If you are going to school to become a medical doctor or dentist there is no way to completely avoid student loans. The cost of education in the medical field is great. While there are grant programs and scholarships that can help to ease the financial burden of the overwhelming tuition costs, they are not going to cover it fully.
Now that you have made it through the 6 plus years of schooling and internships, you leave with high debt and need to know how to manage your medical student loans. Lenders do not make this information easily available to you, leaving you with pennies to live on as your are making your monthly payments at the lenders anticipated amount. Let these tips help guide you throughout payment of your medical student loans, easing the financial burden and allowing you to move forward in your career without being set back by student loan debt.
Income-Based Repayment Plan (IBR)
The income-based repayment plan option has made it possible for many young Doctors and Dentists to make their monthly payments without fear of bankrupt or forced into forbearance or hardship deferrals. The IBR bases medical student loan payments on your income rather than total debt owed or interest rate. Payments on unsubsidized loans through the IBR plan are often much less than even the interest on the loans.
The IBR plan caps medical student loan payments at 10 percent of the discretionary income (the difference between adjusted gross income and 150 percent of the federal poverty level). When you graduate the residency program and begin making more money in your career the IBR payments will revert to a higher amount, calculated at the original 10 year repayment plan. If you make every payment for 20 years, the remainder of the debt that you owe will be forgiven. However at this point in your career, making at least the minimum payment should have your medical student loans repaid by then.
The Public Service Loan Forgiveness (PSLF) Program
The Public Service Loan Forgiveness (PSLF) Program is a type of loan forgiveness that can be beneficial for doctors. It you work for a qualifying 501(c)3 employer, such as the military, Department of Veterans Affairs, a university hospital, or a non-profit hospital, the remainder of the loan forgiveness can be received after 10 years of qualifying payments instead of 20. This program is a great benefit if you are a Doctor specailising with long training programs, such as medical, pediatric, and surgical subspecialists. The PSLF program works by forgiving the amount by which you underpaid your loans in residency, plus the interest that accumulated because of those underpayments.
The federal government offers loan-consolidation programs. However the government combines student loans, putting them all at the same interest rate. Consolidation a medical student loan may not save you any money in the long run.
Loan refinancing with a private bank or other lender is another great option for many doctors. However you have to qualify based on your income-to-debt ratio and credit score. While there are few lenders that offer loan refinancing, those who do start at rates as low as 5 percent fixed and 3 percent variable.