Managing Student Loans: Financial Tips for New Physicians

Most new physicians start their careers with an average of $200,000 in medical school debt, which can seem daunting. But there’s no reason to let that debt become an overwhelming burden. There are many ways to make student debt easier to manage.

From forgiveness programs that will pay off your loans for you to refinancing and income-driven repayment options that keep your payments low, here are five financial tips for new physicians looking to dig out from under medical school debt.

Explore Loan Forgiveness Programs

The best way to manage student loan debt is to have someone else pay it off for you — and there are loan forgiveness programs that do exactly that. Keep these programs in mind when searching for job opportunities and deciding where to live and work.

Loan forgiveness programs exist at both federal and state levels. You may qualify for such programs if you choose to work for the US military, the National Institutes of Health, the National Service Health Corps, nonprofit facilities, or civil service programs like the Indian Health Service. You can even qualify by choosing to work in a rural, underserved region of the country.

For example, if you work in an underserved area in Maryland for a minimum of two years, the state will pay up to $50,000 per year towards your loans. Work three years in a medical shortage area in Nebraska and you can receive up to $60,000 per year for student loans. Under the Montana Rural Physician Incentive Program, you can receive up to $150,000 towards your loan debt. 

Loan forgiveness programs exist across the country, and they’re worth exploring. Learn more about student loan forgiveness programs and review programs available by state in this article

Opt for an Income-Driven Repayment Plan

With an income-driven repayment plan (IDR), your monthly payments are based on how much you earn.

The SAVE plan (Saving on a Valuable Education) considers your current income as well as the size of your family when determining what your monthly payment should be. With the SAVE IDR, your monthly payments will vary from 5-10% of your income.

No matter how much money you’ve borrowed for undergraduate and graduate studies, the repayment term cap is 25 years. When you hit the 25-year mark, the remaining balance of your loans will be forgiven.

Consider Refinancing Your Loans

Refinancing your loans can lower your interest rate and lower your monthly payments. For many new physicians, refinancing makes it easier to manage payments and have more money to put towards other expenses, such as a mortgage, paying down credit card debt, or contributing to a savings account. 

But it’s not the best option for all physicians.

Refinancing may render you ineligible to participate in loan forgiveness programs and income-driven repayment plans. If you have any intention of participating in either of these programs, refinancing may not be the right choice for you.

Create a Budget and Stick to It

One smart way to manage student loans is to pay more than the required monthly minimum so that you pay less interest over time. New physicians who want to take this approach should start by creating a budget.

There’s more to creating a budget than accounting for all your necessary expenses and looking at what you have left over at the end of each month. 

You’ll also want to devote a set amount of money to building your savings, contributing to an IRA or a similar retirement account, and paying for necessary insurance policies, such as malpractice, disability, and life insurance.

If you currently carry credit card debt with higher interest rates than your student debt, focus on paying your credit cards off before you start making additional payments to your student loans.

Protect Your Income with Disability Insurance

Disability insurance is a must-have for all physicians, as it allows you to continue to earn an income even if you become too ill or injured to work. Disability insurance policies also allow you to add optional riders that offer enhanced benefits.

New physicians who carry student loan debt should consider adding the Student Loan Repayment Rider. If a disability renders you unable to work, this rider will pay additional benefits to cover the cost of your monthly student loan payments.

Learn more about physician disability insurance in the LeverageRx review of Ameritas, one of the nation’s leading insurance companies.

In Conclusion

Don’t let medical loan debt feel like an overwhelming burden. Instead, take advantage of loan forgiveness programs or income-driven repayment plans. Consider refinancing your loans to reduce payments and lower your interest rates. Protect yourself with a disability insurance policy that will pay your monthly student loans.

Think about paying off medical school debt as just one more obstacle you’ll have to overcome in life. Like the hurdles you’ve already jumped to become a physician, your student loan debt will, someday, be a thing of the past.

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