Ibrahim Gardner
Paying off student loans is a daunting task for many new doctors. With medical school debt averaging $192,000, and some graduates owing over $250,000, it's no surprise that 25% of doctors expect to take at least 6-10 years to pay off their loans, while 34% expect to take over 10 years. There are various strategies that doctors can employ to tackle their student debt, including working locum tenens or per diem shifts, refinancing, consolidating loans, and taking advantage of loan forgiveness programs such as Public Service Loan Forgiveness (PSLF) or income-driven repayment plans.
| Characteristics | Values |
|---|---|
| Average time to pay off medical school loans | 10 to 30 years |
| Average debt of medical school graduates | $192,000 to $250,000 |
| Average signing bonus for physicians | $24,802 |
| Average student loan debt of doctors | $100,000 |
| Types of loans | Variable-rate, Direct Subsidized, Direct Unsubsidized, Federal Direct, Federal Perkins |
| Repayment options | Public Service Loan Forgiveness (PSLF), IDR plans, refinancing, employer-sponsored repayment, state loan repayment assistance, student loan forgiveness programs |
| Factors influencing repayment | Debt-to-income ratio, marital status, spouse's student loan status, age of loans, salary, family size |
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What You'll Learn
Loan forgiveness programs
Public Service Loan Forgiveness (PSLF) Program
The PSLF program is one of the most well-known and widely available loan forgiveness options. It is open to physicians working in the government or non-profit sector. To qualify, individuals must make 120 qualifying monthly payments while employed full-time by a government or non-profit organization. After meeting these requirements, the remaining balance on Direct Loans may be forgiven, and this benefit is tax-free.
National Health Service Corps (NHSC) Scholarships and Loan Repayment Program
The NHSC offers scholarships to students pursuing a career in primary care. After completing residency, recipients are required to serve for a minimum of two years at a practice site located in a designated health professional shortage area (HPSA). For each year of scholarship support, individuals must commit to one year of service.
Indian Health Service (IHS) Loan Repayment Program
The IHS Loan Repayment Program provides up to $40,000 in student loan repayment assistance for doctors who commit to practicing for two years in health facilities serving American Indian, Alaska Native, and Native American communities.
Health Resources & Services Administration (HRSA) Faculty Loan Repayment Program (FLRP)
The HRSA FLRP offers loan repayment assistance of up to $40,000 over two years for faculty members serving at eligible health professions schools. Fully trained clinicians are also eligible for loan repayment if they serve in designated communities.
Active Duty Health Professions Loan Repayment Program
Active-duty doctors can receive up to $40,000 per year toward student loans for up to three consecutive years, totaling $120,000 in loan forgiveness.
Healthcare Professions Loan Repayment Program (HPLR)
The HPLR program provides up to $40,000 per year, up to a total of $250,000, for certain medical specialties. It is also available to those serving in the Army Reserve, and the Army may allow claiming multiple repayment programs simultaneously.
State-Specific Loan Forgiveness Programs
Many states offer student loan forgiveness programs for doctors and healthcare professionals. These programs often involve working in underserved or designated health professional shortage areas for a certain period. Requirements and benefits can vary from state to state, so it is essential to research the specific programs offered by your state.
In addition to these programs, doctors can also explore options such as refinancing student loans, income-driven repayment plans, and loan consolidation to manage their student debt more effectively.
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Income-driven repayment plans
There are several types of IDRs, including PAYE, IBR, and ICR plans. PAYE plans determine payments based on income and family size, but payments cannot exceed the standard repayment plan. IBR plans, starting in the summer of 2025, will be the only option for making income-driven payments. ICR plans use 20% of discretionary income, but there is a deadline of July 1, 2024, after which borrowers cannot enrol in this plan.
It's important to carefully consider your unique financial situation and career trajectory when deciding on a loan repayment strategy. For example, if you plan to pursue a lucrative career in a private hospital, an IDR may not be the best option. Additionally, IDRs may not be ideal for those with high incomes who don't work in non-profit or public service roles, as refinancing may offer lower interest rates and more favourable terms.
To qualify for refinancing to a lower interest rate, a good credit score and history of timely, full bill payments are typically required. It's worth noting that refinancing may extend the loan term, and in some cases, it may not be the right decision. An experienced student loan consultant can help guide you in selecting the most suitable loan repayment program for your individual needs and circumstances.
