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If you’re a new doctor who has just been offered your first sign on bonus, you’re probably over the moon. Chances are, you’ve put in eight years of school, then another three to seven years of residency and fellowships, all while making do on a low salary. Now, your hard work is finally paying off financially.

The average doctor bonus for physicians who just landed their first full-time job reached nearly $30,000 in 2017, which is a record high. The size of bonuses has increased substantially since 2011, when the average was around $20,000 . The largest recorded bonus paid in 2017 was a whopping $200,000 .

Bonuses are very common: About 90% of doctors now get them. Swelling bonuses and salaries are partly a response to a growing physician shortage in the U.S.

The size of bonuses is especially impressive compared to what you’ve likely earned up until this point. The average medical resident makes only $59,300 a year. Given how frugally you’ve been living, you may not know what to do with this large chunk of change. Here are some tips on how to make the most of your bonus, and some words of caution about how not to spend that newfound cash.

What Not to Do with Your Doctor Sign On Bonus

Since you’re not used to having a large amount of extra cash, you may be tempted to use your bonus on a fun splurge. Or, you may simply not know what to do, having focused more on your medical textbooks than financial know-how. Here are some things to avoid doing with your bonus:

•  Don’t blow it on things that won’t last. After years of penny-pinching, it’s understandable that you’d want to treat yourself to some costly retail therapy, or on expensive meals and trips. There’s nothing wrong with spending on high-quality goods or a life-changing experience but be conscientious about each purchase.

•  Don’t let your money linger. Putting your bonus into a checking or savings account, can seem like the easiest thing to do and a way to protect your money. But, the interest rates you earn likely won’t even be enough to keep up with inflation. That means your money could decrease in value while in these accounts.

•  Don’t slide into debt. Having a large sum of cash can make you feel richer than are. You may be tempted to take on ongoing expenses, such as a house or car, that you can’t really afford once the bonus runs out. If your regular cashflow can’t sustain these expenses, you run the risk of going into credit card debt.

How Much is a Sign On Bonus Taxed?

Your bonus will be considered supplemental income and be subject to federal taxes, as well as state and local taxes depending on where you live. In 2018 , the IRS taxed supplemental wages at a rate of 22%.

If you receive the bonus as a check, rather than as part of your paycheck, it will be up to you to make sure you pay taxes on it. Get clear on how much you owe before you spend the check, and set money aside for taxes—otherwise, you might spend more than you actually have and come up empty when tax time rolls around.

Smart Options for Spending Your Physician Sign on Bonus

If you’re looking for ways to use your physician sign on bonus to wisely plan for the future, there are a lot of options that can be beneficial for your finances. Depending on your personal situation, you’ll be able to determine which option will best set you up to try and hit your financial goals.

Make a Dent in your Debt

If you’re just getting your first physician job, you might still have a hefty amount of student loan debt. Over a quarter of medical residents have student debt over $200,000 .

Since you’ve been living on a pretty low salary, you may have racked up some credit card debt as well. Particularly if your debt comes with high interest rates, it could be a smart move to use your bonus to pay some of it off. This is particularly true for credit card debt, which usually has high interest rates.

With student loans, your bonus could go even further if you refinance. Refinancing student loans involves taking out a single new loan, which comes with a new term and interest rate, to pay off your existing loans. Now that you have a stable job and a higher salary, refinancing may get you a lower interest rate, which may reduce how much you pay over the life of your loan.

Use a student loan calculator to figure out how much you could save, and how putting some of your bonus toward the loan could reduce what you owe over the life of the loan.

Build an Emergency Fund

Many financial professionals advise that everyone have an emergency fund equivalent to about six months of living expenses. This fund is meant to pay for unexpected and urgent costs, such as medical bills, car repairs, or a layoff.

The money should be kept in cash equivalents, so you can access it as soon as you need to. The fund is meant to help prevent you from going into credit card debt or worse if an emergency comes up. If you don’t already have an emergency fund, it makes sense to use your bonus, or part of it, to create one.

Save for Retirement

A frequently cited rule of thumb is to have the equivalent of one year of your salary saved for retirement by the age of 30. But, you might be behind on building your nest egg, since you’ve been in school or in low-paying residencies and fellowships. If you already have an emergency fund, you can use your sign on bonus to increase your 401(k) contribution (the maximum is $18,500 per year).

After you’ve done this, you can also put up to $5,500 into either a traditional or Roth IRA. These are accounts you can open on your own, regardless of what your employer offers, and allow you to invest in a variety of stocks, bonds and other assets.

The traditional and Roth IRA offer different tax benefits, and you must make below a certain income limit to qualify for a Roth IRA. If you’re not sure whether you’re on track in saving for retirement, an online retirement calculator may help you figure out where you stand.

