Apr
24
2023
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How to Find a Financial Advisor

By | Growing Wealth, invest, Investing | Comments Off on How to Find a Financial Advisor

Deciding you’re ready to consult with a financial advisor is a first and important step in reaching your financial goals — but finding the right professional for your needs takes some time and effort, starting with a closer look at what you need, exactly.

A financial advisor can do many things. Generally, they examine a client’s current financial picture, from debt to savings and investments; discuss financial goals (whether retirement, saving for college, or another goal); and create a plan to help the client get there.

Some financial professionals simply offer guidance or a basic plan; others may completely manage a client’s portfolio, while others may offer services that fall somewhere in between. Finding the right person hinges on whether their services match your needs, whether their cost structure makes sense, in addition to other considerations.

Benefits of Using a Financial Advisor

Financial advisors can help their clients create a financial plan that allows them to save and invest for future goals while still meeting the obligations of today. In other words, they can help craft a comprehensive plan to guide people through multiple stages of life in a way that dovetails with their unique goals. Typically, the plan has some degree of personalization.

Plus, advisors can help their clients stay the course, saving and investing for the long term. Creating a financial plan is a key step, but then it’s crucial to stick with the plan. This isn’t always easy when, for example, the market is volatile and emotions are triggered. But that’s when an experienced advisor may come in handy; they can provide perspective and help clients stay focused.

Some financial advisors help clients to become more financial savvy. Some may make trades for their clients, while many monitor investments made to help ensure that a client’s portfolio is on track. Some help with tax issues as well, e.g. whether to use a strategy like tax-loss harvesting, and more complex financial matters like estate planning.

By looking at these benefits, which seem most important to you? Sometimes making a list of requirements can be helping when trying to find a financial advisor. Under some circumstances you may even want to consider hiring a wealth advisor.

Seeking an Advisor

Next step in finding an advisor is to obtain some recommendations. To get a list of advisors to consider:

Friends and Family Recommendations

•   Ask friends and family if they’ve used or are using an advisor. If so, what services are they receiving? How happy are they? Are there any concerns about any of the advisors they’re using? Ideally you want to take recs from people in similar circumstances to your own.

•   Do the same with business colleagues, or people who belong to the same organizations that you do.

By looking at the websites of these advisors, do they seem like a potential match?

Industry Associations

Another option when seeking an advisor is to consult industry associations and trade groups.

•   The National Association of Personal Financial Advisors website (NAPFA focuses on fee-only financial planners).

•   Financial Planning Association. Advisors in this network are CERTIFIED FINANCIAL PLANNERS™ (CFP®s) and you can search by location, area of specialty, how they’re paid and any asset minimums that may exist.

•   Garrett Planning Network. All advisors in this network charge hourly.

Finding the Right Fit

Just as you wouldn’t buy the first car you test-drove, or the first pair of shoes you tried on, you don’t have to commit to working with the first financial planner you talk to. Many advisors offer a free consultation so you can find out more about them. While the selection process does take a little extra time, it’s worth investing that time for your future.

Questions to Consider

Some people may find that the same names keep cropping up when asking for recommendations and exploring online sites. It can therefore make sense to create a short list of financial advisors from those findings and explore those options in more depth.

Questions to ask those advisors can include:

•   What specific services do you offer?

•   What processes do you use to create a plan for me?

•   What qualifications do you have?

•   How often would we meet or otherwise communicate?

•   What is your overall investment philosophy?

If you’re a beginning investor, it can help to ask about the financial advisor’s experience in getting new people started with planning and investing in a basic portfolio.

Fiduciary Rules

Another key question: is a financial advisor a fiduciary? If so, the advisor must work in the best interests of a client and either disclose conflicts of interest or avoid them. If an advisor is not a fiduciary, he or she is required only to make recommendations that are considered suitable.

In 2013, the U.S. Department of Labor tried to mandate that all financial advisors needed to follow a fiduciary standard with retirement accounts. But in 2018, the Fifth Circuit Court overruled the standard. Although this issue may be revisited, for now, investors who want a fiduciary must find out what standard a particular financial advisor follows.

