Financial Wellness

How to Approach Nursing School Debt

Lauren Mochizuki, RN, BSN
November 24, 2020
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The nursing profession provides us with lots of opportunities, flexibility, and a great salary income. Approximately 70% of nurses graduate with student loans in the United States. With many nurses incurring student loan debt, it’s important to establish if loans are imperative, and if they are, what the plan is to pay them off.

Is It Necessary to Get a Nursing School Loan?

It depends. Let’s take a look at our first option: working and cash flowing school as you go. I had a part-time job throughout my entire college education, and working while attending college taught me how to manage my time and money.  

female student carrying books listening to headphones paying of nursing school debt

How to Avoid Nursing School Loans

If you work in a hospital setting while going to school, you can also start making connections to help land your first job. I was able to secure a position as a new graduate registered nurse in the same department that I worked at during nursing school.

Another option is to attend a junior college — whether you attend a junior college to obtain your RN license, or you enroll as a prerequisite before attending a university. Either way this is a cost-effective option to achieve an education. I was able to cashflow my entire junior college experience before I transferred to a university. 

In nursing school, I also had several friends who signed contracts with various hospitals. In exchange for their college tuition, they signed a contract to work for those hospitals for an agreed amount of time post-graduation. This accomplishes two things: a guaranteed position post graduation, and no student loan debt.

Are Loans the Answer?

If you find that none of these options work for you, let’s take a look at loans. Currently, interest rates for school loans range from 2.63% to 4.74% with various terms (if you’re not well versed in the cost of a typical school loan, these current numbers are actually pretty competitive).  

The different options of school loans vary: private vs. federal school loans. There are private loans, which are from private entities such as lenders, banks, credit unions, or schools. And there are Federal loans, which are loans from the government. 

Which one really comes down to a case-by-case basis. Private loans may boast a lower interest rate, but are liable to change, whereas as a federal student loan is typically fixed. Both rates are typically lower than that of a credit card, for example, though. Your choice really depends on your unique financial situation as well as the current rates being set by both private and public institutions. Either way, when taking out a loan, pay as much up front as possible. 

This accomplishes a couple of things: 

  • It decreases the life of your student loan
  • It decreases the amount of interest you pay
  • And ultimately, the more you pay up front, the less your monthly payments will be

Now, It’s Time to Get Your Finances in Order

Before deciding if school loans are necessary, I highly recommend going on a budget. A budget is your financial roadmap to your future. It’s critical to have complete financial transparency before making big monetary decisions. A budget allows you to see how every dollar is spent, and it provides you the freedom to choose how your money will be spent in the future. 

A zero-based budget is a budget that assigns all of your earned income to a category. For example, if you make $3,000, you will know exactly how that $3,000 will be spent because every dollar will be assigned to a budget category (some examples include: housing, transportation, utilities, food, etc.).  

If you are just beginning your budgeting journey, you can sign-up for a free, four-day crash course here.  

Track Your Expenses

Budgeting forces you to track your expenses. It offers insights on the budget categories that you can control to improve your spending habits. I recommend doing a complete inventory of all your bills, utilities, and subscriptions. 

As you go through these items, ask yourself: do I still need this? If so, can I get this service elsewhere for less cost? If this is the case, call up your current provider and try to negotiate, or take your business elsewhere.  

Establish Your Timeline

Now that you have established a budget, it’s imperative to decide on a goal and timeline. Budgeting is very personal, and your journey will be unique to you. Establishing measurable goals makes your financial journey tangible. 

Here is an example of how you can list your debt-payoff goals:

“I will finish paying off my student loans in five years.”  

My tip for executing this goal: take the total amount of debt, divide it by 72 months, and establish a budget category where you can budget the same amount every month for 5 years.

“I will put every extra dollar toward my debt in order to pay it off as soon as possible.” 

A tip for executing this goal: reevaluate and reduce unnecessary expenses, and use this money to put toward your debt. You can also pick up per diem shifts, or take on side jobs and dedicate this income toward your debt.

No matter what your goal is, it has to be sustainable. If you set up unrealistic expectations and goals, it’s easy to set yourself up for failure. When creating your debt-free plan, be sure that it fits in with your lifestyle and is a realistic plan that you can achieve.

There are also various loan repayment and forgiveness programs available for nurses. A loan repayment program is where you will get part of your tuition paid for in exchange for working a certain amount of time with a designated hospital. A loan forgiveness program relinquishes you from your loan; some are scholarships, and others require a commitment to work for a set amount of time at a particular location.  

college or university campus nursing school debt

Debt Snowball Vs. Debt Avalanche

If you don’t qualify or wish to participate in a loan repayment or forgiveness program, and you have multiple sources of debt, decide on a debt-payoff method. The debt snowball is when you pay the smallest debt first, gain momentum, and progress to the largest debt last.  

The debt avalanche is when you pay off the debt with the highest amount of interest first. When people ask which is the best method, I tell them to decide on which method is the most motivating for them. 

What Next?

Perhaps you plan on paying off your nursing school debt by seeking out the most lucrative nursing jobs out there. Use the Nurse Salary Explorer to find the top-paying cities in the country.

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