Medical School Debt Repayment Guide for New Doctors

While graduating from medical school is a huge achievement, you might feel like there’s a major weight holding you down in the form of student loan debt. The median medical school debt for 2019 graduates who borrowed loans was $200,000, according to the Association of American Medical Colleges (AAMC). Many students have even more debt from their undergraduate studies, too.

If you have the median amount of med school debt — or even more than that — find out if you qualify for these medical school loan repayment options and loan forgiveness for doctors.

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3 best ways to manage medical school loan repayment

It’s fairly common for medical graduates to put their student loans into forbearance while they complete their residency. However, doing so can cost you later on: Your loans will grow thanks to interest charges, causing your debt balance to grow over time. By the time you’re ready to make payments, you could owe thousands of dollars more than you originally borrowed.

Making payments during your residency — even if they’re small — can help keep total interest charges under control. Here are three medical school loan repayment ideas you can use to better manage your debt without wrecking your budget:

1. Refinance your medical school loans

Student loan refinancing is a tool you can use to lower the interest you pay on your loans. Through refinancing, you can take out a new loan with a private lender and use those funds to pay off your existing loans. The new loan can have different repayment terms, including a new minimum payment.

If you have high-interest loans, refinancing could help you save a significant amount over the length of your loan. In fact, it’s a strategy that some practicing physicians have used to save thousands of dollars over the life of their loans.

For example, if you owed the median medical school debt of $200,000 at 7.00% interest, you’d pay over $78,000 just in interest payments by the time you paid off your loan over the 10 years of a standard plan.

By contrast, if you refinanced your debt and qualified for a loan with a 5.50% interest rate, you’d instead pay over $60,000 in interest.

You also can look into refinancing options specific to where you are in your career. For example, some lenders have a refinancing product for physicians.

However, refinancing isn’t for everyone. There are some potential drawbacks, such as losing certain federal loan benefits. Make sure you understand all of the pros and cons of refinancing before moving forward with your loan application.

2. Enroll in an income-driven repayment plan

On a standard 10-year plan, monthly payments for the median medical school debt of $200,000 at 7.00% interest are just over $2,300 per month.

Meeting this financial obligation could be a stretch for doctors right out of medical school — especially on the small salary of a first-year resident.

If you have federal student loans, consider switching to an income-driven repayment (IDR) plan to keep up with your payments on a smaller income. These programs set monthly payments to match your income and cost of living, keeping them affordable.

For example, under the Pay As You Earn (PAYE) plan, first-year residents making just under $5,000 gross monthly could have monthly payments below $350, according to the AAMC.

Using an income-driven repayment plan for medical school loans won’t be the fastest or cheapest way to pay off this debt. Still, it could help make your payments manageable and allow you to stay current on your loans.

Keep in mind that eligibility requirements and repayment structures vary, so make sure you get to know each plan before deciding on one.

3. Negotiate a physician signing bonus

Signing bonuses are a common way employers attract the medical professionals they need, and they’re growing. In fact, signing bonus amounts for doctors recruited through the Medicus Firm, a health care recruiting company, increased by nearly 13% in 2018 over the previous year.

If for example, you got a $20,000 bonus and used it to make an extra payment on your loans, you’d save over $18,000 in interest on the median medical school debt balance of $200,000 (assuming a 7.00% interest rate and a standard 10-year term), according to our lump sum extra payment calculator.

If you know you want to join a practice or hospital instead of setting up your own office, look for these opportunities to get extra cash to put toward student loans.

Carefully read your contract and verify the details and conditions of your signing bonus (for example, a signing bonus often requires a commitment to remain with the employer for a certain tenure). Plus, make sure your signing bonus is just that — a bonus — rather than an advance or a loan you’ll repay through future paychecks.

If you can negotiate a large signing bonus, it can be a great start to your medical school loan repayment. You might be able to knock out a significant chunk of that median amount of medical school debt in just one payment, greatly reducing the amount of interest you’ll owe over time.

Medical school loan forgiveness options

In addition to using clever repayment strategies, physicians might look into student loan forgiveness for doctors. It can be a lifeline for physicians who struggle with the median amount of medical school debt or owe even more.

