The Association of American Medical Colleges puts the Class of 2025’s average medical student loans at $223,130, premed loans included. That’s up 5% over last year. With Direct Unsubsidized rates at 7.94% for grad borrowers in 2025-2026 and Grad PLUS at 8.94%, a balance like that quietly snowballs all through residency unless somebody is chipping away at the interest.
So new attendings tend to grab at any plausible lever they can find for paying down their medical student loans. Geography is one of the underused ones. Where you set up practice will move your repayment math more than almost any single decision you make outside of refinancing or qualifying for forgiveness, and sometimes it moves it more than both put together.
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Pay off your medical student loans by working in a underserved area
HRSA labels two kinds of places as undersupplied with clinicians: Health Professional Shortage Areas (HPSAs) and Medically Underserved Areas (MUAs). The acronyms get used somewhat interchangeably in practice, even though they measure slightly different things. What matters for your medical student loans is that taking a job at an approved site in either category makes you eligible for a stack of federal and state programs that pay down your medical student loans while you serve out a commitment of a few years.
The shortage isn’t theoretical. As of June 30, 2024, HRSA counted 7,501 primary care HPSAs covering roughly 75 million people, which is about a fifth of the country. Two-thirds of those shortage zones are rural. HRSA’s own projections show a national shortfall of 87,150 full-time-equivalent primary care doctors by 2037, and that figure makes up the bulk of the projected total physician gap. The HPSA Find Tool lets you search any address, county, or state to see whether it qualifies.
Some of the better-known federal programs:
- The NHSC Scholarship. Tuition, fees, and a monthly stipend for med students who agree to serve in an HPSA after training, with a two-year minimum full-time commitment.
- The NHSC Loan Repayment Program. Up to $75,000 in loan repayment if you serve two years full-time as a primary care physician at a high-need HPSA (shortage score of 14 or above). Sites with lower scores top out at $50,000. Half-time options run at half the award.
- The NHSC SUD Workforce Loan Repayment Program. Built around the addiction crisis, this one offers up to $75,000 for clinicians treating substance use disorders, with a three-year commitment.
- The Indian Health Service LRP. Up to $50,000 for two years at an IHS facility, renewable if you stay.
Federal isn’t the only flavor. Most states run their own loan repayment program (often co-funded with HRSA), and a lot of state medical associations layer on scholarships and repayment dollars to keep doctors in-state. The Rural Health Information Hub keeps a directory if you want to comb through what’s out there.
One thing worth correcting up front: HPSAs aren’t all rural. A lot of them sit inside major metros. Federally qualified health centers in Detroit or the South Bronx. Public hospitals in cities like Cleveland and Houston. Free clinics tucked into the lower-income neighborhoods of basically any major metro. All of these tend to qualify. You don’t have to want small-town life to get the loan benefits. The patient panel will look different (more language access challenges, more housing instability, more uncompensated care), but the program eligibility is the same.
What you’re signing in any of these is a service contract, normally two to four years long. Leave early and you generally repay the funds with penalties stacked on top, occasionally painful ones. The trade is usually worth it if you already know you want to do primary care or work with underserved populations. For physicians who haven’t fully settled on a long-term direction, the contract terms deserve real attention before you sign. Default clauses, breach penalties, what actually counts as fulfilling the commitment. Those details vary by program and they matter.
Move to a city with a lower cost-of-living
This one has nothing to do with shortage designations. It’s just real estate.
Rents in the most expensive U.S. cities have pulled away from everywhere else since the pandemic, and they haven’t come back. Zumper’s most recent data has the median asking rent for a Manhattan one-bedroom around $4,460. San Francisco one-bedrooms broke records again recently, north of $3,800. Boston’s around $2,600. D.C.’s just over $2,000.
Now stack that against the cities a lot of physicians actually end up in. A one-bedroom in Indianapolis or Cleveland tends to come in between $1,000 and $1,400. Pittsburgh’s similar. Kansas City and Oklahoma City too, and most Texas metros that aren’t Austin. So the swing from Manhattan to a place like that, on rent alone, is somewhere in the neighborhood of $3,000 a month. That works out to $36K a year before you account for any of the other things that get cheaper at the same time.
Where it gets really interesting is what those secondary markets pay. Specialty compensation by metro is a thing, and the rankings are not what you’d expect. Doximity’s annual report and Medscape’s compensation surveys both show the same pattern: secondary metros pay more, sometimes much more, than gateway cities for the same specialty. A dermatologist in Milwaukee or Cincinnati or San Antonio frequently outearns a peer in Manhattan, and pays a quarter as much in rent. The reason is supply and demand, basically. Smaller markets have to outbid coastal cities to get talent in the door.
