How To Pay Off Med School Debt | Student Loan Planner

Are you paying down your medical school loans? Here's what you need to know so that you can pay back your medical school debt the right way. If you're a physician, basically everybody loves you in the finance sector. You're gonna get hit up so much by financial advisors, insurance salespeople, mortgage brokers, all kinds of folks want to get access to your ear because you have a high stable income in the future or presently that they are going to be able to easily get you qualified for whatever financial product or advice they're trying to sell you. And student loans are no different. Private lenders will very much want to approve you for private student loans for medical school. And refinancing companies will very much want to approve you for a lower interest rate on your loans after medical school. Physicians can also refinance as soon as their residency because there's a lot more flexibility for physicians than there are other professions. Also in fellowship, you can also refinance well before you have an income that could justify paying back that amount of loans that most people have from medical school. Most lenders will give you $100 payments during training and allow you to make your first large payment when you become an attending. So an example of that, studentloanplanner.com slash refi, you can get cash bonuses if you apply through Laurel Road or SoFi on our sites, then you'll find the option to pay $100 a month in training with a lower interest rate. The problem with that though is there's usually better options that physicians can take advantage of than refinancing when you're in training. And here's why. Most physicians don't realize you can sign up for the revised Pay As You Earn program. It's called Repayee. This program will give you subsidies on your interest in this way. During training, most people's payments will be anywhere from $200 to $400 a month if they're single. And that payment gets applied to the interest and then any remaining interest is subsidized at a rate of 50% by the government and never even shows up in what you owe. The revised Pay As You Earn program usually results in very similar interest rates to what you would have gotten if you had refinanced your loan during residency or fellowship. That's why if someone is somewhat unsure about what they want to do after medical school or after training in terms of what employer they want to work for, then you really want to make sure that you keep your loans federal and probably on the revised Pay As You Earn program so that your interest can be minimized during that training period. Now, what you want to think about though is there are a lot of situations where that revised Pay As You Earn plan is not the right plan. Here's some examples. If you're married, student loan repayment is a lot more complex. One example is you might want to exclude your spouse's income from your payment. Say you're going for public service loan forgiveness as many physicians are planning to do. You want to pay as little as possible. You want to pay extra, right? So that means that you either need to not get married or you need to file your taxes separately and sign up for Pay As You Earn or income-based repayment, which allows you to exclude your spouse from your payment calculation. Now, that can mean the difference between paying a couple hundred a month for your student loans or paying even over $1,000 a month in some cases or several hundred dollars a month for your student loans. That's very important to get that strategy correct. There's also situations where a physician would not want to refinance even if they're going to the private sector. A classic example of this is somebody who went to an osteopathic medical school, which usually costs a lot more on average than allopathic schools. And let's say that person goes into primary care. You know, you might have a $400,000 balance with a $150,000 or $160,000 income. And if you owed more than twice what you earned in the private sector, then going for a 20-year forgiveness plan where you pay for 20 years instead of 10 years and then also in the private sector, you would owe income taxes on any forgiven balance at the end of those 20 years of payments. Whereas in public service loan forgiveness case, you would have no income taxes if you worked for a qualifying employer for 10 years while paying based on your income. So forgiveness is more than just public service loan forgiveness. Many, many physicians that went to the highest cost medical schools that are in primary care or lower earning specialties could benefit from forgiveness in the private sector, which is a 20 to 25-year income-driven forgiveness strategy. So physicians need to either pay back their loans in full, which means at some point you would want to refinance, or you need to go for public service loan forgiveness because you work for a 501c3 or not-for-profit hospital or government employer and you pay for 10 years based on your income and the remainder's forgiven tax-free, or you would do the 20 to 25-year IDR forgiveness, which is taxable when the loans are forgiven, and you can do that working part-time or working in the private sector. Those are the three main paths, and if you do become an attending or if you are in training and you have a spouse that has an income that's pretty high and you know that you want to pay your loans off, that's when refinancing during training makes sense. Once you're out of training, refinancing makes sense. Once you're very sure that you have no desire to return to a 501c3 or hospital or not-for-profit employer. If you did, then you would kick yourself for not getting your loans forgiven tax-free under the public service loan forgiveness program because when you do qualify for that program, the interest rate is usually negative, and nothing is better than a negative interest rate even if you've refinanced to an ultra-low rate. It's still not as good as negative, right? So if you're paying back your student loans from medical school, be aware that a lot of you can do the revised pay-as-you-earn program if you're unsure about your future, or you need to do the pay-as-you-earn program because you're thinking about capping your payments because the pay-as-you-earn program has a hard cap on what you actually have to pay every month. The revised pay-as-you-earn plan has no cap. So if you need to go for public service loan forgiveness and you're sure of this, I would actually recommend typically the pay-as-you-earn program because of the caps and the tax filing flexibility that it affords you. And then if you are in a primary care specialty with a lot of debt, or you're in a lower-earning specialty, or you're in a high-cost-of-living area where you think your incomes are gonna be lower than if you were working, say, in the middle of the country where incomes are much higher, then you might wanna consider the 20 to 25-year taxable forgiveness, which you have to pay income taxes on, and that is something that a lot of physicians don't even know about. Paying back medical school debt is a lot more complicated than people like to think. And if you do wanna get a custom plan and get customized help, that's what we specialize in. We've advised thousands of borrowers for hundreds of millions of dollars in debt, and we love finding people extra savings and figuring out complex strategies that make sense. So reach out to us, studentloanplanner.com slash help. We love to save you money on paying back your medical school loans.