Doctors have a reputation for being high earners, but many people forget that they, like many others, start off with hundreds of thousands of dollars in debt. Even though you may earn that much in your prime, it can feel overwhelming to pay off more debt than you’ve ever earned.
Most doctors have 20-year repayment plans for their student loans, which means you’ll be in your 40s or 50s once that debt is repaid. Want to see how you can repay your loans faster? Check out some tips to go from med school to debt free in five years or less.
Live Like a Student
If you’re a doctor, you might not start enjoying a large salary until you’re in their early 30s. While your friends have already been earning money for a decade, physicians have to endure years of low or no salaries. That can make anyone want to splurge once they start getting a real income.
You should resist the temptation to spend all that hard-earned money. If you continue to budget like you’re a resident or student and use the rest of the money to pay off debt, you can pay off your loans much faster.
Living like a student might include sticking with your old car and apartment, avoiding flashy gadgets and costly subscription services. Doing this for a few years after graduation can save you years of student loan payments.
Refinance Your Loans
One of the best ways to lower your monthly student loan payments is to refinance. When you refinance your student loans, you can get a much lower interest rate, which will help you pay off your student loans faster.
Companies such as DRB, SoFi and CommonBond can work with doctors to refinance their interest rates, sometimes even while they’re residents. The sooner you refinance, the more you’ll save on interest.
If your monthly payments decrease when you refinance, continue making the same payments you were before. This way, you’ll pay down the principal even faster while saving more on interest.
Take Advantage of Repayment Programs
There are many programs where you can work as a physician and have part or all of your student debt forgiven. Many of these require that you work in a rural or underserved area for a few years in order to qualify.
Programs like these repay up to a certain amount, often in the six figures. Those with no specific attachments to a certain area could benefit from these programs. Some doctors may also qualify for the federal Public Service Loan Forgiveness program if they work for a nonprofit or public institution.
Make sure to verify that your employer will qualify for the repayment program and that you’re obeying all the rules. If you refinance your loans, you will not be eligible for the PSLF program, so make sure to weigh the pros and cons before choosing which route to go.
Put Windfalls Toward Your Loans
If you join a private practice after residency may receive a signing bonus. These bonuses, which average about $25,000, can make the most impact if you put them directly to your loans. The average med school debt load is $166,750, so that signing bonus could knock off 15% of your principal.
Any other windfalls you receive, such as checks from grandma or tax refunds, should also go to your loans. Make sure to tell your lender that these should go directly toward your principal.
If you get a raise, holiday bonus or promotion, put that extra money toward your debt and continue living on your previous income. You won’t miss that extra money, but you will be paying off your debt faster.
If so, subscribe now for tips on home, money, and life delivered straight to your inbox.