Janice Lozano
Medical residency can be a stressful, busy, and chaotic time, with residents having to manage high medical school debt, residency application fees, travel costs, and moving expenses. The average student loan debt for a medical student is over $200,000, and residents often make about a quarter of an attending physician's salary. While residents may not have the financial means to make full payments during this period, their loans continue to accrue interest. This has led to concerns about the management of medical school loans and other stressors during residency.
| Characteristics | Values |
|---|---|
| Average student loan debt for a medical student | $200,000 |
| Average student loan debt of medical school graduates | $207,000 |
| Median education debt for indebted medical school graduates in 2019 | 200,000 |
| Percentage of graduates reporting education debt in 2019 | 73% |
| Range of total costs by institution type and location | $159,620 (in-state, public school) to $256,412 (out-of-state, private school) |
| Residency period | 3-7 years |
| Average salary for family medicine residents | $54,000 |
| Average annual income for family physicians | >$231,000 |
| Average signing bonuses for new doctors | $10,000 - $75,000 |
| Student loan repayment options | PSLF, IDR, refinancing, Direct Consolidation Loan, loan-repayment programs, etc. |
| Interest accrual during residency | Varies depending on loan type and lender |
| Repayment period | Often a decade or more |
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What You'll Learn
- Med students can pay a minimum of $100 per month during residency
- Refinancing student loans can lower interest rates and save money
- Interest accrues during residency, increasing the total repayment amount
- PSLF residency programs are typically nonprofits or state hospitals
- Some hospitals offer student loan repayment as a recruitment incentive
Med students can pay a minimum of $100 per month during residency
Medical residency can be stressful, busy, and chaotic, and student loan debt is a major concern for many residents. The average student loan debt for a medical student is over $200,000, according to the Association of American Medical Colleges (AAMC). While residents' salaries are much lower than attending physicians' salaries, there are options for managing and paying off medical school debt during residency.
One option is to refinance student loans, which can help residents lower their interest rates and save money. Some refinancing lenders offer reduced payments for medical residents, with a minimum of $100 per month. Refinancing during residency can dramatically reduce monthly payments and provide a fixed monthly payment, a grace period, and the capitalisation of interest accrued during residency. This can simplify residents' financial situations and free up money for living expenses.
Another option is to choose an income-driven repayment plan (IDR), which uses discretionary income to determine the payment amount. With the new IDR plan from Biden, residents can receive large interest subsidies, and there is a high chance that their loans will be forgiven tax-free. However, residents should be careful to avoid common student loan pitfalls, such as not understanding the rules surrounding Public Service Loan Forgiveness (PSLF) and consolidating federal loans.
Additionally, residents can consider loan-repayment assistance programs, which may require them to work in physician-shortage areas or commit to a certain number of years of service. Some hospitals and medical groups offer matching programs that deduct a percentage of the resident's paycheck and match it with a contribution. Signing bonuses can also be used to make a large lump-sum payment towards debt reduction.
While residents may choose to postpone loan payments during residency, this can result in accrued interest, increasing the total balance owed. Therefore, making even minimum payments of $100 per month during residency can help residents save money and avoid costly mistakes.
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Refinancing student loans can lower interest rates and save money
Medical residency can be stressful, busy, and chaotic. On top of that, medical school debt is a major concern for many residents, fellows, and young physicians. According to the Association of American Medical Colleges (AAMC), in 2020, the average student loan debt of medical school graduates was around $207,000. The median education debt for indebted medical school graduates in 2019 was $200,000, and 73% of graduates reported having education debt.
Refinancing student loans can be a great way to lower your interest rate and monthly payment if you’re struggling to manage your current student loan balance. Combining multiple loans into a single loan also simplifies your budget. When you refinance student loans, a lender pays off your existing loans with a new one at a lower interest rate, which can save you money in the long run. For example, a $30,000 private student loan with an 8% interest rate has a $364 monthly payment over 10 years. Refinancing to a 10-year loan at 5% interest will save you $5,496 in total and $46 per month.
However, there are some drawbacks to refinancing student loans. Since the process usually involves replacing federal loans with private loans, the lower rates you could get through refinancing may not outweigh the payment flexibility and other benefits of federal loans. For instance, refinancing federal student loans will make borrowers ineligible for programs like income-driven repayment, Public Service Loan Forgiveness, and other student debt relief efforts.
If you're considering refinancing, it's important to weigh the pros and cons and decide if it's the right choice for you. You can use student loan refinancing calculators to see how much you would save in interest compared to what you pay now, and many lenders offer prequalification tools to get a rate quote without submitting a loan application.
