Medical School Loan Repayment

After college, medical school, and residency, you’re finally ready to get to work as a practicing physician. You should be excited that you’ve reached the point in life where you can actually begin your career. But many physicians don’t feel that excitement because they’re faced with the heavy burden of paying back student loans.

Unfortunately, that debt isn’t going to miraculously disappear on its own.

Fortunately, there are a variety of different approaches you can take to making those loans a thing of the past.

From refinancing to seeking loan forgiveness to working in a healthcare shortage area, there are a variety of steps that you can take to eradicate your debt.

Here is our physician guide on medical school loan repayment.


Almost All Physicians Have Medical School Loan Debt

According to data from the Association of American Medical Colleges (AAMC), medical students who completed their education in 2018 graduated with an average of $200,000 in education debt. Those who attended private medical schools had a loan balance of about $210k. Those from public medical schools graduated with an average medical school debt of about $190,000.

These numbers are staggering. Most young physicians are significantly in the red before they ever even start to collect a paycheck.

Depending on the institution, a year of medical school tuition ranges from about $36,000 to $99,000 per year. The total cost for a four-year medical education is between $150,000 and $396,000. So it’s no surprise that aspiring physicians pay for most of their education through loans.

It’s common for young physicians to face seemingly insurmountable piles of debt and at-risk credit scores. Fortunately, there are a variety of different ways to start paying it back.

Related: The Full Breakdown to Medical School Student Loans

Ten Strategies for Repaying Medical School Loans

It can take years to pay down medical school loans. In 2019, the average annual physician salary was $313,000. And while it may seem like a $300k+ salary would make it easy to pay off $200k in loans, that’s not necessarily the case.

Between the cost of your mortgage or rent, car payments, utilities, insurances, taxes, and daily expenses, it can take years for borrowers to pay down $200,000 worth of debt on a $313,000 salary.

But it can be done.

Here are ten strategies for paying down your medical school loans.

1. Make Payments While You’re Still in Residency

As a resident, you’re not exactly making big bucks (at least not yet). It can be tempting to want to defer student loans, but those loans will still accrue interest. It is always best to start making medical loan repayments while you’re still in residency.

2. Refinance Your Loans

Student loan refinancing is one of the most popular loan repayment tools that physicians use. By refinancing, you can replace high-interest loans with lower interest loans, which can help you pay down your debt faster and save you tens of thousands of dollars in interest over the years.

The current interest rates for graduate school and professional loans range depending on the specific loan you have. With a refinancing plan, you can take a brand new private loan and pay off your educational debts in one fell swoop. You can pay back the loan to that private lender, and if you have several loans, also consider consolidation.

Depending on your credit history and salary, you may be able to bring your interest rate down to 5% or less. Compared to 7% interest on your original loan, this can save you thousands of dollars over time.

Both federal financial aid loans and private student loans can be refinanced, but you’ll need to qualify for refinancing in order to take advantage of those lower interest rates. If you can’t qualify on your own, you may need to add a cosigner.

Private lenders may also offer you lower monthly payments. This can be an enticing reason to choose the refinancing option. There are, however, some cons to refinancing federal loans.

If you refinance federal student loans, you give up certain rights and built-in protections that can be more valuable than refinancing. For example, you won’t be able to opt into income-driven repayment plans, enjoy deferment or forbearance, or take advantage of loan forgiveness programs.

Related: Understanding Your Resident Doctor Employment Agreement

3. Take Advantage of Loan Forgiveness

happy physician greeting patient

Local, state, and federal governments, as well as some private organizations, offer student loan forgiveness for qualifying physicians.

To qualify, you must seek employment in a region where there is a designated healthcare professional shortage. By working in one of these underserved areas, you can earn stipends for living expenses as well as repayment of your loans.

The most popular of these programs is the PSLF, or Public Service Loan Forgiveness program. Through this program, you may be eligible for loan forgiveness after ten years of working in a public health sector, the U.S. military, or a public or nonprofit hospital.

