The 4 Steps on How to Tackle Your Med School Debt

The 4 Steps on How to Tackle Your Med School Debt

By: Travis Hornsby, founder of Student Loan Planner

If you’re in med school, you’re on your way to achieving some major life goals. Soon, you’ll also probably need to figure out how to pay back your student loan debt. It might be easy to think as a physician, you’ll make more than enough to cover med school bills — and you might be right.

But most med school graduates finish school with giant student loan debt. According to the Association of American Medical Colleges(AAMC), med school graduates average $197,000 in student loan debt.

How do you go about tackling your student loan debt and what choices do you have in terms of repayment? Let’s look at some steps you can take to start tackling your debt and your available repayment options.
 

Steps for paying off med school debt:

1. Have a plan

This may seem obvious, but you’d be surprised how many med school students don’t think about their student loan debt until after they graduate. You need to have a plan.
Explore your repayment options and use a student loan calculator as the first step in figuring out which strategy makes sense for you. Then, weigh the pros and cons, and — if you’re still unsure — seek out professional help.

2. Don’t defer payments during residency

Deferment is a route many med school graduates choose during their medical residency. With deferment, you’re basically pausing your loan repayment.

This might sound like a good idea, but there are two issues you’ll face. First, your loans still accrue interest during deferment. Secondly, not only does your interest continue, but it also capitalizes once your deferment is over. That means that the interest built up during deferment gets added to your loan’s principal balance so you’ll pay interest on an even higher amount.
 

3. Live below your means

I know you want to live that doctor lifestyle and start enjoying the fruits of your labor. However, one of the best ways to pay off student loan debt faster is to live like a resident or med school student even after landing a job.

Hold off on buying that big house or car, stick to a modest budget and focus all of your extra money to paying off your loans. It’s not as fun, but it’s smart. The faster you pay off your debt, the less interest you’ll end up paying.
 

4. Use your signing bonus

If you’re lucky enough to negotiate a physician signing bonus with your first job, take advantage of the opportunity to pay off a big chunk of your student loan debt. You can do the same with other extra income, like bonuses or tax return checks. Any time you can make a big dent in your loan debt, do it.

If you employ these steps, you’ll be in a much better place with your student loan debt. It’s not going to be easy and anyone who tells you differently is giving you bad advice. The work you put in early on, though, can cut years off your repayment, potentially saving you thousands of dollars in interest.

Med school repayment options:

Following the tips above will help cut down your debt, but knowing the repayment option for you is the key to wiping out your debt in an impactful way. What options do you have?
 

Public Service Loan Forgiveness (PSLF)

If you were thinking of working in the public sector, you have an opportunity to get your entire student loan debt forgiven with PSLF. It’s a federal program that forgives the remainder of your student loan debt after 10 years of qualifying student loan payments.

Under PSLF, you’re required to work for a qualifying government or non-profit organization for 10 years while making 120 qualifying student loan payments. Other requirements include having federal direct loans (or consolidating to direct loans), working at least 30 hours a week and moving your payments to an income-driven repayment (IDR) plan.
 

Income-Driven Loan Forgiveness

If you have federal loans, another option is switching to an IDR plan. Your loan payments will go down based on your income, and you can receive loan forgiveness after 20-25 years of payments. There are several income-driven plans to choose from:

• Pay As You Earn (PAYE)
• Revised Pay As You Earn (REPAYE)
• Income-Based Repayment (IBR)
• Income-Contingent Repayment (ICR)

Be sure to look at the pros and cons of each repayment program before choosing one. Also, be aware that when your loans are forgiven through this approach, the forgiven amount is considered taxable income.
 

Other loan forgiveness and repayment programs

Beyond PSLF, there are other programs that offer loan forgiveness as well. These include:

• National Health Service Corps Loan Repayment Program
• National Health Service Corps Students to Service (S2S) Loan Repayment Program
• National Health Service Corps Substance Use Disorder Workforce Loan Repayment Program (SUD Workforce LRP)
• National Institute of Health Loan Repayment Programs
• Indian Health Service Loan Repayment Program
• Military student loan forgiveness for doctors
• State-based student loan forgiveness for doctors

All of these programs have rules and guidelines to follow. Make sure you do your research to learn if you qualify. Knowing the requirements up front can save you headaches later on.
 

Refinance your med school debt

Another option for you, especially if you have excessive amounts of student loan debt, is refinancing your student loans. If you have good credit, you may get a lower interest rate and better terms, which shaves potentially tens of thousands of dollars off your loan interest.

With refinancing, your loans become private loans. You’d lose access to federal loan protections, like deferment and forbearance, and access to income-driven repayment plans and PSLF so don’t make this decision lightly.

Getting a strategic plan in place to pay off your medical school debt is important is a solid first step at freeing yourself of student loans and being able to enjoy all of your hard work up to this point.

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