Invest through a Wealth Account

Opening an individual investment account, such as a SoFi Invest account, is a great way to help your bonus benefit you in the long term. You can put in as much money as you want—the minimum is $100—and withdraw it anytime. Your funds will be invested in five to seven Exchange Traded Funds (ETFs), which consist of a diverse mix of stocks and bonds.

Diversification can help reduce risk, while investing in passively managed ETFs is a good lower fee approach. Plus, there are no management fees no matter the size of your portfolio. SoFi rebalances portfolios at least quarterly to maintain an investment mix and risk level you’re comfortable with. With a SoFi Invest® account, you can benefit from the low costs of automated investing, as well as the clarity that comes with human advisors.

The earlier in life you invest, the more value you can potentially create down the line. Of course, this isn’t guaranteed, since you can’t predict how the market will perform in any given time period. But the earlier you invest, and the longer you leave your money in the market, the more of a chance your money has to grow.

Suddenly having thousands, or even tens of thousands of dollars on your hands can be confusing for anyone. It can be especially overwhelming for a new physician used to getting by on student loans or a low resident’s salary.

Don’t make the mistake of thinking short-term or letting your doctor bonus sit idle.Whether you pay off debt, prepare for emergencies, save for retirement, or invest, you can rest assured that your money will be put to good use. By thinking long term, you can use this windfall at the beginning of your career to help set yourself up for a successful well planned financial future.

Use your sign on bonus to invest in a fulfilling future. Open a SoFi Invest account and put your money to work for you today.

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SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
SoFi doesn’t provide tax or legal advice. Individual circumstances are unique. Consult with a qualified tax advisor or attorney.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.
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If you’re working and want to continue school but aren’t sure how to fund it, your employer may offer assistance.

It’s called tuition reimbursement, and it’s how many companies help employees pay for continuing their education. Tuition reimbursement programs are growing in popularity as companies work to attract and retain employees.

Companies such as Starbucks, Amazon, Target, and more offer programs to help employees pay for a portion of their educational costs. These programs vary by company. Some companies may only cover course costs if the path of education is related to your job. Others may require employees to remain with the company for a certain period of time after completing their degree.

What Is Tuition Reimbursement?

Tuition reimbursement, or tuition assistance, is an arrangement where an employer pays for part or all of an employee’s continuing education whether undergraduate degrees or graduate school.

Your employment contract may lay out the terms of the tuition reimbursement: how much of your tuition your company will cover, what courses qualify, any minimum GPA requirements, and the minimum time period of employment.

Recommended: How to Pay for Graduate School

Tuition reimbursement is often offered as an employee benefit on top of a salary package, along with other benefits like health care, a 401(k), or transportation expenses.

This is different from student loan repayment assistance, when your company provides some amount of funding assistance for your existing student loans.

Not every company offers tuition reimbursement, but many large ones do provide reimbursement or financial support for continuing education. Some companies may stipulate that courses must relate to your current work.

Why Companies Offer Tuition Reimbursement

It’s a perk that helps the company attract and retain employees, while also benefiting the company, since the courses you take may provide skills or knowledge you can put into practice back at work.

Some companies are upping their educational benefits as a way to stay competitive. SoFi at Work helps companies offer a range of benefits to their employees like student loan refinancing and student loan contributions.

Not sure if your employer offers tuition reimbursement? Check in with your HR representative to see what options are available.

Tuition Reimbursement Requirements

The specifics of each company’s education reimbursement policy are likely laid out in an employment contract, but it’s common for a company to only offer a tuition reimbursement in accordance with certain eligibility requirements.

You’ll probably have to sign up and pay for the courses yourself first, so you’ll want to budget appropriately. In most cases you’ll need to pay for your courses out of pocket and then provide proof of completion and your grades in order to be reimbursed.

Program requirements

Your employer may limit its reimbursement program to certain institutions. For example, they may provide a list of accredited institutions you can choose from. Or they require that you attend a four-year program.

Coursework Requirements

Your company may reimburse you only for classes pertaining to your current job description.

Other times, companies will approve courses focused on moving you into a management role or on gaining skills you can put towards other future roles or assignments. For example, if you work in project management for a large corporation and are interested in learning how to use data visualization, you might be able to take community college courses in data production and visual graphics.

After understanding what courses qualify for tuition reimbursement, you could then consider looking over the other requirements. For example, there may be minimum GPA or attendance requirements.

Timeframe Requirements

Sometimes a company will also require you to continue working with them for a set amount of time, since they’ve invested in your education and don’t want you to take those new skills to a competitor.