For physicians interested in working with the military, the U.S. Air Force, Army, and Navy all offer loan repayment options in exchange for service.

The PSLF can be used in conjunction with other repayment strategies, such as an income-driven repayment plan, but it cannot be used with refinanced loans. If you refinance your federal loans to the private sector, you will no longer be eligible for the PSLF.

In addition, you’ll need to have made 120 payments (in-time monthly payments for ten years) in order to qualify for forgiveness on the remainder of your loan balance.

Some of the loan forgiveness programs available include the National Institute on Minority Health and Health Disparities, the Indian Health Service Loan Repayment Program, and the National Health Service Corps Loan Repayment Program.

4. Seek Out Repayment Assistance Programs

There are a variety of state assistance programs designed to help qualified physicians pay off their medical school loan debt.

There are currently over 70 existing programs, such as the California State Loan Repayment Program.

Under this program, primary care physicians (as well as mental behavioral health professionals, dentists, and pharmacists) can earn a grant of up to $50,000 to pay down their medical school debt.

The New Hampshire State Loan Repayment Program is similar. Under this program, physicians who work full-time for three years in underserved areas of New Hampshire will receive $75,000 towards their student loans. Physicians can also work part-time for two years and receive $27,500 towards their student loans..

5. Opt for Income-Driven Repayment

Income-driven repayment plans adjust your monthly loan payments to a reasonable amount, based upon what is reasonable for your income and the cost of living. The IDR strategy is only an option for physicians with federal medical school loans, and there are four repayment options you can choose from.


The Pay As You Earn program allows you to cap your monthly loan payments at 10% of your discretionary income. In order to qualify, you’ll need to prove that you are in financial need.


The Revised Pay As You Earn program is similar to PAYE, but you do not have to demonstrate financial need. With REPAYE, your monthly loan payment will also be maxed out at 10% of your discretionary income.


The Income-Contingent Repayment plan does not have any income eligibility requirements. Under the plan, your monthly loan payment will be 20% of your discretionary income.


Income-Based Repayment is similar to PAYE, but caps monthly loan payments between 10% and 15% of your discretionary income.

Keep in mind, with income-driven repayment programs, you’ll pay less per month now, but it will take you longer to pay those loans off. Ultimately, you could end up paying more because you’ll be paying interest for a longer period of time.

You may also like: Physician Letter of Intent: Should You Sign It?

6. Live As Modestly As You Can

Upon completing your residency and signing a contract for your first full-time position, it can be tempting to want to reward yourself with a new house, a new car, and all sorts of luxuries that you weren’t able to enjoy as a student or a resident.

But when you’re inundated with medical school loan debt, that’s not always the best idea.

The more modest your lifestyle is, the more money you’ll have to put towards your loans every month. Keep your living expenses as low as possible and dedicate as much money as you can to repaying your loans.

Working with a wealth advisor can help you afford buying that new car, new home, or take that luxury vacation that you so deserve while balancing your efforts to make a dent in your student loans. Talk to an advisor who wants to help you reach your financial goals.

Related: The Three Biggest Financial Mistakes New Doctors Make

7. Consider Working in a Rural Area

There are many U.S. states that offer significant loan repayment programs as a way to attract physicians to their most rural areas. For example, the state of Georgia offers up to $25,000 per year in loan repayment.

Want to pay the bulk of your loans off within the next five years? Montana offers an incredible incentive, offering those in health professions up to $150,000 for five years of full-time service in the state.

Related: How Moving Can Help Physicians Pay Off Student Loans

8. Make Extra Payments When Possible

It may be difficult to do while you’re still in residency, but any time that you can make extra student loan payments, you should. Extra payments will pay down your principal faster, saving you money in interest over the life of the loan.

