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ASK A FINANCIAL PLANNER: 'Should I pay my medical school loans quickly or invest

Published by Business Insider on Sun, 10 Jan 2016

Certified financial planner Sophia Bera answers:I plan to graduate with medical school loans and will be earning a small residency salary. Is it better to pay off my loan as fast as possible or pay the minimum and invest/put into savings the rest of the salary that I have'Congrats on your new career! Since your salary is lower in residency and then will be much higher later on, I would look into using one of the income driven repayment options such as Pay As You Earn or Income Based Repaymentfor any federal loanswhile you're in residency. This way, your monthly student loan payment will be tied to your income for the next few years.Once you start working full-time as a doctor, I would really encourage you to aggressively pay off your student loan debt so that you're not tied to your med school loans for the next 20 or 30 years. Start by paying off any private loans and then pay down the federal loans with the highest interest rates first.One caveat to this: If you find a job in the public sector or a non-profit then you can qualify for Public Service Loan Forgiveness (PSLF) in which the balance of your student loans would be forgiven after 10 years (120 on-time payments).You can use this program in conjunction with one of the income driven repayment options. If you have six figures in student loan debt, it is definitely something to consider. This is the only loan forgiveness program where the balance forgiven isn't subject to taxes, so this is an extremely good deal.Don't forget about saving for retirement while you pay off your student loans! While you're in residency, you'll often be eligible for a retirement plan through work with a company match. Make sure you contribute at least enough to get the company match, otherwise, you're leaving free money on the table.As soon as you're working full time, start to max out your work retirement plan (the max is $18,000 per year for 401(k) and 403(b) plans in 2016) because you'll be in a much higher tax bracket and this will help cut your taxes significantly. Plus, you likely haven't been saving much for retirement while you've been in med school and residency so this will help you get back on track.This post is part of a continuing series that answers all of your questions related to personal finance. Have your own question'Email yourmoney[at]businessinsider[dot]com.Sophia Bera, CFP is the Founder of Gen Y Planning and has been quoted in The New York Times, Forbes, Business Insider, AOL, The Wall Street Journal, and Money Magazine. Shetweets, travels, and loves helping millennials manage their money more effectively. Curious' Sign up for the free Gen Y Planning Newsletter.SEE ALSO:ASK A FINANCIAL PLANNER: 'Should I consolidate my student loans''Join the conversation about this storyNOW WATCH: Why '5+5+5=15' is wrong under Common Core
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