Financing (and Paying Off) Your Medical Education

The Costs of Medical Education

Few careers are as rewarding as medicine. From the ability to save human life to research into the next generation of drugs and treatments, there’s an expansive, highly beneficial field that attracts millions of people every year. Schools around the world turn out graduates all year long, and those students go into residency or further medical programs, along with hospitals, laboratories, and research centers. In the United States each year, an average of 26,641 people graduate from medical schools. No matter what you’re looking for or want to do with your medical career, someone has a program for you.

Which brings us to the main point: paying for medical school or medical careers isn’t always so black and white. In fact, sometimes it can feel harder than the surgeries you might be performing as part of your career. The average medical school debt per person in the United States is $215,900—which is excluding undergraduate debt or other academic debt. On average, medical school debt in the United States is $4.349 billion per year.

For comparison, in the United States in 1978, the average medical school debt was $13,500 (which is closer to $50,000 today when adjusted for inflation). Over just 15 years, there was a whopping 177.7% increase in average medical school debt. The majority of medical school graduates have debt to pay off upon graduation; many take out loans to cover these payments, and the loans can tick into the hundreds of thousands of dollars over the full course of the educational term.

For those medical graduates starting their careers in residency or practice, paying off the loans for the degree can be an ominous barrier to financial independence and freedom. It can take decades to pay off loans of the average size, especially if the chosen medical field is saturated with graduates and low on jobs. You can be on the hook for a lot of money and not have a lot of opportunities to pay it off, or simply not be equipped to do so in the near term.

So how can this problem be solved? Is paying off a medical loan as easy as taking a prescription drug and being better in a few days? Do you call someone in the morning to discuss your prognosis? It may not be as easy as that, but it is an equally solvable problem that can be bridged with smart financial saving, a competent and dedicated payment plan, and a budget and a focus on being debt-free within a manageable term.

Tools and Techniques to Pay Off Your Debt

After graduation, many loans commonly enter a “grace” period of several months where no monthly payments are due. Direct Subsidized and Direct Unsubsidized Loans both have an automatic grace period of six months, for example. Once the grace period (if applicable) is over, you’ll have to start considering your repayment options.

First and foremost: you’ll need a budget. No matter your level of debt or your salary to pay it off, a budget is your best friend and should be a constant companion in your financial journey. A budget doesn’t have to be anything complicated or a new frustration in your life—in fact, a budget done right should decrease or hopefully eliminate some of your stress and anxiety about your payments.

Excel is a great program, if you’re looking for a simple interface and a common program to break down your costs and your needs vs. wants. You’re likely accustomed to this program already, but if you have another program suitable for budgeting that you’re more comfortable with, feel free to use that. The important thing is to have a list of your expenses, your wants and your needs, and a monthly list of your expenses and your income. This list will also show you where you’re spending too much and how you can trim costs to reallocate to other, more important things like medical school loans.

Once you have your budget, you’re ready to start going deeper.

For instance, it’s possible to delay loan repayment if you’re in residency or a fellowship program. But if you make payments during this period instead, you’ll be that much closer to being rid of your debt. If you practiced budgeting and belt-tightening during medical school and got good at living frugally while making payments, keep this habit up during your residency or program. Even if you have the option to delay payment, make those payments as soon as you’re able. Pausing payments for years can add thousands of dollars in interest to your total owed, further delaying your financial freedom. Don’t make that mistake. Check your Loan Repayment Timeline closely if you’re considering this.

If you do end up needing a forbearance or a deferment on your payments, consult the Education Debt Manager before deciding on an avenue to go with.

You can also find other avenues to pay off your loans, such as seeking loan forgiveness. Loan forgiveness is usually accomplished by working in underserved or lower income areas for a period of years. This benefits the community while also benefitting you. Many of these jobs can be tough and far from glamorous, but they are a beneficial service that will provide you ample experience (helping your resume look more attractive for even better-paying jobs) while helping you directly pay off your accrued debt.

If you’re wanting to pay off your medical debt faster and you have the applicable income to make it happen, you can refinance your loan and save on interest. Many doctors are good candidates for lower interest payments in a refinance because they have reliable income, often have good credit and are more likely to pay off the loan and are less risky to potential lenders. It can take a lot to achieve a new refinancing plan, including having excellent credit, but it’s a great option for those who want to aggressively pursue their debt and have the salary or the payments to do so.

If you’re trying to save at the same time as paying off your loan, you can do one of four federal income-driven repayment plans. Income-driven repayment cap your monthly payments to your income, which saves you money each money but can delay your repayment period by several decades (often 20 to 25 years). Income-driven plans are much different than refinancing, and are suitable for different candidates and will vary strongly on your income and career plans and goals.

Income-driven repayment plans include:

  • Income-Based (IBR)
  • Pay As You Earn (PAYE)
  • Revised Pay As You Earn (REPAYE)
  • Income-Contingent (ICR)

You can also choose from standard, extended, or graduated repayment plans. Working with a financial advisor or planner to determine your best option is a solid option if you’re confused or unsure what to pursue.

Whatever path or plan you choose, remember to avoid a few major pitfalls:

  • Don’t spend frivolously upon graduation
  • Keep a close watch on your budget; don’t let it wander or get out of control
  • Segment needs versus wants and hold to it (use the 50/30/20 rule if it helps you)
  • Keep your financial options open

Putting It All Together

Flexibility and a smart budget can save you from countless problems no matter what field you’re pursuing or what your future goals are.

It isn’t so different from a normal college payment plan, which involves either loans or other financing options and can have comparable prices and debts. But medical school adds an extra layer of education (and thus educational debt) to your total tally, which can really begin to rack up. Undergraduate and medical degrees combined can involve lots of headaches for payments if you’re not staying on top of it.

But for those in medical school or looking to rid themselves of their school debt, the options vary. One thing to keep in mind is that you can absolutely do it, and your career is certainly worth it. You made the right choice and following your passion and your dream is worth it. If you go into lower income areas to service the underserved to pay off your loans, you’re doing a good service. If you’ve been successful and are in a position to refinance, pursue it aggressively and hold to it.

You can do it. And smart financial options are your paths forward.