Minimize and delay borrowing student loans as much as possible
Goes without saying, the more you delay the onset of loan origination and associated fees, the more you delay interest ballooning. Time value of money is against as when someone else’s collecting the interest from us.
Starting in 2012, feds got rid of subsidized loans for medical students. Which meant the moment your loan’s disbursed, it starts snowballing at 5.4% or more, depending on how much you had borrowed that year. Some interest rates were as high as 9-11%. That I call predatory lending…
What You Should Do to Minimize Student Loan Interest
I paid my tuition and living expenses with a credit card, usually one I had just opened and had a 0% deal on for 12-18 months. Since my tuition was $15,000-17,000 per quarter, and the cost of living was pretty high, I regularly charged up a large balance on the credit card.
I made the cash back rewards from large purchases, rode the balance interest free for 1.5 years, then requested student loan to pay the credit card balance off before the 20% credit card interest rate hits after the promotional period of 0% interest ends.
So I didn’t pay a dime in credit card transaction fees or interest, avoided student loan interest and origination fees for 18 months, made extra cash from the promotion/cash back bonus, AND built an incredible credit history.
Following this recipe, I saved ~$27K in student loan interest during medical school, and made an extra ~$10K+ in cash back rewards.
For more details on how I pulled this off as a full time medical student/ mom with 2 jobs, see my guest post on WCI titled “hitting a net worth of zero as an intern.”