Managing Your Debt as a Healthcare Professional

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by Lindsay Miller, BSN

It is estimated that the typical medical student graduates with over $200,000 in total student loan debt, counting that acquired during their undergraduate years. With first-year starting salaries for doctors starting as low as $50,000 or less in some geographic areas and fields, some students are left wondering if their medical degree will be worth the price of their education. Even nurses, who don’t have to worry about paying for the astronomically high tuition of med school, still hold nearly $30,000 in student debt themselves – not a small chunk of change by any stretch of the imagination.

Although most people naturally affiliate medical degrees and doctors with sky-high salaries, many doctors and other healthcare professionals choose work that is relatively low-paying but rewarding in other, non-financial ways. Whether that’s your particular situation, or you simply want to get a handle on your student loan repayment, here are several approaches for helping you manage your student loan debt.

Reduce Your Monthly Payments with IDR

According to Adventures in Education, if your income is relatively low compared to your level of student loan debt, look into the Federal Government’s Income-Driven Repayment (IDR) Plans. These plans, of which there are several options, allow borrowers to cap their monthly federal loan payments at either 10% or 15% of their discretionary monthly income. For some borrowers with very low income or a large family size, the monthly payment can be as low as $0/month no matter the size of their federal student debt. The caveat here is that IDR is only available for federal loans, and not for private ones. In order to reduce your monthly payment for private loans, it is necessary to refinance them at more favorable terms than you originally borrowed.

Consolidate your Student Loans with a Private Bank

According to LendEDU, consolidation, and refinancing is a debt management solution that applies to either private or federal loans. However, borrowers who refinance federal loans with a private lender need to be extra aware of the pros and cons of doing so. Federal loans automatically come with a slew of benefits hard to find in the private lender market, including forbearance, loan forgiveness, and the IDR plans discussed above. Once federal loans are refinanced, the only benefits available are those offered by the new, private lender. And loans that have been privately refinanced can never go back to being federal loans.

On the other hand, private loans should almost always be refinanced once a borrower has graduated and has an income. During school, rates were likely higher because a student has less credit history and little-to-no income. However, once they graduate and start working—even if still in a residency—they become a much more attractive credit risk to lenders. Student borrowers who got great rates in school either on their own or with the help of a creditworthy cosigner may not find that they can refinance for a better deal, but everyone else should investigate better rates within a few months after graduation. Not only can the interest rate go down, but payments will typically be lower since less interest will accrue each month.

Look into Loan Forgiveness

According to The Student Doctor Network, there are many options for loan forgiveness available to doctors and other healthcare professionals. For starters, the Federal Government offers a program known as Public Student Loan Forgiveness (PSLF) which offers complete forgiveness of remaining federal student loans after ten years of working for a qualifying entity and making monthly payments. Qualifying entities are typically state-sponsored hospitals and clinics or those that are set up as non-profits. The amazing thing about PSLF is that it can be combined with reduced monthly payments set up on an IDR plan. This allows a borrower to make reduced monthly payments for ten years and then have their remaining loan balance forgiven. Working in an area that is underserved by the medical profession also offers a route to loan forgiveness, and there are many state programs that offer their own loan forgiveness for health professionals willing to work in low-income and rural areas.

See What the Military Can Do for You

The military offers two general types of student loan help for medical students. The first is tuition assistance for service members who enroll in medical school and will become military doctors upon graduation and completion of their residency (the military branches also offer residencies in many VA hospitals). The second is loan forgiveness help for doctors who have already graduated and who enroll in the military to serve as doctors. Different branches offer their own forms of assistance and incentives, which can include loan repayment, monthly stipends which can be put toward student loan payments, and special grants.

Lindsay Miller is a recent graduate of the University of Wisconsin-Madison where she earned her BS in Nursing. Aside from her work as a nurse, she enjoys reading and writing about personal finance and figuring out the best strategies to repay her $37,000 in student loan debt.

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