That’s probably why 34% of physicians completing a residency in 2019 cited student loan forgiveness as a major concern, according to a survey by health care research firm Merritt Hawkins.

The trade-off, however, is fewer employment choices. You’ll likely have to work in an area of high need or for a nonprofit hospital to qualify for programs that offer loan forgiveness for doctors. Staying eligible for student loan forgiveness through these programs might also might limit your choice of pay, specialty, location and employer.

If you’re willing to make these sacrifices, student loan forgiveness programs can pay off in the long run.

Public Student Loan Forgiveness (PSLF) for doctors

Physicians whose work qualifies as public service can qualify for the Public Student Loan Forgiveness Program.

This is largely determined by their employer. Public service includes full-time employment by a 501(c)(3) tax-exempt nonprofit or public institution (which many hospitals are). It also includes working in areas that are underserved or have a high need for medical professionals.

Borrowers must make 120 payments (monthly payments for 10 years) while carrying out PSLF-qualified work. Then, the federal government will forgive their remaining debt.

Military programs for medical school loan repayment assistance

Branches of the military offer help with tuition for medical students who are service members. But even doctors who have already graduated and are practicing can enroll in military service and get student loan assistance.

Some of these benefits can be combined, while others are an either/or choice. Any of them can take a large chunk out of the median amount of medical school debt.

Ensure that you understand these programs and their service requirements before enrolling.

Army doctor student loan assistance

Several student loan repayment assistance options for Army physicians exist and can help you manage your medical school student loans:

• The Financial Assistance Program awards grants of up to $45,000 per year as well as a monthly stipend of $2,000 or more to Army members enrolled in an accredited residency.
• The Active Duty Health Professions Loan Repayment Program offers up to $120,000 toward repaying medical school loans. Physicians must be on active duty to qualify, and the benefit is paid out in $40,000 annual disbursements over three years.
• The Health Professionals Special Pay bonus program offers up to $50,000 annually to both active-duty physicians and doctors who are members of the Army Reserve who have completed a residency in a qualifying specialty.

Navy medical school loan repayment assistance

Members of the military serving as Navy physicians can take advantage of similar incentives. Here are some Navy medical loan repayment assistance options:

• The Health Professions Loan Repayment Program (HPLRP) offers a yearly maximum payment of $40,000 directly to medical school loans minus federal income taxes (typically about 25%). It’s open to medical students or residents and Navy physicians.
• The Navy Financial Assistance Program offers annual grants and monthly stipends to qualifying doctors and dentists, though it doesn’t specify how much.
• Practicing physician sign-on bonuses offered by the Navy are also impressive — they can be up to $400,000, depending on your specialty and experience.

Air Force medical school loan assistance

The main way the Air Force helps its members pay for medical school is through its Health Professions Scholarship Program. However, this is mostly for students who have yet to complete a degree.

The Air Force Financial Assistance Program (FAP), however, can help physicians in the Air Force pay their medical school debt. Similar to the Navy’s program, it offers a $45,000 grant for each year of your residency and has a monthly stipend of $2,000. Once you complete your residency, you’ll be obliged to complete a year of service for each year you receive FAP funds plus an additional year.

Indian Health Services Loan Repayment Program

The Indian Health Service (IHS) is a federal health program for American Indians and Alaska Natives that offers a loan repayment program for health professionals. Those who take advantage of this program will be based in IHS facilities with the greatest need.

In exchange for a two-year service commitment, the IHS Loan Repayment Program will repay up to $40,000 in medical school loans. Physicians will be able to renew their contract for additional student loan benefits until their debt is repaid.

National Institutes of Health Loan Repayment Programs

While many programs offer medical school repayment assistance for practicing doctors, the National Institutes of Health (NIH) offers awards to health professionals in research careers.

To qualify for the NIH Loan Repayment Programs, participants must agree to a minimum two-year contract to perform research funded by a U.S. government entity or nonprofit organization.

Participants can qualify for $50,000 per year in student loan repayment. It also can be applied to most undergraduate, graduate and medical school debt.

