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. The median medical school debt was $196,250 for 2018 graduates, according to the Association of American Medical Colleges (AAMC). 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 for doctors. Specifically, let’s look at:
3 best ways to manage medical school debt
Student loan forgiveness for doctors
Military programs for medical school loan repayment assistance
Indian Health Services Loan Repayment Program
National Institutes of Health Loan Repayment Programs
National Health Service Corps loan repayment assistance
Medical school loan repayment assistance programs by state
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 will have different repayment terms, including 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 average medical school debt of $196,250 at 7.00% interest, you’d pay over $77,000 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 pay about $59,000 in interest.
You also can look into refinancing options specific to where you are in your career. For example, SoFi has a refinancing product for physicians.
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 $196,250 at 7.00% interest could be nearly $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 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. But unlike forbearance, PAYE will help fight the balance creep from 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, 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 almost $18,000 in interest on the average medical school debt balance of $196,250 (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. A signing bonus often requires a commitment to remain with 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 might be able to knock out a quarter of the average medical school debt in one payment, greatly reducing the amount of interest you’ll owe over time.
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 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 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.
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.
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 $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%. It’s open to medical students or residents and Navy physicians.
- The Navy Financial Assistance Program offers grants of up to $45,000 per year for up to four years for medical students or residents. It also covers your tuition, reimbursements for books and supplies as well as a monthly living stipend of around $2,000.
- Practicing physician sign-on bonuses offered by the Navy are also impressive. They can be between $220,000 and $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.
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.
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. or a government entity.
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.
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. 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.
Students to Service Loan Repayment Program
For medical students in their last year of school, the NHSC offers a Students to Service Loan Repayment 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 after graduation.
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.
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.
Andrew Pentis contributed to this report.
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1 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
ANNUAL PERCENTAGE RATE (“APR”)
There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.
For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
ELIGIBILITY & ELIGIBLE LOANS
Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).
Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.
All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.
For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.
The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.
The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.
POSTPONING OR REDUCING PAYMENTS
After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.
We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.
We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.
If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020 and is subject to change.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of June 15, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 6/15/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.2% effective May 10, 2020.