6 Ways for Medical School Graduates to Manage Student Loan Debt

By Katie Taylor Updated on March 31, 2021

No academic degree takes longer to earn—or is more expensive to pay off—than a medical degree. The average medical school student now graduates with $192,000 in student loan debt, according to the Association of American Medical Colleges.

So if you’re feeling overwhelmed by your student loans, you’re not alone. 

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Repaying medical school loans can be a long and tedious process if you don’t have a good strategy. We’re here with a few tips that’ll help you pay off your medical school loans faster. 

1) Consider income-driven 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 may want to enroll in an income-driven repayment plan. These plans cap 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.

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 may consider refinancing to get a lower rate.

Doctors are often great candidates for refinancing because banks look at the type of degree earned, credit score, and income when determining interest rates. 

Check current interest rates now.

Even if you have federal loans, you may still want 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.

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3) Explore loan forgiveness programs

There are several government programs that offer student loan repayment incentives to encourage health care providers to work in under-served 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 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 numerous hospitals and practices to offer signing bonuses to attract talented applicants. According to The Medicus Firm, which specializes in placement of physicians, nine out of 10 doctors received a signing bonus in 2016. Bonuses average around $24,000, with some physicians receiving as much as $100,000.

Also, in addition to 401(k) plans and health benefits, some companies have started offering student loan help as a perk of employment. Only 4% of employers currently offer this perk, but 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. Most programs require at least a three-year service commitment, but you could wipe out $120,000 of debt while helping your country.

6) Resist the urge to splurge

After years of grueling study, sleepless nights, and economic hardship, you may be tempted to go a bit wild when you get your first full-time position.

Instead of making extravagant purchases, increase your payments to pay off your loans so you can shave off thousands of dollars over the life of the loan.

A good first step

Focusing on lowering your medical school loan payments can be hard 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 student loan refinancing lenders have programs specifically designed for doctors, and their online applications generally take less than five minutes to complete. In no time at all, you can get a personalized quote with no impact on your credit score.

Use our Student Loan Refinancing Calculator to see how much you could save by refinancing your loans.

Published in: Refinance, Lower Payments

About the Author
Katie Taylor

Katie Taylor is a content writer and editor with expertise in law and policy, finance, and entrepreneurship. She writes for startups and small businesses about everything from bookkeeping to telecom. Her work has been featured in The Washington Post and SheKnows.com. She is continuing to pay off law school loans and lives in Richmond, Vermont with her wife, son, and an unruly dog. Read more by Katie Taylor