Use this checklist to prepare for your first year of residency.

• Organize your loan portfolio.
• Learn what loan repayment options are available.
• Creating a monthly budget and spending plan.
• Familiarize yourself with your stipend and how much take-home funds you will have.
• Research the cost of living for your residency location.
• Prepare to live life on a resident stipend.
• Create financial goals for residency and beyond.
• Know how to begin contributing to your retirement.
• Start thinking about your financial goals.
• Consider factors such as insurance and speak with your Benefits Office.

Helpful Links

• Handling Finances During Residency

• The Cost of Applying for Medical Residency

• Residency and Relocation Loans

• Transition to Residency

Now that you’ve begun residency, you’ll want to prioritize organizing your student loans and preparing for your repayment options. The first step in managing your education debt is getting organized. Once you have all your documents gathered and organized in a single place, you will be better prepared to manage your debt.

The MedLoans^® Organizer and Calculator (MLOC) Tool

To help you stay organized during residency, the AAMC has created an online resource specifically designed to organize loan information safely and securely as well as calculate various repayment scenarios. This tool can help you understand the impact of your borrowing and provide total estimated costs for different repayment strategies. Using the MedLoans® Organizer and Calculator tool will help you make educated decisions about repaying your student loans.

Resources

Loan Servicers
Complete Exit Counseling

During Residency

Financially, your years of residency will not be your most extravagant or lavish. During this time, not only is it a good idea to continue living within a realistic budget, but it is also a good idea to begin actively managing the repayment of your student loans.

You have many options as you choose the strategy that will best support your financial goals during residency. These options range from postponing payments by using grace, deferment, or forbearance to making affordable payments through one of the repayment plans.

During Your Grace Period

After you leave school, your loans will either enter a grace period or require immediate payment. The grace period is a time when payments aren’t required and occurs automatically on Direct Loans. Unsubsidized and PLUS loans accrue interest during the grace period. The availability and length of a grace period depend on the loan type. If you borrowed a private loan through an outside financial institution, you may be asked to begin repayment right after graduation. Check all your loans to be certain when your payments begin so you aren’t in jeopardy of being delinquent.

Before Repayment Begins

For federal Direct Loans, the repayment will begin after the grace period. The actual repayment start date for loans differs depending on the:

• Loan type.
• Grace period.
• Loan disbursement date.
• Loan servicer.

Some of you may have taken breaks in your education lasting longer than six months. If that’s the case, you may have used your grace period. Check with your loan servicer to be sure when your repayment begins on each loan. Some loans may offer additional options under certain circumstances, so make certain with your servicers what those are, and that they are the best decision for you.

Postponing Loan Repayment

Federal student loan payments are postponed during periods of grace, deferment and/or forbearance. As a resident, if you do not wish to make payments on your loans you are entitled to a mandatory residency forbearance. It’s important to know the difference and which benefits you most.

Consolidation

A Direct Consolidation Loan allows you to consolidate (combine) one or more federal education loans into a new Direct Consolidation Loan for the purpose of lowering your monthly payment amount or gaining access to federal forgiveness programs. The decision to consolidate should be made carefully. Consolidation is not required but may be necessary in some instances. Be sure and look at the facts about consolidation when making this decision.

Refinancing

If you have good credit, you may be able to refinance your existing federal student loans into a private loan. Before doing that, it’s important to understand the full impact of making this permanent change to your loans. As a federal student loan borrower, you have certain rights that are not typically available with private loans. While refinancing your federal student loans into a private student loan can sometimes lower your interest rate, your private student loan will not necessarily have the same terms and conditions as your federal student loan.

Public Service Loan Forgiveness 

In addition to the state, federal and/or county programs found in the AAMC database, there is also a federal program, Public Service Loan Forgiveness (PSLF), that may be of interest to federal loan borrowers. After meeting the requirements for PSLF, if a borrower has a remaining federal Direct Loan balance, their loan balance is forgiven, and the amount forgiven is non-taxable.

New rules for Public Service Loan Forgiveness have been implemented so be sure to learn what those are and how they may impact your loan repayment strategies.

The first step in creating a budget is to document all incoming funds. If you are married, this would include your spouse’s income as well as your income.

The second step to building a budget is to identify your monthly expenses. There are two types of expenses - fixed and variable. Fixed expenses include monthly expenses that are the same amount each month like rent and car payments. There are also expenses that fluctuate each month; these are variable expenses and could include things like clothing, gasoline, groceries, and some utility bills.

Once all income and expenses have been accounted for and properly subtracted, the remaining number is your discretionary funds, and this amount can be used for the extra things in life. 

