Care to guess how much new doctors owe, on average, for their premed and medical school loans?
$250,995.
And…“if debt continues to outpace the cost of attendance at the present rate, the average medical student debt will exceed $300,000 by 2024,” according to the Education Data Initiative.
Statistics only hint at the actual impact on many new providers since average data includes, at one extreme, the graduates who have no debt, and at the other, those who carry debt upwards of $500,000.
That’s a lot of dough.
If you’re among the 73% of emerging physicians who have med school debt, you may feel your obligations are insurmountable. Of course, you can always slowly chip away at your loans by paying your minimum monthly payments. But depending on your situation and type of loan, this could take you between 10 and 30 years.
The good news is there are many strategies for paying your med school debt off fast, and we’ll cover them here!
How Can I Reduce My Med School Loans?
You can reduce your medical school loans through several methods, from landing a high-paying job to pursuing public service loan forgiveness.
1. Land Your First Job
First things first: get a job! You can’t pay your debts without a job, after all. As you perform your job search, in addition to thinking about location, work environment, and long-term goals, carefully consider the compensation you’ll need to meet your current living expenses and debt obligations. If you choose to work with a trusted staffing agency and recruiter, they can help you find an opportunity that fulfills your wants and needs. Plus, they’ll be able to negotiate on your behalf.
2. Consider the Public Service Loan Forgiveness Program
Through the Public Service Loan Forgiveness program (PSLF), you may be eligible to have the balance of your loans forgiven after you have made 120 qualifying consecutive monthly payments. To qualify for the PSLF, you must work for an eligible organization: U.S.-based government organizations at any level (federal, state, local, tribal and military), tax-exempt 501(c)(3) not-for-profit organizations, and other not-for-profit organizations that devote a majority of their full-time equivalent employees to providing certain qualifying public services.
3. Research Private Employers’ Loan Repayment Programs
Some employers offer physician loan repayment as incentives in their hiring package. These employer loan repayment programs are part of for-profit healthcare organizations’ attempts to combat the physician shortage and help new doctors meet the rising education costs. A recruiter can help you research hospitals and health systems that offer these programs.
4. Look Into Income-Driven Repayment Plans
While traditional repayment plans are based on how much you borrowed and your loan’s term, income-driven repayment plans (IDR) are based on how much you earn and your household size. IDR plans are for Direct Loans only and are based on an average of 5-10% of your income. They can extend your loan repayment up to 25 years. This plan can be quite helpful for providers just embarking on their careers.
5. Pay Down Your Principal
Any time you can afford to put more money (like a gift, signing bonus, or tax refund) toward your principal, you’ll lower the total interest you’ll pay over the life of your med school loan. According to Forbes, “Say you had $200,000 in loans at 5% interest and a 10-year repayment term, your monthly payment would be about $2,121. If you paid an extra $50 monthly toward your loans, you’d save $1,717 in interest and be out of debt three months earlier. Increase your payments by $200, and you’d save $6,281 in interest charges and pay off your loans 13 months sooner.”
6. Deduct Your Loan Interest at Tax Time
Lower your taxable income and increase the chances of a larger tax refund by taking advantage of the IRS Student Loan Interest Deduction: “Student loan interest is interest you paid during the year on a qualified student loan. It includes both required and voluntarily prepaid interest payments. You may deduct the lesser of $2,500 or the amount of interest you actually paid during the year.”
7. Live Frugally…for Now
“Live like a resident,” says Dr. Jim Dahle of the White Coat Investor. Dahle recommends physicians continue their resident lifestyle and spending habits for 2-5 years after residency. During this time, aggressively pay down the loan. Once you’re done, you’ll be free to invest in your home, retirement, luxury car and the like.
While you may feel you’re facing an uphill battle with your medical school obligations, taking a strategic approach at the outset will level the ground. You’ll be able to get a handle on the loans early on. By paying them down now, rather than gradually chipping away at them over decades, you can make profound progress upfront and gain momentum to help you build prosperity over the long run.
Cross Country Search Is Here
Ready to land your first job, conquer those med school loans and start amassing wealth? We’re here to help!
As a trusted physician recruitment partner to thousands of healthcare organizations for over 37 years, Cross Country Search has an opportunity for every physician. Our recruiters are among the most tenured and knowledgeable in the industry, having built close relationships with some of the most prestigious healthcare organizations in the country.
Whether you’re just finishing up your residency or fellowship, looking to advance your experience, or finding that perfect physician work/life balance, we want to help you find your ideal career opportunity.
Contact us and begin a rewarding career journey with Cross Country Search.