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Interest accrues during residency, increasing the total repayment amount
The average student loan debt for a medical student is over $200,000, according to the Association of American Medical Colleges (AAMC). With such a substantial debt looming, it's no surprise that medical school loans and their repayment are a major concern for residents.
While residents may not have to start repaying their loans immediately, interest still accrues during residency. This means that the total repayment amount increases over time. For example, if you have a Direct Unsubsidized Loan, interest accrues while you are in school and will continue to be added during your grace period. If you don't pay the interest as it accumulates, it will be capitalized and added to your original loan amount, resulting in a larger principal balance.
To manage this growing debt, residents have a few options. One option is to refinance student loans, which can help lower the interest rate and save money in the long run. Residents with excellent credit and a low debt-to-income ratio are ideal candidates for refinancing. Additionally, some refinancing lenders offer reduced payments specifically for medical residents, recognizing their lower income during this period.
Another strategy is to enroll in an income-driven repayment plan (IDR). These plans use your discretionary income to determine your payment amount, so a lower resident income may result in lower payments. However, it's important to carefully consider all options and consult trusted resources or a financial planner to avoid costly mistakes in managing your student loans during residency.
Furthermore, residents can explore loan repayment assistance programs. Some hospitals and employers offer loan repayment as a recruitment incentive, which can provide substantial relief for residents with significant debt. Additionally, organizations like The National Health Service Corps and the Public Service Loan Forgiveness Program (PSLF) offer loan repayment assistance in exchange for service in physician-shortage areas.
While interest accrual during residency increases the total repayment amount, residents can take proactive steps to manage their debt effectively and minimize its long-term impact.
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PSLF residency programs are typically nonprofits or state hospitals
The average medical school graduate owes more than $200,000 in total student loan debt, with the median education debt for indebted medical school graduates in 2019 being $200,000. 73% of graduates reported having education debt, with the cost of attendance for medical education increasing by an average of $1,030 per year. The burden of student loan debt can be stressful and affect the decisions that new residents make about their professional trajectory and the start of their medical careers.
Public Service Loan Forgiveness (PSLF) programs are available to doctors who work for the government or qualifying nonprofit organizations. PSLF can ease the burden of high student loan debt by forgiving the remaining student loan balance after ten years (or 120 qualifying payments) of repayment in an Income-Driven Repayment (IDR) plan. It's important to note that student loans from private lenders do not qualify for PSLF, and only qualifying payments made on the new Direct Consolidation Loan are counted toward the 120 payments.
To determine if a hospital qualifies for PSLF, you can search for it on Guidestar's directory of nonprofit organizations or use the PSLF Help Tool to search for eligible employers. It's also a good idea to ask your recruiter about a hospital's for-profit or non-profit status during your job interview. By choosing a PSLF residency program, new residents can take advantage of the financial benefits offered by the program and focus on their training and professional development.
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Some hospitals offer student loan repayment as a recruitment incentive
The cost of medical education in the United States has been rising, with the average student loan debt of medical school graduates in 2020 being around $207,000. This has resulted in a growing number of student loan forgiveness programs being unveiled to help alleviate the financial burden on medical graduates.
Some hospitals and other employers have started offering student loan repayment as a recruitment incentive for physicians with significant residual medical education debt. This is particularly common in rural areas that are hard to recruit to. Hospitals may offer a recruitment agreement with an income guarantee, signing bonuses, and student loan repayment. For example, the Alaska Native Medical Center has a variety of reimbursement and tuition programs available to employees, while Honor Health Hospital System offers up to $52,540 per year for education.
However, loan-repayment programs often come with strings attached. For instance, the physician may be required to stay and treat patients within a certain area or for a specified number of years. These requirements are put in place so that the hospital can benefit from downstream revenue from referrals from this physician in the future.
There are also other options for managing and paying off medical school debt during residency. For instance, medical residents qualify for mandatory forbearance while in residency, which means that interest still accrues, but no payments have to be made. Additionally, residents can consider refinancing their student loans to have a fixed monthly payment and a six-month grace period after residency.
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Frequently asked questions
Yes, med students do have to start paying loans during residency. However, residents can qualify for mandatory forbearance, meaning that interest will still accrue but no payments have to be made.
The average student loan debt for a medical student is just over $200,000.
Refinancing student loans can help lower the interest rate on your debt and reduce monthly payments. Some lenders offer reduced payments for medical residents.
PSLF stands for Public Service Loan Forgiveness Program. This is a program that forgives student loans for those working in public service positions. Residency can count towards PSLF, but only if certain conditions are met.