Advisors who follow a fee-based payment structure are, by definition, fiduciaries. Those who get paid a commission when clients make certain investments may or may not be. When an advisor isn’t a fiduciary, they might recommend investments because they’re right for the client, but they could also be recommended because the advisor gets paid a commission.

Also, when comparing advisors, what will services for each of them cost?

Common Financial Advisor Charges

Financial advisors’ fees can be structured in a number of ways, and what you pay for a financial advisor depends on a number of factors. In general, financial advisors are either paid a flat fee (such as a retainer or a fee-for-services), commissions on products and investments they sell you (such as insurances and/or mutual funds), or a hybrid.

Retainer

Some advisors charge fixed retainer fees, due monthly, quarterly, or annually. The fees can range significantly; annually, the low end may be $2,000, with the high end at $7,500. Investors can ask an advisor to explain what they get for paying the retainer.

Commission

In this scenario, advisors get paid based on the products they sell to clients. Some advisors may receive a percentage of the assets of a client before the investments are made. Others can be paid by a financial institution after the transaction has occurred, while others may charge clients each time that a stock is bought or sold.

Advisory Fees

This can be a percentage of the assets being managed by the financial advisor. Generally speaking, paying 1% annually is reasonable under this structure when including both the fees of a financial advisor and any investment fees. When considering an advisor who charges these fees, it can make sense to ask for a breakdown and the reasoning behind the fee structure.

Planning Fees

This could be an upfront fee for a financial plan or for ongoing advice. There can also be a subscription-based fee structure, similar to a retainer. Fees for these services vary widely, so be sure to ask what your all-in costs would be when working with any advisor.

Hourly Fees

This would involve a straight hourly fee for services provided. For example, setting up your retirement portfolio might cost $X, while setting up a 529 college savings plan for your kids might cost $Y.

Robo Advising vs Financial Advisors

It may also make sense to consider an online robo-advisor, or automated investing platform. This is an algorithm-driven digital platform that provides clients with basic financial guidance and pre-set portfolio options.

First, the investor responds to a questionnaire by inputting their goals and time horizon. Typical questions may also include risk tolerance. (Here’s a helpful risk tolerance quiz.)

Based on the investor’s preferences, the technology on the backend comes up with a basic plan and a recommended portfolio option (e.g. one that’s more aggressive or more conservative).

Because most automated portfolios are built with low-cost index or exchange-traded funds (ETFs), these services are considered efficient and low cost compared with using a human advisor.

Robo portfolios often involve an annual fee, perhaps 0.25% to 1% of the account balance. In some instances, a robo advisor may charge a small monthly dollar amount for lower balances, e.g. $4 per month, instead of a percentage. Remember, these costs are in addition to the fees for the underlying funds in your portfolio.

Automated investing platforms may not be the right choice for people who need advice for complex financial situations, such as tax planning. It also wouldn’t fit the needs of investors who simply prefer to sit down with a human advisor, of course.

Just like with human advisors, different robo advisor programs offer different services. So if the idea of robo advising sounds appealing, it can help to check more than one option.

Free Financial Advice

Some companies offer complimentary financial advice for their customers. In some cases this feature is only offered if your account balance is high enough. But even though an advisory service might be touted as ‘no cost’, remember that different investment products always come with a fee, such as an expense ratio. Topics discussed can include how to:

•   Set and reach financial goals, based on the current financial landscape.

•   Create a budget and practice good spending habits.

•   Leverage debt strategically by balancing repayment of debt with saving for long-term goals.

•   Build an emergency fund and save for the future.

•   Create an investment strategy that dovetails with personal risk tolerance and goals.

The Takeaway

Deciding to work with a financial advisor is an exciting step toward taking control of your financial future. Finding the right person, however, takes time and diligence. Financial advisors can come with a range of qualifications and specialties. The services they offer and the fees they charge also vary.

Fortunately, there are a number of organizations that can help you do a search for someone who is the right fit. And you can also consider taking a more tech-driven route and using a robo-advisor.

Ready to invest in your goals? It’s easy to get started when you open an Active Invest account with SoFi invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here), and members can access complimentary financial advice from a professional.

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected]. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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Apr
24
2023
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What Is the Dow Jones?

By | Growing Wealth, invest, Investing, Terminology | Comments Off on What Is the Dow Jones?

