How to pay off medical school debt

Though a career in medicine can be lucrative, many doctors leave medical school with six-figure debt. The average medical school graduate owes more than $200,000 and almost one-fifth of medical students leave school with $300,000 or more in debt.

Though the debt load can be daunting, some strategies can help with repayment, like income-driven repayment plans, forgiveness programs and employer assistance. By reorganizing your debt or finding ways to cut back your balance, you should be able to find a plan that is easier on your budget.

How to pay off medical debt: 5 strategies

There isn’t a one-size-fits-all method for repaying medical school debt; what works for someone else might not work best for you. Here are a few different strategies to try.

Get on an income-driven repayment plan

Doctor salaries are vastly different depending on the type of doctor you are, where you live and how many years you’ve been practicing; if you don’t yet have a high salary, a federal income-driven repayment plan could make payments more manageable.

Income-driven repayment plans are a type of repayment plan for federal student loans where your payments are based on how much you earn and the size of your household. If you’re not working, your payments could be as little as $0. Your monthly payments will increase or decrease based on how much you’re earning annually; you have to recertify your income each year via StudentAid.Gov.

Enrolling in an income-driven repayment plan also gives you some forgiveness options. After 10 to 25 years of payments, depending on the plan, your remaining balance will be forgiven. These are only available for federal student loans; private student loans aren’t eligible for income-driven repayment.

Apply for forgiveness

Doctors have a few avenues for student loan forgiveness. The most popular one is Public Service Loan Forgiveness (PSLF), where physicians working full time for an employer in the public sector can see their remaining loan balance forgiven after making 120 payments on an income-driven repayment plan. You can check your eligibility and apply using the PSLF Help Tool on the StudentAid.gov website.

Other organizations also offer student loan forgiveness programs for doctors. You may qualify for loan forgiveness or repayment assistance from the National Health Services Corps, the U.S. military and state-specific programs. In most cases, you’ll be required to serve in a specific role or high-need area to qualify for assistance.

Make payments during residency

Most student loans offer deferment during residency — meaning you’re not required to make payments — but interest will still accrue. That means that you’ll owe even more by the time you start making payments.

Say you owe $250,000 in unsubsidized loans with a 5 percent interest rate and a 10-year repayment term. If you start payments while in residency without deferment, your monthly payments will be $2,651. However, if you defer payments for three years of residency, you’ll add $37,500 in interest to your loan — bringing your monthly payments to $3,049 per month.

While the payments might be large while you’re still in residency, try to find ways to make small payments during this time. Even making interest-only payments can prevent your loan balance from ballooning while you’re still in school.

Get help through your job

Doctors are always in demand. According to the Association of American Medical Colleges, the U.S. could face a shortage of up to 124,000 physicians by 2034. The more in demand a job is, the more likely you will have the upper hand in negotiations.

When talking to potential employers, talk about bonus opportunities, like a signing bonus, year-end bonus, performance bonus or annual salary increases. You can also ask about student loan repayment assistance: Employers can contribute up to $5,250 each year to student loan repayment on a tax-free basis for both the employer and the employee.

Refinance for a lower interest rate

Refinancing your student loans could lower your interest rate or monthly payment. Refinancing also moves all of your outstanding loans into a single loan, streamlining your repayment to one bill each month.

Most lenders generally require good credit and a stable income to qualify for student loan refinancing. If you don’t have those things, adding a co-signer who does may help you get approved.

Refinancing is only a good idea if there are potential savings. Since the Federal Reserve recently lowered its key interest rate a half a percentage point, after more than a year of hikes, the interest charged on financial products like student loans is also likely to decline slightly.

If you can’t get a lower interest rate or make your payments more manageable, refinancing might not be worth it, since it could make your loans more expensive. If you refinance federal student loans, you’ll also lose out on federal benefits, like deferment, PSLF and income-driven repayment plans. It’s critical to review all of your options before refinancing your student loans.

How long does it take to pay off medical school debt?

How long it takes to repay medical school debt largely depends on how much you owe, how much you can afford to pay and your other expenses, like a car loan or mortgage.

The standard repayment plan for federal student loans is 10 years, but that may not be feasible for doctors who’ve taken out six figures in debt. Medical school graduates with federal loans can use a Direct Consolidation Loan to extend their repayment period for up to 30 years or enroll in an income-driven repayment for 20 or 25 years.

Private student loans don’t have any standard repayment period; you can select a term when you take out the loan. For medical school, many private loans offer terms of up to 20 years, but you can always choose a shorter term to save on interest. If you’re partway through your repayment term and are having trouble making payments, you can refinance to extend your term.

The bottom line

With medical school debt often stretching well into six figures for most borrowers, it could feel like an eternity before you can pay it off. But there are multiple ways to pay off those loans on a timeline that works for you. If you’re struggling to find ways to pay off your medical school loans, review all of the options specific to your loan type. If you need help, your loan servicer can provide an overview of your options.