Medical student debt creates a heavy burden for physicians. On average, physicians graduate with around $200 to 250k in total student loan debt. In contrast, the average student graduates with just over $35k in student loan debt—roughly six times less.
Fortunately, physicians are rewarded with above-average earnings to compensate for the additional student debt and years out of the workforce. That said, when it comes to student loan debt, many physicians feel the emotional weight of paying their loans for years or even decades to come.
For many physicians, high medical student debt leads to feelings of stress, anxiety, and fear. In addition, it can leave new physicians feeling trapped and lead to higher levels of financial stress.
The ideal way to manage the burden of medical student debt is to craft a plan and start attacking your debt. When preparing a plan, it is essential to understand the various nuances of repayment and know your options to avoid costly mistakes.
Avoiding Costly Mistakes
Dr. Jim Dahle, a well-respected advisor and the author of the White Coat Investor blog, writes that there are some classic mistakes he sees physicians make that can cost them money in the long run.
He writes: “For many doctors, an ounce of prevention is worth a pound of cure. Consider these classic mistakes and the amount of money that each mistake could cost a typical white coat investor:
Refinancing when you should have pursued forgiveness (hundreds of thousands)
Not enrolling in an income-driven repayment plan (tens of thousands)
Choosing the wrong income-driven repayment plan (tens of thousands)
Mistakenly going into forbearance or deferment when pursuing forgiveness (tens of thousands)
Not refinancing (tens of thousands)
Choosing the wrong term or type of loan when refinancing (thousands).”
Jim typically recommends that physicians meet with a financial professional during or shortly after medical school to avoid mistakes that could cost them big over the long run. He explains that while certain physicians can probably get by on their own—as long as their situation is relatively straightforward—he strongly recommends that you consult with a professional if:
You’re married to another income earner or borrower.
The total balance of your medical student debt is greater than your expected annual income.
Crafting Your Unique Plan
The team at Idaho Medical Association Financial Services has helped hundreds of physicians and families navigate medical student loan debt. If you decide you want help reviewing your situation and creating a plan to crush your medical student debt, here are some things we will cover:
1. Avoid Deferring Medical School Debt During Residency
Unfortunately, many medical school graduates choose to defer their loan payments during residency, temporarily pausing repayment.
While this can seem like a good idea—giving recent graduates some breathing room—it can potentially lead to accrued interest of thousands and thousands of dollars that will add to the loan balance.
This can have a lasting financial impact on a physician’s loan repayment plan by starting with a higher total debt balance.
2. Income-Driven Repayment Plans (IDR)
Depending on your unique situation, an income-driven repayment plan (IDR) may be the best option available. That said, it is critical to know the pros and cons before diving in.
There are currently four different income-driven repayment plans offered by the federal government, each with slightly different rules and considerations.
An essential aspect of every IDR is that your total monthly loan payment will be capped at a certain percentage of your income. If someone needs breathing room in their budget, this is an ideal opportunity.
Another aspect to consider is that each IDR plan comes with a set repayment length, after which the student loan debt is forgiven. Typically, these timelines range from 20 to 25 years.
It’s important to note that with IDR plan forgiveness, taxable income includes the balance of student loans forgiven in that year. This has the potential to create a significant tax burden and should be planned for accordingly.
3. Public Service Loan Forgiveness (PSLF)
Lastly, public service loan forgiveness may be an excellent option for physicians working in a public or nonprofit hospital, academia, the public health sector, or the military. Of course, there are specific nuances to understand with PSLF programs as well. Still, the general idea is this: The remaining balance of your student loans is forgiven after ten years working for a qualifying employer and paying your student loans.
PSLF comes with some distinct tradeoffs. For example, one of the significant advantages of PSLF over an income-driven repayment plan is that the forgiven balance does not count as taxable income. Alternatively, physicians who seek a job in a public or nonprofit hospital may end up earning lower than average wages and possibly working in an undesirable location, both of which can be potential drawbacks.
When pursuing PSLF, it is critical to ensure you understand the eligibility criteria and avoid making costly mistakes such as refinancing or consolidating your loans, which can potentially reset the ten-year forgiveness clock.
This is an area where it can be invaluable to work with a financial professional and avoid costly mistakes. A financial professional will also help you balance the desire to live a rich and whole life now while helping you remove the burden of medical student debt.
The Trusted Services of Idaho Medical Association Financial Services Are Here for You
If you’ve been searching for a trusted Financial Advisor that can help guide you through the world of medical student debt, our team is here with professional medical wealth management services.
At Idaho Medical Association Financial Services, our advisors focus on helping clients build enduring wealth and security while maximizing the everyday enjoyment they receive from financial security. Our firm achieves this by pairing our customers with a truthful and committed CFP® professional and a team of financial experts. With our extensive experience in the financial world, our staff is acutely aware of the challenges faced when navigating the complexities of medical student debt. That is why we help our clients craft a unique repayment plan and walk with them each step of the way.
For our team at Idaho Medical Association Financial Services, it’s about so much more than simply money. It’s about serving the community and helping our clients achieve freedom and flexibility in their lives while building a foundation for the future. To learn more about asset management in Idaho or schedule a no-cost financial consultation, contact online or call 1-(208)-504-1736.