The cost of a four-year medical school education is up at both public and private universities, and physicians are now graduating with high levels of medical school debt.
According to the Association of American Medical Colleges, in 2015 the average medical school graduate carried $183,000 in loans and nearly 80% of new physicians have more than $100,000 in debt!
As medical school costs continue to increase, it's important that medical students, residents, fellows, and attending physicians carefully consider their options for student loan repayment as debt can stifle financial success and curtail personal goals if it's not dealt with swiftly.
So we've put together a list of some of the top ways to slay the student loan dragons.
Loan Repayment Strategies
Forbearance allows you to stop making or to reduce your federal student loan payments during medical school (for undergraduate loans) or during training (for medical school loans).
While many medical school graduates put their loans into forbearance during training, we'd recommend avoiding this option as doing so allows interest to accrue and can add a lot to the top of your debt.
For example, if you owe the average amount of $183,000 (assuming the current fixed interest rate of 6.8% on Subsidized Federal Stafford Loans) and put your loans into forbearance during a 3-year residency program, you'll come out owing nearly $223,000. That's nearly $40,000 in interest alone, plus then your payments once you start paying will be based on the higher amount.
But if you owe the average of $183,000 for medical school, those monthly payments on a standard 10-year plan can be more than $2,000 per month.
That can be a stretch on a resident's salary! But there are different income-driven repayment programs that can help you avoid the accrual of interest during training.
While using an income-based repayment plan isn't the fastest or cheapest way to pay off student loans, it can at least help you to avoid additional interest from being added to your loans while you finish your residency or fellowship.
But just remember that income-driven repayment programs are designed to be safety nets. Due to the reduction in the monthly payment, they can result in something called "negative amortization." This is where your payments don't cover the interest, which causes your balance to grow even though you're paying every month.
But income-driven repayment plans can be great during training! They mean that your loan balance won't grow while you're in your residency or fellowship.
Under an income-driven repayment program, your payment amount is a percentage of your discretionary income, with the percentage dependent on the plan.
There are four different available programs:
Income-Based Repayment (IBR)
- Available for both Federal Family Education Loan Program (FFELP) and Direct Loans, IBR bases your payment amount on your adjusted gross income, total indebtedness, and family size.
- After 20 or 25 years your remaining loan balance is eligible for forgiveness.
Income-Contingent Repayment (ICR)
- Available for Direct Loans only, ICR payments are based on your adjusted gross income, total Direct Loan amount, and family size.
- Your remaining loan balance is eligible for forgiveness after 25 years.
Pay As You Earn (PAYE)
- Available for Direct Loans Only, payments are based on your adjusted gross income, total federal student loan balance, and family size.
- Your loans are eligible for forgiveness after 20 years of qualifying payments.
- In order to be eligible you need at least one Direct Loan that was disbursed on or after October 1, 2011, and you can't have a student loan that was disbursed prior to October 1, 2007 that had a remaining balance on that date.
Revised Pay As You Earn (REPAYE)
- For Direct Loans only, payments are calculated on your adjusted gross income, total eligible federal student loan balance, and family size.
- You can qualify if you make qualifying payments for 25 years to graduate-level borrowers.
This refers to the practice of taking out a new loan with a private lender and using those funds to pay your existing debt.
Refinancing allows you to adjust your repayment schedule and potential qualify for a lower interest rate. Securing a lower interest rate when you have a large debt burden can result in huge savings.
But if you refinance, you are no longer eligible for IBR or for Public Service Loan Forgiveness (PSLF) programs. And like other student loans, refinanced student loans aren't discharged in bankruptcy.
As with all loan repayment strategies, make sure to decide whether the savings that would result in getting a lower interest rate would be worth giving up access to federal repayment plans and access to other federal and state loan forgiveness programs.
Especially for specialties that are in high demand, signing bonuses have become an increasingly common hiring incentive. In 2016, nine out of 10 physicians received a signing bonus, and the average amount received was nearly $25,000.
