Written By Travis Hornsby, CFA®, CFP®
Updated on February 17, 2021
One of the most critical decisions you have to make as a student loan borrower is where to live and work. Do you want to live in a big city where you have access to modern cultural amenities, or do you want to settle down in a rural town in the middle of nowhere? Where do you want to raise your family?
Your financial goals can also affect your location decision. How much will you be able to earn as a professional working in a given area? Do you plan to retire early, or do you want to be working in your 60s? Are you planning to pay off your student loans, or are you pursuing student loan forgiveness?
Choosing where to live
The location you choose greatly influences your income, your costs and the opportunities available to you. Let’s take the example of healthcare professionals. Living in a big city has its perks, but it could also mean that your income is capped and your costs are higher.
If you are a dentist, for instance, and choose to live and work in a big city, one advantage you have is access to a dental school where you can pursue further specialist training and research.
Your kids will also be able to go to good schools, and your family can enjoy other cultural amenities such as good hotels, sporting events, shopping and cultural options.
However, you’re likely to earn a lower income on average than a dentist who sets up their practice or works in a rural area. If you live in a less populated location that might not be as desirable, such as a rural place, your salary and your profits tend to be a lot higher.
The cost factor
Labor and rental costs are some of the biggest costs associated with providing healthcare services in most places. The price of setting up a private practice is generally much lower in a rural area compared to a big city for several reasons.
First, the rent for buildings is much lower. The rent could be about $15 per square foot in an out-of-the-way area. But in a city, you could pay closer to $100 per square foot.
Labor costs are lower, too. There's less competition because fewer employers are available, plus the cost of living is lower for potential employees in the area.
That means that the cost of doing business is much lower in a rural town and therefore more profitable. You don't have to generate a lot of revenue or see many patients to cover your costs and make a profit.
Low competition, more revenue
Because there are fewer healthcare providers in a middle-of-nowhere place, there is little competition.
With little competition, you can charge higher fees for consultation because you might be the only healthcare provider for miles. You can also be selective about which health insurance providers to work with or even ask for cash payment.
You don’t even need to have a marketing budget because everyone in your county knows your practice.
This is the complete opposite of working in a big city as there are more healthcare professionals, which leads to very stiff competition. People have multiple options to choose from when picking healthcare providers, and that drives down prices. Furthermore, you have to accept various insurance plans and perform more procedures to survive in a competitive environment.
Now, it is possible to earn a high income even in a big city, especially if you’re a high-ranking specialist such as a surgeon or an orthodontist.
But for most healthcare professionals, going where the demand is higher for your services is the best strategy if you want to pay off your loans and save for early retirement. And this can be replicated in almost all other kinds of professions, too.
It’s all about supply and demand.
Location and student loan payment strategy
Clearly, location affects the level of income you earn, housing costs, the cost of doing business and the opportunities you can access. So, if you choose to live in an area where your income is higher, it's more likely you're going to pay your student loans off.
Earning a higher income means that you are an attractive candidate for student loan refinancing, and you can pay off your student loan.
Your average cost of living is also much lower in a rural setting. Property prices and taxes, for instance, are often much lower in rural areas compared to big cities. Lower taxes and cost of living can give you more disposable income to pay off your debt, save for retirement and invest more.
On the other hand, if you live in a big city where you have access to more culture and amenities, you face higher lifestyle costs and less disposable income. In that case, it might be better to pursue a student loan forgiveness strategy.
You can get on an income-driven repayment plan such as Pay As You Earn (PAYE), and you can get it forgiven instead of paying it all back.
The impact of location on your student loans
At the end of the day, the choice of location is not merely financial. Many other factors can influence your decision. And it’s not just about rural versus urban, either. Many of the clients we’ve seen make a very high salary in big cities in the midwest or even in areas you might think are a little over-saturated.
Each location has its perks. It all depends on what you envision for your life and family and what makes you happy.
Earning more and paying off your loans is great, as is having a fun lifestyle, enrolling your kids in good schools and having the option to retire early. The key is to optimize your loan plan for what you want and design your student loans around your life goals.
We can help you come up with an excellent plan for your student loan debt repayment. Book a student loan consultation today to get a repayment strategy that works for you.
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