Through these programs, health researchers can receive student loan assistance while employed with the NIH (intramural programs) and eligible organizations outside the NIH (extramural programs).

The NIH also has loan repayment programs for clinicians. One assists clinicians from a disadvantaged background, and the other assists clinicians who are conducting health disparity research.

National Institute on Minority Health and Health Disparities Loan Repayment

This program offers loan repayment assistance of up to $50,000 per year to health professionals with doctoral degrees. To qualify, you need to commit to at least two years of health disparities or clinical research.

There are two tracks within this program:

• Loan Repayment Program for Health Disparities Research, which supports health professionals who conduct research that addresses health disparities
• Extramural Clinical Research Loan Repayment Program for Individuals from Disadvantaged Backgrounds, which supports professionals from disadvantaged backgrounds who conduct clinical research.

National Health Service Corps loan repayment assistance

The National Health Service Corps (NHSC) offers loan repayment assistance to doctors and medical professionals.

NHSC Loan Repayment Program

Through the NHSC Loan Repayment Program, participants commit to working at least two years at an NHSC-approved site.

This program can earn licensed health care providers up to $50,000 (for that initial term) toward student loans. Participants can also serve as primary care medical or mental/behavioral health clinicians. What’s more, the student loan payout is tax-free.

The length and level of assistance provided by the NCHS will depend on the area of service, with high-need areas qualifying for larger loan repayments.

NHSC Substance Use Disorder Loan Repayment

This program supports health professionals who are working to combat the opioid crisis. It provides up to $75,000 in student loan assistance to qualifying professionals who provide substance use disorder treatment services at NHSC-approved sites for three years.

Students to Service Loan Repayment Program

For medical students in their final year of school, the NHSC offers the Students to Service Loan Repayment Program, which provides up to $120,000 toward educational costs and student loans.

In return, the med student commits to providing primary health care at an NHSC-approved site for three years after graduation.

Medical school loan repayment assistance programs by state

There are many state-sponsored programs that help physicians and doctors repay medical school loans.

Many are offered through the NHSC’s State Loan Repayment Program (SLRP). It provides incentives for doctors to practice in federally designated “health professional shortage areas” (HPSAs).

These areas are listed in the AAMC’s database of state-level loan forgiveness and repayment programs for medical school.

Some states also have their own student loan repayment assistance plans (LRAPs) for physicians. Most often, these plans offer student loan repayment or special pay for doctors who commit to practice in medically underserved areas.

Finally, there are student loan assistance programs available in each state (excluding state loan repayment programs that are currently unfunded or otherwise inactive). Some states also might have SLRPs that are unlisted and administered through the NHSC.

How to get your medical school loans forgiven

If you think you could qualify for one of the medical school loan forgiveness programs described above, here are some steps to take:

1. Figure out if you qualify

Loan forgiveness programs have a number of eligibility requirements, including your profession and place of employment. Most require you to work in an underserved community or for a nonprofit organization. You can head to the Health Resources & Service Administration website for a list of eligible shortage areas.

Second, you’ll need to make sure your student loans qualify. Federal programs only forgive federal loans, so find out if you have federal loans, private loans or both. You might also need to get your federal loans on a certain repayment plan or consolidate them with a direct consolidation loan.

Read over all the eligibility requirements to make sure you’re on track toward receiving loan forgiveness.

2. Get on the right repayment plan

Some programs, like PSLF, require you to be on an income-driven repayment plan in order to qualify. However, with the recent PSLF Limited Waiver Opportunity, you might be able to get credit for all your student loan payments if you take certain steps.

Even if it’s not required, it could be worth getting your loans on an income-driven repayment plan: You can lower your monthly payments in the short-term and increase the amount of loan forgiveness you ultimately get.

3. Be strategic about refinancing

Refinancing can be a savvy move if you can lower your interest rate and save money on your student loans. However, refinancing federal loans turns them private, so it wouldn’t be a good idea to refinance federal loans if you’re pursuing a federal medical school loan forgiveness program.

Make sure you’re not sacrificing any loan forgiveness options before applying to refinance. If you have private loans, however, refinancing them could make sense, since they wouldn’t be eligible for federal loan forgiveness anyway.