5 Tips to Reduce Medical School Debt for New Doctors

Becoming a doctor is not for the feint of heart. On top of the grueling schooling schedule, and sleepless years as a resident, there is the pressure of student loans to repay.

According to the Association of American Medical Colleges, $183,000 is the average amount of medical school debt graduates had in 2014. Nearly 80 percent of all graduates start their career owing at least $100,000.

Repaying medical school loans can be a long and tedious process, but if you are proactive and smart about your loans you can potentially save thousands of dollars over the course of your repayment.

Here are 5 tips that can help new doctors reduce medical school debt.

Working in a remote area for the NHSC

There are opportunities for debt relief if you are willing to work in need for providers in locations where there is a lack of physician support. The National Health Service Corps offers health providers and professionals the opportunity to receive up to $50,000 in tax relief for loan repayment for a two-year commitment. Also, Medical students in their final year of school can get up to $120,000 in loan repayment for a three-year service commitment at an NHSC site.

Look at Refinancing or Consolidation options

Refinancing or consolidation is worth considering for those with high loan burdens and high interest rates.

According to an article by Student Loan Hero, “When you apply, most banks and lenders will look at your credit score, annual income, savings, and college degree type. If you meet these requirements, you might be an excellent candidate for student loan refinancing and consolidation.”

Avoid Using Forbearance

During your residency, some loans offer you the option to defer payments until you become an attending physician. While this may seem a tempting option, it may be advisable to try to avoid this situation. Forbearance might seem to save you from making monthly payments during the years of heavy call, however accumulating interest can add thousands of dollars to your overall debt burden.

Use Income Based Repayment to your advantage

Under Income Based Repayment (IBR) the federal government allows you to make loan payments based on your income level. If you have financial hardship, try make payments of 10% of your income to reduce your loans. Additionally, a partial interest subsidy is available for the first three years which means less interest accumulation.

Resist the Temptation to ‘Upscale’ after Medical School

As with all your medical training, delaying gratification can reap huge benefits down the track.

Once a doctor finishes medical school, they will finally start earning income. There can be a sudden temptation to begin upscaling your lifestyle. This an understandable desire considering so many years of sacrifice. If you can, resist large lifestyle expenses for another 2 to 5 years if possible.

Try to discipline yourself to reallocate your excess income to building a health financial program. By lowering your debts, it will make a very positive difference to your long term financial well-being.

Want to Read More about how to Reduce Medical School Debt?

The Graduate Student Debt Review by Jason Delisle
60 Ways to Wipe Out your Student Debt by CBSNews
The Ultimate Student Loan Repayment Guide for Doctors by Student Loan Hero