Our Loan Repayment Progress in 2023

In April of 2022 I published a post that revealed exactly how my medical education debt repayment is going.  I thought it would be a great idea to update our audience after briefly discussing our medical education debt and our loan repayment progress in 2023 during an interview with the Physician on Fire! As I have alluded to in the past, my wife and I use a shared spreadsheet for our budgeting.  We also have a student loans tab on our shared budget that allows us to visualize our progress.  I want to make sure I am providing a regular update on our loan repayment.  With this post, I hope to share the importance of our progress, and what has made this possible.  I will make sure to outline why we refinanced our loans, our debt elimination strategy, and our future plans.  Here is our loan repayment progress in 2023!

Why we refinanced our student loans

One of the earliest posts I wrote for this website was called Choosing Refinancing over PSLF.  This was an article that received attention after it was picked up by The White Coat Investor.  This brought early notoriety to the website.  However, as with many things, everyone seemed to have their opinion on our family’s decision to refinance.  If you want to know more about why we ended up feeling refinancing our student loans was best, check out the link above.  However, here is a brief synopsis: 

Making ourselves ineligible for PSLF

When we moved to our current location, my wife had just finished her fellowship and I had just graduated from residency.  I matched into my dream program at our dream location, which returned us to our home state.  My wife was hoping to pursue a career at the same local academic hospital where I was beginning fellowship.  However, at that time, there were no positions available for an emergency medicine physician.  The jobs available to her in the area were for-profit institutions that were ineligible for Public Service Loan Forgiveness (PSLF).  Further, my wife and I were overwhelmed by our combined student loan interest rates of 6-7%; the overwhelming majority being unsubsidized loans.  If my wife was going to take a job that deemed her ineligible for PSLF, and I had years before I would make an attending income, then we needed to intervene on our crushing interest…fast.

We decided to refinance both of our loans for a lower interest rate.  As fate would have it, shortly after we refinanced our loans and became ineligible for PSLF, a position opened up at my academic institution.  This was my wife’s dream job.  Fortunately, she was able to accept the position on short notice, but by now we had already refinanced.  For better or for worse, PSLF was no longer an option.  We were at peace with this, and directed our debt elimination plan towards lowering our interest rates as often as possible. No use crying over spilt milk.

Our debt elimination plan

As many of you know, I am wildly debt averse.  I absolutely detest debt.  It is a cause of anxiety for me and is a huge factor in how we prioritize our loan payments.  As I initially highlighted in our post titled How We Paid Off $209,000 of Debt in 2 Years, our family works to put at least $100,000 towards our debt annually. 

Amongst all the other necessities of sound financial decisions, debt elimination is arguably the most important for our family (at this time).  There are a few factors to understand before we get to our updated graph and demonstrate our progress.  First, I think it best to share how we budget for our monthly payments.  For us, we take our expected $100,000 debt payments annually and divide it by 12 (months).  This comes out to roughly $8,333.33.  So, monthly, we expect to put at least that much towards loans so that we can expect to reach our six-figure goal by December.  Now, whenever we receive any extra income, like moonlighting, or bonuses, we put all of this towards our debts.  This way we either expedite reaching our annual debt elimination goal, or put more than our goal away by year’s end. 

For my wife, she has a minimum monthly payment that must be paid given that we have refinanced and she has graduated from her grace period as she is no longer a trainee.  For me, I am roughly six months out of fellowship and thus my grace period is ending (more on that later).  However, we work hard to create a budget that allows us to reach our debt elimination goal each year.  When you start with a combined debt of $670,000, you have to make payments habitual…it is a marathon, not a sprint. 

