How Doctors Should Address Student Loans in 2024

I sometimes dread writing about this topic because it is nuanced and situation-specific.  However, fortunately, most physicians in training (or exiting training) will fall into a few categories.  No matter how you eliminate your debt, you should create a sound plan and stick to it.  This chapter will discuss the broader categories available to you, the pros and cons of each, and a few disclaimers to understand as you navigate debt repayment.  

Debt can be a very personal and emotional topic, so please understand that though I often make light of the situation, it is imperative that you understand how critical timely debt elimination is to your future financial success.  Here is how doctors should address student loans in 2024. Let’s get started!

Doctor Money: A Personal Finance Guide for Physicians

Previous Chapter:

Chapter 6: Protecting Your Ass(ets)

Chapter 7: Addressing Student Loans

Though I have written about this on many previous occasions on our website, I am no stranger to colossal medical education debt.  After my wife and I wed, our combined student loan burden approached $680,000!  At that time, my portion of that debt carried an average interest rate of 7%.  The interest on our debts alone could buy a new Tesla Model 3 yearly.  When we fully realized the extent of our debt burden, we were still trainees, making little money and feeling our loans would be insurmountable. 

However, merely five years later, I am here to tell you we have successfully paid off my spouse’s debt, and mine is being fully reimbursed by my employer.  No matter how overwhelming your debt may seem, your chosen profession will allow you to destroy it with patience and frugality.  To learn more about our loan repayment journey, check out How We Crushed Half Our Student Loan Debt.  There, you can find more details on our repayment progress and strategy and data and figures to back it up.  Though that publication was released in 2023, it paints a realistic picture of the cadence of loan repayment for physicians.

Most Doctors Carry Debt

The statistical truth is that most physicians carry debt.  As you may have read in this book’s introduction, most physicians exiting training carry some form of educational debt.  However, for those who may have missed that introduction, here are a few statistics taken from the most recent Association of American Medical Colleges (AAMC) data from 2023:

• 70% of graduates had education debt
  • 73% of students attending public education
  • 67% of students attending private education
• The mean education debt of those indebted was $206,924
  • $197,843 for public school graduates
  • $222,381 for private school graduates
• 28% of all graduates had undergraduate (college) debts, with a median of $27,000

What is the takeaway here?  Medical education is expensive.  Some of those attending medical school have already accumulated some debt from their undergraduate training.  Further, most graduating physicians accumulate six-figure debts. As such, recognize that many of your physician colleagues are simultaneously tackling their debt.  You are not alone. 

Paying Down Debt is Simple, Not Easy

Here is the hard truth.  Getting a loan repayment plan in place and subsequently executing that plan is simple.  Anyone intelligent enough to enter a healthcare profession is equipped with the knowledge and skills to tackle the elementary math necessary to eliminate debt.  The problem is that it is far from easy. 

In fact, many physicians struggle to adequately save for retirement or tolerate unexpected financial expenses because they live ‘on the margin.’  What I mean is that they inflate their expenses and lifestyle to fit their salary and thus become beholden to their careers to maintain their quality of life. 

That is what makes debt elimination so difficult.  One must understand that to successfully and timely eliminate their debts, one must enroll in the correct Public Service Loan Forgiveness (PSLF) program and make dedicated regular payments for 120 months (10 years) or live below their means and funnel money towards their debts. 

That is The Doctor’s Dilemma.  Our profession delays gratification for so long that upon completion of training, physicians feel they deserve many of life’s luxuries sooner than they can realistically afford them.  This often leads to an inflated lifestyle not conducive to debt elimination.  This is why a solid financial plan and debt elimination strategy are so important; they can help one avoid the mistakes many other physicians make, often costing them hundreds of thousands, if not millions, of dollars in retirement savings. 

Don’t make the same mistake.  Utilize one of the debt elimination methods below and stick to it!  Let’s start by discussing the first and most important debt elimination strategy… PSLF. 

Public Service Loan Forgiveness (PSLF)

I would be surprised if there is an individual reading this who does not have some understanding of the PSLF program.  Essentially, the government has created a program for individuals who have taken out government loans to pay for education, where enrollment in a specific payment plan allows your loans to be completely forgiven after 120 qualifying monthly payments (a.k.a. 10 years).  This has proven to be quite an appealing offer for physicians as many can enroll during residency and remain during fellowship. 

This allows trainees with extended residencies or fellowships to satisfy most of their monthly payments at a lower income bracket, keeping the required monthly payment minimal and limiting the years you are subjected to loan repayment amounts at an attending salary.  This often means that subspecialty-trained physicians may only be subjected to larger income-driven repayment (IDR) plans for 2-4 years before their debt (often hundreds of thousands of dollars) is forgiven.  That’s an incredible deal!

Qualifying Payments

However, a few key aspects of PSLF must be understood.  It is imperative that physicians make sure they are enrolled in a qualifying loan repayment plan and that each monthly payment is, in fact, deemed a ‘certified’ payment.  This often means you are regularly interacting with StudentAid.gov to make sure everything is working appropriately.

SAVE Plan

Another relatively new aspect of the PSLF program is the SAVE program. The SAVE plan is one of the qualifying IDR repayment plans for the PSLF program. The Biden Administration instituted this novel repayment plan in an attempt to offer more options for loan forgiveness to those carrying student debt. 

