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A Doctor's Guide to Student Loan Repayment Thumbnail

A Doctor's Guide to Student Loan Repayment

Did you know that the average medical school debt is approximately $196,000

The vast majority of PGY physicians earn an annual salary near $60,000. Although physician salaries dramatically increase beyond residency/fellowship, that doesn’t necessarily help with the loans you’ll be paying back as an intern. 

With increasing costs and a decline in reimbursements due to the Medicare and Medicaid pay cuts in 2015 from the Affordable Care Act, student loan repayment should be a major part of any physician’s financial planning.  

After all, the last thing you want to be worried about are financial issues when you kick off your much-anticipated medical career! The good news is that you can start planning now to ensure that you’re ahead of the curve when it comes time to start paying back your student loans. 

Step One: Get Organized

You can’t hit a target you can’t see. Your first step is to determine exactly how much you owe in student loans. Take the time to list out each of your loan providers, the interest rates on each of your loans, and the varying balances. Although these numbers may feel overwhelming, it’s critical that you’re familiar with your student debt as you start your career. You can’t reverse engineer a plan to pay off your loans if you don’t know what you’re working towards!

Let’s look at a typical example of total medical school debt:

If we stick with the average debt balance of $196,000, and add a 6% interest rate with a 10-year repayment plan, you will be paying $2,176 per month toward your loans.  

You’re also responsible for living expenses and any “extras” like travel or a night out with friends after a long week. When you put the $2,000+ monthly loan payment in perspective, it doesn’t take long to realize that it’s not a small number!

This is why it’s critically important that new physicians determine a debt payoff plan before making any major lifestyle changes. A new house or car immediately after graduation may seem like the perfect way to kick off your career, but you may not realistically have it in your budget during PGY1. 

Rather than make big financial decisions immediately after graduation, take that time and put it to good use figuring out a debt payoff plan. Once you know how you’re going to knock back your loans, you can start to plan for other financial goals - like that new car you’ve been dreaming about!

Step Two: Refinance Your Private Student Loans

If you have private student loans, consolidation and/or refinancing may be in your best interest. Remember, this strategy isn’t for Federal loans. Federal loans lose a wide range of repayment options when consolidated or refinanced, such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay Aa You Earn (REPAYE). However, private student loans often have high interest rates, making them prime candidates for consolidation. 

Ideally, consolidating your loans should allow you to lock in a lower interest rate and move all of your private loans under one umbrella. This helps you to pay less over the life of your loan, and saves you from having to track your progress on paying down multiple loans private loans - which can be a pain. 

Given the rising cost of college tuition, even for non-medical students, student loan consolidation and refinancing is becoming an increasingly popular option. That means there are more and more providers offering these services each year. This is great news for you! You have the opportunity to shop around for the best rate based on your credit score, and analyze different providers. A few popular providers tend to be:

  • First Republic Bank
  • CommonBond
  • So-Fi
  • Earnest

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Your goal with consolidation is to take your high-balance, high-interest private loans and consolidate them into one, lower-interest-rate loan. Doing this can save you thousands of dollars over the life of your loan, and keep more money in your pocket. It’s a win-win!

Looking for help analyzing providers? Check out free resources like Student Loan Hero, or if you want a more detailed analysis of your loans with a custom plan, The Student Loan Planner is a great resource.

Step Three: Determine Your Federal Loan Payment Plan

Your Federal loans usually offer lower interest rates and more flexible repayment plans than your private loans. The three most common payment plans are:

  • Income-Based Repayment (IBR)
  • Pay As You Earn (PAYE)
  • Revised Pay As You Earn (REPAYE)

Both IBR and PAYE help ensure that, regardless of your salary, you can pay a comfortable amount toward your loans as a new physician without going broke. These payment plans cap monthly student loan payments at either 15% (if you started borrowing prior to July 2014), or 10% of your discretionary income. 

After 25 years of IBR, or 20 years of PAYE, your remaining federal student debt is forgiven. There is no limit to the amount of student loans that can be forgiven, so medical students stand to benefit the most. Remember: this loan forgiveness program only applies to federal loans - private loans don’t qualify.

Given this information, the typical next-step for new physicians is to:

  1. Consolidate and refinance your private loans.
  2. Enter an income drive repayment plan for all federal loans (Federal Direct Loans!) to keep your monthly payment low until they’re forgiven.

Step Four: Know Your Forgiveness Options & Alternate Repayment Strategies

As a physician, you have several unique opportunities to have your student loans forgiven, or to avoid paying them off while you’re still in residency. Let’s go over a few of these options: 


If you work as a physician in the government or non-profit sector for 10 years, your loans may be forgiven thanks to the Public Service Loan Forgiveness (PSLF) program. The key is to make sure they are Direct loans and make 120 (10 years) payments based on an income based repayment plan. Once these required payments are made, you may qualify for PSLF to forgive the remaining balance on your loans.


Medical residents who do not wish to begin repaying their loans during residency have the option of going into forbearance. With forbearance, no payments are required. However, interest continues to accrue and the federal government no longer pays interest on the subsidized portion of a borrower's loans. Also, interest may be capitalized under forbearance, making this a more expensive option for borrowers. 

