There’s an old story on the Wall Street Journal about a doctor who whose student loans went from $250,000 to $555,000.
It is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.
Lessons for you:
- Read the fine print when you borrow the money. After you graduate and go into repayment, read it again to refresh. Know what will happen if you don’t pay – and what your options are.
- Avoid deferment at all costs. Doctors don’t make much money while in residency, but they still make more than most people. Surely the person in the above story could have paid something towards her loans during that time.
- DO NOT DEFAULT. This sounds like a simple lesson, but it involves planning your career adequately, making decisions to improve your income and stability, as well as managing your money well.
I know you’re thinking “she’s a doctor!”, but doctors don’t make as much as you might think. Further, sometimes when people make a lot of money, they are even more likely to mismanage it – just look at professional athletes and other celebrities.
Don’t be afraid to seek professional help if you need it because it can literally save you hundreds of thousands down the road!
Have you ever defaulted on a loan? Do you currently feel close to it? What have you done to better avoid deferment?