If at all possible, pay a little bit extra per month or make an extra payment here or there. Even one extra payment per year will help shorten the overall length of the repayment process and reduce the amount of interest you’ll have to pay.

One easy way to do this is by budgeting on a bi-weekly repayment plan. Homeowners looking to pay down their mortgage faster often do this, and it’s very easy to do.

To take this approach, set aside 50% of your monthly loan payment from your paycheck every two weeks. By doing so, you’ll make 13 payments per year as opposed to the required 12.

Did you know that as a doctor, you might be able to get special home loans that free up your money to pay off student loans? Read The Doctor Loan: A Complete Guide to Physician Mortgages to learn more.

9. Pay Down Debt With Your Signing Bonus

young physicians shaking hands
One way that you can choose to make an extra payment is to use your signing bonus.

It is common for physicians to earn signing bonuses with new employment positions. In 2017, the average signing bonus for physicians was $30,000. Putting even a small portion of that bonus onto your loans can save you thousands of dollars in interest over time.

10. Pay Off School Debt Strategically

It may seem logical to pay off your med school loans as soon as possible, but this isn’t necessarily the best choice. Sometimes, paying them off slowly is the best option.

Making extra payments and paying more than you owe each month will eradicate that loan debt faster, but it might not be worth it to do so. There may be better ways to spend your money.

If the real estate market is strong for buyers, you may be better off putting some cash into buying a home or an investment property. If you have high-interest credit card debt, you can save yourself money by paying that off before paying off low-interest student loans. There may very well be better ways to gain financial strength, it all depends on your cash flow, income, and level of debt.

Speak with a financial advisor before you make any decisions about putting all of your extra cash into paying off student loan debt. In some cases, it may be wiser to invest in other avenues that can net you more money in the long run.

Related: What’s Included in a Doctor’s Benefits Package?

Why You Need a Solid Repayment Plan

When you finish med school and begin your residency, it’s essential that you put a solid loan repayment plan in place. Not only will this help you pay down your loans, but it will also allow you to balance that debt with other goals, such as purchasing a home or making other financial investments.

The best way to create a plan is to speak to a trusted financial advisor. A financial advisor will take a look at your debt, your current income, and your potential future income and balance those with other goals, including tax planning, investing, and retirement planning.

This is important for individual physicians, but it is even more critical if both you and your spouse have mountains of student loan debt.

Before you enter into any repayment plan, consult with a tax advisor to determine how you should file. Depending on your finances, submitting your taxes as married filing separately may be more beneficial than married filing jointly.

For more in-depth information, read our ebook, A Guide on Managing Medical School Student Debt.

Mistakes to Avoid When Paying Off Medical School Loans

Nobody wants to think about paying back hundreds of thousands of dollars in loans. But this financial obligation cannot be ignored. While your mountain of debt may seem daunting, you can make it more manageable just by knowing how to avoid some of the most common loan repayment mistakes.

The most important aspect of creating a repayment plan is to know how much you owe. Medical school loans amortize over time, so make sure you understand the big picture and know exactly how much you will pay in total between making your first and last payments.

It’s also crucial to know if you are eligible for any sort of loan forgiveness. Some physicians don’t realize how many opportunities there are for loan forgiveness. Between state programs and federal opportunities, there are a variety of positions you can take that will allow you to take advantage of these programs.

Protect your income in case of emergencies. Read our guide to Disability Insurance for Physicians.

For most physicians, medical school loan repayment is an unavoidable fact of life. While it can seem overwhelming, especially while you’re in residency, there will come a day when you’ve paid it all off. And that will be a cause for celebration.

Before your medical school loans come due, create a strategy. Develop a plan for repayment that will reduce your monthly payments now or save you on interest in the long run. Know if you qualify for any sort of loan forgiveness and research state, government, and local programs for repayment programs.

The bottom line is this:

Develop a strategy, create a plan, and stick with it.

For more information regarding student loan repayment assistance, contact Physicians Thrive now.

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