Let’s look at an example: Assuming you have $183,000 in federal loans and you use forbearance during residency (3 years). After residency you go to a standard repayment plan. Your monthly payment would be $0 per month in residency (forbearance) and then go up to $2,700 per month for the next 10 years. When it’s all said and done, you would have paid a total of $329,000, which includes $146,000 of interest. Ouch! Forbearance may sound attractive, but could cost you in the long run. Additionally, forbearance delays the “qualifying payments” you could be making during residency to earn PSLF. 

Pro-Tip: With the addition of income based repayment plans, you should try to avoid forbearance as much as possible. 

Step Five: Consider Ways to Expedite Loan Repayment

Personally, I’m a huge Indianapolis Colts fan. So, to demonstrate the following example, let’s use a fun sports fact. In 2004, Peyton Manning signed a 7-year contract with a signing bonus of $34.5 million. 

Now, you may not be able to swing a $34.5 million signing bonus (hey, we all can dream, right?), but the fact remains the same: a signing bonus in addition to your salary can help you to expedite your loan repayment.  

Many hospitals and employers are offering signing bonuses to physicians as an incentive to come and work for them directly out of medical school. Modern Medicine Network says that bonuses are becoming more popular due to the shortage of primary care doctors. The range is between $24,000 and $150,000. Imagine what a $75,000 bonus could do for your loans! 

It’s tempting to use a signing bonus toward another major life goal - like purchasing a home. However, putting those funds directly toward one, massive loan payment could nearly cut your debt in half (and minimize the total number of years you’ll be paying down your loans!). 

As with all things compensation-related, make sure you read the fine print. You want your signing bonus to be a true one-time payment, not something that’s dispersed slowly over the next few years.

Pro-Tip: If you are going for PSLF, do NOT put the bonus toward your loans. 

Another option to expedite your loan repayment is to join the military. That’s right, the military offers a large stipend and a grant during residency to help knock down student debt. 

Here is an example from the Navy Financial Assistance Program (FAP):

Join as a medical resident and get an annual grant of $45,000 on top of your residency income. You can use that grant for debt repayment each year. Let’s assume a four-year residency; you would get $180,000 in extra income during residency. You could use that to pay off the vast majority of your medical school loans!

On top of the $45,000 grant, you will get a monthly stipend of $2,179 to help with living expenses for up to 48 months. Add that to an average resident’s salary of $50,000-$60,000 and you have the ability to take care of any other debt you may have or start investing.

Typically, you’ll have 3-5 years of active duty depending on your agreement and specialty. You would enter as an officer, and put your skills to work caring for the brave men and women who serve our country. While this option isn’t for everyone, it can be incredibly rewarding as well as financially beneficial.

Finally, you might consider working in a health shortage area to speed up the repayment of your loans. The AAMC (Association of American Medical Colleges) has published a comprehensive list of each state and program that offers federal loan forgiveness programs on their website. This includes the public service loan forgiveness program and scholarships for those in the medical field. A few are only for those new to medical school. 

You can apply if you are a resident, or looking for your first job as a physician. Many residents and medical professionals believe it’s difficult to get scholarships while in medical school or to find significant repayment options outside of residency. With some solid research (start at the AAMC website), you can find numerous opportunities!

Of course, with this type of option, it’s important to do a bit of analysis before signing on to work in a health shortage area. There are some pros that usually come with this type of position:

  • Your employer may cover relocation costs
  • Cost of living may be lower in an underserved area
  • The financial stipend/loan forgiveness available could make a notable impact on your existing student loans

However, there can also be downsides to programs like these:

  • Salary may be lower than in high-demand areas
  • Relocating away from your support network during residency can be challenging
  • The cost of living isn’t always lower, especially if you’re often traveling home to visit loved ones

No matter what loan repayment strategy you’re researching, take the time to weigh all of the pros and cons - not just the readily available information. You want to take the steps necessary to expedite your loan repayment, but don’t necessarily want to sacrifice quality of life to do so. It’s important that you make a wise decision that aligns with your long-term financial and lifestyle goals!


Determining how you’re going to pay down your medical student loans can be a daunting task. In fact, many residents and young medical professionals essentially ignore their student loans because the idea of creating a payment strategy is too overwhelming. The truth is that you deserve to pay your loans off in a timely fashion, while still leveraging your salary to live a life you love. 

If you are not ready for comprehensive financial planning, and just need to get your loans organized and on track, contact The Student Loan Planner.

If you are looking for a comprehensive financial plan and also have student loans in place, look to partner with a financial advisor that is a Certified Student Loan Professional (CSLP) who is well-versed in student loans. You don’t have to go through this alone! You are welcome to schedule a free Icebreaker Call with us if this sounds like a good fit for you

Looking for a more thorough all-in-one spot for your financial life? Check out of free eBook, A Doctor’s Prescription to Comprehensive Financial Wellness

Written by Chad Chubb, CFP®, CSLP®

This information is for general purposes only. This information is not intended to be a substitute for specific professional financial or tax advice, as individual circumstances vary. Please see a financial professional in regards to your own individual situation.

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