Worth doing the math both ways when you compare offers. Our compensation review services exist for this exact reason, and Physicians Thrive’s physician compensation report is a fine starting point if you want benchmarks before you walk into a recruiter conversation.
Relocate to a state with no income tax (or other tax perks)
With all the weighty decisions facing medical residents and fellows, many young physicians have never paused to consider the impact of state taxes on their financial futures. Where you choose to live and practice can have a tremendous effect on your net earnings, since certain states offer serious tax perks.
In an effort to attract talented professionals, several states charge no state income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming. Washington also charges no tax on wages, though it does impose a capital gains tax on high earners.
By comparison, several states levy top marginal rates that take a sizable bite out of physician income. Oregon’s top rate is 9.9%, New York’s is 10.9% (with up to another 3.876% in New York City), and Washington, D.C. tops out at 10.75%. Even states with reputations for being tax-friendly to professionals, like Idaho at 5.3%, can still cost a high earner thousands of dollars a year.
For physicians, the dollars add up quickly. Consider a $300,000 attending salary: in Oregon, that physician could owe roughly $25,000 a year in state income tax. The same physician living and working in Texas or Florida would owe nothing — money that could go straight toward medical student loans principal, retirement contributions, or a down payment.
What State Income Tax Actually Costs a Physician
The savings from relocating to a no-income-tax state aren’t theoretical. Here’s what an attending physician would owe in state income tax at two common income levels:
| State | $300K Income | $500K Income |
|---|---|---|
| Oregon | ~$27,700 | ~$47,500 |
| California | ~$23,900 | ~$44,500 |
| Washington, D.C. | ~$22,900 | ~$41,400 |
| New York* | ~$17,600 | ~$31,300 |
| Idaho | ~$15,100 | ~$25,700 |
| Texas / Florida | $0 | $0 |
Estimates based on 2025 single-filer brackets with standard deduction. Actual liability varies by filing status, deductions, and credits. *New York City residents owe an additional 3.078–3.876% in local income tax on top of state.
The takeaway: A physician earning $500,000 in Oregon pays nearly $50,000 a year in state income tax. The same physician in Texas or Florida pays $0 — money that could go straight toward medical student loans principal, retirement, or a down payment.
A note of caution: in some no-income-tax states, the savings can be partially offset by higher property or sales taxes. Texas, for instance, has some of the highest property tax rates in the country. Still, for physicians earning well into the six figures, relocating to a low- or no-income-tax state often produces meaningful annual savings. A financial advisor can help you map out the long-term benefits and trade-offs of different state tax codes before you sign your first attending contract.
Also see: The Full Tax Planning Guide for Physicians
Conclusion
Moving isn’t right for everyone. Family, a spouse’s career, fellowship locations, weather, religious community, the city your residency program is in and the network you’ve built there. All of that matters and should weigh into the decision. But for physicians who actually have flexibility about where they spend the early years of practice, the financial delta between the right move and the default move can run into six figures over a relatively short window. That’s enough to change the timeline on a house, a real retirement contribution, or become free of medical student loans.
If it’d help to walk through the actual numbers on a specific job offer or a head-to-head comparison between two cities, our advisors at Physicians Thrive can run it for you (taxes, cost of living, any forgiveness or repayment programs you might qualify for, the whole picture).
FAQs
Can I combine loan forgiveness and a no-income-tax state?
Yes, and a couple of states stack especially well. Texas and Florida both have zero state income tax and a lot of designated HPSAs, particularly in border counties, the Rio Grande Valley, and rural regions of both states. A physician at a qualifying site in either state gets the federal NHSC repayment dollars plus the absence of state tax. That combination is a real edge over taking the same kind of position in, say, Oregon.
Does PSLF still work for physicians?
Yes, but the rules keep moving. The 120-payment structure is still the basic deal: ten years of qualifying monthly payments while working full-time for a nonprofit hospital or government employer. What’s been changing is which income-driven repayment plans count toward those 120, and federal courts have been weighing in on that on a near-monthly basis lately. If PSLF is your strategy, this is one of those spots where paying for a financial planner who specializes in medical student loans is going to pay back many times over.
What about state-level loan forgiveness?
Almost every state runs at least one. Eligibility rules are all over the map. A given program might tie repayment to HPSA service, or to a particular specialty (primary care, psychiatry, and OB/GYN are the usual ones), or to employment at state-funded facilities like correctional health systems. The Rural Health Information Hub directory linked above is a starting point. Your state medical association’s site is usually the best source for anything more recent or state-specific.
How much can I actually save by moving?
Depends entirely on which levers are available to you. A physician trading a high-cost, high-tax metro for a low-cost no-tax state can realistically save $50,000 a year or more once you total up rent, state income tax, and everyday expenses. Stacking an HPSA position onto that adds another $25,000 to $75,000 in straight medical student loans payoff across the service term.
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