3 Strategies to Manage Your Student Loan Debt After Medical School

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The average indebted medical school student owes nearly $190,000 upon graduating.
The average indebted medical school student owes nearly $190,000 upon graduating.

We live in an era of astronomical student debt. Unfortunately, this widespread issue disproportionately affects the medical field. Whereas 70% of all college graduates carry debt,1 that figure rises to 76% among medical school graduates.2

Just how costly is obtaining an education for an aspiring oncologist? According to the Association of American Medical Colleges, students who attend public medical institutions rack up slightly more than $180,000 in debt on average. That number swells to more than $203,000 for graduates of private medical schools.2

And then there's interest. Suppose you graduate medical school with $180,000 owed. If you were to pay that amount back in 10 years at a 5% interest rate, you'd wind up paying nearly $50,000 in interest on top of principal.3

Suffice it to say, knowledge doesn't come cheap. How can you better manage your student loan debt while living within a budget? Here are 3 strategies you can try:

1. Refinance Your Loans

Medical school debt usually involves large balances owed. However, you can significantly reduce what you owe by lowering your interest rate. Let's use “Mark” and “Stacy” as examples…

Mark and Stacy both owe $180,000 and plan to pay off their debt over 10 years. Mark will pay 5% interest; Stacy will pay 3%.

Over those 10 years, Mark will pay at least $20,000 more in interest than Stacy.3 Another way to look at it: if Mark had refinanced his loan down to 3%, he would have saved more than $20,000.

There are numerous student loan refinancers that offer rates well below 3%.4 To refinance your loan, you'll need to meet a number of requirements: banks and lenders generally look at annual income, savings, and credit score, among other factors. If you meet the lender's requirements, they might let you refinance.

2. Negotiate a Signing Bonus

Signing bonuses are quite common in the medical field. Among all physicians, an estimated 90% receive one.5

Suppose Mark is offered a $25,000 signing bonus and he has about $18,000 left after taxes. By putting those $18,000 into a one-time lump sum payment, Mark would save more than $10,000.6

3. Enroll in an Income-Driven Repayment Plan

Paying in the vicinity of $1,900 a month – as Mark would without refinancing his loan or applying a signing bonus – can be difficult. While oncologists are generally well compensated, it can be a tall task to pay back such hefty loans and stay above water.

If you have federal student loans, an income-driven repayment (IDR) plan – such as the US Department of Education's Revised Pay as You Earn (REPAYE) program – could be the answer. IDR's are based on your income and are designed to make paying back student loans more manageable.7 Payment amounts under these plans generally don't exceed 10% of your discretionary income.

Final Note

Student loan debt can be overwhelming, but it's essential to make paying it off a top priority. Keep your discretionary spending and living expenses as low as reasonably possible and explore all avenues available in making payments more manageable.

References

  1. Powell F. 10 student loan facts college grads need to know. US News & World Report. May 9, 2016. Accessed August 8, 2018.
  2. 2017 education debt manager for graduating medical school students. Association of American Medical Colleges. January 2017. Accessed August 8, 2018.
  3. Student loan calculator. Bankrate. Accessed August 8, 2018.
  4. Refinance your student loans. NerdWallet. Accessed August 8, 2018.
  5. Shute D. Recruiter: 9 in 10 physicians got signing bonuses in 2016. HealthLeaders Media. March 2, 2017. Accessed August 8, 2018.
  6. Lump sum extra payment calculator. Student Loan Hero. Accessed August 8, 2018.
  7. Income-driven plans. Federal Student Aid. Accessed August 8, 2018.

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