Paying Off Medical School Debt in 5 Steps

Medical school is expensive. In fact, according to the Association of American Medical Colleges (AAMC), students who attend private schools can expect to pay more than $50,000 per year in tuition costs, while students attending state schools will pay an average of $34,592 or $58,668, depending on whether they live in the same state as the school they attend.

And although many people assume everyone with a medical degree is pulling in the big bucks, the reality is that during residency you likely won’t be making very much money—especially relative to the amount you owe.

It can be extremely taxing to manage a big debt burden while working long hours at a stressful job, so it’s important you make a plan for student loan repayment, so the stress doesn’t cause burnout before your career even begins.

If you’re not sure what to do to take control of your debt, this guide will show you how to get started. You’ll also get some tips other doctors have used to help repay their debt more quickly.

In this guide:

How Long Does it Take to Pay Off Medical School Debt?
Paying off Medical School Debt in 5 Steps

How Long Does it Take to Pay Off Medical School Debt?

Paying off medical school debt is inevitably going to take time—but the amount of time it takes is going to vary depending on your situation.

If you’re working in a job that qualifies you for Public Service Loan Forgiveness, you could be debt-free in as little as 10 years—at least when it comes to federal student loan debt. Other borrowers will have a mixture of federal and private loans with terms that last 20 years or more.

Of course, the key determining factor in how fast you can pay off your loans is how aggressive you want to be in making extra payments towards your debt each month.

How the Doctors Darko Did It

Take Drs. Nii and Renée Darko, for example. The couple had $662,900 worth of combined student loan debt when they made a pact to free themselves from it within 15 years.

“We adjusted our budget to make paying off our student loans a priority,” they told LendEDU. “We significantly lowered our insurance and food spending and became more intentional by budgeting on a monthly basis. We told our money exactly where we wanted it to go in the beginning of every month rather than trying to figure out where it went at the end of every month.”
Drs. Nii and Renée Darko

The Darko’s chose to rent rather than buy a home—far from their families in the expensive New York-New Jersey area. They switched to spending cash and not using credit cards to better track spending, and they declined invitations to go out. They even deferred investments, outside of the retirement matching offered by their then-employer. All of this taught them an immense lesson in the art of money management, and it paid off.

Just three short years later, they were debt-free.

Of course, not everyone will be able to divert so much cash toward debt payoff.

During residency, especially, it may also be infeasible to put extra cash towards your loans. But, if you follow the steps below to get your debt repayment plan in order, you may be able to start managing debt right away and get ahead of schedule as soon as you start earning more.

Paying off Medical School Debt in 5 Steps

Here are five steps to follow to manage medical school debt repayment.

1. Prioritize your Loans

If you have medical school debt, you likely have more than one type of student loan you’re paying down. Unless you’ve consolidated all your loans into one big monthly payment, you’ll have to figure out which loans you want to repay first.

To do this, write down all the loans you have, along with their interest rates. Order them based on their interest rates, with the loans that have the highest rates at the top of the list. Those are the loans you should pay off first to save the most on interest payments.

Federal student loans typically have the lowest rates and should likely be put on the back burner as you focus on paying down private debt. But just because these loans are a lower priority doesn’t mean you can ignore them. You still have to make regular monthly payments on all of the debt you owe. That brings us to our next step.

2. Choose the Right Repayment Plan

You need to keep up with the necessary minimum monthly payments on all loans, even as you divert extra cash toward higher priority loans. However, you have a lot of flexibility in how you pay back federal student loans. For example, you can check to see if you qualify for an income-driven repayment plan. These types of plans match payments with your salary so you don’t get stuck making high payments while you’re still in residency and your income is relatively low.

You have a number of income-driven payment plans to choose from, including:

PAYE: This plan is called Pay As You Earn, and it caps your federal student loan payments at 10% of your discretionary income. However, your payment cannot ever exceed the payment you’d make on the standard repayment plan. Any remaining balance on your loan is forgiven after 20 years of monthly payments.
REPAYE: Revised Pay As You Earn also caps your payments at 10% of your discretionary income. If some of the loans on this program were for graduated study, the maximum repayment period is 25 years—and any remaining balance is forgiven after this time.
Income-Based Repayment: Income Based-Repayment caps payments at 10% of your discretionary income if you didn’t take any federal loans before July 1, 2014. Again, your payment can’t ever exceed the payment you’d make on the standard repayment plan. For new borrowers after July 1, 2014, you make payments for only 20 years total and the remaining loan balance is forgiven.
Income-Contingent Repayment: This plan caps your payment at the lesser of 20% of discretionary income or the amount you’d pay on a 12-year repayment plan with fixed payments, adjusted based on income. Any remaining loan balance is forgiven after 25 years of payments.

