Student loans are burdensome for graduates all over the country, but for those who pursue a medical school education, the numbers can be absolutely staggering. According to the Association of American Medical Colleges, the average medical school student graduates with $180,723 of student loan debt. If a medical student went to a private medical school, the average is $193,483. That's not counting loans a student might have taken out for an undergraduate or other graduate education, either.
My husband recently completed medical school and his student loan debts are higher than the averages listed above. A non-traditional student, my husband started medical school later in life at age 29 after completing a rigorous master's degree program in Public Health. The combined cost for his undergraduate education, his master's degree and medical school was $500,000. With graduation looming in early June, payments are about to begin.
Luckily, there are many ways to manage six figures of student loan debt, even if they climb to the half a million dollar range. Here are some examples:
1. Enroll in Income Based Repayment
Many people don't realize that physicians have to start paying back their student loans while they are medical residents making around $50,000 a year. At that salary level, they cannot make standard payments on their loans so many of them enroll in income-based repayment (IBR) or Pay As You Earn (PAYE) which allows them to cap student loan payments to up to 10 percent of their income.
2. Refinance Student Loans
Once a physician completes residency training and can afford larger student loan payments (as opposed to the smaller payments available under Income Based Repayment), they should consider refinancing their student loans. One very important thing to note about refinancing student loans is that you will be refinancing with a private lender, which means you lose some flexibility of federal student loans. Still, it's very worthwhile to pursue student loan refinancing for several reasons.
When you refinance your student loans, the primary goal is to lower your interest rate and save money. This works for many people who have student loans, but for physicians who have several hundreds of thousands of dollars in student loan debt, the savings on interest alone is remarkable. Plus, you will combine and consolidate all of your loans for one easy payment.
Using LendingTree's student loan refinance calculator, you can see how much money you could save on interest by refinancing your student loans after residency.
Using my husband's student loan debt as an example, I used the calculator to show me how much I could save on a student loan refinance. If he refinanced $500,000 worth of loans that had on average 6.59% interest and 120 payments left into a loan with 3.25% interest and 120 payments, he would save right under $98,000 in interest payments. That's enough to put a down payment on a nice house or buy a few cars.
Of course, the results of the calculator below are just one example of how student loan refinancing can help someone with large loans. You could also use student loan refinancing to shorten your loan terms or lengthen them depending on how you want to handle your payments. The $5,000+ in monthly payments shown below is certainly not a small number, but on a physician's income in my husband's field, it is possible to make them. I personally plan on paying off his student loans much faster than 10 years, but a refinance is definitely part of the repayment plan.
3. Work a Job that Qualifies for Public Service Loan Forgiveness
One of the biggest loopholes currently available to people with large student loans is Public Service Loan Forgiveness. This is where you work in a job that is classified as "public service." Luckily for physicians, many hospitals are non-profit, which makes it easy to meet this requirement. You have to make student loan payments for 10 years and after that, your student loans are forgiven. Under this program, there isn't a limit to the amount of student loan debt forgiven, although there have been a few bills in congress to try to change that.
Ultimately, my husband's medical education was worth it, every penny of it, and although his student loan debt amount is extreme, we plan to use some of the ideas mentioned above including student loan refinancing to help conquer the debt sooner rather than later.