Medical School Debt: What Med School Costs and How to Pay It Off Quick

It’s no secret that the cost of a medical qualification is extremely high. A four-year bachelor’s degree and four years in medical school topped with a three-year residency and possibly additional years in a fellowship (if you want to specialize) comes at a high price. Not all medical school students are fortunate enough to have a college fund from their parents or receive full scholarships. This means most physicians will run up a few hundred thousand dollars in debt before they start practicing.

This means your medical school loans can be quite a burden on your shoulders and can easily dampen the excitement of graduating from medical school. The good news is there are a few things you can do to get rid of your med school debt quicker. If you are looking for ways to ease the burden of medical school debt read on. We provide some tips below.

The Cost of Medical School

So what does medical school actually cost? The average cost for one year’s attendance at a public medical school in 2016 was $32,495. A private medical school’s tuition and fees were about $52,515 on average. No doubt it will be more today. What’s more, these costs don’t even include boarding, books, transportation or any other living costs when you are in medical school.

Average Physician’s Student Debt

According to the Association of American Colleges, the average med school debt for 2017 medical school graduates were $189,000. This does not include the debt many graduates still had for their undergraduate studies.

If you aspire to be a physician, your undergraduate degree (including tuition, boarding, books and living cost) will cost between $100,000 and $200,000 on average. This will be more if you attend a private school, as well as at some colleges who charge more for degrees that specialize in medical sciences. On average, the student debt for a doctor’s undergraduate is $24,000.

Clearly, being a physician comes at quite a price. If you consider the cost of med school, it’s no wonder the average medical school debt is so high. Your med school debt does not, however, need to be a dark tunnel. There are a few strategies you can apply to manage your med school debt and help ease the burden in the long run.

3 Best Ways to Manage Your Medical School Debt

There are a lot of financial strategies and we encourage you to go read more about managing your personal finances and budget so you can take control of your debt. Below are some tips you can specifically apply to your medical school loans in order to conquer this mountain. This is especially applicable if your med school debt is as high as the average medical school debt.

Negotiate a Physician Signing Bonus

A signing bonus is money employers pay new employees to incentivize them to join their company. This is a common thing in the medical profession and many employers use this method to attract new, up and coming physicians to their practice.

The average signing bonus for physicians is about $25,000. After tax, this means you take home about $18,750. This money can go straight into your medical school debt!

At first, you might be hesitant to use this bonus to only pay off debt as there are most likely some other living costs that will come up as you start a new job. It will be a good idea to compare the pros and cons. Let’s take a look at the advantages of rather using your signing bonus to pay off your student debt for a doctor than using it for something else.

If your average med school debt is $189,000 and you have an average interest rate of 6.5%  with a standard 10-year repayment term, you will save $15,650 in interest if you pay your signing bonus straight into your debt. This is a huge saving! And not only do you save, you pay off about a quarter of your medical school loans in one go!

If your new employer does offer you a signing bonus, just make sure you read your contract carefully and check all the conditions that might come with the signing bonus. Your employer might require you to work for them for a certain number of years in order to get the bonus. In this case, the bonus is not so much a bonus as it is an advance or loan you’ll be paying back through future paychecks.

Sign Up for Income-Based Repayment

Income-based repayment (or otherwise known as an income-driven repayment plan) is a plan available on federal loans whereby your monthly repayment is determined in accordance with what you can afford each month. This takes into account your income and average living cost.

If you just came out of medical school, chances are your salary is still quite small. On the other hand, if you have the average medical school debt of $189,000 your monthly repayments are likely to be high. This means it can be a challenge to meet your monthly payments and keep things running smoothly in other parts of your budget.

If this is the case, income-based repayment might be a good solution for you. Income-based repayment might result in you not paying off your loan super-fast, as well as adding little more interest over the long run. But it is, however, definitely a better solution than possibly defaulting on your loan payment or not being able to take care of your other financial obligations.

Refinance Your Medical School Loans

With refinancing, you take out a new loan with a new interest rate and different payment terms to pay off your existing loans. The purpose of refinancing is to lower your interest rate, which usually means a lower monthly payment and paying less in the long run. If you have the average medical school debt of $189,000 and you get a new interest rate that is 1.5% lower, you’ll save about $17,000 in interest payments. There are a few lenders who will even refinance your med school debt if you are an international student.

There are many perks to refinancing and it certainly is a great way to save money, but make sure you do proper research to see if it is the right choice for you. If you have a federal loan, consider other options like income-based repayment or loan forgiveness before you just jump into refinancing. Refinancing means you will have to take out a private loan to pay off your federal loan. Perks like loan forgiveness won’t be an option anymore and you might lose out on some great financial benefits.

Student Loan Forgiveness for Doctors

Over and above some of the smart repayment strategies that are available for doctors to pay off their medical debt, there is also student loan forgiveness for doctors. Student loan forgiveness means a part of your loan is forgiven (i.e. you don’t have to pay it anymore) if you meet certain criteria.

Most of the qualification criteria for student loan forgiveness for doctors revolve around the employer you work for. If you opt for this, your employment choices will be limited. Chances are you’ll have to work for a non-profit hospital in an area of high need. Having limited employment options also means you have a limited choice of pay, location, and specialty. If you are willing to sacrifice this, student loan forgiveness for doctors is a great way to ease the burden of medical school loans.

Public Student Loan Forgiveness for Doctors (PSLF)

Public Student Loan Forgiveness is a program specifically designed for public employees or non-profit workers. Essentially your employer will determine whether you qualify. To qualify, you need to work for a government organization or a 501(c)(3) non-profit institution.

Apart from the employer you work for, you’ll need to make 120 loan payments (i.e. pay your loan for 10 years) before you will qualify. You need to work for the qualifying employer while you make these loan payments.

Once you’ve done this, your outstanding med school debt will be forgiven and you will be debt free!

Conclusion

Even though med school debt can seem crippling, it doesn’t have to destroy your short and medium term life goals. There are a lot of options for doctors who want to tackle their debt head-on or who are willing to sacrifice a little bit to gain a great advantage. If you are struggling with your medical school debt, consider some of the options we explained above to help you pay off your debt sooner, or at least easier.

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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