10 Ways to Reduce Medical School Debt Before, During, and After School

October 29, 2021

10 Ways to Reduce Medical School Debt Before, During, and After School

October 29, 2021

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Last updated: 02/28/2024

Higher education is not cheap (and the price continues to climb every year), and medical school is no exception. In fact, the price to become a doctor is comparable to the price of family homes in some U.S. areas. According to Forbes, 55% of students from public four-year institutions have student loans, compared to 57% of students from private nonprofit four-year institutions.

As of 2024, 73% of medical school graduates leave school with an average of $202,453 in education debt, according to EducationData.org. Those who borrow for medical school face large loans, but there are financial strategies to make paying off those loans less daunting.

According to NerdWallet, “the best strategy to pay off medical school loans will depend on your career, salary, and financial priorities.” Despite this situational repayment, some key tips to manage your debt include learning finance basics, developing a plan to how you’ll pay for medical school and your living expenses, learning how to budget and manage your money, and learning about financing and repayment options for your education and student loans. The sooner you increase your financial savviness, the greater impact you will have on managing your debt.

Below are ten ways in which medical school students can reduce the stress (and cost) of their medical school debt:

  1. If you’re just entering or still in school, look for financial aid options.

You may be eligible for grants, fellowships, or scholarships that can reduce your need for loans, thus lowering the final debt amount you’ll have to pay.

Bonus tip: If you can pay anything toward your loans during medical school, even if it’s simply making the interest payments, this can help significantly reduce your total balance.

  1. Improve your financial literacy

The first step to reducing debt is educating yourself on basic finance concepts and your financial commitments. Making smart decisions about your finances before, during, and after medical school means you’ll likely be better at managing your debt. Your school may offer financial literacy classes, or you may need to take the initiative to educate yourself. Learning from other physicians’ financial mistakes can prevent you from making those same (and costly) mistakes and will set you up for success when it’s time to pay off those torturous loans. Improving your financial literacy will also help you manage your general finances as you start and advance in your career, so learn about it now to create those good financial habits for the future!

17 Money Mistakes Doctors (and Other High Earners) Make

  1. Create a repayment plan—and stick to it

According to AAMC, “the students who are most inquisitive about debt are the most successful at paying it off.” This includes asking questions like, “What is my student loan debt, what are my options for repaying it, how quickly could I potentially pay it off?” Those who push it off to worry about later may struggle more. Draft up an outline of how you will hold yourself accountable for paying for the price of your studies. Keep your plan realistic but having a plan to repayment may help you stay on track.

  1. Determine if loan forgiveness is right for you

Several medical school loan forgiveness programs are available to doctors willing to work in the public sector or in underserved areas for a certain time or for those who join the military. Depending on whether your loan type (federal vs. private student loans), you may be able to combine loan forgiveness for physicians with another repayment strategy to increase the amount forgiven. Your career goals can and should determine if loan forgiveness is a good option; if they align with one of these program’s requirements, it may be a right for you. Be wary: If you are unwilling to work in these service areas, loan forgiveness is likely not the right avenue for you. Read up on what each program is requires before making the leap!

  1. Make payments during residency

While you’re in school, your medical school loans will accrue interest; they typically require you to start repayment six months after you graduate. You can likely postpone student loan payments during your residency or fellowship, but it will cost you (oh, interest). Interest continues to accrue during periods of deferment and forbearance, thus increasing your total balance. An example from Nerdwallet: “Pausing payments for three years on $201,490 would add about $37,779 to your balance,” assuming a 6.25% average interest rate and you didn’t make any interest payments during that time nor have subsidized loans. “To save on interest, make at least partial payments during residency and use deferment and forbearance only as a last resort. If you can’t afford full payments during residency, sign up for an income-driven repayment plan” (see below).

  1. Refinance to save on interest

For many doctors, a major pain point on medical school debt is interest rates. Student loan refinancing—either during or after your residency—is likely the best option for doctors aggressively paying off medical school debt. A lower rate could save thousands of dollars in interest over the loan’s life. Refinancing during your residency may allow you to pay as little as $100 a month (and on a resident’s salary nonetheless).

