Should You Pay Off Your Debt First?

 Is there a better option than to pay your debt first?

Ever since we started teaching at medical centers and universities we have received all kinds of questions. Which pertain to the dilemma of carrying so much medical student loan debt. With the average doctor coming out of medical school with a hundred or more than $200k in education loans, it’s no surprise which financial area is the greatest burden.

The big question that comes up from those doctors who are just getting started is, “what should my strategy be?” Doctors would ask if they should pay it all off first, make the minimum required payment amount. Or somewhere in-between.

The answer you should expect to hear from a professional who specializes in working with doctors is it depends on your financial plan, goals and objectives. If the goal is to grow your wealth efficiently so that you have the most available at retirement or to be used for most other purposes, then the likely answer is NO. You should NOT pay off all of your loans first.


Initial objections to this are, “but my interest rates are really high. And I’m not likely to get a high enough return somewhere else.” Or “I’ll have more to save and invest once I’m done paying off my loans so I can make it up then.”

These are really good points. However, the problem is that the math doesn’t necessarily line up with the logic. The best thing you can do is have your advisor model it out for you. If you do xyz, how will that look in the future? With reasonable assumptions for inflation, taxes, health care, life events, growth rates etc, your advisor should be able to make a projection of what life would look like either way.

This is the kind of management information that makes these kinds of financial questions easier to navigate rather than just going off of your gut or what someone else is suggesting. You’d be much better off by having the facts to back it up to see what the real difference is.

With the hundreds of doctors we’ve consulted with who fall into the camp of “trying to do the right thing with their debt,” they’ve been able to see that there’s more than one way to approach this. Most of the time it makes more sense to follow the 50/30/20 rule we’ve shared in other podcasts.

There is a bright side to the debt that has been accumulated. You know what it is. Having a career with a significant, predictable income is rarely able to be duplicated in many other professions. This earning power is very valuable and instead of being all negative Nancy about it, take it for what it is, an investment for you and your family.


Now it’s just a matter of finding the best way to manage it.

As you may have found across the financial industry, the best place to get financial advice is from a fee only financial planner and investment advisor. We agree. Which is why we are one. Talk with your advisor, run the calculations or contact us. We’d be happy to help you run the numbers.

There’s no reason why you have to make the decision without having clarify. After all that’s what we are here for.

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