Be Prepared for Unexpected Expenses

Even the most financially prepared person should be aware of expenses that may randomly occur. Personal emergencies, change in family size, car maintenance, out of town travel and medical situations are some examples of these. Using your discretionary funds and starting a savings account is a good way to prepare for these types of expenses. In doing so, you are helping yourself not to use credit cards or borrow loans to cover those costs.

Resources

• Budgeting Basics and Tips
• Easing into Residency: Transition Tips
• Budget Worksheet for Residents
• Living on a Resident Stipend

Credit Cards

As a resident, you want to be able to focus on your credit right away. This will prepare you to meet financial goals such as owning a home after you become an attending physician. Credit cards have many positive financial aspects including the ability to use money for free for 30 days (depending on the terms of the card). Credit cards can also improve your credit score and help establish a positive credit history. Credit cards can also be helpful in emergencies. If used irresponsibly, credit cards will have a negative impact on your financial well-being. Signs to watch out for are:

• Relying on credit cards to pay for the basics, such as food and utilities.
• Continually responding to offers to transfer balances from one card to another.
• Making only minimum monthly payments.
• Maxing out your credit cards.

Identity Theft

As a resident, you will pay bills online, shop online to save time and even order food online because you are extremely busy. Identity theft costs victims billions of dollars per year and fraud scams continue to increase at a rapid pace. You can stay safe and avoid this situation by:

• Being careful when connecting to public Wi-Fi.
• Checking your credit report at least once a year.
• Using safe and strong passwords for your accounts.
• Recognizing secure websites and avoiding those that aren’t.
• Watching closely for emails and attachments from imitators.

Credit Score

A good credit score is essential for a resident with financial goals. That score is an indicator of the creditworthiness of an individual. This score is important because it will directly affect your approval rate (for insurance, housing, utilities, and more) and your interest rate for loans. In most situations, the better your credit score, the less it will cost you to borrow.

During residency, focusing on the following items will improve your credit score:

• Pay your bills on time.
• Pay down your debt. Limit the amount of debt you put on credit cards (revolving lines of credit).
• Don’t close accounts and limit opening new ones.

After watching and protecting your credit, it’s possible that you’ll have a better credit score than when you started residency which will help you to make purchases as an attending physician. Here’s a breakdown of how your credit score is determined:

Good credit means you are more likely to get a loan approved. Beyond that, you’ll enjoy:

• Better loan offers (rates, terms, and conditions).
• Lower interest rates on credit cards.
• Faster credit approvals.
• Increased leasing and rental options.
• Reduced security deposits.
• Reduced premiums on auto, home, renter, and life insurance policies.

Being proactive about your credit is the way to begin making smart financial decisions that will give you a solid financial foundation for years to come.

Resources

• AAMC Financial Wellness Program
• Credit Scores and Identity Theft Precautions (Video)
• Credit 101
• Monitoring, Maintaining and Improving Your Credit Score (Video)

Overall financial wellness is key to helping you reach your financial goals and make necessary financial decisions for every resident. Starting now, you are just a few years away from becoming an attending physician so be sure you research and familiarize yourself with all you can about investments, retirement, insurance, and savings. Believe it or not, you can get a jump-start on all of these as a resident and set yourself up for success immediately.

Take advantage of programs such as the AAMC Financial Wellness program. This program can help you:

• Measure your financial health and get personalized recommendations.
• Complete online courses.
• Assess your risk of identity theft, create financial goals and a spending plan, track your expenses, and much more.

Resources

• Disability Insurance
• Tax Benefits for Education
• Selecting a Financial Planner

Beginning Residency, Annually and if You Change Employers

If you are interested in Public Service Loan Forgiveness (PSLF), complete the borrower section of the PSLF form, have your employer complete their sections and then submit the form to MOHELA for processing.

Before the End of your 6-Month Grace/Post Enrollment Deferment Period

If you want to make payments during residency: about 60 days before the end of your grace period, apply for your repayment plan. Apply for an income-driven repayment plan on the Federal Student Aid (FSA) website or by contacting your loan servicer(s). If you submit your application too early, it can be denied, and you may have to re-apply.

Annually

If you are enrolled in an income-driven repayment (IDR) plan, submit your income and household size information to your servicer by the servicer’s recertification due date. Check with your loan servicer for the re-certification date and mark this on your calendar.

If you are enrolled in a mandatory residency forbearance and want to continue the forbearance throughout residency, be sure to submit the forbearance request form annually before the original request expires.

Final Thoughts

Residency will be a challenging but extremely rewarding time in your career. You will have many responsibilities that you’re asked to focus on, and finances will be one of them. Hopefully, using this guide will give you the necessary knowledge to apply all you know and learned to create and reach your financial goals.