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How to pay off medical school debt: A comprehensive guide.


Medical school student debt is a burden that follows many physicians well into their career. Fortunately, there are sound financial strategies that can help you pay your debt off more quickly and reduce the overall amount you'll end up paying. This guide will help you:

  1. Understand your options

  2. Learn how some physicians are paying off debt

  3. Know when and where to get help

How does your debt compare?

Most physicians finish residency with more than $200,000 in medical school student loans, and it's not uncommon for new doctors to carry student loan debt of $300,000 or more.

A 2019 medical school debt survey conducted by Weatherby Healthcare produced similar findings. Of the physicians surveyed who were still carrying medical school debt, 49% said they still owed more than $200,000, and 32% had more than $250,000 in medical school debt remaining.

Most (59%) expect to be paying off their loans for at least six more years, and 34% believe it will be more than 10 years before their medical school debt is eliminated. However, the survey's findings also shed a ray of hope for those physicians who are aggressive in their debt-repayment strategies. Of the respondents who had already paid off their medical school loans (35%), a majority were able to do so relatively quickly. Nearly three-quarters (74%) were medical school debt-free in five years or less, while 47% had paid off their loans in two years or less. Understanding ways to pay off medical school debt can help you make this your reality.

Medical school debt repayment options and strategies

Every physician's circumstances are unique, and there are many different ways to eliminate medical school debt. Which strategy is best for you will depend on factors such as: 

  • Your specialty 

  • How much you earn 

  • Where you want to work 

  • Your desired lifestyle 

  • Your current loan situation 

Here's a summary of the most common repayment options, along with insights on when and why you should consider them.

Public Service Loan Forgiveness (PSLF) is a good option if you plan to stay in the nonprofit world working for a hospital or university once you become an attending physician. This federal program forgives the remaining loan balance tax-free after 10 years of service of working full time for a qualified employer. PSLF is not an option if you plan to work for a private practice or a for-profit group.

The total savings can be significant, especially if you have a higher student loan balance. However, for physicians with lower student debt, it may not be the best option.

In addition to working full time for a qualified employer, you must have PSLF-qualified direct loans and be enrolled in an income-driven repayment program that will determine your qualified payments.

The most common income-driven programs are:

  • Saving on a Valuable Education (SAVE) Plan — formerly the REPAYE Plan

  • Pay As You Earn Repayment Plan (PAYE Plan)

  • Income-Based Repayment Plan (IBR Plan)

  • Income-Contingent Repayment Plan (ICR Plan)

Deciding which of the four income-driven programs to use depends on your situation — whether or not you're married, whether or not your spouse has student loans themselves, and how old your loans are can all affect your decision.  An experienced student loan consultant can help you select the right program for your individual needs and circumstances.

PSLF aside, there are many states with medical student loan forgiveness programs with some offering loan repayment of up to $20,000 or more annually. Don’t forget to explore this option if you plan on staying in one state.

Deferring student loans in residency can be a wise decision, but if you are looking to take advantage of Public Service Loan Forgiveness (PSLF), deferring means you lost out on some time to make many small Income-Driven Repayment payments during your residency/fellowship. If you’re a physician who fits this description you have two options: refinance and work hard to pay them off fast or go for PSLF. The right choice depends on a few factors:

  1. Do you have a moderate or worse debt-to-income ratio (DTI>1)?

    Run the numbers carefully — in some cases loan forgiveness may not be possible or not worth the hassle. In other cases, PSLF is a no brainer or is likely a good move. A financial advisor or free online resources can help you determine what’s possible for you.

  2. Are you working for a PSLF qualifying employer?

    Qualifying providers include government employers and many nonprofit organizations. If you don’t already work for one of these organizations and want to explore the option, understand that you must work full time and make 120 qualifying monthly payments during your employment under a qualifying repayment plan.

  3. Do you have Direct Federal Student Loans?

    Consolidating your loans to a direct loan will automatically convert all federal loans to a qualified loan type that will work for all forgiveness and income-driven programs, including PSLF. This also allows you to choose the loan servicer. There are dozens of loan servicers you can work with, but you will need to report your qualified payments to FedLoan, which is the loan servicer that actually administers PSLF. Working with them directly, you can cut out the middle man.

Caution: If you’re already a few years into your career and have been making qualified payments, you may want to think before you consolidate. By consolidating you may cancel your qualified payments and have to start from scratch.

Whether or not you qualify for Public Service Loan Forgiveness, you can still enroll in an income-driven plan. These plans will forgive the remaining balance after 20 or 25 years, depending on the plan, and your payment size depends on your debt-to-income ratio.

If your income is lower compared to your debt, an income-drive plan is a good option. For example, if you make $150,000 – $175,000 and you owe $500,000, income-driven plans will often outperform even the best refinance despite the cost of the forgiveness tax you will pay at the end of the program. As a general rule, anybody who has a 2X DBI is a good candidate; however, if your DBI is low you will be able to pay off the loan before you ever receive forgiveness, so refinancing may be a better option.

Unlike the PSLF program, income-driven plans do not forgive your remaining loan balance tax-free at the end of the program, so make sure to reserve a portion of your income to pay taxes at the end of the program. Speaking with a financial advisor can help you ensure you come out ahead, but most likely if you start with a high loan balance you will still come out ahead, even with the taxes, because of lower cumulative payments.

If Public Service Loan Forgiveness (PSLF) isn't the right option for you, consider private loan refinancing. Private loan refinancing involves changing federal loans into a bank loan. Bank loans typically come with lower rates and improved repayment terms. Private loans can be refinanced multiple times during the loan's lifetime, allowing you to take advantage of lower rates whenever they arise.

That said, it's common for physicians to make irreversible mistakes during the transition stage when they are still planning out their career path. Once you refinance federal student loans with a private lender, you close the door on loan forgiveness options. Make sure you get some advice first before you refinance.

Using an income-driven plan is a way to keep your payments low so you can have increased cash flow for other priorities.

For example, a pediatrician expects to earn $175,000 per year as an attending and has a loan balance of $400,000. In full repayment, a $400,000 loan will yield a payment of between $3,500 and $5,000 per month, depending on the interest rate and how long it takes to pay off the loan. An income-driven plan will lower the payments to the low $1,000s, which frees up $3,000 per month that can be used toward other financial objectives, such as paying off other debt, contributing to retirement savings, or investing.

Before employing this strategy, you should determine if the average return on your investment is higher than your interest rate, what taxes you might face from your investment, and what your personal money goals are. For those who’d rather relieve the burden of their debt sooner than see a growing investment account, this isn’t the right approach.

A strategy employed by many early career physicians is to work locum tenens or per diem shifts and apply the extra earnings toward paying off student loans more quickly.

According to data from a CHG Healthcare study, on average across all specialties, physicians who work locum tenens full time make $32.45 per hour more than permanent-only doctors. Given that data and the many other benefits of working locum tenens, it’s no surprise then that 59% of those surveyed by CHG Healthcare worked locums within 10 years of entering the field.

Whether you work locums full time or on the side, it can help boost your income to pay down student loans faster. This is true even if you’re not interested in travel with 51% percent of physicians who’ve done locums report working locums assignments close to home.

When & where to get help

Help is available for physicians who want guidance in determining which debt repayment strategy to pursue, and while it's best to get advice early in the process, there’s many points in a physician’s career where a professional can help. Consider consulting with a professional:

  • In the last couple months of medical school

  • At least once during residency

  • Once you’re offered a full attending position

  • Anytime you make a major career change

  • Regularly to ensure you’re on track with your chosen plan

For additional help in paying off your medical school debt, check out these helpful resources:

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