Residency

Consider paying your loans during residency

Residency Program Insider, February 16, 2018

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According to U.S. News and World Report, 83% of medical school graduates owe more than $100,000 in student loans. To lessen this burden, financial experts recommend that medical students avoid deferring their loans and at least pay the interest during residency. Although these payments aren’t required, interest capitalizes on loans during deferment, increasing the balance. In 2017, medical school graduates left school with an average debt of approximately $191,000. If the student attended a private medical school, the figure was closer to $206,000.

Though the eventual earning potential for physicians is high, the average medical resident only makes $51,000 a year on average. These realities make it important to develop financial strategies on how to manage your student debt early on to prevent it from getting out of hand. Here are three things to consider:

1.    Consider the compensation provided by each specialty. Surgical specialization offers a higher return on investment than primary care. Studies have found that students are less likely to pursue a field with a lower salary if it has a high debt burden.

2.    Learn if Public Service Loan Forgiveness is an option. Physicians with federal student loans may qualify for relief on certain balances following ten years of public service work. The years spent during residency qualify with program requirements of being employed at a nonprofit (most academic hospitals are considered nonprofits). Another helpful option to consider is the Revised Pay As You Earn plan where payments are based on discretionary income. 

3.    Research if refinancing will reduce costs. Alternative lenders allow borrowers to make small monthly payments during residency while also locking in a low fixed interest rate. However, be cautious when considering whether to refinance federal loans, they only reduce payments in the short term.

Source: U.S. News and World Reports



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