The Ultimate Medical School Debt Repayment Guide for New Doctors

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average medical school debt

Graduating from medical school is a huge achievement that speaks to your hard work, dedication, and skill. But, rather than celebrating your success, you might feel like there’s a major weight holding you down. With the massive student loan debt that comes with a medical degree, it’s easy to feel overwhelmed.

You’re certainly not alone. According to the Association of American Medical Colleges (AAMC), the average medical school graduate left with $189,000 in student loans in 2017. Worse, many students have more debt from their undergraduate studies, too.

If you have the average med school debt or even more than that, find out if you qualify for these medical school repayment options and loan forgiveness programs for doctors.

3 best ways to manage medical school debt

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 loan balance to grow over time. By the time you’re ready to make payments, you could owe thousands more than you originally borrowed.

Making payments during your residency — even if they’re small — can help keep interest 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 in 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 will have completely different repayment terms, including minimum payment.

If you have high-interest loans, refinancing can 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.

For example, if you had $189,000 at 7.00% interest, you’d pay over $74,000 just in interest payments by the time you paid off your loan.

By contrast, if you refinanced your debt and qualified for a loan with a 5.50% interest rate, you’d pay about $57,000 in interest. By spending just a few minutes applying for a refinancing loan, you saved over $17,000.

You also can look into refinancing options specific to where you are in your career. For example, SoFi has a refinancing product for current physicians.

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However, refinancing is not 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 average medical school debt of $189,000 are more than $2,100 per month.

Meeting this financial obligation could be a stretch for doctors right out of medical school — especially on the small salary you can expect as 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 would have monthly payments of $300 to $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 this debt. But unlike forbearance, PAYE will help fight the balance creep of accrued interest.

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. In fact, 90 percent of doctors recruited through the Medicus Firm in 2016 received employment offers that included a signing bonus, reports HealthLeaders Media.

The average signing bonus offered to physicians was just under $25,000. Assuming a 25 percent income tax rate, you’d take home $18,750 of that signing bonus.

If you applied that sum to make an extra payment, you’d save $15,650 in interest on the average medical school debt balance of $189,000 (assuming a 6.50% 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. A signing bonus often requires a commitment to remain at the employer for a certain tenure. And 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 could knock out a quarter of the average medical school debt in one payment, greatly reducing the amount of interest you’ll owe over time.

Student loan forgiveness for doctors

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 average medical school debt or owe even more.

That’s probably why 3 in 5 physicians completing a residency in 2017 cited student loan forgiveness as a major concern, according to a survey from 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 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 the 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 average medical school debt.

Make sure you understand these programs and their service requirements so you know what you’re signing up for.

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 disbursements over three years.
  • Health Professionals Special Pay offers up to $75,000 to both active-duty physicians and doctors who are members of the Army Reserve who have completed a residency in a qualifying specialty. Payments of up to $25,000 are made over the three years.

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, which are typically about 25 percent. It’s open to medical students or residents and Navy physicians.
  • The Navy Financial Assistance Program offers up to $275,000 in assistance to medical residents. It’s paid in grants of up to $45,000 per year for up to four years. It also includes a monthly living stipend of $2,200 for up to 48 months.
  • Practicing physician sign-on bonuses offered by the Navy are also impressive. They can be between $220,000 and $400,000, depending on the physician’s 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 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 can 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 nonprofit organization in the U.S.

Participants can qualify for $35,000 per year in student loan repayment. It also can be applied to most undergraduate, graduate, and medical school debt.

Through these eight 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 two loan repayment programs for clinicians. One assists clinicians from a disadvantaged background, and the other assists clinicians conducting health disparity 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

The first option is 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 toward student loans. Participants also can serve as primary care medical or mental/behavioral health clinicians.

The student loan payout is tax-free and disburses at the beginning of the service commitment to maximize interest savings. What’s more, program participants can apply to extend this benefit beyond the initial two years.

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.

Students to Service Program

For medical students in their last year of school, the NHSC offers a Students to Service Program that 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 post-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” (HPSA).

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.

Here are the 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 State Loan Repayment Programs that are unlisted and administered through the NHSC.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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