The Dow Jones Industrial Average is one of the earliest examples of a stock index, a collection of 30 blue-chip company stocks that are calculated into one number that’s supposed to represent the U.S. stock market as a whole or a subset of it.

Now there are hundreds of indices, which represent everything from smaller companies (The Russell 2000), to specific industries, like the KBW Bank Index, to the S&P 500 — the oft-cited index that represents a broad cross-section of America’s largest companies. But the Dow is still watched, domestically and worldwide, as a leading market indicator.

What Is the Dow Jones Industrial Average?

The Dow Jones Industrial Average is based on the performance of 30 companies that represent the industry leaders in the world economy: Apple, Microsoft, JP Morgan Chase, Nike, Coca-Cola, Walmart, Disney, along with companies like Dow or Caterpillar that you may not be as familiar with, but are massive and play an important role in business in the United States and around the world.

The Dow is considered an index of blue-chip companies, which signals not only some of the largest companies, but also the most solid and well established.

Nonetheless, the companies on the Dow Jones Industrial Average change regularly, reflecting changes in the U.S. economy.

It’s important for investors to follow the Dow, as it’s one of the leading stock market indicators. And while it’s certainly not the only one, understanding the Dow’s movements in addition to other indicators can help inform your investing strategy.

What Makes the Dow Jones Industrial Average Different?

The Dow Jones Industrial Average is just one of many collections of stocks whose value is represented in a single number. The Dow Jones Industrial Average isn’t just distinct because of its age, but because of how it’s calculated.

The other two major stock indices that are frequently cited as bellwethers of the overall market, the S&P 500 and the Nasdaq Composite, are both “market capitalization weighted,” whereas the Dow Jones Industrial Average is “price-weighted.”

That means that the Dow Jones Industrial Average’s “points” are calculated from the per-share price of every stock in the index, as opposed to the company’s overall value. As such, the DJIA doesn’t reflect the overall stock market return, but rather it can be used as a gauge of market trends and/or investor sentiment.

In a market-weighted index, the influence any given stock has over the index’s overall value is determined by a company’s market capitalization or market cap. A company’s market cap is determined by multiplying the number of shares by the value of the stock.

In this type of index, the influence of a company is determined by how valuable the company is, not solely by the price of a stock.

Example of How Stock Price Can Skew an Index

Apple only joined the Dow Jones Industrial Average after it did a stock split, lowering its per share price from around $650 to under $100, but increasing the number of shares by seven. Had it split its stock before joining the Dow, it would have entered the index with a price of nearly $900, as opposed to around $126, giving the company an outsize role on the index.

Because the Dow Jones Industrial Average is price weighted, adding companies with hefty per-share price tags could cause problems. That’s the main reason that companies like Alphabet, the parent company of Google, and Amazon, aren’t included in the index. On the other hand, Microsoft, which is worth over $1 trillion, is priced at below $200 a share and is a member of the Dow Jones Industrial Average.

The Dow Divisor

Today’s economy is far different from the late 19th century or the late 1920s — the number of industries in which the U.S. has large, established companies has grown, and the size of those companies is bigger.

In order to account for some of these changes over time, the Dow Divisor is used to determine the value of the Dow Jones Industrial Average. Using the Dow Divisor can help in historical comparisons and account for differences that may arise due to a stock split or other factors.

How the Dow Jones Industrial Average Changed Over Time

The Dow Jones Industrial Average is intimately tied up with the history of the markets and American financial journalism. The Dow Jones Industrial Average is just eight years younger than the Wall Street Journal, which was founded in 1889, while the Dow Jones Industrial Average was founded as a 12-company index in 1896.

The Dow Jones Industrial Average was originally developed by Charles Dow and Edward Jones.

But it wasn’t the first ever stock index; that title belongs to the Dow Jones Transportation Average, a collection of railroad stocks that Dow came up with in 1884.

