Financial Resources for Early-Career Physicians

Student Debt

How to Tackle Your Med School Loans

How to figure out the optimal strategy for repaying your student loans, so you don't pay a dollar more than you need to.

James Pommert, CFP
April 20, 2023
6 min

As an early-career physician transitioning from the training years to the attending years, you’re faced with a bunch of financial decisions and responsibilities–from obtaining disability insurance, to navigating employer benefits, to negotiating job offers, to figuring out how to best repay your student loans–and more. 

If it feels like a lot, it’s because… well, it is. Young doctors are faced with more high-stakes financial decisions in a narrow period of time (that window right before training ends until right after the attending years begin) than virtually any other profession out there. 

But in 15 years of working with early-career physicians (and knowing many others personally), I’ve noticed that when it comes to developing a strategy for repaying their student loans, many residents adopt the "ostrich approach," burying their heads in the sand. Instead of dealing with their loans head-on while they’re in training, they instead kick the can down the road, often because of the complexity of it all. 

“What in the world is a "Stafford loan" is, and why do I have 12 of them?” 

“PAYE, REPAYE, IBR, ICR? What’s the right repayment plan for me?” 

“I don’t have much money today. Should I forbear my loans and deal with them later?”

“Eh, this all feels like a lot to figure out. I’ll get to it later.” 

Sound familiar? 

We get it. It all feels complicated–especially when you’re stretched so thin during the training years–and especially you don’t deal with it every day like we do! If you’re like the other doctors in our lives, you’re highly intelligent, but this stuff was never taught or tested in medical school.

But the reality is: failing to nail-down a strategy for paying back your student loans–and doing so while you’re in residency–can create unnecessary stress and cause you to pay more money than you need to. So, it is crucial for physicians to address their student loans head-on and develop the optimal repayment strategy while you’re still in-training. 

Take it from me... 


My physician wife and I learned the hard way that not having a solid gameplan plan for tackling your student loan repayment can be costly in the long run. My mistake cost us real moolah–5-figures worth. 

Years ago, when I was just starting out as a financial advisor and my wife was in her medical training, we decided to forbear on her student loans. Forbearance is when the borrower is allowed to temporarily stop making payments or reduce their monthly payment amount, but interest continues to accrue during this time and will ultimately result in a higher overall loan balance.  

At the time, we had barely two nickles to rub together, and figured if we could defer her student loan payments for later when we had more money, why wouldn’t we? 

Little did we know, however, that our decision to forbear her student loans after medical school would cost me big money down the road. 

See, my wife was on the Public Service Loan Forgiveness (or PSLF) track. And nearly every residency and fellowship–including the one she was in–is a 501(c)3 employer. Because of this, loan payments made during training would count towards the 120 payments needed before PSLF kicks in and loans are forgiven.

What I failed to recognize was: under an IBR payment plan, because her income was so low, our payments would have been $0 (or close to it) for the first year of training anyway–and YES, a $0 payment still COUNTS as a payment towards an IDR plan!

Most doctors forbear because they want a $0 payment when they're starting residency. But if we had avoided forbearance and started making “payments” under an IBR plan, we would have had a $0 payment and would have gotten the benefit of those “payments” counting towards PSLF… a win-win. 

Bottom line: my wife would be 6-months further along in her loan forgiveness had I not missed this, and we would have been able to avoid paying Uncle Sam thousands of dollars. 

This is a perfect example of the how tricky it can be to figure out the optimal repayment strategy, and the real-dollar cost of poorly informed financial decisions. 

But as time went on and I worked wtih a growing number of physicians, I quickly learned the tricks of the student loan trade. So just below, I’m going to walk you through the the first few steps to take towards figuring out the optimal student loan payback strategy for you. 

Taking these steps now–while you’re still in training–so you can avoid the stress and the costly mistakes that can set you back financially. By following these steps, physicians can focus on what matters most during their residency, without the added stress of mounting student loan debt.


Step 1: Pull It All Together

If you're like some physicians, you might have a junk drawer with a bunch of loan statements stuffed into it. This is your "I'll get to it someday" drawer. Or you have a stack of mail from your lender sitting on your desk collecting dust. 

To figure out the right plan of attack, you first need know what you’re working with. 

To create a solid repayment plan, start by gathering all your necessary loan information, including the type of loan (public or private), outstanding balance, interest rate, and repayment terms. 

This information can be obtained from your loan servicer or the Federal Student Aid website.  

Some residents have upwards of 10 different student loans. So simple as it may seem, getting everything pulled-together in this way will help to make this less daunting and more approachable. It will allow you to see what you're working with in one place. 

Just start here. 

Step 2: Get Clear On Your Goals

What are you trying to do with your student loans? 

The obvious answer, if you’re feeling sarcastic, is “I’m trying to pay them off!” 

But if your number one objective was to maximize your cash flow during the upcoming years, for example, we’d approach your loan strategy differently than if you knew you weren’t going to qualify for PSLF because you were planning to go into private practice... and were most focused on paying back your loans as quickly as possible. 