Refinanced loans aren’t eligible for federal programs like Public Service Loan Forgiveness or income-driven repayment. Before refinancing, make sure you’re comfortable giving up access to these programs.

  1. Enter an income-driven repayment program

Traditional repayment plans determine payments based on the total amount of money they owe. According to AAMC, “with the federal government’s income-driven repayment plans, monthly payments are a percentage of discretionary income, which is more manageable for borrowers.” For instance, with a Pay As You Earn (PAYE) repayment plan, “a monthly payment is 10% of discretionary income based on family size and adjusted gross income. The repayment term is up to 20 years. After that, the remaining balance is forgiven” but still taxable.

  1. Inquire about or negotiate a physician signing bonus into your employment contract

According to a 2022 report by AMN Healthcare 92% of physicians received a sign-on bonus as part of their compensation package. You can put some (or all) of this towards your student loans—it could make a big impact, shaving months or even years off of your repayment period.

  1. As your career advances, make extra student loan payments or pay more than the minimum amount due.

Even making one extra payment a year can reduce the length of time you need to pay off loans by several years and total interest paid (depending on your loan size and payment terms). 

  1. Live like a resident—no matter where you are in your career—until you pay off your loans

After years of education and training, you’ll finally reap the benefits of a higher income after residency. But living like a resident for a bit longer will provide more money to devote to saving for life goals and retirement, investing, and paying off student loans.

As you begin to grow into your income and pay down your debt, focus on other financial priorities, including:

  • Establishing an emergency fund of at least $2000, but ideally enough to cover 3–6 months of living expenses.
  • Starting to save for retirement—at least enough to get your employer’s 401(k) match (don’t miss out on that free money!)
  • Paying down high-interest debt (e.g., credit cards)

Whether you’re a recent medical school graduate or seasoned physician, you’re likely anxious to tackle your student debt; it’s another thing looming over every other responsibility you have and your overall financial future. It’s normal to feel overwhelmed and unsure of the best path forward. Plus, the time and mental energy required to tackle your student loans can be compounded by the long days practicing medicine, making it especially challenging.

However, making repaying your medical school debt a top financial priority can take years off your loans and the total amount repaid, allowing you to focus on practicing what you spent years studying and training for. You’ll save thousands of dollars in interest, which you can invest in other ways. Although it’s time-consuming—and maybe not as exciting—to live below your means and manage your student loan payments, your wallet (and your mental well-being) will thank you when you pay off your debt.

If you want to learn about more personalized and advanced strategies, schedule a 15-minute call with our team.

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AAFP. (n.d.) Managing Medical School Debt. https://www.aafp.org/students-residents/medical-students/begin-your-medical-education/debt-management.html

Budd, Ken. (2020, October 4). 7 ways to reduce medical school debt. AAMC. https://www.aamc.org/news-insights/7-ways-reduce-medical-school-debt

Credible. (2021, October 7). Average Student Loan Debt for Medical School for 2021. https://www.credible.com/blog/statistics/average-medical-school-debt/

Fay, M. (2021, April 26). How to Pay Off Medical School Loans Faster. Debt.org. https://www.debt.org/students/loan-consolidation/medical-school-loans/pay-off-fast/

Kirkham, Elyssa. (2021, January 5). 7 Smart Strategies for Paying Off Medical School Debt. Student Loan Hero. https://studentloanhero.com/featured/pay-off-medical-school-debt/

Nykiel, Teddy, & Lane, Ryan. (2020, July 2). Paying Off Medical School Debt: 5 Strategies for Doctors. Nerdwallet. https://www.nerdwallet.com/article/loans/student-loans/paying-off-medical-school-debt

Saley, Chad. (2019, August 6). Weatherby Healthcare Medical School Debt Report 2019. Weatherby Healthcare. https://weatherbyhealthcare.com/blog/medical-school-debt-report-2019