What occurred in our original article

In part one of the series, we discussed the importance of keeping a loan repayment tab in your budget.  It can offer transparency as you work towards your financial goals.  It also acts as a motivating graphical representation of your progress.  When you have as much debt as we did ($670,000), it can seem insurmountable.  The grind of placing large monthly sums of money towards a colossal debt can be anxiety provoking.  I felt like I was feeding an insatiable monster!  It can seem like there is no end in sight…  However, being able to visualize your progress can serve as an easy reminder that you are making headway.  Your efforts are chipping away at your debt and limiting how interest works against you.  Here is where we were in early 2022 (when Part 1 was published):

Our original (2022) loan repayment progress

With the publication of that article in Spring of 2022, we wanted to share with our viewership a few things.  First, we wished to share that we too struggle with debt.  A majority of physicians exiting medical school carry some form of debt.  It is taboo in our society to talk about money and debt.  I find this incredibly frustrating, especially when money, and our management of it, has such an effect on our mental and emotional well-being. 

The second purpose for the publication of that article was to demonstrate that we too only make steady regular payments towards our debt.  Though we are a dual physician household, we do not currently live on 20% of our income and put the rest towards our debt.  Though I often read in wonder as I hear stories of single income physician families paying off $300,000 of debt in one year…this extreme is not the route we have chosen for our finances or quality of life. 

Debt elimination is a marathon, not a sprint

I preach (and practice) intelligent investing, sound finances, and ample wiggle room.  However, I do wish to have some semblance of comfort in my life.  As such, our family has settled into the habit of saving well over 25% of our income, automatically maxing out our retirement contributions, our HSA, and making regular payments towards our debt.  All of this is achievable through our dual physician incomes while still prioritizing a great quality of life. 

Our final grace period payment

I specifically chose February of 2023 as the appropriate time to publish his post because it offers a milestone on the journey towards our debt elimination.  As of this month, I will be paying my final grace period payment.  For those of you who are not familiar with this concept, a grace period is a protected window of time offered by lenders while you are a trainee.  For example, if you are a resident or fellow (trainee), the lenders understand the income potential you have as a physician.  As such, they invest in you by allowing refinancing your loans while in training.  Given your current level of training and lower income, they protect you from large monthly payments until you have completed your residency/fellowship. 

What this (generally) means is that while in training, the lenders keep your payments to a minimum, often $100 a month.  This allows you to make a minimum monthly payment to remain in good standing with the program.  However, remember that interest will continue to work against you during these months.  Though you make the minimum payment, if you have six-figures worth of debt, interest will continue to grow your total loan amount (principle + interest). 

In my experience (working with various lenders and refinancing my loans multiple times), lenders often extend the grace period to include the first six months after you graduate from residency or fellowship.  This protects your income as you adjust to your attending salary.  However, there will come a month where your grace period ends and your real payments begin. 

Re-amortization

This brings us to the importance of re-amortizing your payments.  Re-amortization, or recalculating your monthly payments, is important.  For me, as soon as I pay my last grace period payment, I will contact my lender and ask for a re-amortization.  Given that I have paid roughly $4,000.00 to my loans monthly ($3,900 over the minimum grace period payment of $100), I have made a significant dent in my student loans since initially refinancing.  This is important for a few reasons.

The importance of making payments during training

For starters, if you make regular large payments towards your refinanced loans during residency and/or fellowship, this limits how much interest can work against you during training.  Secondly, this approach affords you room to lessen your minimum payment burden when your grace period ends.  Take me for example…  When I most recently refinanced, I refinanced approximately $342,000 of medical student loans.  Disgusting I know… but that was during residency.  Almost 3 years have passed since then as I have been in fellowship.  I made large regular payments towards my loans during that time and have reduced my personal loan burden down to $268,000.  Therefore, as my grace period ends and my real payments begin, my principal has been reduced by $74,000 (not factoring in interest paid also).

As I graduate from my grace period payments and begin to tackle larger monthly payments, I can ask my lender to re-calculate my minimum monthly payment using the remaining principal and interest ($268,000) instead of what my initial refinanced amount was ($342,000).  This is important because my current interest rate is 3.615%.  If I had only paid the minimum grace period payment of $100.00, then after three years, I would be graduating from my grace period with a personal loan total of $376,714.  That would be the ramifications of not prioritizing debt and allowing interest to accumulate during three years of fellowship training.  An almost $100,000 difference from where I am currently!  Given that I have a 5-year fixed loan term, I have 59 remaining monthly payments following the end of the grace period.

