We get SO MANY questions from resident and fellow physicians on this topic. Med school is expensive! So if you're not one of the lucky ones to graduate without student loan debt, here's a little breakdown from Brad:
There are two types of student loans most physicians & dentists have beginning their careers: public and private.
Private Loans - if you have private loans you were probably an international student or you studied abroad. A co-signer is often necessary on these loans and they tend to have higher average interest rates than public loans.
A couple things you can do upon finishing med school:
- If you have a co-signer and you decide maintain your loan as-is, think about getting a small life insurance policy to cover the outstanding debt for your co-signer. They'll appreciate it.
- When you secure your position, an employment contract or paystubs provide proof of income that can help you refinance your loan at what might be substantially lower interest rates. Check out companies like SoFi and Laurel Road who have great programs for this.
Public Loans - without getting into all the different types of public and federal loans, we'll just talk about repayment options topically.
- Standard 10 year amortized payments. Your debt is divided equally over ten years worth of monthly payments. These tend to be generally high payments.
- Pay As You Earn (PAYE) or income-based repayment. This is calculated using your state's poverty line and your discretionary income to determine an appropriate monthly repayment amount. These tend to be lower monthly payments than 10 year standard, and are a great alternative if you're in a comparatively lower-paying specialty.
- Alternative Options - Extension (extending the payback period to greater than the 10 year standard) or graded payments (increasing payments over the life of the loan repayment)
Public Service Loan Forgiveness Program
The Basics - The program was initially designed ten years ago to help those in public service occupations with a high amount of student loan debt (and typically a lower-earning profession - like teachers). It stated that at a certain point in the future, if you had banked enough "credit" of public service over those ten years, made regular payments in a qualifying way, and fulfilled administrative obligations of the program with your loan servicing provider and employer, you could be eligible for total student loan forgiveness with no tax-ramifications. Dreamy, right?
Well…how's it's actually worked out so far:
Tens of thousands of applications have been submitted and fewer than 1000 have been accepted! Often because of improper paperwork filed by the individual or loan servicing company. It has yet to be seen how this will continue to unfold, but suffice it say that it doesn't look like an easy road to forgiveness.
But! If you're trying to pursue public student loan forgiveness here's a couple tips:
- From the onset, let your loan servicing provider know that public service loan forgiveness is what you're trying to do.
- Ask what your loan servicer requires - this includes employment certification forms which must be filed.
- Make a call annually to your loan servicing company to help ensure you've fulfilled your obligations correctly, giving yourself the best chance at forgiveness.
- Last, and I know you don't want to hear this, save additional money as a back-up for loan repayment so if your PSLF application isn't accepted, you're prepared. (if it is – cha-ching! You'll have a chunk of change to throw at your retirement or other saving goals)
If you're looking for more information - studentaid.ed.gov has all the info and tools. You can also find the official public service loan forgiveness application, as well as the employment certification form.
SoFi and Laurel Road are not affiliated with nor endorsed by LPL Financial