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Federal vs private refinancing
Doctors often accumulate multiple loans from both private and federal loan programs to fund their medical schooling. When refinancing, it's important to understand the differences between federal and private refinancing.
Federal Refinancing
Federal refinancing allows you to keep the benefits of federal loans, such as income-driven repayment plans and loan forgiveness programs like Public Service Loan Forgiveness (PSLF). Federal loans also offer deferment and forbearance options, which can be helpful if you need to pause your payments temporarily. Additionally, federal loans discharge the loan in the event of death or permanent disability, even if there is a cosigner.
Private Refinancing
Private refinancing involves taking out a new loan with a private lender, ideally at a lower interest rate. Private refinancing can be a good option if you qualify for a lower interest rate, as it can help you save money on interest charges. However, by refinancing federal loans with a private lender, you will lose access to federal loan benefits. Private loans may not offer the same repayment flexibility, and your monthly payments will be based on the loan size, interest rate, and term, rather than your income.
Factors to Consider
When deciding between federal and private refinancing, consider your career goals and income stability. If you plan to work for a non-profit, the government, or are unsure about your income, federal refinancing may be a better option. Federal loans offer more flexibility with repayment plans and forgiveness programs. On the other hand, if you are confident in your ability to make full monthly payments and don't need access to federal benefits, private refinancing could provide a lower interest rate and help you save money.
Additionally, your credit score will impact your refinancing options. A higher credit score will generally qualify you for lower interest rates. It's a good idea to shop around and compare rates from multiple lenders before making a decision.
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Employer-sponsored hiring incentives
One example of an employer-sponsored hiring incentive is the Health Professions Scholarship Program (HPSP). This is a military-funded scholarship program that covers medical school expenses in exchange for service in the Armed Forces. For MDs/DOs, the program requires a minimum of 18 months of service at a VA facility for every year of sponsorship.
Another example is the National Health Service Corps (NHSC), which offers three different repayment programs for physicians: the NHSC Loan Repayment Program, the NHSC SUD Workforce Loan Repayment Program, and the NHSC Rural Community Loan Repayment Program. These programs provide repayment benefits of up to $75,000 to $100,000 over the service term, which typically lasts two to three years.
Additionally, certain state governments offer funding to help medical professionals repay their medical school loans. These programs often require individuals to serve in underserved communities or health professional shortage areas.
It is important to note that employer-sponsored hiring incentives may vary depending on the employer and the specific program. It is always a good idea for doctors to carefully review the terms and conditions of any incentive program before making a decision.
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Locum tenens work
- Locum tenens providers typically earn a higher hourly wage than physicians in permanent positions, allowing them to allocate more income towards loan repayment.
- The flexibility of locum tenens work enables doctors to take on extra shifts or work in different locations, including rural and underserved areas, to maximize their earnings.
- Travel expenses, housing, and even malpractice premiums are often covered by the locum tenens agency, reducing overall living costs and freeing up more money for loan payments.
- Short-term locum assignments can be ideal for physicians who are newly out of residency or completing fellowship programs, as they can supplement their full-time income with locum earnings.
- While locum tenens work may not qualify for Public Service Loan Forgiveness (PSLF), there are still opportunities for loan forgiveness. Strategies such as lowering taxable income and working with a financial advisor can help maximize forgiveness potential.
- Refinancing student loans as a locum tenens doctor can be more challenging due to income verification and employment stability concerns, but it is still achievable, especially for dentists and physicians.
- It is important to carefully consider the potential impact of locum tenens work on long-term employment plans and loan repayment strategies. Consulting with a specialist in student loan repayment can help locum tenens physicians make informed decisions.
Overall, locum tenens work provides doctors with the opportunity to boost their income and accelerate student loan repayment while also gaining experience in diverse practice settings.
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Frequently asked questions
Public Service Loan Forgiveness (PSLF) is the quickest way for doctors to pay off their student loans. 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.
Other ways to pay off student loans include working locum tenens or per diem shifts, refinancing, and employer-sponsored hiring incentives.
Depending on various factors, paying off medical school loans might take 10 to 30 years. 25% of doctors expect to take 6 to 10 years, while 34% expect to take at least 10 years.
IDR plans, or income-driven repayment plans, calculate your monthly student loan payment amount based on your discretionary income and family size.
Federal repayment refers to loan forgiveness programs offered by the government, such as PSLF or IDR plans. Private refinancing involves working with a lender to pay off your loans.
