Dealing with Nursing School Debt

It’s a common assumption that nurses make comfortable salaries, but anyone in the field knows that salary can vary wildly based on experience, location, specialty and a number of other variables.

Mix that with other challenges like hefty family expenses or inconvenient emergencies that set you back financially, and those hefty loan repayments can leave you feeling tapped out.

If that feeling describes you, clearly you’re not alone.

Here are some options we would advise nurses to explore to help drill down your debt.

Take a Closer Look At Your Finances

This may seem obvious, but we’ve got to start at the very beginning.

Write out all of your expenses for the month, add them up and subtract them from your gross monthly income.

After you’ve subtracted your basic needs, like keeping a roof over you and your family’s head, getting food in everyone’s stomach and putting clothes on everyone’s back, what’s left over?

How much are you wasting on things like cable? Starbucks coffee? Buying lunch?

This TIME magazine article found that the average American could save $2500 per year from simply carrying a brown bag lunch to work. 

The truth may hurt, but if the stress of feeling like you’ll be tied to debt until death hurts more, tell your ego to shut up and power through this exercise. Be honest with yourself.

Analyze and breakdown all of your monthly expenses and you may be surprised at what you find.  

Consider implementing budgeting tools to help you better manage your funds.

For example, Mint.com offers popular budget-based software accessible from your computer, tablet or smartphone for free. You provide your financial details such as bank accounts, credit lines and investment accounts, and Mint will track your money. You can use the default budgeting categories (mortgage, insurance, grocery shopping, etc.) for expenses to develop your budget. The program will warn you when you’ve gone over budget and make suggestions.

There are many other free and paid tools you can use to handle your finances, including classic budgeting tool Quicken, YNAB.com (You Need a Budget) and even a simple Excel spreadsheet budgeting template.

New York Times bestseller, financial author, radio host, motivational speaker and creator of Financial Peace University, Dave Ramsey, is widely popular, highly respected finance expert who has helped thousands of people improve their finances. Lucky for you, he provides a lot of free tools and resources on DaveRamsey.com to get people started on eliminating their debt. Check out his Get Started page to learn more about methods like the Snowball Effect for attacking debt along with other proven solutions for reaching financial freedom.

Here are a few more links that you may find helpful:

Money Habits We Need To Break

How to Make Getting Out of Debt Fun

Save $1000 in One Month

Answer Three Questions to Achieve Your Money Goals

Employee Work Programs

Next, if you’re current employer doesn’t offer some kind of repayment assistance regarding student loans, seek out an employer who will. Many workplaces do this, but you more than likely will need to sign a contract promising to work for a set amount of years.

The Nurse Corps Loan Repayment Program previously called Nursing Education Loan Repayment helps alleviate nurse shortages at critical shortage facilities in the United States by offering loan repayment assistance. Participants can get up to 60 percent of qualifying student loans paid for if they commit to a two-year service commitment. They can cut off another 25 percent from the original loan balance if they stick around for a third year. ( For more information, click here: http://www.hrsa.gov/loanscholarships/repayment/nursing.) 

Once you have your financial situation spelled out in front of you, and you’ve considered employment opportunities that will help you pay off your debt, identify the type(s) of student loans you have.

Dealing with Federal Loans Vs Private Loans

Federal loans are almost always preferred over private loans for the lower interest rates, deferred payment options and loan forgiveness opportunities.

However, the amount approved for a student’s federal loan may not cover all education-related costs, and this leads many people to go to a private lender, like Navient (formerly Sallie Mae).

Since the lender-bank sets the terms and not the government, your subject to whatever conditions that lender creates.

Typically, private lenders allow students to borrow much more money than federal loan programs, but between variable interest rates, compound interest and less flexible repayment options---borrowers can end up paying back double or more, and sometimes, you simply can’t afford it.

If you have only federal loans, there are lots of options at your disposal to get out of debt.

If you have both federal and private loans, you can still use federal loan programs to help you get out of debt faster.