Signing bonuses allow you to take a big chunk out of your loans immediately, which will see your interest payments drop and that amount applied to the principal increase right away.
But make sure to carefully go through your contract to make sure that your signing bonus is a true bonus, and not an advance or loan that you'll need to repay through future paychecks.
Updated August 20th, 2018: the Trump administration has proposed eliminating the program, and its 2019 proposed budget would "discontinue the program for new borrowers." However, the 2019 federal budget bill added $350 million in new money for the PSLF program. While PSLF remains a topic of interest, it currently remains in place with an increased budget for fiscal year 2019.
The PSLF program clears the balance on your direct loans after you've made 120 monthly payments on an income-driven repayment plan while working full-time for a qualifying employer.
This is unlike service-based loan repayment assistance, because instead of paying incentives directly to your existing educational loans, the rest of the money you owe on your loans is forgiven.
Designed to recruit doctors to public service as a reaction to the national physician workforce shortage, the PSLF program applies if you work for employers such as government organizations, nonprofits that are 501(c)(3) except, and other types of nonprofits that provide some types of public services such as work on public safety or health.
If you are doing your residency at a nonprofit or 501(c)(3) organization, your time in residency and fellowship can count toward your 120 qualifying payments.
But make sure that you submit the PSLF Employment Certification Form annually so you have a record of your payments.
If you would like to use the PSLF program on all of your loans, you must consolidate all of them into one direct loan with the federal government at the end of medical school. You can go to www.studentloans.gov to start the consolidation process.
If you do not consolidate your loans into a direct federal loan and submit the PSLF Employment Certification Form annually, your time spent on an income-driven repayment program during training may not count toward PSLF!
Future administrations may make changes to student loan legislation, including the PSLF program. Hopefully those that are currently in the program will be grandfathered in, however, there isn't a guarantee of that so please take that into consideration when considering whether to take advantage of the PSLF program.
Service-based Loan Repayment Assistance Programs
These repayment assistance programs offer loan repayment incentives in exchange for a term of service.
Staying eligible for these programs may limit your choices, from pay to specialty, location, and employer, but they can be immensely helpful to medical school graduates who have a lot to pay back for their education.
Military Loan Repayment Assistance Programs
The Army has multiple programs that provide assistance for loan repayment in exchange for a term of service.
The Financial Assistance Program (FAP) pays $45,000 in loan repayment for each year that you participate, plus a $2,000 per month stipend.
The Active Duty Health Professions Loan Repayment Program pays up to $120,000 to pay down medical school debt, with $40,000 provided each year for up to three years.
The Healthcare Professionals Loan Repayment Program provides up to $250,000 for student loans to physicians who serve in certain Army programs. For each year of service, up to $40,000 will be applied to your education loans.
The Navy's Health Professions Scholarship Program (HPSP) is for medical students and offers about 200 scholarships each year. The program pays full tuition directly to your medical school and also covers textbooks and other required supplies and equipment. It also provides a signing bonus of $20,000 and a monthly stipend of over $2,000 (as of 2016, the stipend was $2,229.30).
In return, you have an Active Duty Obligation (ADO) of one year for each year in the program.
The Financial Assistance Program (FAP) is specifically for physicians or dentists that are currently in training. It pays any tuition costs plus as monthly stipend, as well as $45,000 toward any educational loans.
Beneficiaries have an ADO of two years for their first year and then an ADO of one year for each following years in the FAP.
The Air Force Financial Assistance Program (FAP) pays at least $45,000 toward your student loans for each year that you're in the program, and also provides a monthly stipend of more than $2,000.
When you complete your residency you have an obligation of one year of service for each year in the program, plus an additional year.
This program pays up to $40,00 toward your student loans (both government and commercial) in exchange for a two-year commitment to practice in clinics serving American Indian and Alaska Native communities.
You can also extend your contract until your qualified student debt is completely paid.
