Managing Student Loan Debt for Medical Residents

Written by: Nichole Coyle, CFP®

Becoming a physician is a significant investment of your time and finances. Of course, your investment often leads to a rewarding career, but it can also bring along substantial student loan debt. For medical residents, the transition from med school to the workforce can be financially challenging. 

At the end of 2022, the Federal Reserve Consumer Credit report showed that approximately 43.5 million Americans have either Federal and/or private student loan debt. However, there are some unique aspects of student loan debt specific to medical residents. For example, you often earn a modest salary compared to the number of hours you work and the amount of responsibility you have. At the same time, you may have accumulated a greater amount of student loan debt during medical school compared to other professions. 

At Impact Wealth Management, we help you by providing strategies specifically designed for medical residents to help you manage and eventually eliminate the financial burden of student loans. Each of the following strategies can be used separately or in conjunction with others. Some of the strategies we use for managing student loans debt for medical residents include:

Income-Driven Repayment Plans: These plans can be established through your student loan servicer and can adjust your monthly payments based on your income and family size. This option can provide some financial relief during the lower-earning residency years.

Loan Forgiveness Programs: Some medical residents may qualify for federal loan forgiveness programs such as Public Service Loan Forgiveness (PSLF) or the National Health Service Corps (NHSC) program. These programs can provide loan forgiveness in exchange for working in underserved areas or for certain employers. These plans typically require that you continue to make monthly payments for a certain period of time (usually 10 years) before the remainder balance can be forgiven though, so if this is part of your plan, know you have to play the long game.

Living at or Below Your Means: If your intention is to knock out your student loan debt as quickly as possible, practicing frugality and budgeting effectively can make a significant difference. Cutting unnecessary expenses and creating a strict budget can help you allocate more funds towards loan repayment.

Prioritizing High-Interest Loans: Prior to meeting with us, many clients we’ve met with over the years were paying a little extra on all or several of their debts. We have a different approach to consider: paying the minimum payments on all but one debt then applying all additional payments to one specific debt until it is paid off. After that debt is paid off, you move the additional funds to the next specific debt, and so on.

Have you ever heard of the terms “debt snowball” or “debt avalanche?” In the “Debt Snowball Method” you only pay extra on the smallest debt first. This feels good because you see the number of debts dropping quicker at first. 

Conversely, in the “Debt Avalanche Method” you only pay extra on the debt with the highest interest rate. It may take longer to pay off the first debt in full, but, by targeting the loan with the highest interest rate first, it can help reduce the overall interest paid over time. In order to keep more money in your pocket long term, consider directing extra payments towards the highest interest rate loan while maintaining minimum payments on the others.

Impact of Your Residency and Fellowship: The specialty you choose will determine not only the length of time you’ll spend as a resident, but also whether or not you choose a fellowship and what your initial salary could look like.  Neurosurgeons, for example, spend 7 years in residency and could spend another 1-2 years in a fellowship program. Meanwhile family/internal med or peds spend 3 years in residency. Clearly there’s a huge difference in a 10 year period between these specialties. 

In 10-years post grad, the physician choosing neurosurgery will have 1-3 years as an attending with a huge increase in income to start attacking their student loans, while the family med physician has had 7 years of increased income to pay down (or pay off) their student loans. One choice is not better than another, they simply create the opportunity for a unique plan based on specialty.

Creating a Repayment Timeline: Establishing a clear timeline for debt repayment, along with financial goals, can provide you with a roadmap to track your progress and stay motivated.

Seeking Professional Advice: Financial Planners and student loan experts can offer personalized guidance based on individual circumstances. Residents should consider consulting these professionals to gain insights tailored to your situation.

Navigating student loan debt as a medical resident requires careful planning, strategic thinking, and perseverance. By exploring various repayment options, adhering to a disciplined budget, and seeking professional advice, medical residents can take steps toward achieving financial stability and ultimately, a debt-free future. Remember, while the journey may be challenging, it is a valuable investment in a fulfilling medical career.

If you would like to learn more about a “done-for-you” student loan repayment plan that considers your specialty, family circumstances, unique goals, and budget, contact us to schedule your 30-minute virtual consultation.