The nuances of this program are that it is, in fact, an IDR plan, but it is based on your income and family size.  Further, of all the other qualifying IDR plans, it is likely to lead to the lowest monthly payments as it is based on a smaller portion of adjusted gross income (AGI). 

Lastly, there is also an interest incentive for the SAVE plan.  Suppose one makes their qualifying monthly payment, which is not large enough to cover interest accrued. In that case, the federal government pays the remaining interest, essentially preventing your loans from growing as a result of unpaid interest.  For physicians with large debt burdens, this equates to tens of thousands of dollars forgiven annually, unrelated to the prospect of complete debt forgiveness after 20-25 years of qualifying payments.  It should be noted that they are still addending the SAVE plan with rumor of the time to IDR loan forgiveness to reduce to 10 years from the current 20-25 year timeline.

PSLF should always be the first debt elimination strategy that all trainees and physicians consider if they utilized federal loans to pay for their medical education. 

Student Loan Refinancing

The second means of debt elimination is loan refinancing.  As I addressed above, this option should only be considered after you have reviewed PSLF options.  Once you refinance your student loans with a private lender, you are no longer eligible for the PSLF program.  As such, genuinely make sure you do not wish to enroll in PSLF before you decide to formally refinance your student loans. 

However, loan refinancing can be a great solution for those who are more debt-averse and wish to have their debts eliminated in a timely fashion.  Our household chose to refinance our student loans, and though we will pay every penny of our debt, we will also be debt free within five years of training completion.  This frees up massive amounts of discretionary income for us to redistribute towards other financial goals. 

Student loan refinancing is relatively simple.  Many reputable platforms (SoFi, Laurel Road, Earnest, LendKey, etc.) offer better interest rates than are often provided by the federal government.  The incentive here is if you are paying down debt aggressively (and not pursuing its forgiveness), then you can refinance to a lower interest rate, thus lessening the interest working against you as you aggressively pay down debt.  Further, once you refinance, you can refinance as many times as you like, chasing better interest rates.  My wife and I have refinanced twice to reach an interest rate of 3% on our debts. 

Many factors can influence one’s decision to refinance their student loans and not pursue PSLF. If you wish to learn more about our reasoning, make sure to check out Choosing Refinancing over PSLF. Here, I discuss my personal reasons for refinancing. I would largely recommend this approach for individuals who are very debt-averse, may not qualify for PSLF, or feel a greater obligation to pay off all of their debts for moral or ethical reasons. 

Student Loan Reimbursement

The third and final category I will include as a debt elimination strategy is formal loan reimbursement.  This is essentially having your employer reimburse you for your loan repayment expenses.  There are many avenues for this process. 

Some come in the form of formal contract negotiation, whereby your employer will pay all or some of your loan annually.  Another form of loan reimbursement may come as a renegotiated sign-on bonus.  Further, other employers like the Veterans Affairs Healthcare Administration offer programs like the Education Debt Reduction Program (EDRP), where an amount of loan reimbursement is paid over five years.  There are many programs and contractual negotiations that exist to further lessen your debt burden. 

The greater benefit is that the negotiation of loan reimbursement is not contingent on one of the above loan repayment strategies.  You can refinance your student loans and still work to receive loan reimbursement.  Though many early career physicians feel timid about contract negotiation, realize that these reimbursement programs exist for a reason.  Many employers set this money aside as an incentive and expect these programs to be discussed, do not be so shy as to leave money on the table. 

Advocate for yourself or hire a contract negotiator to do so on your behalf; it is well worth the money. 

The Future Is Uncertain

There are a few important comments to make as we close out this chapter.  It is important to realize the polarizing political climate in the United States.  As such, the promise of future loan forgiveness remains uncertain.  There is no guarantee that this program would not be re-evaluated should the political pendulum swing in the other direction.  With our national debt rising to unprecedented levels, I can foresee a future where programs like PSLF become less appealing to lawmakers.  Please do not take this as a comment for or against the loan forgiveness program; it is just an admission that there is no guarantee of the program’s long-term survival.  Thus, it is always important to have a backup plan.

It is also important to understand that the decision to refinance your student loans to a private lender (at the time this post was published) is a criterion for ineligibility to the PSLF program. So, each individual who is making a debt elimination plan should think long and hard before refinancing. 

Stick To Your Plan

With that said, the most important aspect of all of this is grit.  Be it PSLF or loan refinancing, all repayment strategies require a healthy dose of patience and perseverance.  Though PSLF may lighten the burden on your wallet, it still requires enrollment for ten years.  Refinancing may take a much more taxing toll on your budget, but it may allow you to rid yourself of debt in two to five years.  There are clear tradeoffs for both.  No matter what you do, create a solid plan, incorporate it into your financial plan, and advocate for loan reimbursement in your contract.  Addressing student loans is integral to sound finances and safeguarding a secure retirement.

Though we addressed debt elimination in broad strokes, there are many individual nuances. It should always be recommended that you seek professional help as you determine your loan repayment plan. I have included some additional resources below to supplement what was covered here. Cheers!

Additional Resources

Public Student Loan Forgiveness – Studentaid.gov

The Moral Hazard of Federal Student Loan Policy – The White Coat Investor

How To Refinance Medical Student Loans – The Motivated M.D.

Student Loan Advice – A White Coat Investor Company

The Student Loan Planner – Another reputable student loan advice company

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