The 12 companies initially included in 1896 were companies that reflected the shape of the American economy — largely manufacturing and agricultural companies and the transportation networks that helped move goods. The companies included in that first year were:

•   American Cotton Oil

•   American Sugar

•   American Tobacco

•   Chicago Gas

•   Distilling & Cattle Feeding

•   General Electric

•   Laclede Gas

•   National Lead

•   North American

•   Tennessee Coal & Iron

•   U.S. Leather

•   U.S. Rubber

The Dow Jones Industrial Average in the 20th Century

The index was expanded to its current number of 30 in 1928, and by 1932 the Index started to resemble the American economy as we might recognize it today, with a mixture of manufacturing (General Motors, Chrysler), retail (Sears, Woolworth), consumer (Coca-Cola, Procter & Gamble) technology (IBM) and energy (multiple descendants of John Rockefeller’s Standard Oil).

The first companies associated with the personal computer revolution came much later (IBM being an exception), with Hewlett-Packard getting added in 1997, Intel and Microsoft added in 1999, and Apple only joining the Dow in 2015, when it replaced AT&T.

Walmart was added to the index in 1997. America’s entertainment industry, one of its leading export industries, was only represented in the index in 1991, when Disney was added.

Right now the Dow Jones Industrial Average “covers all industries except transportation and utilities,” according to S&P Dow Jones Indices.

While the Dow Jones Industrial Average is managed by S&P Dow Jones Indices, it still retains a connection with the Wall Street Journal and its publishing company, Dow Jones. The editor of the paper is part of the committee that determines membership in the Dow Jones Industrial Average.

The Takeaway

Investors can look to the Dow Jones Industrial Index as an overall indicator of how the largest companies in the U.S. are performing. Historically, the Dow Jones Industrial Average has shown similar returns to the S&P 500, which tracks 500 large-cap U.S. companies.

Indexes, like the Dow Jones Industrial Index, can provide helpful insight for investors. They can be used to help investors compare current and past stock prices, to determine the market performance. Understanding this information can be helpful to investors as they review their own portfolio and adjust their investing strategy.

Ready to invest in your goals? It’s easy to get started when you open an Active Invest account with SoFi invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commission, but other fees apply (full fee disclosure here), and members can access complimentary financial advice from a professional.

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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Apr
24
2023
How to Pay Off Dental School Debt and Thrive as a New Dentist

How to Pay Off Dental School Debt

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

In dental school you’re taught the skills you need to become a successful dentist. What they don’t tell you is how to effectively handle your dental school debt. A typical dental school graduate enters the profession with a student loan burden topping $293,900, according to the Education Data Initiative.

That’s $90,000 more than the average medical school debt. Right when dentists are ready to hit the accelerator on their careers, the reality of repayment presents a sizable speed bump.

The good news is, you’ve picked the right profession when it comes to ROEd, or the “return on education” you should reap down the road. The average base salary for general dentists is $217,620, and more than $355,570 for specialists who provide implant services, per a 2021 survey by DentalPost and Endeavor Media.

Ways to Pay Off Dental School

At this stage of the game, it’s important to have a plan for paying down your debt as efficiently as possible. Getting your finances in order early is especially critical if you anticipate borrowing more money down the road to open your own practice or buy a home.

Below, we explain the various student loan payment options available and how to know which one makes the most sense for you.

Choose a Repayment Plan

Federal student loan borrowers have four repayment plans to consider. They all set your monthly loan payment at an amount deemed affordable based on your income and family size. You can change your plan anytime without incurring fees.

•   Standard Repayment Plan. Spreads payments evenly over 10 years. Under this plan, if you have a loan balance of $250,000 at 7.54%, your monthly payment will be about $2,900. This is the default plan if no other plan is chosen.

•   Graduated Repayment Plan. With this plan, payments start lower and then gradually increase over time, usually every two years. Repayment takes place over 10 years.

•   Extended Repayment Plan. Choose either fixed or graduated payments. Repayment takes place over 25 years.

•   Income-Driven Repayment Plans. There are four types of income-driven repayment plans that tie a borrower’s income to their loan payments. Repayment takes place over 20 or 25 years. At the end of the repayment period, the remaining balance is forgiven (though this amount may be taxable).

Thanks to their higher income, dental professionals often pay off their loans before the end of the repayment period, making the forgiveness benefit irrelevant. Also, you may not be eligible for forgiveness programs if your income is over a certain threshold. (Still, we’ll get into forgiveness programs a bit more in the next section.)

