Medical school is expensive. In comparison, the average amount owed by 2017 medical school graduates who had debt was $192,000, which is equal to the cost of purchasing a home in that same year.
The difference is that homebuyers get 30 years to pay off that debt. Medical school graduates want to get out of the game quickly so they can afford to buy a house of their own!
Public Service Loan Forgiveness (PSLF) is the quickest way doctors can pay off medical school debt. If you work for a nonprofit hospital or medical facility that is registered under section 501(c)(3), the military, or academia, your federal student loans are discharged after ten years.
To minimize your monthly payments and optimize the amount forgiven, sign up for the PAYE repayment program. After 120 monthly payments, the remaining loan debt is forgiven.
Although the Trump administration aimed to end this program in 2018 and it might not be around for much longer, those who have already enrolled should anticipate having their loan forgiveness honored.
The least expensive method of repaying student loans for medical school in the private sector is to sign up for REPAYE during residency and refinance after you begin working.
The advantage of REPAYE is that monthly payments are only 10% of discretionary income. On top of that, the government subsidizes half the interest that would accrue.
A resident making $50k/year with $200k in student loans at 6. 8% interest would only owe $270/month. The $13,600 in interest that would accrue in the first year would not be touched by that small payment, but keep in mind that the government would pay for half of it. Of that total, $5,180 is forgiven, which effectively lowers the interest rate to 4. 2%.
Those REPAYE benefits are nullified as soon as you become an attending physician with a substantially higher salary. Refinance your loans before that happens to stay ahead of the game.
Until recently, student loan refinancing wasn’t an option for doctors right out of college. The residency requirement meant that standard monthly payments were unreasonably high.
Today, several companies offer programs tailored to the medical profession. Getting several quotes is a good idea to see if any lenders can match the REPAYE-achieved effective rate.
Medical school is a significant investment, with graduates often facing substantial debt. The average medical school graduate in 2017 owed $192,000, which can take years to repay. This article explores the various factors influencing the repayment timeline and strategies for expediting the process
Factors Affecting Repayment Duration
Several factors influence the time it takes to pay off medical school loans:
- Loan amount: Higher debt translates to longer repayment periods.
- Interest rate: Lower interest rates lead to faster repayment due to reduced interest accrual.
- Repayment plan: Different plans offer varying payment amounts and terms, impacting the repayment duration.
- Income: Higher income allows for larger monthly payments, accelerating debt repayment.
- Lifestyle choices: Maintaining a modest lifestyle and minimizing expenses can free up funds for faster debt repayment.
Strategies for Faster Repayment
Here are some strategies to help medical school graduates pay off their loans faster:
- Start repayment during residency: Making payments during residency, even if small, can significantly reduce the total interest accrued and shorten the repayment period.
- Refinance to a lower interest rate: Refinancing to a private lender with a lower interest rate can save money on interest charges and accelerate repayment.
- Make extra payments: Contributing more than the minimum monthly payment can significantly reduce the loan term and save on interest.
- Utilize signing bonuses: Many medical professionals receive signing bonuses upon employment. Applying these bonuses towards loan repayment can make a substantial dent in the debt.
- Maintain a modest lifestyle: Living within your means and avoiding unnecessary expenses can free up funds for faster debt repayment.
Loan Forgiveness Programs
Certain loan forgiveness programs can help reduce or eliminate medical school debt:
- Public Service Loan Forgiveness (PSLF): This program forgives the remaining balance on federal Direct Loans after 120 qualifying payments while working full-time for a qualifying employer.
- Income-Driven Repayment (IDR) plans: These plans base monthly payments on income, potentially reducing the amount owed over time. Some IDR plans offer forgiveness after 20 or 25 years of qualifying payments.
The time it takes to pay off medical school loans varies depending on individual circumstances. However, by employing strategic approaches like early repayment, refinancing, and utilizing available programs, medical professionals can significantly shorten their debt repayment journey. Remember, the sooner you start tackling your debt, the faster you’ll achieve financial freedom and reach your financial goals.
How Long Does It Take to Pay of Medical School Debt?
The length of time it takes to pay off medical school loans varies depending on whether you opt for REPAYE, PSLF, or refinancing.
