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A Doctor’s Repayment Guide: Strategies for Repaying Medical School Debt

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According to the American Association of Medical Colleges, approximately 18,938 students graduated from U.S.-based medical schools in 2016. This new batch of doctors is presumably the cream of the crop, especially since only around 39.3 percent of med school applicants make the cut, and even fewer make it to graduation.

Unfortunately, some new doctors may have a wider range of responsibilities than they realized. In addition to saving lives and performing important medical research, many new doctors will deal with enormous student debt loads for decades to come.

Average Medical School Debt

The Association of American Medical Colleges (AAMC) offers a glimpse at the average medical school debt load of new doctors in their Medical Student Education: Debt, Costs, and Loan Repayment Fact Card. As the document points out, indebted medical school graduates from the class of 2015 carried a mean debt load of $180,723 across both public and private schools. Unfortunately, around a third of graduates also had an average of $24,000 in student debt from their undergraduate years.

As you can imagine, the ongoing costs to service these debts can be staggering. Although the annual mean wage for physicians and surgeons was $210,170 nationally in 2016, graduates who owe $180,723 on the standard, ten-year repayment plan at 5 percent interest rate would need to pay around $1,979 per month during that time.

7 Ways to Pay Back Medical School Loans

While it’s possible to use your higher income to repay six figures of student loan debt, many new doctors still struggle. It takes a while to reach a traditional doctor’s salary, for starters. Further, many new doctors are ready to get married, have children, buy a house, and enjoy the spoils of their hard work.

If you’re a medical school graduate struggling under the weight of student loan debt, a handful of options could make loan repayment a lot less painful. Here are seven smart loan repayment scenarios to consider:

1. Utilizing Income-Driven Repayment Plans for Medical School

If your debt burden feels insurmountable, an income-driven repayment plan could help lighten your load. Supported by the federal government, income-driven repayment plans let you pay a smaller monthly payment for up to 25 years, only to forgive your remaining loans in the end.

Current income-driven repayment plans include:

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

While the details vary with each of these plans, you are typically required to pay 10-20 percent of your “discretionary income” for 20-25 years. Once you complete the program, your remaining loan balance will be forgiven. However, it’s important to note that any forgiven loan amounts will be treated as taxable income. In other words, forgiveness isn’t free. If you have a large amount of loans forgiven in the end, you may receive a huge tax bill.

2. Medical School Loan Forgiveness

If your goal is having your loans forgiven, there are a handful of medical school loan forgiveness programs to consider. These programs can be offered through federal and state governments, including departments of the U.S. military.

The tradeoff with these programs is that you’ll need to work in a specific field of medicine for a predetermined length of time. You may be required to relocate to work in an area of “high need,” and your income potential may be limited while you complete the program.

One of the most popular loan forgiveness programs for doctors and other professionals is the Public Service Loan Forgiveness program (PSLF). With PSLF, doctors are required to work in a public service position in a qualified facility for ten years. After they make 120 qualified payments on their student loans, all college loan debts are forgiven. As a bonus, debts forgiven through the PSLF program are not considered taxable income (as of right now).

If you owe a large sum of money and don’t mind working in a qualified, not-for-profit hospital (as most are), then PSLF can be a smart option without any lingering side effects.

3. Refinance Medical School Loans

If you don’t like the idea of loan forgiveness or have no desire to let a repayment program dictate where you work, refinancing your student loans is another option to consider. By refinancing your student loans, you can lock in a new loan with a potentially lower interest rate and better terms. With a lower interest rate, you may be able to enjoy lower monthly payments and interest savings over time.

Let’s say your current debt load sits at $180,000, and your average interest rate is 7 percent. At this rate, you’ll need to pay $2,090 per month for ten full years using the standard, ten-year repayment plan.

If you refinance medical school loans into a new loan product with a 4.99 percent interest rate, however, you could reduce your monthly payment to $1,908, saving $182 per month and $21,798 in interest over ten years.

While this may sound ideal, it’s important to understand the risks that come with refinancing. If you transition federal loans to a private lender, you’ll lose out on federal student loan protections, including student loan forgiveness for doctors.

