How to pay off medical school debt

1. Begin repayments ASAP

Starting repayments as soon as you can is the best way to get on top of your debt. Not only will you be out of debt faster, you’ll also pay less in interest, which adds up over time.

Can’t afford full repayments while you’re in school? Even making interest-only or small fixed repayments of $25 toward your loans instead of deferring until graduation makes a difference. That’s because of interest capitalization, where your lender adds any unpaid interest to your loan balance when you start making full repayments. This ups your monthly repayments and increases the total cost of your loan.

2. Repay during your residency

You might be tempted to refinance your loan with a lender that offers deferment during your residency. While this can lower your costs, making payments toward your loans can help you avoid interest capitalization. Instead, consider extending your loan term to lower your monthly repayments or picking a repayment plan that increases over time.

3. Refinance more than once

Refinancing with another lender can help you qualify for lower rates and more favorable terms than you originally had. Since doctors tend to have high salaries, lenders like Laurel Road even offer special deals for medical professionals.

You might want to consider refinancing whenever you get a significant pay increase — especially if you have a lot of debt. The higher your salary and credit score — the better deal you’ll get. Even a one percentage point change to your interest rate can make a huge difference with a six-figure debt load.

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4. Apply for forgiveness and repayment assistance

If you’re planning on going into public service — or don’t mind starting your career with a low-paying salary — you might want to look into forgiveness and repayment assistance programs. Typically, these require you to work for a few years in an underserved area in exchange for around $30,000 of forgiveness per year of service.

8 forgiveness and repayment programs to consider

• Public Service Loan Forgiveness (PSLF). This program forgives 100% of your remaining balance after you make 120 income-driven repayments while working a public service job. But it has a very low approval rate, and private loans aren’t eligible.
• National Health Service Corps (NHSC) Loan Repayment Program. Get up to $50,000 of forgiveness after working in a designated Health Professional Shortage Area (HPSA).
• National Institute of Health (NIH) Loan Repayment Programs. Get up to $70,000 of forgiveness if you have over $140,000 in debt and work at the NIH.
• National Health Service Corps (NHSC) Students to Service Loan Repayment Program. Get up to $120,000 in forgiveness after working in an HPSA for four years straight out of medical school.
• Health Professions Loan Repayment Program (HPLRP). Get up to $40,000 a year in loan repayment assistance if you’re a new doctor entering the Navy through this program.
• Faculty Loan Repayment Program (FLRP). Doctors from disadvantaged backgrounds can qualify for up to $40,000 in repayment assistance for teaching in a health professions degree program.
• State repayment assistance. Many states have their own local repayment assistance programs for doctors.
• Cross-military loan repayment programs. If you’re in the military, check with your commanding officer to learn about your repayment assistance options.

Take a deeper dive into these forgiveness programs for doctors

5. Consider salary when picking a specialization

The higher your salary, the easier it will be to afford those high loan repayments — and avoid expensive fixes like deferment, forbearance or longer loan terms. While salary shouldn’t be your only consideration when you’re picking an area to specialize in, it’s worth keeping in mind.

6. Sign up for an income-driven repayment plan

Federal loans come with the option to enroll in one of several repayment plans based on your income. Since you’re in a profession with salaries that start low and increase quickly, income-driven repayments give you lower monthly repayments during your residency and higher repayments as you progress in your career. Any debt left over after 20 to 25 years gets forgiven.

There are a few drawbacks to consider before signing up, though. If you leave a plan, that interest gets capitalized — so you have to be in it for the long haul. The Pay As You Earn (PAYE) and Income-Based Repayment (IBR) Plans kick you off if your repayments are higher than what you’d pay on the 10-year Standard Repayment Plan, so you might want to avoid those.

5 types of income-driven repayment plans — explained

7. Put your signing bonus toward your student loans

Many medical positions come with a signing bonus — particularly those in high-paying, high-demand fields. Rather than spending this money, consider putting it toward your student loan balance. In some cases, it could be as much as you’d earn through a student loan repayment assistance program.

8. Commit to a modest lifestyle

It might be tempting to upgrade your lifestyle when you finally finish your residency. But you might want to hold off until you’ve paid off your student debt. Having a high student loan balance can make it more difficult to qualify for a good deal on other types of financing that you might need to buy a new house or car.

So waiting to pay off your debt before you upgrade your life can not only help you save on interest by giving you more funds to pay off your loans faster, but it can also help you get a better deal on other loans.

9. Be strategic about extra repayments

Making extra repayments toward your balance whenever you can is a great way to get out of debt faster. However, having a repayment strategy can help you save the most.

Some people like to pay off their loans with the highest interest rate first — this will save you the most in the long run. Others like to focus on the smallest loans so they can close those accounts faster and draw motivation from the sense of accomplishment.

15 tips to pay off your student loans faster

Bottom line

Medical school is expensive, but that $300,000 student debt load might not be as daunting if you go into a high-paying field like cardiology. And if you’re more interested in working with underserved communities, you could be eligible for multiple federal and state forgiveness programs.

Get a salary bump? Improve your credit score? You might want to consider refinancing for a lower rate.

Otherwise, explore more tips for paying off professional student loans.

Frequently asked questions

• Is the number of medical students with debt increasing or decreasing?

  The number of medical students graduating with student debt has actually been on the decline for the past few years — but only by a few percentage points. However, the cost of attending medical school has increased for both public and private universities.

• Can I get a loan while paying off medical school debt?

  It’s possible, though it depends on factors like your credit score, salary and debt load. You might have trouble qualifying if your debt-to-income ratio is over 43%. Go for a lender that considers your profession when you apply, since being a doctor often works in your favor.

• What's the best debt consolidation program for medical school debt?

  It depends on your unique situation. While you’re a resident, you might want to consider refinancing your private student loans with a lender that allows you to make reduced repayments during your residency.

  Federal loan holders who plan on applying for forgiveness or income-driven repayments might want to consider a Direct Consolidation Loan and apply for forbearance during their residency.

  Started a high-paying career? You might be able to get a better deal on both your federal and private loans by refinancing — especially with a lender like Laurel Road that offers special student loan refinancing programs for medical professionals.

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