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4 Key Steps Doctors Should Take to Pay Off Student Loans


What can you buy with $176,000? A luxury condo, a tricked-out Audi R8, or the world’s greatest entertainment system, to name a few options.

You could also spend it on an expensive medical degree.

$176,000 is the average amount of medical school debt accumulated by graduates in 2014, according to the Association of American Medical Colleges — a pretty big chunk of change.

Many new physicians and dentists graduate believing their high income potential means they’ll have an easy time repaying their student loans. What they don’t realize is that medical costs are rising while reimbursements are declining, forcing doctors to pay more out-of-pocket than ever before and leaving less money to put toward debt.

But all’s not lost — there are steps you can take right now to get on track and repay your student loans while staying within your budget. Read on for a guide to student loan repayment specifically for medical professionals.

Do the math

The first thing you need to do is crunch the numbers so you can figure out exactly what you owe. The average medical student owes $176,000, but your total may be lower or even higher, depending on where you went to school and when you began paying off your loans.

Remember, it’s best to pay off your student loans as quickly as possible to avoid spending thousands extra in interest charges.

For example, a $176,000 loan at 6% interest over 10 years adds up to $58,475.30 in total interest! That’s enough for a pretty substantial mortgage down payment or a healthy contribution to your retirement fund.

Work in public service

Not all doctors and dentists look to start out in private practices. And for those who do work for qualifying nonprofits, the perks can be great.
Through Public Service Loan Forgiveness, you can have your remaining student loan debt forgiven after 10 years of consistent payments, with no limit to how much is forgiven.

Many other state-level programs exist to offer loan repayment assistance and/or forgiveness to medical professionals working in public service as well. The Association of American Medical Colleges has a comprehensive list of programs on their website.

Another way to pay your college tuition quickly (and get a stipend) is to join the armed forces as a dentist or physician. For example, medical residents who join the Navy can receive an annual grant of $45,000, on top of regular residency income of about $50,000, and a $2,179 monthly stipend. Usually, this requires three to five years of active duty.

Enroll in income-driven repayment

One of the benefits of federally backed student loans is that you have the option to make payments proportional to how much you earn.

Income-based repayment (IBR) and Pay As You Earn (PAYE) are a couple examples of income-driven repayment plans; they cap monthly payments at no more than 10 percent of your income (15 percent for loans funded before July 2014).

IBR also postpones interest capitalization, giving you a partial interest subsidy for the first three years you make payments.

Keep in mind, however, that these plans often extend the length of your loan. That means paying more interest over time. Income-driven plans should be considered only if you really are having a hard time affording your payments.

Consider refinancing

Refinancing your medical school loans is another way you can potentially cut down your monthly payments by paying a lower interest rate. Refinancing isn’t for everyone, but it can be a great, money-saving option for those who do qualify.

When you refinance your student loans, you work with a new, private loan company to pay off your old loans and fund a new one with new terms and ideally, a lower interest rate. The lowest rates are usually reserved for borrowers with excellent credit, so remember to check your credit score before applying for refinancing.

It’s also important to note that because refinancing is done through a private lender, any federal loans you have (the kind backed by the government) will lose the flexible payment options the government offers, such as income-based repayment and deferment.

If you make enough money and can fit in monthly payments with your budget, refinancing is a worthwhile idea to consider. But if your income is variable or you don’t yet have a stable job, you may want to think about other options.

Doctors and dentists rightfully command high salaries, but that doesn’t mean it’s any easier for medical professionals to pay off their student loans. Fortunately, there are several options to help those in the medical field get out from under the burden of expensive student debt and focus on their careers.