School is already expensive, but when it comes to medical school that price goes up — the average med school debt is $251,600.
If you’re struggling with paying off medical school debt, here are the best tips to help you tackle your debt and save some money.
- Decide what to do with your loans in residency
- Sign up for an income-driven repayment plan
- Refinance your student loans
- Qualify for student loan repayment assistance programs
- Use your signing bonus
- Make extra loan payments
- Don’t give in to lifestyle inflation
- Make payments while still in school
- Apply for loan forgiveness
1. Decide what to do with your loans in residency
Many medical school graduates don’t earn enough as residents to start making full payments on their loans. The three most popular options for managing loans during residency are:
- Request mandatory forbearance: You have the right to postpone payments on your loans until after you complete your residency
- Enroll in income-driven repayment: In an IDR plan, your monthly payments are based on a percentage of your income, which makes them more affordable
- Enroll in a graduated repayment plan: In a graduated plan, your payments start out low and increase every two years
Whatever option you choose, remember that if your payments don’t cover the interest you owe, some or all of that unpaid interest may be added to your loan balance when you complete your residency. You can limit the damage by making whatever monthly payment you can afford when your loans are in deferment or forbearance.
2. Sign up for an income-driven repayment plan
If you’re dealing with a six-figure loan balance, you could have trouble affording your minimum monthly payments. Luckily, you might qualify for an alternative payment plan if you have federal student loans.
Income-driven repayment (IDR) plans extend your repayment term and cap your monthly payments at a percentage of your discretionary income, drastically reducing your monthly bill. And, after 20 to 25 years of making payments, the remaining loan balance is forgiven.
Keep in mind, an IDR plan will typically extend your payment term. When you do this, you’ll likely pay more in interest over the life of the loan because you’re paying it off for a longer time.
You can always consider going on an IDR plan to help control your monthly payments. Then, when you’re in a better financial situation, you can refinance your loans to a shorter term to cut down on the total interest you end up paying.
3. Refinance your student loans
If you have high-interest student loan debt, your interest rate can cause you to repay thousands more than you originally borrowed. A great way to save money and pay off your debt faster is to refinance your loans.
If you choose to refinance, you could qualify for a lower interest rate. Because more of your payment goes toward principal, rather than interest, the savings can be significant.
The good thing about refinancing your student loans is that there is no limit to the number of times you can refinance. As your financial situation gets better it is a good idea to check to see if you can lower your rates once again. You can compare your student loan refinance options and get quotes from multiple lenders with Credible.
4. Qualify for student loan repayment assistance programs
If you’re willing to serve in a high-need community, you may be able to qualify for substantial assistance with your student loans. Many organizations and states offer repayment assistance programs. Participants agree to work for a certain period of time; in return, they get thousands of dollars to repay some or all of their loans.
There are dozens of state and national student loan repayment assistance programs available for medical school graduates, and most will help you repay both federal and private student loans.
5. Use your signing bonus
Physicians are in high demand, which means you may be able to get a signing bonus when you’re hired for a new job — which can be around $30,000.
If you put that signing bonus directly toward your student loan debt, it can help you pay off your debt faster and save money.
6. Make extra loan payments
When it comes to student loans, your loan balance can feel insurmountable. But if you can find a little extra money each month to make additional payments, you can cut down your loan repayment term and become debt-free much sooner.
7. Don’t give in to lifestyle inflation
After you finish your residency, it can be tempting to give in to lifestyle inflation. With a physician’s salary, you could go out and buy a nice new car and move into a luxurious home, but those can be costly mistakes.
Instead, continue to live as if you’re still a student. Stick to a strict budget, limit your purchases, and direct your extra money to your student loans to save money over time.
8. Make payments while still in school
If at all possible, make payments on your student loans while you’re still in school, rather than deferring them until after you graduate.
Even if you can only afford a small amount each month, doing so will reduce the amount of interest that accrues. Over time, you’ll save money, and you can even shorten your repayment term.
Typically, when in deferment, the autopay discount won’t apply. This means your interest is potentially accruing at .25% more. If you make minimum payments while you are in school, you get the added benefit of the 0.25% autopay discount.
9. Apply for loan forgiveness
If you have federal student loans and you’re willing to work for a non-profit organization or government agency, you could qualify for Public Service Loan Forgiveness (PSLF). Through this program, you work for a qualifying employer for 10 years while making payments on your loans.
After making 120 eligible payments, the government eliminates your remaining balance. Payments made under an IDR plan qualify for PSLF and, best of all, the forgiven amount is not taxable as income.