How To Pay Off Medical School Debt (2024)

Jobs in the healthcare industry typically have high salaries, making the industry a high-reward path for those who choose it. For example, medical doctors have a median annual income of $238,978 in 2023. Regardless of income, healthcare professionals fill an invaluable role in the well-being of our society.

However, healthcare careers require extensive education. After earning a bachelor’s degree, you must attend medical school, which can be expensive. The median four-year tuition price for medical school was over $360,000 in 2022, according to the Association of American Medical Colleges (AAMC).

At such a high price, many medical students must rely on loans. The AAMC reported that 71% of medical school students had student loan debt with a median balance of $200,000 in 2022. If you want to become a doctor or are a recent graduate, learning how to pay off medical school debt will help you save money and become debt-free faster.

10 Strategies To Pay Off Medical School Debt

Medical school debt can last between 10 to 30 years, depending on your repayment plan. If you want to learn how to pay off medical school debt faster, use these tips:

1. Review Income-Driven Repayment Plans

To become a doctor, you must complete a bachelor’s degree before attending medical school, which can take another four years. Depending on your specialty, you may also need to complete between three and nine years of internships and residency programs.

It can be a while before you can comfortably afford monthly student loan payments under a standard repayment plan. However, many recent medical school graduates pursue alternative payment plans, including income-driven repayment (IDR) plans for federal student loans.

An IDR plan bases your payments on discretionary income. Most payment terms last between 20 to 25 years. At the beginning of your career, IDR plans to grant more affordable payments.

2. Make Payments During School or Residency

With most student loans, medical school loan interest accumulates while you’re in school and during the loan’s grace period. The interest amount is added to the balance and can increase your debt over time.

You can reduce your interest by paying while you’re in school and during your medical residency. Even small payments can lower the accrued interest and help you save money.

3. Make Extra Payments

Making additional payments, regardless of size, can slowly eliminate the interest on your loan.

Windfalls, such as a tax refund or gift, can reduce your debt and help you save money. Trimming your budget by eliminating non essential expenses can liberate more money for loan repayment. For example, let’s say you had $200,000 in loans at 5% interest and a 10-year repayment term, your monthly payment would be about $2,121.

If you paid an extra $50 monthly toward your loans, you’d save $1,717 in interest and be out of debt three months earlier. Increase your payments by $200, and you’d save $6,281 in interest charges and pay off your loans 13 months sooner.

4. Consider Loan Forgiveness Opportunities

If you have federal student loans from medical school, you may be eligible for one of the following loan forgiveness programs:

• Income-driven repayment (IDR) plan. An IDR plan can reduce your monthly payments to match your income level. Your payments could be as low as $0 if you’re unemployed. If you still maintain a balance at the end of your repayment term, the government will forgive the remaining amount.
• Public Service Loan Forgiveness (PSLF). You can qualify for the PSLF program if you work full-time for a nonprofit hospital, health clinic, university or other nonprofit organization or government agency. The government will forgive the balance after 10 years of employment and 120 qualifying monthly payments.

5. Explore Repayment Assistance Programs

With federal or student loans, you may qualify for a national or state-based loan repayment assistance program. Through these programs, the government or a state agency will partially cover your debt in exchange for a commitment to work in high-need areas for a specific period.

A few of these programs include the following:

• National Health Service Corps (NHSC) Loan Repayment Program. Eligible physicians can receive up to $50,000 in loan repayment assistance for federal or private loans. To qualify, they must commit to a two-year service term at an NHSC-approved site in a designated health-professional shortage area.
• NHSC Rural Community Loan Repayment Program. This program provides up to $100,000 in loan repayment assistance for full-time clinicians working in a rural HHSC-approved substance use disorder treatment facility for three years.
• State loan repayment programs. Some states run their own loan repayment assistance programs to encourage healthcare workers to practice within the state. For example:
  • Arizona. Physicians who’ve worked at least two years in high-need areas qualify for up to $65,000 in loan repayment assistance for federal and private loans. Physicians can work additional service terms to receive other aid.
  • Colorado. The Colorado Health Services Corps offers up to $120,000 in loan repayment assistance to doctors that work in a designated health professional shortage area in a facility that primarily treats underserved patients.
  • Kentucky. The Kentucky State Loan Repayment Program offers up to $100,000 in loan repayment assistance to doctors that commit to two-year terms in rural or underserved areas.

To determine which program you qualify for, visit your state department of health services’ website or the AAMC’s database of federal and state loan repayment assistance programs.

6. Seek Employer Assistance

Your employer can be a valuable source of aid when trying to pay off debt. The Employee Benefit Research Institute reported that 25% of employers offer student loan debt assistance, and an additional 24% are planning to offer this benefit in the near future.

Many hospitals and clinics advertise student loan repayment benefits in their job listings. For example:

• Fairview Health Services. Employees can receive $2,000 to $10,000 per year in loan repayment assistance.
• HCA Healthcare. HCA Healthcare gives employees up to $100 per month to repay their student loans.
• Prisma Health. Full-time employees can qualify for up to $1,800 in tax-free yearly student loan repayment assistance.

Talk to your employer’s human resources department to find out if student loan repayment benefits are available.

7. Use Your Signing Bonus

Physicians are in demand. Many hospitals and clinics offer substantial signing bonuses to attract new doctors. According to a report released by Merrit Hawkins in 2022, the average signing bonus for physicians was $31,000 in 2022.

Using some or all of your bonus to repay your student loans can be a smart move. It can allow you to make significant progress and save more money over time.

8. Take Advantage of Tax Deductions

With the student loan interest tax deduction, you can reduce your taxable income by $2,500 or your loan’s interest. Reducing your taxable income can position you for a larger tax refund, which you could use for extra loan payments.

You will likely qualify for it during your residency or during the first few years of working full-time.

9. State Incentive Programs

In certain states, you can qualify for repayment assistance and other student loan benefits simply by living and working in-state. A few examples include:

• Kansas. You can qualify for up to $15,000 in loan repayment assistance over five years if you move to a designated rural opportunity zone.
• Maine. The student loan repayment program functions as a refundable tax credit. You can qualify for $2,500 to $25,000 in tax credit if you earned an in-state degree.

Visit your state education agency or department of housing and community development for similar programs in your area.

10. Consider Refinancing

With high-interest loans, student loan refinancing can be an effective way to lower your rate, reduce your payments and save money.

Refinancing involves working with a private lender to consolidate your debt into one loan. If you have an adequate credit score or a co-signer, you may qualify for a loan with a lower interest rate of a longer term to reduce your monthly payment amount.

However, refinancing federal loans transfers them to a private lender, making you ineligible for federal programs like IDR plans, PSLF or any future loan forgiveness programs.

To see how refinancing will affect your monthly payments and overall repayment cost, use the student loan refinance calculator.