5 Things No One Tells You About Medical School Debt

4 min read

Posted on July 28, 2021

Working on a computer in a café.

Here’s something nobody tells you about graduating from med school: just as you’re finally getting a chance to celebrate your accomplishments and catch up on sleep, you’ll get a rude awakening from an unwelcome guest: your lender.

During that final semester of medical school, you are working hard to match into residency (if you haven’t already) and are enjoying more freedom and flexibility than you have in four years. That is, until you have that sobering meeting with the financial aid adviser who wants to talk about your student loan debt.

Chances are you haven’t given much thought to your loans. But the time has come to face the music, develop a repayment strategy, and ultimately start paying back those loans. If you wait until residency, you’ll be swallowed up in a chaotic routine of rounds, reports and research.

For all those 14-hour days, you’ll probably earn an average of $64,000 per year, according to Medscape’s Residents Salary & Debt Report. Your monthly loan payments, however, will feel like an extra car payment even if they’re capped at 10% of your income. On top of your other living expenses, making those loan payments may seem impossible.

Fortunately, there are some simple steps you can take to manage your debt so you can focus on what really matters. Here are five options you may not have considered when it comes to dealing with medical school debt during residency and beyond.

1. You Can Consolidate Your Debt

The average medical student graduates with more than $201,500 in debt, according to the American Association of Medical Colleges (AMMC). Many have five or more loans, each with separate payment schedules and loan servicers.

Unless you plan to hire a personal assistant to follow up with each one while you’re hard at work in the hospital, you’ll want to consolidate your medical student loans. Doing so will give you a simplified view of what you owe and a single point of contact, making it easier to tackle your debt. And while you can consolidate federal loans with the government, many students have a combination of federal and private loans. To simplify your life by rolling both into a single payment, you’ll need to work with a private lender.

2. You Can Defer Payments

If you want to avoid the stress of making large payments on a meager salary, you can defer payments during residency and fellowship. Deferment allows you to temporarily delay your payments while avoiding default. In some cases, you can also avoid paying interest if you have federal, subsidized loans. Unsubsidized loans will still accumulate interest during the repayment period, so the amount you’ll pay will be higher in the future. In a few years, however, you should be earning enough to make a much bigger dent in your debt.

To defer loans, you’ll need to contact each of your loan servicers individually. Keep in mind that deferment eligibility requirements and your obligations for paying interest may vary depending on the type of loan and whether your loan is subsidized or unsubsidized.

3. You Can Make Payments Based on Your Income

If you want to minimize payments during your training years, choosing one of the government’s income-based repayment plans is a smart choice. The federal government administers four income-driven loan repayment plans that help keep loan payments affordable by capping payments based on income and family size.

They are the Income-Based Repayment Plan (IBR), the Pay as You Earn Plan (PAYE), the Revised Pay As You Earn Plan (REPAYE) and the Income-Contingent Plan (ICR).

Under REPAYE, undergraduate student loans are forgiven after 20 years, and graduate student loans are forgiven after 25 years. The plan also includes a new interest subsidy benefit to keep loan balances from ballooning for those who are unable to keep up with accruing interest through their income-driven payments. These plans have different terms and conditions, and different borrowers qualify for each. Talk with your financial adviser to make sure an income-driven repayment plan is right for you, and determine which plan is best. If you don’t have a financial adviser, definitely consider finding one that you trust.

4. Public Service Loan Forgiveness is an Option (But Not For Everyone)

If you’re considering working in the public sector or at a nonprofit organization, the Public Service Loan Forgiveness Program (PSLF) may be your best bet. This federal program forgives the remaining balance on federal loans after you’ve made 120 qualifying payments.

PSLF has specific guidelines that define qualifying monthly payments, qualifying repayment plans, how to track payments, and eventually, how to apply for loan forgiveness. It’s a good idea to review all the details before enrolling.

It’s also worth noting that loan amounts forgiven under PSLF aren’t considered income by the IRS, and therefore aren’t subject to federal income tax. While this program can put you on a path towards getting out of debt faster, it does come at a cost.

Public sector jobs typically pay less — at least $50,000 per year less — than those in the private sector, according to career expert, Zippa. As a result, you could be sacrificing hundreds of thousands in earning potential while you’re in the program. That may not bother you, but it’s still something to consider.

5. You Can Refinance your Loans

Refinancing simply means that you take out a new loan to replace your existing loan(s) through a private lender. The lender then pays off your existing loans and creates a new one for you, often at a lower interest rate. Refinancing your medical student loans can amount to thousands in savings, both in the short and long term. With a lower interest rate, you will have the capacity to save more during the difficult training years. Your future self will thank you.

If refinancing sounds like a viable option for you, check out loan options available through Splash Financial.


The information provided in this blog post is not intended to provide legal, financial or tax advice. We recommend consulting with a financial adviser before making a major financial decision.

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