A medical education is one of the most expensive career paths there is, with arguably one of the most rewarding payoffs — becoming a medical professional.
Despite the rising costs, many hopeful physicians continue to seek out top medical programs, and should feel confident in doing so. However, the substantial stress of medical school debt means that these future care-givers need more help in managing the heavy financial burden that follows these rigorous years of training.
If you’re an aspiring medical professional, you’ve likely seen the numbers. According to the Association of American Medical Colleges (AAMC), 70% of the graduating class of 2023 reported leaving medical school with student loan debt. Across the country, the median level of medical school debt for each member of the class of 2023 was $200,000.
With graduation in May, a move in June, and residencies beginning in June/July, there will be less free time available for dealing with finances than you might think.
What should you do to prepare for residency?
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Get organized.
Gather the records of all your debt, e.g., student loans, car payments, mortgage, personal loans, credit cards, etc., and keep them in one safe place. Be sure your records include balances, terms, payments, interest rates, and any other key information.
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Know what you owe.
Familiarize yourself with the full picture of your debt so you can make informed financial decisions. This should encompass how much you owe, monthly payment due dates, and your current payoff dates, even if they are 10, 15, or 20 years away.
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Map your personal and professional goals.
House, kids, private practice, lifestyle—include it all. Even if plans and circumstances change, thinking about where you want to go now will help you be better prepared for the future.
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Determine when and how you will be paid.
Weekly, bi-weekly, or monthly – and if direct deposit is available, take advantage of it.
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Create—and stick to—a monthly budget.
- Live like a resident on a resident’s salary – the average yearly salary for a resident is $67,400 according to a Medscape survey.
- Remember that location matters to total cost of living.
- Don’t forget about retirement – it’s never too early to start saving for retirement. If your workplace provides retirement account plans—and almost all do—take advantage of them and any matching-funds options offered.
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Protect yourself with insurance.
Disability, life (if you’re married and/or have children), and umbrella liability insurance coverage preserves your investment in yourself, your assets, and your capacity to earn future income.
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Establish an emergency savings fund.
Since insurance can’t cover every eventuality, having a financial cushion could help get you through an unexpected challenge. An online savings account, such as the Laurel Road High Yield Savings account, could be one way to build your rainy day fund.
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Maximize your tax deductions.
For example, you may be eligible to deduct up to $2,500 of student loan interest paid in a given year. There are some restrictions, though, so check the income requirements each tax year and consult a tax professional for more information.
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Set a loan repayment strategy.
- Do the math to ensure your repayment plan makes financial sense.
- If you are in a period of deferment or forbearance, or still in school, consider making some sort of payment on the interest that is accruing on the costliest loans, particularly private in-school loans, federal unsubsidized loans, or GRAD Plus loans.
- Pay off higher interest rate loans first to potentially save on interest.
- Eliminate the smallest balance which may free up more money to tackle the next-largest balance.
- Make every effort to make on-time payments. A late payment may result in late fees and/or a negative impact to your credit score.
Medical student loan forgiveness programs
Public Service Loan Forgiveness (PSLF)
Borrowers who work for the government or eligible nonprofit organizations could have their loans forgiven after making 120 qualifying monthly payments under a qualifying repayment plan. Qualifying public service employment includes work in 501(c)(3) nonprofits, government agencies, and/or some other not-for-profit organizations, such as qualifying medical schools and teaching hospitals, employment with AmeriCorps or Peace Corps, military service, public health, and public safety. Learn more about the PSLF Program to see whether you might qualify.
Key considerations:
- The amount forgiven is not taxed. Consult your tax advisor for more details.
- Money saved needs to be balanced against income lost if taking a job that pays significantly less than private or for-profit sectors.
- US Department of Education policy for PSLF may change, so borrowers should monitor developments.
Student Loan Forgiveness Counseling
Need help navigating your Income-Driven Repayment or federal repayment options? Schedule a free consultation from a student loan expert who can help you evaluate your repayment, forgiveness and refinancing options.
Medical student loan repayment assistance programs by state
In certain states, the government offers funding to help physicians and doctors repay their medical school loans. For a comprehensive list of medical student loan repayment assistance programs by state, please visit the Association of American Medical Colleges (AAMC) website that allows you to search by location and profession.
Compare medical school repayment options
Direct Consolidation Loan
If you have federal student loans, a Direct Consolidation Loan can help simplify loan repayment. Consolidation combines two or more loans into a single loan with one fixed interest rate, which is based on the weighted average of the original loans’ rates. Repayment terms can vary.
Learn more about Direct Consolidation Loans.
Key considerations:
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Pros |
Cons |
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Simplified repayment – consolidation facilitates the consolidation of multiple loans into a singular more manageable monthly payment |
No lower interest rate – Unlike refinancing, consolidation does not result in a reduction of your interest rate. Its primary advantage lies in simplifying your payment structure. |
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Access to federal student loan benefits – federal student loan consolidation could potentially make you eligible for Income-Driven Repayment (IDR) plans which offer repayment flexibility based on your income and eventual forgiveness. |
Loss of benefits – be mindful of potential loss of any borrower benefits from the original loan such as interest rate discounts or principal rebates. |
Income-Driven Repayment plans
Income-Driven Repayment (IDR) plans allow you to reduce monthly payment amounts for federal loans according to your income. The payment amount is typically calculated as a percentage of your discretionary income, and is updated annually to account for changes in your income. Learn more about Income-Driven Repayment.