In exchange for clinical research in non-federal research settings like academic institutions or nonprofits, this program offers repayment of up to $35,000 per year toward your student loans.
During your (at least) two-year commitment, you must spend at least 50% of your time researching specific diseases and health issues that address health disparities.
If you're a primary care medical, dental or mental/ behavioral health clinician, you can get up to $50,000 to repay your student loans. In exchange, you must make a two-year commitment to work at an approved NHSC site in a high-need area.
The payment is free from federal taxes and is paid at the beginning of your service, which would allow you to pay off a big chunk of your loans at once and seriously reduce your interest payments.
The amount of repayment you receive is based on where you serve and whether you do the half- or full-time option.
State Loan Repayment and Assistance Programs
Many states have State Loan Repayment Programs (SLRP) that are federally-funded grant programs that provide loan repayment in exchange for work in Health Professional Shortage Areas (HPSA) within a given state.
In addition, some states have their own loan repayment programs, including programs for medical school students. Here is a partial list of state programs.
Other states had loan repayment programs in the past that are currently suspended; those are not included here.
Educational loans are awarded for students enrolled in medical school. In return for repaying the loan, recipients commit to return to an underserved community to practice primary care medicine.
In order to be eligible, applicants must be enrolled in medical school in Alabama.
The Support for Service to Health Care Practitioners (SHARP) program was designed to increase the number and improve the distribution of healthcare providers throughout the state.
In return for serving in an HPSA program, SHARP recipients receive repayment of qualifying educational loans.
The State Loans Repayment Programs available in Arizona consist of the Primary Care Provider Loan Repayment Program and the Rural Private Primary Care Provider Loan Repayment Program.
In exchange for a two-year commitment to provide primary care in HPSAs or in Arizona Medically Underserved Areas (AzMUA), recipients can have their qualifying educational loans repaid.
In order to qualify, physicians must be a U.S. citizen or U.S. national, and be in the fields of family medicine, pediatrics, obstetrics, internal medicine, geriatrics, or psychiatry.
There are two different programs in Arkansas: the Rural Practice Loan and Scholarship Program (for medical students or applicants) and the Community Match Rural Physician Recruitment Program (for physicians).
Both programs aim to increase the number of physicians practicing in rural Arkansas.
The Rural Practice Loan and Scholarship Program gives grants and loans to Arkansas residents who agree to repay their loans by practicing full-time primary care in a qualifying rural community.
The Community Match Rural Physician Recruitment Program pays up $20,000 per year for up to four years in exchange for a primary care physician practicing in a qualifying rural community.
There are multiple programs that operate in California.
The Steven M. Thompson Physician Corps Loan Repayment Program pays up to $105,000 in educational loans in exchange for a three-year service obligation practicing direct patient care in a medically underserved area.
The California State Loan Repayment Program awards up to $50,000 for an initial two-year award to primary care medical professions who commit to practice in medically underserved areas in public or non-profit practices or institutions for a minimum of two years.
The Colorado Health Service Corps Loan Repayment Program provides repayment of qualified student loans in exchange for delivering primary care services in an HPSA for a term of three years at the approved site.
Both part-time and full-time options are available. Award amounts are $90,000 for full-time physicians, and $45,000 for part-time physicians.
The DC Health Professional Loan Repayment Program (HPLRP) requires two years of full-time practice as a certified HPLRP site in exchange for a repayment award of up to $145,232 over four years.
The Physicians for Rural Areas Assistance Program offers a service-cancelable loan of up to $25,000 per contracted year to physicians in exchange for providing direct patient care in underserved rural areas of Georgia. Contracts are awarded for one year and are renewable for up to four years.
The Georgia Physician Loan Repayment Program provides a service-cancelable loan of up to $25,000 per year in exchange for a two-year commitment to practice in an HPSA.