Keep in mind that the longer your repayment term, the more interest you pay over the life of that loan. The shorter your term, the less you’ll pay in interest, but the higher your monthly payment will be.

A student loan payoff calculator will give you an idea of your monthly payment for different repayment terms.

Recommended: How To Get Out of Student Loan Debt

Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) program is an option if you start your career at an eligible nonprofit or public service agency. Work for a local, state, tribal, or federal government organization or for a nonprofit organization, and you may be eligible for federal Direct Loan forgiveness after 10 years in an income-based plan. Serving as a full-time AmeriCorps or Peace Corps volunteer also counts.

Examples of qualifying government employers are the U.S. military, public colleges, and public child and family service agencies, but not government contractors.

There are also a number of federal and state loan-repayment assistance programs that reward dentists for providing service to certain segments of the population. The Indian Health Service Loan Repayment Program, for example, offers dentists who serve American Indian communities up to $20,000 per year toward the repayment of school loans.

Student loans from private lenders do not qualify for PSLF.

Student Loan Consolidation

Federal student loan consolidation lets you combine multiple federal student loans into a single new loan with a fixed rate. Your new rate is the weighted average of the old student loans’ interest rates rounded up to the nearest eighth of a percentage point. That means the rate might actually be slightly higher than the prior rate on some of the loans.

If your monthly payment decreases, it’s likely the result of lengthening the term (up to 30 years), which can mean paying more interest over time.

By the way, you can’t include private student loans in this type of a consolidation loan.

Student Loan Refinancing

For many dental school grads, consolidating multiple student loans into a single loan with a private lender, and then refinancing the balance at a lower interest rate, makes sense. Student loan refinancing makes it easier to manage your finances: You’ll get one bill each month from a single lender, instead of several bills for varying amounts that are based on different rates.

Depending on how you structure your loan, a lower interest rate might allow you to pay back your debt faster. That can save you a substantial amount of money over the life of the loan.

You can also choose a term that lowers your monthly payments, leaving more money in your pocket to be used for other things: building an emergency fund, starting a family, and investing for retirement.

Tips for Thriving as a New Dentist

Here are some ways you can set yourself up for success from the very start of your career.

•   Create a budget you can stick to. Leave room for annual and quarterly expenses as well as incidentals.

•   Start a savings plan. The sooner you start saving and investing, the sooner you can enjoy compound growth, which is when your money grows faster over time.

•   Set up automatic payments for student loans. This helps you make payments on time, plus many loan service providers offer a discount if you arrange to autopay.

•   Look into different ways to invest. In addition to maxing out your 401(k) or 403(b), you may also want to consider vehicles such as a health savings account or individual retirement account.

•   Get familiar with your employee benefits package. Find out what perks your employer offers, such as help with student loan repayment.

Recommended: Budgeting as a New Dentist

The Takeaway

Though a typical dental school student owes nearly $294,000 by the time they graduate, there are several student loan payment options that can help borrowers pay down debt more efficiently. All four federal student repayment options, for example, set your monthly payments based on your income and family size. And depending on your employer, you may also qualify for a forgiveness program.

Have multiple loans? Federal student loan consolidation lets you combine them into one new loan with new terms and a new interest rate. Student loan refinancing, which lets you consolidate multiple student loans into a single loan with a private lender, is another option to consider.

It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for example, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more—at no extra cost.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.


†Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE THAT THE WHITE HOUSE HAS ANNOUNCED UP TO $20,000 OF STUDENT LOAN FORGIVENESS FOR PELL GRANT RECIPIENTS AND $10,000 FOR QUALIFYING BORROWERS WHOSE STUDENT LOANS ARE FEDERALLY HELD. ADDITIONALLY, THE FEDERAL STUDENT LOAN PAYMENT PAUSE AND INTEREST HOLIDAY HAS BEEN EXTENDED TO DEC. 31, 2022. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE THE AMOUNT OR PORTION OF YOUR FEDERAL STUDENT DEBT THAT YOU REFINANCE WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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24
2023
Smart Medical School Loan Repayment Strategies

Smart Medical School Loan Repayment Strategies

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

If you’re a doctor or studying to be one, chances are you have student loans. A typical medical school graduate has an average student loan debt of $202,450, according to the Education Data Initiative. That’s seven times as much as the average college student owes.