IDR Comparison Chart
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Applications for SAVE, other IDR plans, and loan consolidation are available on http://studentaid.gov. You can also submit a PDF application to your loan servicer by uploading it to your servicer’s website, or mailing it to them. Expect a delay in processing times. The Education Department recommends checking its website for updates – there is no processing time estimate available. |
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Plan |
Monthly Payments |
Repayment Period |
Status |
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SAVE (formerly REPAYE) |
- 5% of discretionary income for Undergraduate Loans
- 10% of discretionary income for Graduate Loans
- Weighted average for borrowers who have both
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- 10 years for low-balance borrowers (less than $12,000)
- 20 years for only undergraduate loans
- 25 years for any Graduate Loans
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Replaced REPAYE |
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Income-Based Repayment (IBR) |
- 10-15% of your discretionary income (and your spouse’s if filing jointly)
- Never more than federal 10-year Standard Repayment Plan amount
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20-25 years, depending on when you become a new borrower |
Remains available but borrowers cannot select plan after 60 payments on REPAYE that occur on/after July 1, 2024 |
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Income-Contingent Repayment (ICR) |
The lesser of the following: - 20% of your discretionary income or
- What you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income
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25 years |
Not accepting enrollments for current students; only available to future borrowers with consolidated Parent PLUS loans |
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Pay as You Earn (PAYE) |
- 10% of your discretionary income (and your spouse’s if filing jointly)
- Never more than federal 10-year Standard Repayment Plan amount
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20 years |
Accepting new enrollment applications |
IDR Plans: Challenges to SAVE
Multiple legal challenges made by states to the Saving on A Valuable Education (SAVE) plan could impact implementation of key aspects of the plan. For the most up-to-date developments, visit studentaid.gov.
Key considerations:
- The monthly payment amount for IDR plans is recalculated each year and can increase as your income rises.
- These plans offer some relief should your financial situation change for the worse during repayment.
- Savings can be achieved if your student loans are forgiven; however, any amount forgiven is considered taxable income.
Medical student loan refinancing
Refinancing provides the opportunity to pay off your original student loans by obtaining a new, consolidated loan with different repayment terms and a potentially lower interest rate. Each lender has its own criteria for determining eligibility and rates, such as your credit history, total monthly debt payments, and income. Those who are in good financial standing, demonstrate a strong career trajectory, have good credit scores, and have shown they are responsible with debts and monthly budgeting are more likely to be approved with a potentially lower interest rate.
Student loan refinancing could provide an opportunity for those who are looking to:
- Save with a lower interest rate1 or shorter term
- Save money over the life of their loans
- Pay off their loans more quickly
- Lower their monthly payments
- Change from a fixed rate to a variable rate, or vice versa
- Reduce the number of loans in repayment
- Gain terms and rates based on their current financial situation and creditworthiness
Student Loan Refinancing: Questions to Ask Your Lender
Interest Rates, Fees & Terms
Loan Application Process
Refinancing Options & Offers
- How is the interest rate calculated?
- Is it a fixed or variable rate loan?
- What are the terms of the loan?
- What is the monthly payment?
- Is there an online application?
- Can rate options be checked instantly?
- Is a co-signer required?
- If a co-signer is needed, can the co-signer eventually be removed from the loan and what is the process?
- When does repayment start?
- Are deferment and forbearance options offered after graduation and during residency?
- Are incentives offered for on-time or electronic payments?
- Are there any pre-payment penalties?
To learn more about what Laurel Road offers, check out our FAQs
Student Loan Refinancing: Doing the Math
For residents it is important to consider how you will pay back your student loans, and create a plan during training. To make your monthly payments more manageable, you might consider an IDR plan—or refinancing with a company like Laurel Road, which offers special repayment options specifically tailored to residents.
The benefit of an IDR plan while in residency is that monthly payments are based on your income, and not the total outstanding loan balance. However after residency, that payment will likely jumps significantly based on your salary as an attending.
Alternatively, Student Loan Refinancing offers an opportunity for residents to pay lower monthly payments during training without having to enter into a longer term, potentially saving money on interest. During training, residents only pay $100 a month,2 and accrued interest does not compound while in training. Afterwards, they begin paying full monthly payments for a similar term as their original loans, which are manageable given the higher earning potential and may allow you to pay off your student loans in a shorter time period than an IDR plan.
So, what are some of the other factors that could impact this decision toward refinancing?
- If you earn more income during training (or have a high-earning spouse)
- If you are able to make extra payments while in residency
- If you have a short residency period
- If you might need to take advantage of federal benefits in the future
Evaluate your medical student loan repayment options
Laurel Road understands the unique stresses of medical student, residents and professionals, especially when it comes to managing medical school debt. That’s why we offer student loan forgiveness counseling and refinancing for residents with special terms tailored to the unique needs of medical residents and professionals. To explore you options, schedule a free consultation with a student loan specialist.
Sources:
- Medscape 2023 Residents Salary Debt Report
- AMA Medical Student Financial FAQ: https://www.ama-assn.org/medical-students/medical-school-life/medical-student-financial-faq-insight-loan-forgiveness