The program is limited to physicians and is aimed at physicians practicing family medicine, internal medicine, pediatrics, OB/GYN, geriatrics, or psychiatry. Physicians can reapply for another two-year commitment for a maximum of four years of $100,00 paid on qualifying student loans.
The Hawaii State Loan Repayment Program (HSLRP) provides incentives to health providers who work in an HPSA for a two-year commitment. This program requires that the site or other donors have to provide matching funds equal to half of the incentives provided by the HSLRP.
Idaho's State Loan Repayment Program awards between $2,500 to $25,000 per year, depending on employer contribution. A service obligation is required, and sites must submit reports during the funding period.
The Illinois State Loan Repayment Program pays educational loans up to $25,000 annually in exchange for two years of service in an HPSA.
The Iowa Loan Repayment Program (PRIMECARRE) awards up to $50,000 for a two-year contract and $35,000 for a two-year part-time contract to primary care physicians who practice in an HPSA.
In order to be eligible, physicians must be a U.S. citizen, licensed to practice in Iowa, and have debts related to medical education.
The Kansas Bridging Plan is administered by the University of Kansas Medical Center's Rural Health Education and Services and offers a loan forgiveness program of up to $26,000 to physicians in Kansas residency programs of family practice, internal medicine, or pediatrics.
Physicians in return agree to practice medicine full-time in a rural community for 36 continuous months after they finish their residency.
The Kansas State Loan Repayment Program offers up to $50,000 for a physician's initial two-year contract to practice in an HPSA.
The Kentucky State Loan Repayment Program offers up to $80,000 for a two-year commitment to practice in an HPSA. In order to be eligible, a physician must be a U.S. citizen and must be Kentucky licensed.
The Louisiana State Loan Repayment Program is for physicians who have completed a residency in family practice, general practice, OB/GYN, internal medicine, pediatrics, general psychiatry, or dentistry.
Physicians and dentists can receive up to $30,000 per year for a three-year initial commitment to work in an HPSA.
Massachusetts State Loan Repayment Program recipients are eligible for up to $50,000 for a two-year contract in an HPSA, though the actual amounts vary by discipline.
The Michigan State Loan Repayment Program requires that participants enter into two-year MSLRP service obligations in exchange for up to $200,000 in tax-free funds to pay educational debt over a period of up to eight years.
The Minnesota Rural Physician Loan Forgiveness Program provides an annual payment of up to $25,000 to practitioners in OB/GYN, family practice, internal medicine, or psychiatry in exchange for a minimum of three years and up to four years in a designated rural area. The maximum payment allowed is a total of $100,000.
The Minnesota Urban State Loan Repayment Program requires that participants complete a two-year service obligation in an underserved urban community for repayment of qualifying education loans of up to $20,000 per year.
The State Medical Education Forgivable Loan Program is open to medical students, and the loan-to-service obligation can be discharged on the basis of one year's service for one year of forgivable loan received.
The physician must complete their service as a licensed physician in an area of the state that has a shortage of medical professionals.
Applicants must be a current legal Mississippi resident, be fully admitted to the University of Mississippi Medical Center School of Medicine, and agree to specialize in either family medicine, internal medicine, pediatrics, or OB/GYN.
The Missouri Health Professional State Loan Repayment Program requires a minimum two-year contract in exchange for up to $50,000 in loan reimbursement for primary care physicians.
The Primary Care Resource Initiative for Missouri (PRIMO) is a program that awards forgivable loans to students pursuing health care training in Missouri.
One year of service providing care in a HPSA is required to repay a PRIMO loan, and the number of years a participant will need to work to repay a debt through forgiveness is determined by the number of loans received.
The Nebraska Loan Repayment Program recruits physicians in general internal medicine, pediatrics, OB/GYN, general surgery, psychiatry, and dentists.
In exchange for a three-year practice obligation in a state-designated shortage area, physicians and dentists may receive up to $40,000 for loan repayment. A local or community match is required.
