There is no academic degree that takes longer to earn – or is more expensive to pay off – than a medical degree. The average medical school student now graduates with $190,000 in student loan debt. Eventually, most doctors earn incomes that make the sacrifices worthwhile. But before then, there are 3 to 7 years of residency, during which the average salary is a relatively-low $56,500.
Repaying medical school loans can be a long and tedious process if you don’t have a good strategy. At the National Student Loan Union, we specialize in helping college graduates manage and eliminate their student debt. We’ve put together the following tips to help you pay off your medical school loan payments faster.
1) Consider income-based repayment
Many new doctors put their student loans into forbearance during residency, but postponing payments can add thousands of dollars of interest to the principal each year. When this happens, you end up paying interest on interest, and your debt grows accordingly. If you have federal loans, you can enroll in an income-based repayment plan. It caps monthly payments to 10-15% of your discretionary income. Private loans don’t qualify for income-based repayment, but some lenders have interest-only options in the early years after graduation. Contact your lender or servicer to find out what is available.
2) Refinance to a lower interest rate
Graduate school loans carry much higher interest rates than undergraduate loans. If you have private loans, or you’re already in practice and don’t qualify for loan forgiveness, you should consider refinancing to get a lower rate. Doctors are great candidates for refinancing, because banks look at the type of degree earned, credit score, and income when determining interest rates.
If you have federal loans, it still might make sense to refinance. Although refinancing federal loans makes you ineligible for benefits like income-based repayment and loan forgiveness, the savings from a lower interest rate might be greater than any amount forgiven. Be sure to crunch the numbers and weigh the tradeoffs. And remember that it’s possible to refinance some loans, but leave others intact.
3) Explore loan forgiveness programs
There are several government programs that offer student loan repayment incentives to encourage health care providers to work in underserved communities. Not all specialties are eligible and you might have to relocate to a rural or economically depressed area for a few years. But if there is a public service element to your practice, you could potentially wipe out large chunks of your debt.
The National Health Service Corps Loan Repayment Program offers up to $50,000 in tax-free loan assistance for doctors who serve at least two years in a Health Professional Shortage Area (HPSA). Students in their final year of medical school can earn up to $120,000 in tax-free loan assistance through the Students to Service Loan Repayment Program by committing to serve three years in one of the greatest need HPSAs. Several states also have their own incentives. In most cases, both federal and private student loans are eligible, and the repayment assistance is tax free.
4) Ask about employer benefits
Doctors are in high demand in many parts of the country, leading many hospitals and practices to offer signing bonuses to attract talented applicants. Bonuses typically range from $25,000 to $150,000. Also, in addition to 401(k) plans and health benefits, some companies have started offering student loan help as a perk of employment. Only 3 percent of employers currently offer this perk, but if you qualify, it’s a great way to get help with your loans. Before you sign on the dotted line for a residency, fellowship, or staff position, check with the human resources department.
5) Don’t overlook military benefits
If you served in the military in the past, or are interested in being a military doctor, the Army, Navy, and Air Force all have loan forgiveness programs for health professionals. Active duty doctors can earn $40,000 a year in loan assistance. Reservists can earn $25,000 a year in loan assistance. Most programs require a three-year service commitment, but you could wipe out $75,000 to $120,000 of debt while also helping your country.
6) Resist the urge to splurge
After years of grueling study, sleepless nights, and economic hardship, it can be tempting to go a bit wild when you get your first full-time position. It’s reasonable to want to buy a home or a car, but you should hold off on extravagant purchases until you’ve eliminated your debt. Increasing your payments to pay off your loans sooner can shave off thousands of dollars over the life of the loan.
A good first step
It can be hard to focus on lowering your medical school loan payments while you’re doing long shifts as a new doctor. Fortunately, one of the most effective payment reduction methods is also the easiest to explore. Many modern student loan refinancing companies have programs specifically designed for doctors, and their online applications generally take less than 5 minutes to complete. In no time at all, you can get a personalized quote with no impact on your credit score.
Here at the National Student Loan Union, we regularly review student lenders to help borrowers consolidate or refinance their loans. These are the companies we consider the nation’s best, based on their interest rates, transparency, product offerings, track record, ease of applying, and customer service. If you’re looking to lower your medical school student loan payments, we recommend that you start here: