How to Pay Off Medical School Debt

School is already expensive, but when it comes to medical school that price goes up. The average amount of student loan debt that med students graduate with is $186,600.

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.

  1. Sign up for an income-driven repayment plan
  2. Refinance your student loans
  3. Qualify for student loan repayment assistance programs
  4. Use your signing bonus
  5. Make extra loan payments
  6. Don’t give in to lifestyle inflation
  7. Make payments while still in school
  8. Apply for loan forgiveness

1. 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.

For example, let’s say you had $196,520 in Direct PLUS Loans at 7.6% interest, were single with no children, and had an income of $208,000. Your monthly payment under a 10-year Standard Repayment Plan would be $2,343 per month.

However, if you signed up for Revised Pay As You Earn — one of the four IDR plans available — your payment would start at just $1,577 a month, giving you about $800 in breathing room in your budget.

It is important to note that with an IDR plan you are typically extending your payment term. When you do this, you’ll likely pay more in interest over the life of the loan. One option is to go 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.

2. 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.

For example, if you had $196,520 in student loans at 7.6% interest and repaid them over the course of 10 years, you’d repay a total of $281,160.

But let’s say you refinanced your loans and qualified for an interest rate of just 5.5%. Over a repayment period of 10 years, you’d pay a total of $255,931. Taking just a few minutes to refinance your loans would help you save over $25,000.

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.

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3. 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.

For example, Colorado offers up to $90,000 to full-time physicians and dentists who agree to work for at least three years at an approved site.

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.

4. 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.

If you had $196,520 at 7.6% interest, were on a 10-year repayment plan, and made a $30,000 lump sum payment, you’d pay off your student loans two years ahead of schedule. And, you’d save $29,208 in interest charges.

Learn: How to Pay Off $100,000+ in Student Loans

5. 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.

For example, let’s say you have $196,520 in student loans at 7.6% interest and a minimum monthly payment of $2,343. If you paid just $200 extra each month — making your payment $2,543 — you’d repay your loans a full year earlier. And you’d save over $10,000 in interest charges.

6. 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.

7. 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.

8. 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.

Find out if refinancing is right for you

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