Interest matters…

If I had only made the minimum payments, They would be dividing $376,714.00 by the remaining 59 payments and my monthly minimum payment would be nearly $7,515 (factoring interest that would accumulate over the 5 year duration of the loan).  However, since I have brought my loan balance down to $268,000, once they redistribute my payments over the remainder of the loan (again factoring in interest), my monthly payment should be closer to $4800.  Whew… that is a monthly difference of $2715.  That is a difference of nearly $32,000 annually!  Moral of the story, if you refinance, make sure to pay down debt during training.

Our loan repayment progress in 2023

Ok… now that I have dragged you through all that math, let’s turn to our loan repayment graph.  Here is where our total debt is as of the publication of this post (February 2023):

As you can see, we continue to make progress.  At the start of February 2023 we are approaching only $390,000 remaining. It is hard to believe that we started with almost $700,000 worth of combined educational debt.  I am incredibly proud of our medical education and profession, but that is a steep price to pay!

At this point in time, we are fast approaching the halfway point regarding our debt elimination strategy.  As our debt declines, interest becomes less and less of a factor.  This makes each dollar have more of an impact on our principle.  This allows momentum to build and will manifest by further accelerating the rate we pay off our debt. 

Negotiating loan repayment

It is important to note that I have negotiated loan reimbursement through my current employer.  As such, I will receive $150,000 of reimbursement towards my loan repayments over 5 years.  That is $30,000 annually.  Because of this, I am very pleased with the progress we have made on our loans.  I suspect that this year we will bring my wife’s loans into the 5-figure range, and my loans will be on autopilot. 

Future debt elimination plans

So…where do we go from here?  What is next after our loan repayment progress in 2023. This year is a pivotal one for us as a family.  For starters, this will be the first year that my wife and I both make attending incomes for a full 12 months.  Secondly, this will be the first year that our loans have graduated from the ‘grace period.’  We will both be making our larger monthly payments.  Lastly, we have lofty financial goals that we wish to achieve.  These include paying another $100,000 towards our loans, growing our children’s education funds, investing, reaching a positive net worth, and setting ourselves up to completely pay off my wife’s loans in 2024.    

I feel strongly that with intelligent financial choices, my wife and I have a real shot of paying off our debt and reaching millionaire status before 2030.  I actually think this is completely feasible.  However, it is important to not only focus on the short and medium-term goals.  Yes, each month we sit down and ‘pay ourselves first.’  We put money towards our debt, our retirements, our investments, etc.  However, the grind is for a greater purpose.  For us, that is the prospect of a life where we are in control.  Each and every financial decision should work to further this cause.  Our student loan graphs help remind us that the monthly monetary sacrifice is working. 

Take home points

If I have said it once, I have said it a thousand times…  Prioritizing sound financial choices is simple, but it is not easy.  If it was, everyone would do it!  If that were the case then lending services would be non-existent.  Loan services succeed because so many individuals (including educated high-income earners) become complacent in their debt repayment journey.  When this happens, their debt grows and their lenders reap the benefits. 

If refinancing is the right choice for you, use the power of lower interest rates to slow the growth of your debt, then use your high income to destroy what remains.  This is what we have instituted to reach our loan repayment progress in 2023. The sooner you pay off your debt, the sooner you can reach financial freedom.  If you want to know more about loan refinancing, make sure to check out How to Refinance Student Loans!  As always…

Stay motivated!

The Motivated M.D.

Make sure to check out our original post on our loan repayment progress if you haven’t. You can find it by clicking here! I hope you have found the article Our Loan Repayment Progress in 2023 entertaining!  If you did, please share it with others using the ‘share’ buttons located on the left-hand sidebar (on desktop) or below this article.  It would also be very helpful if you would follow us on social media!  Instagram and Twitter accounts can be found using the right-handed sidebar (on desktop) or below (on mobile devices).  Thank you!

How is your loan repayment progress going?  Let us know in the comments below regarding our article Our Loan Repayment Progress in 2023!  We love to hear from you.

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