When an early-career physician comes to us asking, “What is the best way to repay my student loans?” ... we have to first ask, "Well, what are your goals, and how do you see your medical career progressing?” Your life and career objectives should drive your loan repayment strategy, not the other way around. 

  • Do you expect to practice in a for-profit private group or not-for-profit academic setting?
  • Is your residency/fellowship on the longer or shorter side?
  • Are you married or do you expect to be?
  • If married, does your spouse earn more or less than you and do they have student loans?
  • Do you plan to have children?

Although every physician’s situation is different–and their objectives may therefore differ–most residents prioritize one of these four goals when it comes to their loans: 

  • MInimizing their monthly payment
  • Paying off their loans as quickly as possible 
  • Maximizing the benefit they get from PSLF (if you’re on the PSLF track)

Being clear on what you’re solving for is key to figuring out the best plan of attack. If you’re unsure, speak to a financial advisor who can help you sort this out. (We help early-career physicians think through this all the time.)

Step 3: Pick the Optimal Payment Plan

Once you’re clear on the details of your loans and what you’re wanting to achieve with your loans payback, you have what you need to figure out the best payment plan. Here, we’re going to focus on Federal student loans, as they are the most common. 

When it comes to payment plans for Federal Student Loans, there’s good news and bad news here: 

The good news: there are ONLY 6 ways to pay back Federal med school loans... and one of these will apply to you! This narrows the set of possible strategies. 

Standard: The standard repayment plan is the default option with a fixed monthly payment that enables you to pay off your loans in 10 years. While it's a simple plan, the fixed payments may be challenging to handle during your residency, especially if your income is limited. The higher loan payments can put a strain on your finances.

Extended: The Extended Repayment Plan is a good option if you need to make lower monthly payments over an extended period of time, up to 25 years. However, keep in mind that this plan results in higher interest payments over the life of the loan compared to the Standard Repayment Plan.

Income-Based Repayment (IBR): Income-based repayment calculates your monthly payment based on your income and family size. In some cases, your payment could be as low as $0. After making payments for 20-25 years, any outstanding balance is forgiven. However, it's important to note that you may owe taxes on the amount that is forgiven.

Income Contingent Repayment (ICR): Income Contingent Repayment Plan calculates your monthly payment based on your income, family size, and loan amount. This plan requires your payments to be recalculated each year, and any remaining balance on your loans may be forgiven after 25 years of qualifying payments.

Revised Pay As You Earn (REPAYE): This plan bases your monthly payments on your income and family size, similar to IBR and ICR. However, unlike these plans, there is no cap on your total payments. Instead, your payment is set at 10% of your discretionary income. REPAYE offers forgiveness on any remaining loan balance after 20 years for undergraduate loans and 25 years for graduate loans.

Pay As You Earn (PAYE): This plan sets your monthly payments at 10% of your discretionary income, based on your income and family size. This option is available only to those who became new borrowers on or after October 1, 2007. After making payments for 20 years, any remaining balance may be forgiven, but you may owe taxes on the forgiven amount.

The bad news is: there are 6 ways to pay back Federal student loans, and you have to figure out which of these is best. Fortunately, figuring out which payment program makes the most sense for come down to some ol' fashioned math. 

You'll need to calculate your monthly payment for each repayment program and compare the total cost of each program over the life of your loans.

This may seem like a daunting task, but the Department of Education's loan repayment simulator can help simplify the process. The simulator allows you to compare monthly payments and total loan costs for different repayment programs based on your loan balance, income, and family size.  You can also run various simulations based on different potential future scenarios such as raising a family, various practice settings, and income potential.

It's important to keep in mind that while some of these repayment plans may appear similar, even slight differences between them can significantly affect your financial situation. This is why it's valuable to seek guidance from a specialized advisor who has experience working with physicians and understands the intricacies of these payment programs. 

At Equitta, we guide young physicians through this process all the time. But regardless of who you choose to work with, we strongly recommend getting expert help at this stage to avoid making costly mistakes. 

Step 4: Start paying and review every tax season 

Enroll in your chosen repayment plan and start paying. It is, of course, critical to stay current on your payments. 

It is also important to revisit periodically–usually each year during tax season. Your income, family situation, and future career pathway may evolve, which could impact your repayment strategy. And you want to ensure that the payment plan you're on remains the best fit for you given your new situation. 

Physicians are able to switch repayment plans if needed, but this should only be done after researching any potential impacts it could have to your repayment progress.  By revisiting this annualy, you can be confident that your payments remain affordable and manageable, and you'll successfully pay off your loans.

*  *  *  *  *

Managing your student loans can feel complicated. But as complex as the government may make it, figuring out the optimal loan repayment strategy doesn't have to be that hard... as long as you have the right person guiding you through it. 

If you're ready to nail down your repayment strategy, feel free to book a call with us, and we'll get you moving in the right direction in a short 30 minute call. 

Important Note: This blog post is intended to provide general information and should not be considered as professional advice nor investment advice. Please consult with a qualified financial or insurance professional for personalized guidance based on your specific circumstances.

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