Financial Tips for Doctors with Student Loan Debt

Financial Tips for Doctors with Student Loan Debt
How to Get Strategic About Tackling Your Medical School Costs

Medical school can certainly be viewed as an investment – but it’s a costly one. Statistics show that the average student loan debt for college students is $28,950, while the average medical school debt is around $200,000. Even for doctors who are earning high salaries, it can be challenging to pay down such a hefty amount of educational debt.

Feeling burdened by debt can seriously impact your finances, but it can wreak havoc on your emotional and physical well-being, too. If you’re a medical student or doctor looking to protect your net worth and quality of life, it’s imperative that you establish a savvy plan for paying off your student loans. Below are five tips to help you get started.

First: A Word on Federal Student Loan Forgiveness for Doctors

At this article’s writing, President Biden’s student loan forgiveness program is tied up in the courts and it remains unclear when borrowers may get final answers on whether they qualify for any form of federal loan forgiveness. However, it should be noted that some doctors could eventually qualify for medical school loan forgiveness. Get updates here as they come.

Now, onto helpful tips that doctors can use to pay off student loan debt.

Tip #1: Don’t Throw All Your Money at Your Loans

It’s tempting to want to discharge your debt as quickly as possible, but it’s important to budget out your paycheck to fund other priorities, too. This means putting some money into a savings account to establish an emergency fund so that you’re protected from the unexpected, and thinking about other financial goals you’re working towards, too.

Should you amass huge savings? No, not while you have significant debt. However, you should save at least three to six months’ worth of expenses so that you have a solid amount to fall back on should life throw you a curveball – which it’s bound to do at some point. The last thing you want to do is increase your overall debt because you didn’t have the funds to cover an unforeseen expense.

Tip #2: Investigate Income-Driven Repayment Options

You may be able to ease your student loan debt through the federal income-driven repayment program. They set your monthly student loan payment to an amount that is deemed to be affordable based on your income and family size. Often, your payments can be adjusted to around 10% of your discretionary income amount. Discretionary income is determined by taking the difference between your Adjusted Gross Income and 150% of the federal poverty guideline.

Income-based repayment plans can be quite advantageous from a cash-flow point of view. However, when taking on any new payment plan, be sure to also consider any anticipated medical school loan debt forgiveness, any risk of capitalizing interest, and potential tax consequences.


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Tip #3: Refinance Cautiously

Oftentimes, you’ll come across options to refinance your loans at a lower rate through private lenders. This can be a smart move if the loans are equal, though that isn’t always the case. You may end up taking on more risk through a refinance than originally intended, so proceed with care.

Though it might not be obvious at first glance, federal student loans come with several benefits that refinanced loans don’t have. For example, with federal student loans, you can qualify for income-driven repayment programs, public service loan forgiveness opportunities, and more forgiving ways of dealing with financial setbacks such as long-term disability. So, before refinancing medical school debt, doctors should consider all factors and carefully weigh the pros and cons of a refi.

Tip #4: Avoid ‘Lifestyle Creep’

This is a concept that can be detrimental in any profession, but high earners such as doctors can be particularly susceptible. As you get more established in your medical career and begin to see your hard work reflected in your paycheck, it can be tempting to begin introducing more luxury into your lifestyle or to increase your spending. While you don’t have to deny yourself material rewards like a big house or fancy car, be sure that you’re budgeting appropriately and not getting carried away. For example, a pay increase should never always go to new lifestyle expenses. Be sure to increase your savings and investments, too.

Prioritize building an emergency fund, think about your mid-term savings goals, always work to max out your retirement accounts, and pay extra on your student loan debt, too. After your financial responsibilities are satisfied, you can indulge in more lifestyle spending with the knowledge that you’re on firm financial footing.

Tip #5: Tackle High-Interest Loans with Gusto

Some people tackle large amounts of debt by paying off smaller loans first, which is called the snowball method. However, note that the benefit of paying off your debts this way is purely psychological. The idea is that each small debt you pay off will motivate you to continue on to larger ones. Financially speaking, there’s no real benefit to paying off smaller loans before others. For doctors with significant student loan debt, paying off your loans with the highest interest rates first allows you to pay less in interest over time and more towards the loan principal – a savvier strategy for your financial outlook.

Are You a Doctor Chipping Away at Student Loan Debt?

To achieve your dream of entering the medical profession, you’ve likely invested time and money and made countless personal sacrifices, too. And while your career may be rewarding, it’s also normal to feel the heavy burden of medical school loan debt.

If you’d like to discuss retirement planning or a related topic, schedule a 15-minute phone call with one of our advisors!


Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

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