Medical School Loan (123RF)

The American Association of Medical Colleges (AAMC) reports that the average student loan debt for medical school graduates in the class of 2014 amounted to $176,000. While this number might not be particularly shocking, the amount of interest that accrues on this monstrous amount of debt will be.

For example, interest charges on $176,000 in loans at the 2014 Federal Direct Unsubsidized loan interest rate of 6.21% total nearly $11,000 annually.

Although overcoming this staggering amount of interest can be difficult, there are several opportunities for medical school grads to save money as long as they get a head start on their loan repayments.

With this knowledge in mind, we’ve developed a student loan repayment guide for doctors and medical school grads. Here are a few highlights from the guide and steps that medical professionals can take to efficiently overcome their student loan debt.

 

1. Take Inventory of Your Student Loans

For graduates and professionals in any field, lifestyle inflation that accompanies earning a salary is common. Given the exceptional amount of hard work that it takes to earn a professional degree, this kind of inflation is also completely understandable.

Yet, running the numbers on your student loan debt will invariably suggest how being more aggressive with your student loan debt repayment can yield long-term savings. Bearing that in mind, the first step is simply to take a long, hard look at your student loan debt.

To reuse the previous example: If a physician wanted to pay back $176,000 at 6% interest over 10 years, then that would cost about $1,972 every month for a decade. Over the life of these loans, the total repayment would include approximately $60,600 in interest charges.

Fortunately, this option isn’t the only approach to loan repayment. Instead, medical professionals can adopt the following strategies to reduce the total amount that they repay.

 

2. Use Signing Bonuses to Make Lump-Sum Debt Payments

Making lump-sum payments on student loan principals is a highly effective approach for paying off balances and immediately reducing interest costs. One way that doctors in particular can activate this strategy is to negotiate for a signing bonus.

The Modern Medicine Network reports that signing bonuses among medical professionals are becoming fairly common. Though the average signing bonus is roughly $24,000, in some cases, bonuses can approach a whopping $150,000.

Clearly, signing bonuses can help to cover relocation expenses and other immediate costs that new medical professionals incur. However, not all bonus money needs to be put toward these costs. Instead, applying half of a signing bonus to student loan repayment can put a considerable dent in a professional’s outstanding debt.

To use the above example once more: Reducing the $176,000 principal by $15,000 can save about $5,000 in interest over 10 years of repayment.

 

3. Find Positions That Help to Repay Medical Student Loans

Across the medical field, several options can grant doctors assistance with repaying their student loans or else obtain forgiveness for these loans.

On the state level, dozens of programs are available to help doctors with paying off their student loans. Many of these programs involve practicing in underserved communities, as the AAMC’s list of all of these programs shows. Some examples include:

AAMC’s student loan repayment and forgiveness database also includes some federal programs, too. These programs assist medical professionals serving in the US Navy, Air Force, and National Institutes of Health, among other agencies.

 

4. Use Income-Driven Repayment and Student Loan Forgiveness Options

To pay off federal student loans, a few options can allow both quicker repayment and increased savings. A primary method that many doctors use involves enrolling in the Public Service Loan Forgiveness (PSLF) Program.

The PSLF Program allows all federal student loan balances in the Direct Loan Program to be forgiven after 120 full, on-time payments. If you work in the public or nonprofit sector, then you might qualify to have your student loans forgiven via PSLF.

Eligible payments count toward the total of 120 as long as you are enrolled in the Standard Repayment Plan or another income-driven repayment plan. If you plan to apply for the PSLF Program, then consider the benefits of selecting an income-driven plan, since it can reduce your monthly payments and later result in the greatest amount of forgiven debt.

For more information, the AAMC provides a useful guide for PSLF for medical professionals.

 

5. Consider Student Loan Refinancing

Another way to reduce interest charges is to find a lower interest rate on your student loans. To this end, many student loan borrowers take advantage of student loan refinancing options.

By refinancing student loans, borrowers can:

  • Save money on interest
  • Pay off student loans faster
  • Lower monthly payments
  • Remove cosigners
  • Switch student loan servicers

Most student loan refinancing lenders do not charge application, origination, and other fees common among other types of loans. Plus, upon refinancing private student loans, borrowers will likely observe few changes in how they repay their student loans.

However, when refinancing federal student loans, there are a few tradeoffs to keep in mind. For example, borrowers who refinance federal student loans with a private lender forfeit access to repayment options such as the Income-Based Repayment and Pay As You Earn Plans. Furthermore, after refinancing, student loan forgiveness via the PSLF Program is also no longer an option.

While the savings in interest are a worthwhile tradeoff for some borrowers, it is important that borrowers recognize the impacts of refinancing federal student loans before committing.


For more information, read about the student loan refinancing options offered by Student Loan Hero’s partners.

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