Paying back the loans can be a challenge for doctors during residency and the early part of their career. But the good news is, the profession tends to pay well. In 2023, a typical entry-level doctor earned around $210,000 per year.

Ways to Pay Off Medical School

No matter how much you owe, it’s smart to have the right repayment strategy in place. This can help ensure your monthly loan payments are manageable and your financial health is protected.

Let’s take a closer look at the various student loan payment options available.

Choose a Repayment Plan

When it comes to federal student loans, borrowers have four different repayment options. No matter which plan you choose, your monthly loan payment will be based on your income and family size. If you need to change your plan at any time, you can do so without incurring fees.

•   Standard Repayment Plan. This plan spreads out payments evenly over 10 years. For example, if you have a loan balance of $200,000 at 6.54%, your monthly payment will be about $2,275.

•   Graduated Repayment Plan. With a graduated plan, your payments start out lower and then gradually increase over time, typically very two years. Repayment takes place over 10 years.

•   Extended Repayment Plan. You can choose either fixed or graduated payments, and repayment takes place over 25 years.

•   Income-Driven Repayment Plans. There are four types of income-driven repayment plans: Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (RPAYE). Repayment takes place over 20 or 25 years, depending on your income and the plan you choose. At the end of the repayment period, the remaining balance is forgiven, though this amount may be taxable.

As you weigh your options, think about the length of the repayment term and the monthly payment amount. With a longer repayment term, your monthly bill is lower but the amount of interest you pay over the life of the loan is higher. With a shorter term, you pay less in interest over the life of the loan but your monthly payment is higher. A student loan payoff calculator will give you an idea of your monthly payment for different repayment terms.

Recommended: 4 Student Loan Repayment Options — and How to Choose the Right One for You

Loan Forgiveness Programs

Loan forgiveness programs can wipe out some or all of your medical student loan debt, provided you meet certain criteria. If you work for an eligible nonprofit or public service agency, for example, you may qualify for the Public Service Loan Forgiveness (PSLF) program. Considering a job with a local, state, tribal, or federal government organization or with a nonprofit organization? You could be eligible for federal Direct Loan forgiveness after 10 years in an income-based plan.

You may also qualify for a federal or state loan-repayment assistance program if you provide service to certain areas or segments of the population. For instance, the National Health Service Corps Loan Repayment program will erase as much as $50,000 of eligible student debt, tax-free, if you work for at least two years in an approved medical facility.

Student loans from private lenders do not qualify for PSLF.

Student Loan Consolidation

If you’re paying off more than one federal loan, federal student loan consolidation may be an option worth exploring. Consolidation lets you combine different federal student loans into a single new loan with a fixed rate. The new rate is a weighted average of all your federal loan rates, rounded up to the nearest eighth of a percent. This may result in a slightly higher rate than you were paying before on some loans.

When you consolidate, you have the option to choose a new repayment plan that extends the life of the new loan up to 30 years. Keep in mind that you can’t include any private student loans in this type of consolidation loan.

Student Loan Refinancing

With student loan refinancing, you combine private and federal student loans into one new loan with a private lender, and then refinance the balance at a potentially lower interest rate. This in turn can lower how much you pay in interest over the life of your loan. Refinancing can also make it easier to manage student loan payments. Instead of bills from different lenders, you get one bill each month from one lender.

You can choose a new length for your loan, which lets you adjust your monthly payments. This may be especially helpful if you choose to refinance during your residency.

Recommended: A Guide to Private Student Loans

The Takeaway

Attending medical school isn’t cheap, and it’s common to graduate with significant student loan debt. The good news is, there are several repayment options that can help you tackle your debt more efficiently and protect your financial health. For example, if you have federal student loans, your monthly payments are based on your income and family size. You may qualify for a forgiveness program, which could erase part or all of your balance.

Have more than one loan? Consolidation lets you combine multiple federal loans into a single loan with new terms and a new fixed rate. With student loan refinancing, you combine private and federal student loans into a single loan with a private lender and then refinance it at a potentially lower interest rate.

Refinancing can be a great choice for working medical school graduates who have higher-interest PLUS loans, Direct Unsubsidized Loans, and/or private loans.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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