For example, you can apply for income-based repayment on your federal loans, which can reduce your loan repayments, so they exceed no more than 10 to 15 percent of your income. You can use the money left over and apply it to your private loan payment so you can drive down the balance. This technique is referred to as the debt avalanche.

This works by paying off your high interest loans first (which will likely be your private loans if you have any.) Paying extra money toward these loans will save you money on interest long term.

See What Qualifies For Federal Direct Loan Consolidation

There are certain unsubsidized medical field student loans can be consolidated into a federal direct loans, including:

• Health Professions Student Loans (HPSL)
• Health Education Assistance Loans (HEAL)
• Nursing Student Loans (NSL)

This is great news considering federal direct loans have many benefits, including competitive interest rates, and in certain cases, they’re eligible for student loan forgiveness.

In certain cases, student loan forgiveness can dismiss certain percentages of your loan or even all of it, depending on a number of factors.

When it comes to federal loans, there are a number of professions offering up to 100 percent forgiveness under the Public Service Loan Forgiveness program, and nursing is one of them.

For more information on that program, check out Student Aid links: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation#when-can-my-federal

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

Dear Borrower Letter

Instructions for Completing Employment Certification for Public Service Loan Forgiveness

Employment Certification for Public Service Loan Forgiveness

For more information on navigating Public Service Forgiveness Programs, take a look student loan expert Heather Jarvis’ helpful links:

Public Service Loan Forgiveness in 5 Easy Steps

The Right Kind of Job for Public Service Loan Forgiveness

The Right Kind of Loans for Public Service Loan Forgiveness

The Right Kind of Payments for Public Service Loan Forgiveness

As mentioned earlier, other programs available to nurses with federal student loans are Income Based Repayment plans.

One of them include the Income-Based Repayment or IBR. IBR caps your monthly payments based on a certain percentage of your income, which is perfect if you’re struggling with monthly payments and need something more manageable.

For more details on each plan, visit https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven

You can also apply for an Income Driven plan here: https://studentloans.gov/myDirectLoan/index.action

Loans from private lenders, however, can be a bit trickier.

Options For Private Loans

As we stated before, repayment plans for private loans are a lot less flexible, but if you really can’t afford your payments, the first step is to try and negotiate with your lender. Let them know in writing you want to pay it off but you simply can’t afford the payments “as is” and you want more manageable monthly payments. In some cases, they may modify your loan – lower payment, and longer terms – if it means that they will be repaid.  They much prefer that to you defaulting on your loan, going into collections, the expensive paperwork associated with suing you, etc.  So, if you need a reduced payment, just ask and you might get it granted.

Another thing to keep in mind when it comes to private loans is these lenders aren’t allowed to garnish your wages unless they have sued you.

Even if you are sued, there’s a plus side--you might be able to A. negotiate better payment terms or B. stop them with bankruptcy.  

Bankruptcy

Another option to explore, particularly if you have private student loans (like Navient, formerly Sallie Mae) if you have run out of other options is consider filing for chapter 13 bankruptcy. Consumer debt expert Steven Rhodes is the owner of Getoutofdebt.org, a wonderful resource that will assist you in finding a local bankruptcy attorney that will discuss your specific circumstance with you for free. http://bankruptcy.getoutofdebt.org/

How this Affects Private Loans

Filing Chapter 13 can assist you in keeping private loan lenders at a distance so you can get a bit of wiggle room to catch up on bills. However, if you’ve earned an RN degree or higher, says it’s unlikely that you can completely discharge private loans, but a partial discharge or more reasonable payment options are likely.

Check out the experiences of others who had their student loans discharged through bankruptcy on Steve Rhode’s site here:  A Look at Sallie Mae and Other Student Loans Discharged in Bankruptcy in 2012 .

None of these options are particularly easy, but if you can implement them, they will work. We want every nurse to have the chance to be free of student-loan debt and enjoy the fruits of your nurse education.

If you have freed yourself from nursing school debt or are in the process of paying it off, tell us about your journey.

Any good ideas that we may have missed? Please share it with your fellow nurses in the comments section.