According to the Association of American Medical Colleges, the average amount of medical school debt was $176,000 in 2014. Combined with increasing costs and declines in physician reimbursements, this means that paying for medical school is harder and more costly than ever. With just six percent interest, doctors are charged nearly $60,000 over a decade in interest payments alone. Recently, Student Loan Hero, a startup focused on helping people tackle this problem, shared with us their student loan repayment guide. The information seemed resonant and applicable, so we asked one of their writers, Jeffry Trull, to put together a crib sheet. Here’s what they shared. Below are four key tips to help doctors pay off your debt as quickly and efficiently as possible. Negotiate a Signing Bonus Many new employers now offer signing bonuses as an incentive for joining. This may be of particular interest to those looking to join a practice or hospital instead of setting up their own practice.Modern Medicine Network notes that given the current shortage of primary care doctors, these signing bonuses can range anywhere from $24,000 to $150,000 – and these figures are nearly always up for negotiation. On that note, when negotiating your next contract, make sure to read the fine print. A signing bonus should be just that – a bonus. It should not be a slow-paying incentive added to each paycheck. Ultimately, you may be able to pay back a large chunk of your student loan in a single payment, substantially lessening the amount in interest you will owe over the duration of the loan. Refinance Your Loans (with Caution) If you have a good credit score and the interest rates on your student loans are high, refinancing can help you drop your interest rates, saving you thousands of dollars in the long run. Refinancing student loans allows you to work with a new lender, who pays off your existing debt. You then pay the new lender, often at a substantially lower interest rate. The major drawback to refinancing applies to federal loans. Because federal loans are controlled or arbitrated by the government, they generally allow flexible repayment options such as deferments and income-based repayments. When you work with a refinancing company, however, you lose access to federal student loan repayment programs. Some offer unemployment protection, but others don’t. Therefore, ensure refinancing is right for you before going with this strategy. Work in a Health-Shortage Area or the Military There are numerous state and federal programs that offer federal loan forgiveness programs. Most involve working in areas where healthcare is inaccessible or populations are underserved. While a move like this might require a huge lifestyle shift, it could also pay off big in the long the run. For example, the Massachusetts State Loan Repayment Program allows primary care physicians to work in specific areas of the state for two years, providing up to $25,000 in loan repayments each year. Another program, the Georgia Physician Loan Repayment Program, sends doctors to underserved areas, repaying up to $25,000 each year for four years. The military offers many perks in exchange for service. For example, the Navy Financial Assistance Program (FAP) gives residents an annual grant of $45,000 to repay student loans, plus a salary of approximately $50,000 and a monthly stipend of $2,179 to help with living expenses. That can add up to $121,000 annually – easily enough to pay off your loans and begin investing even without a 401K. Of course, joining the military means you agree to service. This usually entails between three and five years of active duty, plus several more years in the reserves. However, you have the added benefit of treating those serving our country – an excellent way to give back. Change Your Payment Plan Consider enrolling in Income-Based Repayment or Pay As You Earn, which will allow you to pay back your loan as a function of your income, rather than simply accruing interest without paying at all. This strategy also postpones interest capitalization and gives you a partial interest subsidyfor the first three years of making payments, allowing you to forego your loans after 20-25 years, depending on the program you choose. In addition, if you work in the government or in the not-for-profit sector, you may be able to have loans forgiven after ten years of service with Public Service Loan Forgiveness. There is no limit to the amount of student loans that can be forgiven – a huge benefit to current doctors. When you started medical school, you likely envisioned a life of service to others – but also one that afforded you financial peace of mind. By shedding your medical school debt as quickly as possible, you can enjoy your income, save for the future, and move forward in your career. Source
