A Physician’s Guide to Managing Student Loan Debt

Insights

There’s no doubt about it—going to medical school to become a physician is expensive. 

According to the Association of American Medical Colleges (AAMC), the median medical school debt among the class of 2021 was $200,000. And that doesn’t include undergrad debt. 

In reality, the total amount of student loan debt will vary based on the type of medical school one attends (private vs. public), their choice of specialty, and the amount of funding one receives via grants, scholarships, and fellowships. For any physician, receiving monthly student loan statements with a large outstanding balance can seem overwhelming, regardless of the principal amount or the anticipated salary. 

That said, it shouldn’t—with the right information and resources, you can manage your debt obligations with ease. You can even find ways to maximize the available subsidies and benefits, reducing monthly payments of student loan debt without adding more to the lifetime total. 

Let’s explore a few helpful options.

Income-Driven Repayment Plans

An income-driven repayment (IDR) plan is helpful for federal student loan borrowers who cannot afford the standard fixed monthly payments to pay back their loans. IDR plans allow student loan borrowers to pay off their loans based on the discretionary incomes they report to the federal government. 

With these plans, you can spend anywhere from 10% to 20% of your earnings on repaying the student loan, making it an ideal option if your monthly student loan payment is much higher than you can actually afford after budgeting for living expenses. Ultimately, IDR plans act as a form of relief upon completing medical school and settling into your career before you can grow your income. The flexibility enables you to afford the monthly payments. 

Student loan IDR plans also require borrowers to recertify their income and family size every year, as this impacts the monthly payments calculated by the federal government. Additionally, some IDR plans require borrowers to report their spouses’ income, which can increase the repayment amounts if the additional reported income drives up the total household income.

Student Loan Forgiveness with an Eligible Employer

Another option for physicians to manage student loan debt is to qualify for Public Service Loan Forgiveness (PSLF) by working for an eligible employer, such as certain non-profits or government agencies. Additionally, you must be employed for the equivalent of 120 monthly loan payments and be considered a full-time employee during that period.

The only loans eligible for PSLF are those physicians receive through the Direct Loan Program, including:

• Direct subsidized loans
• Direct unsubsidized loans
• Direct PLUS loans
• Direct consolidation loans

Physicians whose loans don’t qualify for PSLF can still consolidate them into a Direct Loan Program using a Direct Consolidation Plan.

Student Loan Refinancing

Physicians who borrowed private student loans can consider refinancing them to get a loan with more favorable terms than their existing ones. Since refinancing is taking out another loan, you should be comfortable with the new loan terms and they should make sense for your financial situation.

For instance, if you end up paying significantly lower interest over the life of the new loan compared to your existing loan, then refinancing is a great alternative. However, if you’re simply extending the loan term, with lower monthly payments but much higher interest paid over time, it may not be worth the refinancing cost. In this case, it may be helpful to shop around with additional lenders or wait until interest rates change before refinancing the outstanding student loan debt. 

Note: When deciding whether or not to refinance student loans, be aware that only government loans can qualify for forgiveness programs or other government-sponsored student loan programs.

Work With Student Loan Payment Specialists

The medical field offers numerous high-paying specialties that allow you to pay down student loan debt quicker than other professions. High-paying specialties provide the financial leverage you need to reduce your monthly student loan payments and free up cash flow to invest into dividend-generating assets. 

That said, maximizing financial resources is difficult when you have to account for loans and debt.

Our partners at Student Loan Tutor have expertise handling the unique financial situations of highly educated professionals that carry high student loan balances but with the potential to generate significant income. Together, we can help you increase your savings and maximize your money’s ability to work for you. 

Work with Trusted Financial Advisors to Lower Student Loan Debt

Finishing medical school and becoming a physician is a significant time and financial investment. You’ve worked hard to develop your career to where it is, and worrying about student loan debt shouldn’t limit your future success. 

At Tomoro, we believe that helping you manage your cash flow, increasing your savings, and decreasing your debt can help maximize your money’s ability to work for you. Our team of advisors, in partnership with Student Loan Tutor, has experience navigating complex financial scenarios and can help you find the right solutions to properly manage your student loan debt.

Contact us to learn more about our financial advisory services.