In exchange for loan repayment funds, participants in the Nevada Health Service Corps agree to serve in an assigned underserved community for a specified length of time.
The typical length of the contract is two years of full-time practice. Each application is individually evaluated, and loan repayment awards are made based upon the funding available during that application cycle.
Physicians willing to commit to a three-year contract (full-time employee) or a two-year contract (part-time employee) can receive $75,000 for a full-time commitment and $27,500 for a part-time commitment from the New Hampshire State Loan Repayment Program.
The Primary Care Practitioner Loan Redemption Program of New Jersey (NFLRP) provides up to $120,000 over a four-year period of service for qualifying student loans in exchange for a commitment to provide primary health care services at an NJLRP-approved site for at least two-year, up to a maximum of four years.
The Health Professional Loan Repayment Program (HPLRP) is open to U.S. citizens and health professions who make a two-year commitment to practice full-time in a designated medical shortage area in New Mexico.
The maximum award is $25,000 for those working in state-designated medical shortage areas and up to $35,000 for those working in a federal HPSA.
The reward, however, depends on the applicant's amount of student loan debt and available funding.
The Community Practitioner Program is a donation-funded program that rewards educational loan payments over a five-year period in exchange for working in an underserved area of the state. The average grant generally pays up to a maximum of $70,000.
The North Dakota Federal State Loan Repayment Program rewards recipients up to $50,000 for two years of service in an underserved area. This program requires a community match and is open to U.S. citizens or U.S. nationals.
The Oklahoma Family Practice Resident Rural Scholarship Loan Program gives residents enrolled in accredited Oklahoma Family Practice or Family Medicine programs up to $1,000 per month with a month-to-month practice obligation in an underserved community.
The Oklahoma Medical Loan Repayment Program requires a minimum of two-years of practice, and provides loan payments after each anniversary date. The first payment would be $25,000, and the payments increase by $10,000 per year for a total not to exceed $160,000 over a four-year period.
If less than $160,000 is owed, the physician is eligible for only the outstanding debt amount. If the physician decides not to fulfill the minimum obligation, they would owe in lump sum the amount received, plus interest and any collection costs.
The Oregon Partnership State Loan Repayment pays up to $35,000 per year of 25% of total debt, whichever is smaller, upon a commitment to a service obligation of at least two years with the option to extend for an additional three years.
The Oregon Primary Care Loan Forgiveness Program participants are eligible for loans of up to $35,000 per year for tuition and fees in exchange for one year of service to an approved rural Oregon facility. Applicants must be enrolled as full-time second or third year students.
The Rhode Island Health Professionals Loan Repayment requires either full-time or half-time clinical practice providing primary health services at an eligible site in exchange for loan repayment assistance.
South Dakota Recruitment Assistance Program recipients agree to practice full-time in an eligible community for at least three consecutive years and must have completed a residency program in family practice, pediatrics, internal medicine, or OB/GYN.
The amount of the incentive payment is equal to twice the University of South Dakota School of Medicine resident tuition for the four most recently completed academic years; the current amount is $196,674.
The Physician Education Loan Repayment Program provides loan repayment fund for up to $160,000 over a period of four years to qualifying physicians who agree to practice in an HPSA.
The St. David's Foundation Public Health Corps Loan Repayment Program provides $30,000 per years for physicians and dentists who agree to provide four years of service at an approved practice site.
The Vermont Educational Loan Repayment Program for Health Care Professionals requires a two-year service commitment and pays up to $20,000 per year in educational repayment incentives for primary care and psychiatry practitioners, as well as dentists.
The Virginia State Loan Repayment Program has a maximum incentive of $100,000 and requires both a community match and a minimum service obligation of two years.
The Medical Student Loan Program pays up to $10,000 per year in forgivable loans for students attending any West Virginia medical schools.
The Health Professions Loan Assistance Program pays up to $100,000 in education loan assistance in return for a three-year commitment to practice in a federally designated HPSA.