Your money will start earning interest and that will earn more interest. 

Don’t Consolidate/Refinance Your Loans without Calculation - This one is nuanced. Consolidation may be the right decision if you have a debt-to-income ratio of less than 1:1. If you have greater debt than your annual salary, then it’s likely that you will lose money with consolidation. So, don’t privately consolidate without checking and double-checking the math, and make sure it’s the best decision for you. 

Last One - Don’t Bury Your Head in the Sand - You’re here and reading this, so I know you are on top of it. But student loans are not a set-and-forget situation. The laws, regulations, and policies around student loans are changing constantly. Your servicers will change several times over the life of your loans. Additionally, your life will change. New jobs, new salaries, and starting a family will all change your numbers,  which will change the calculus of your decision. So you have to reassess your situation regularly and stay up to date with changes in the federal and state programs. There is no better place to stay up to date than the VIN Foundation’s Student Debt Center. These veterinarians digest this huge amount of information and provide you with the relevant information you need to know. 

The list of pitfalls and traps in the “Do Not” list is easy to avoid, you just have to watch your step! You’re making massive progress along the path to learning everything you can about your student loans!