5 Must-Try Strategies for Paying Off Medical School Debt

Renee Layberry
May 4, 2021

Becoming a doctor requires years of coursework and clinical practice, and that training comes at a cost, forcing you to come up with a plan for paying off your medical school debt.   In 2019-2020, the average annual cost of medical school for first year students was just over $60,000 in private institutions, according to the Association of American Medical Colleges.   Multiply this annual tuition by four years of medical school, and you’re saddled with a six-figure total at graduation. And remember, you’ll have to add any pre-med student loans you incurred to that amount. In fact, the average of both undergraduate college debt and medical school debt for the class of 2019 is $201,490.   Since most people don't have $200,000 lying around, taking out student loans is a common financing option to fund their attendance at medical school. Once you begin your career as a doctor, however, it's time to tackle that debt.   Let's start with these 5 strategies to pay off medical school loans.  

1. Devise a smart repayment strategy for paying off medical school debt 

Most doctors wait until their first post-residency job to start paying off their medical school debt. Others start making payments during residency, and that’s a smart move.   The typical grace period on student loans is six months after you graduate; for medical students, this forbearance continues through residency. That period ranges from three to seven years. During that time you don't have to make payments, but interest on your student loans is accumulating.    And that interest isn’t just accumulating: It’s also being added to your loan balance. Once the grace period ends, unpaid interest is capitalized (added to the principal amount owing), so that you’ll be paying interest on your interest.    Learn more >> Interest rates are important to pay attention to with any kind of debt, check out the interest rates for 2020 and learn how they affect your repayment strategy   If you are able to make even small payments against your debt during your residency, do it. Remember that the average salary for a medical resident is around $60,000, so if you create and stick to a budget, you might be able to plan to make monthly payments throughout those years.   stethoscope on a table near an open medical textbook Photo by @anytka via Twenty20

2. Refinance your medical school loans to reduce interest payments

Consider refinancing your student loans for significant savings. Refinancing private student loans can help you reduce your interest rate.    Some of your current loans might carry high interest rates or have variable interest rates that change with market conditions. When you refinance, you can replace these with a lower, fixed rate of interest.   Before you pursue this option, make sure you're a good candidate for loan refinancing. Then, use our student loan refinancing calculator to see what your savings could be a well as your monthly payments. Your steady income as a doctor will make you appealing to potential lenders. However, you'll also need to be in good standing with your lender, meaning you're up to date on your payments and don't have a history of late or missed payments. Your credit score is also important when it comes to refinancing, a good to excellent credit score is also important to ensure you're appealing to lenders.    Learn more >> What credit score do you need to refinance your student loans and get a better rate?  

How to refinance your medical school student loans

If you meet the criteria and want to reduce your monthly payment with a lower interest rate or shorten the life of your loan, check out different lenders to see what they can offer.   While you might not find an interest rate as low as you want from every lender, you might find some loans that offer a better interest rate than your current one. Even a slight reduction in the interest rate matters.   Learn more >> Do you know how many times you can refinance your student loans?  That means even if you don't get the lowest interest rate possible, you can always settle in the meantime while you build your credit score and then refinance again   Before you refinance, however, make sure that the new payment isn't lower only because the loan term is longer. If that's the case, keep looking.  

3. Loan forgiveness programs for medical school loans

Student loan forgiveness programs exist but are reserved for individuals in certain fields. Fortunately, medical professionals may be one of the groups eligible to have some of their student loans forgiven.    The federal government's Public Service Loan Forgiveness program requires eligible individuals to make 120 payments or ten years' worth of student loan payments before having the balance forgiven.    In addition, you must:   Photo by the National Cancer Institute
  Another loan forgiveness option for doctors is the National Health Service Corps Loan Repayment Program. Licensed primary care clinicians in eligible disciplines commit two or three years of service in an area designated as a Health Professional Shortage Area. In exchange, they are eligible for up to $100,000 in loan repayment, which can help reduce or eliminate your student loan debt.   Consider the National Institutes of Health Loan Repayment Programs if you are looking for or have a position in medical research. These repayment programs target physicians and researchers in various fields, including pediatrics, AIDS, and infertility. Eligible individuals can earn up to $50,000 annually for two years.   The military has Health Professions Loan Repayment Programs you can also look into. The Air Force has a maximum loan repayment of $40,000 per year for two years. The terms are the same for the U.S. Navy, while Army doctors can receive up to $120,000 over three years to help pay down medical school debt.  

4. Choose an income-driven repayment plan

Consider signing up for an income-driven repayment plan to manage your federal student loan debt. Here, the amount you pay is based on how much you make. This loan option allows you to pay consistently no matter your income. You won't have to worry about a loan payment that you can't afford because your lender considers your income when setting the payment amount.   In the case of a medical student, you can begin to pay your medical debt during your residency. At this point, your income will be relatively low, so your loan payment will be less. Then, as you complete residency and secure your first position as a physician, you'll see a salary increase. At this point, your lender will increase your monthly payments since you can afford a higher payment.   

5. Make bi-weekly payments and let that determine your budget

You've already lived like a resident on a budget, what's a little longer? By making bi-weekly payments on your student loans you are determining your budget by allocating that money towards your debt.   The key to this being an accelerator in your debt payoff strategy is to not actually split the full payment into two payments, rather, pay the full payment two times.   This means instead of 12 payments a year you would be making 24, cutting your term in half.   Before you decide to try this method, make sure you can afford an extra payment every month. With a significant amount of debt like this your monthly payments might already be high enough.   If you can't make the full amount, see if you can contribute a portion of your monthly payment as an extra payment every month. The important thing here is to pay a little more so you can ultimately pay your debt off faster and pay less interest in doing so.  

Conquering medical school debt starts with a plan

As with most things, there's no one size fits all plan when it comes to paying off student loans. When trying to figure out how long it will take to pay off medical school debt, the answer depends on how aggressively you plan to pay off your loans.   It's normal to have anxiety around your student debt, and to feel overwhelmed by how you're going to pay it all back in a reasonable amount of time. Not to mention the natural stressors of being a doctor especially in your first years.   The most important part of the process is that you feel motivated and rewarded as you see your debt dwindle.  Take your personal financial situation into consideration when deciding on what strategy you want to run with to become debt free.   Keep in mind that getting out of debt is definitely a huge accomplishment but so is completing medical school! The hard part is already over, now time to focus on your financial future!   Don't discount your success just because you have student loans.