Take a typical med school graduate who owes $192k and spends three years in residency. He/she will earn the median salary of about $54,600 during residency and can expect to earn $185k post-residency. That salary could be lowered to around $140k if the graduate works at a nonprofit to pursue PSLF.
| PSLF | Refinance | Standard Plan | REPAYE | |
|---|---|---|---|---|
| Monthly Payment (Residency) | $310-$360 | $100 | $0 | $310-$360 |
| Monthly Payment (Post-Residency) | $1,100-$1,300 | $2,270 | $2,900 | $1,500-$2,300 |
| Total Repayment | $113k | $272k | $348k | $405k |
| Total Years | 10 | 13 | 13 | 21 |
Association of American Medical Colleges
Student loan repayment terms typically last ten years, but for physicians, this term is added to the length of residency.
Let’s say this graduate refinanced to a 4. 8% interest rate and a reasonable monthly payment calculated near 15% of his/her discretionary income. That still comes to a total of 13 years—a 10-year loan term plus a three-year residency.
Refinancing is unquestionably preferable to the federal government’s Standard Repayment Plan after forbearance through residency. The monthly payment would exceed the discretionary income of the individual by 2020 percent, and the interest added would bring the total amount over $76,000 more than the refinanced rate.
This graduate may have to pay $133k and have their repayment period extended by eight years if they choose to remain enrolled in REPAYE during the repayment process. REPAYE makes sense during residency because it offers low monthly payments and subsidized interest. However, after residency, it is not necessary.
For medical professionals pursuing specializations that demand five or more years of residency, the PSLF program makes far more sense. This will guarantee they get the most amount forgiven by reducing the number of years they have to make a sizable monthly payment.
Should I Start Repayment While in Residency or Wait?
Paying down student loans while in residency can save money and shorten the loan term.
Before a doctor can start practicing, most specialties require three to five years of residency, with a median salary of $54,600 (plastic surgery takes six years and neurosurgery takes seven).
The issue is that the majority of the interest on student loans accrues during the first few years, when the principle is very high and residency pay for doctors is low. Many medical school graduates choose to postpone paying back their loans during their residency and start doing so after they start working.
That can be very costly.
Refinancing with a lender like SoFi and making more than the required $100 payment during residency is a better option. Then, to pay it off faster, pay what the initial monthly payment would have been when you start practicing.
| Refinance (Extra Payment) | Refinance | Forbearance Then Refinance | |
|---|---|---|---|
| Monthly Payment (Residency) | $768 | $100 | $0 |
| Monthly Payment (Post Residency) | $2,270 | $2,270 | $2,458 |
| Total Payment | $235k | $272k | $295k |
| Total Years (Including Residency) | 11 Years, 8 Months | 13 Years | 13 Years |
Interest accrues $9,216 annually for the average graduate with $192k in medical school debt (interest is capitalized only after residency under SoFi). That equates to $768/month.
The loan term could be shortened by 16 months and a total of $37,000 saved if a $768 monthly payment was made during residency in addition to the initial $2,270 monthly payment made as a practicing physician.
Choosing forbearance through residency is a no-win situation. Zero payments prevent you from making progress toward the principle, and interest capitalizes at the high federal rate, further hindering your financial situation.
How I’m Paying off Student Loans
FAQ
How long does it take on average to pay off student loans?
Do hospitals pay off student loans doctors?
How do doctors get out of debt?
What is the average debt for a vet student?
How long does it take to pay off medical school debt?
Your repayment strategy will determine how long it takes to pay off medical school debt. For example, pursuing Public Service Loan Forgiveness will mean 10 years in repayment, while income-driven plans can last as long as 25 years.
How do doctors pay off medical school loans?
Repayment for medical school loans boils down to three choices. Public Service Loan Forgiveness (PSLF) is the quickest way doctors can pay off medical school debt. Federal student loans are discharged after 10 years if you work for a nonprofit hospital or medical facility that is a registered 501 (c) (3), the military or academia.
How long do doctors carry a medical school loan?
But how long do doctors carry that debt once they’re done with training? Average medical school loans can be paid off in under 5 years. However, physicians have a number of alternatives for loan repayment. A majority of physicians are pursuing public service loan forgiveness, which takes 10 years but may cost less overall.
How long does it take to pay off medical student loans?
The amount of time it takes to pay off medical student loans depends on if you pursue PSLF, choose to refinance or enroll in REPAYE. Take a typical med school graduate who owes $192k and spends three years in residency. He/she will earn the median salary of about $54,600 during residency and can expect to earn $185k post-residency.