The ideal candidate for refinancing is a medical graduate with high interest rates and no desire for student loan forgiveness. If your goal is paying off your loans quickly and without outside help, refinancing can be the smartest option available. And since many banks and lenders offer excellent interest rates and loan terms, saving money with this strategy may be easier than you think.

4. Ask Your Employer for a Physician Signing Bonus

If you work in an area where qualified doctors are in short supply, it may be possible to negotiate a hefty physician signing bonus. With a signup bonus, you could reduce your medical school loans substantially in one fell swoop.

According to Becker’s Hospital Review, the average physician signing bonus was $21,595 in 2015. However, many doctors secure higher bonuses based on where they live, their experience, and their specialty.

If you think you might qualify for a physician signing bonus to help with medical school debt, make sure to mention this to your potential employer. By negotiating a large upfront bonus, you may be able to knock out a single student loan or part of a larger one, saving repayment time and interest in the process.

5. Participating in Military Programs for Doctors

If you’ve considered military service in the past, you may want to take a second look. Various branches of the military offer lucrative programs that can help new graduates deal with medical school debt.

While some of the programs are geared to students who want to serve while they earn a medical degree, others are available to doctors who have already graduated. Here are a few of the best programs to consider:

Army Student Loan Assistance

The United States Army offers a few different options that can help doctors deal with looming medical school debt. First, their Financial Assistance Program offers grants worth up to $45,000 per year in addition to monthly stipends worth $2,000 or more. This program is available to army doctors enrolled in a qualified residency.

The Active Duty Health Professions Loan Repayment Program is another lucrative option for doctors with medical debt. This program offers up to $120,000 in debt repayment assistance for physicians serving active duty. This amount is paid out in $40,000 increments over a period of three years.

Health Professionals Special Pay is another program that grants up to $75,000 to active duty physicians and doctors who serve in the U.S. Army Reserve. The payment is split up over a period of three years, during which doctors are expected to serve.

Navy Student Loan Assistance

Physicians who serve in the United States Navy may qualify for their own form of student loan repayment assistance.

For example, the Health Professions Loan Repayment Program (HPLRP) offers up to $40,000 per year (minus federal taxes) in repayment assistance for doctors. This program is open to medical students as well as Navy physicians who already have student loan debt.

The Navy Financial Assistance Program offers its own share of benefits, including up to $275,000 in assistance to doctors with medical school debt. This amount can include grants that work out to $45,000 per year, plus monthly living stipends for up to four years.

As a bonus, many practicing physicians have been known to secure hefty signing bonuses for offering to serve active duty in the U.S. Navy. If you’re suffering from mounting medical school loans, make sure to ask if you’re eligible for a lucrative signup bonus.

Air Force Student Loan Assistance

The United States Air Force offers an Air Force Financial Assistance program that can help physicians joining the Air Force deal with medical school debt. This program offers up to $45,000 in grants for each year of service, along with monthly living stipends.

It’s important to note, however, that this program has a service component with long-lasting requirements. Per the U.S. Air Force website, “upon completion of your residency, you’ll have a one-year obligation for each year of participation, plus one extra year.”

6. Indian Health Services Loan Repayment Program

The Federal Health Program for American Indians and Alaska Natives offers a loan repayment program that can help doctors deal with medical school debt. With this program, doctors can secure up to $40,000 in loan repayment assistance “in exchange for an initial two-year service commitment to practice in health facilities serving American Indian and Alaska Native communities,” notes the website.

To qualify for this program, you must be willing to work in high-need areas serving Indian populations within the United States.

7. National Institute of Health (NIH) Loan Repayment Program

A final assistance option for doctors is the NIH Loan Repayment Program. This program was created for doctors and other medical workers who devote their careers to medical research.

To qualify, you must be willing to make a two-year commitment to a range of specific careers within the field of medical research. If you can meet the requirements, you may qualify for up to $35,000 in loan repayment assistance per year.

Keep in mind that the NIH offers eight total plans that offer loan repayment assistance. Before you decide on a program, make sure to read through the details on each to see exactly what they entail.


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