With private student loans, you do not have as much flexibility in how you pay back your loans, and you won’t have income-based payment options. See how much you can allocate toward your private loans after setting up minimum payments on all other loans.

If you can’t afford to make the minimum payment on all of them, you may need to consider refinancing with a private lender to lower your rate or lengthen your repayment term (more on that later).

Tip: Don’t Defer If You Can Help It

With some student loans, you may have the option to defer payments not just while you’re in school but also until after you finish your residency. While this can make finishing up your education easier in the short-term, deferring payments can add thousands to your debt as interest continues to accrue. If you can afford not to defer payments, this is a better option.

3. See If You Qualify for Public Service Loan Forgiveness (PSLF)

As mentioned above, if you work for a qualifying employer you may be able to qualify for Public Service Loan Forgiveness (PSLF). Eligible employers include:

The federal government
Your state government
The local government
A nonprofit or 501(c)(3) organization
The U.S. military
Certain private non-profit organizations that work in the public interest, including providing medical care in underrepresented areas

PSLF allows you to have the remaining balance of your loan forgiven after making 120 monthly payments.

If you qualify for PSLF, it’s imperative to make sure you’re in the right type of repayment plan. In recent years, many employees who thought they qualified for student loan forgiveness reached their 10-year mark, only to find that they were enrolled in the wrong repayment plan and did not qualify to have their debt balances wiped out.

Student loan repayment plans that qualify for PSLF include all income-driven repayment plans. If you will qualify for loan forgiveness, pick the income-driven plan with the lowest minimum payments and then focus on private loan repayment.

Tip: Your State May Also Offer Forgiveness

Some states also have their own loan forgiveness programs for medical professionals who meet certain qualifying requirements. You should check with your state, but some options include:

CalHealthCares: This program repays up to $300,000 in educational debt for a five-year service commitment. Doctors in California who qualify have to maintain a caseload that includes at least 30% Medi-Cal beneficiaries.
Regents Physician Loan Forgiveness: This is available for New York doctors and provides up to $10,000 in loan forgiveness per year for two years. Doctors must commit to serving in an area determined to have an underserved population.
The Physician Education Loan Repayment Program: Texas doctors could have loans forgiven if they practice in a health professional shortage area for at least four years. Doctors can get $25,000 or 15% of a loan balance below $160,000 forgiven for the first year; $35,000 or 22% of loan balance below $160,000 for the second year; $45,000 or 28% of loan balance below $160,000 for the third year; and $55,000 or 34% of a loan balance below $160,000 for the fourth year.

4. Consider Refinancing Your Med School Debt

Student loan refinancing is another way to help pay off your debt. When you refinance, you get a new loan to pay off existing student loans. You can refinance both private and federal loans, although you give up borrower benefits by refinancing federal student debt. You can change to a new loan with a lower interest rate and/or different loan term by refinancing.

Not everyone will qualify for refinancing, but if you have a job lined up and can prove you’ll have a high future income, or if you’ve already paid down quite a bit of debt, you could potentially qualify for a refinance loan at a very competitive rate.

Just be aware that refinanced loans are private loans, so they don’t offer loan forgiveness or income-driven payment plans. You don’t want to give up these federal loan benefits unless you’re definitely not going to use them.

Check out our guide to refinancing your medical school loans to see some options you can consider.

5. Look for Ways to Make Extra Payments

If you’ve followed the steps thus far, you should have your debt repayment process running smoothly. You know which loans you want to repay first, what repayment plan works best for you, and whether you could potentially qualify for loan forgiveness or save money by refinancing your loans.

Now, the last step is to see if you can get ahead of schedule and save more money by making extra payments. You can do this by cutting your budget, working extra hours, and putting bonuses or windfalls towards your debt.

If you receive a physician signing bonus when you get your first job, consider using this money to wipe out a chunk of your highest interest debt—or even the whole amount. This could save you thousands of dollars in interest over the next decade, and it’s a wiser option than spending the cash.

As your income goes up, you should also try to avoid lifestyle inflation. Keep your budget the same as it was when you were a resident—at least for a few years. You can use the extra money to make loan payments and get ahead on paying off high-interest loans. You’ll thank yourself later when you’re debt-free and your colleagues still have student loans to worry about.

Bottom Line: Paying Off Medical School Debt Takes Time, But It’s Possible

As you can see, there’s a lot involved in paying off medical school debt—but it can be done. Just be strategic about which loans you pay off early and how you set up your loan repayment plans so you can make debt payoff as quick and easy as possible.