Tuition Reimbursement And the FAFSA®

An employer’s tuition reimbursement program does not preclude you from filling out the Free Application for Federal Student Aid (FAFSA). In most scenarios, an employer is unlikely to cover 100% of tuition costs, and you may still qualify for aid in the form of federal loans and grants.

That said, you will be asked to not how much you are reimbursed for, which may have an effect on how much financial aid you’re offered.

Is Tuition Reimbursement Taxable?

While you should always consult with a licensed tax professional regarding the current tax law, and in no way should any of this publicly-available information be considered tax advice, the IRS’ website currently states that employers can deduct the cost of tuition reimbursement (up to $5,250 annually). It’s a business expense for them. The IRS website also states that the first $5,250 of tuition reimbursement isn’t considered taxable income. However, anything above that counts as part of your taxable wages and salary. Again, talking to a tax professional is always recommended.

The IRS does have some requirements on tax-free educational assistance benefits — which are not necessarily the same requirements your employer has.

Typically, for the IRS to consider tuition assistance as tax-free, it should be used to pay for tuition, fees, textbooks, supplies, or equipment.

And typically, it can’t be used for meals, lodging, transportation, or any equipment you keep after the course. It’s also not applicable to sports, games, or hobbies — unless they’re a degree requirement or you can prove they’re related to your employer’s business.

Again, consult with an accountant or tax attorney to get the complete picture.

What Are Other Options to Lower Education Costs?

The average cost of attending a four-year public college as an in-state student during the 2020-21 school year was $10,560 and that price tag only goes up for private schools and out-of-state students.

Federal Student Aid

For those who do not qualify for employer offered tuition reimbursement, there are other options that could be worth considering. As mentioned above, students can fill out FAFSA® annually. This allows them to apply for all types of federal student aid, including scholarships, grants, work-study, and federal student loans.

Private Student Loans

Beyond that, some may consider private student loans. While private student loans offer students the opportunity to finance their education, they do not always have the same borrower protections, like income-driven repayment plans, that are afforded to federal student loans. For this reason, they are most often considered only after all other options.

Recommended: Private vs Federal Student Loans

SoFi offers no-fee private student loans with flexible repayment options. (Again, private student loans don’t offer the same repayment benefits that federal student loans offer, so do your research.)

Refinancing Existing Student Loans

If you already have student loans, when it comes time to repay you could consider refinancing to a lower interest rate. This could help you reduce the amount of money paid in interest over the total life of the loan; refinancing at a lower monthly payment could help with budgeting in the short term. Note that lowering monthly payments is frequently the result of extending the loan term, which will result in increased cost over the life of the loan.

It’s important to note that there are various federal student loan repayment options and borrower protections (such as deferment or forbearance options). Refinancing federal loans eliminates them from these programs. Some private lenders offer programs similar to deferment that temporarily allow borrowers to pause payments when they experience temporary financial difficulties, including with SoFi’s Unemployment Protection.

The Takeaway

Employers who offer tuition reimbursement programs will cover a portion of tuition costs if the employee meets program eligibility requirements. These requirements vary by company, but may include things like maintaining a minimum GPA, coursework requirements, and stipulations around the length of employment.

If you’re looking to refinance student loans, prequalifying online with SoFi takes just two minutes. SoFi offers student loan refinancing with no application or origination fees and no prepayment penalties. Plus, existing SoFi members may qualify for rate discounts.

Learn more about refinancing your student loans with SoFi today.

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SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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There are several options for teachers seeking to reduce their student loan debt, including loan forgiveness, cancellation, or certain grants. For example, teachers may qualify for the Teacher Loan Forgiveness program, Public Service Loan Forgiveness program (PSLF), and Perkins Loans Cancellation for Teachers. Also, there are state and local loan forgiveness, cancellation, or grant programs. We’ll discuss these options in more depth below.

Teacher Loan Forgiveness Program

Amount forgiven:

Up to $5,000 or up to $17,500, depending on the subject area taught.

Which loans might qualify:

Direct (or Stafford) Loans, both subsidized and unsubsidized, and FFEL Program Loans. For borrowers with Direct Consolidation Loans, the outstanding portion of the consolidation loan that repaid an eligible Direct Subsidized Loan, Direct Unsubsidized Loan, Subsidized Federal Stafford Loan, or Unsubsidized Federal Stafford Loan may qualify as well. Learn more here .

Qualifications:

•  Teaching at a low-income school; you can search for a school in this directory

•  Teaching for five complete and consecutive academic years

•  Existing student loans cannot be in default

Details:

The maximum amount that a borrower can have forgiven under this program depends on the role and subject taught. Teachers are eligible to receive up to the highest forgivable amount, $17,500, if they are considered “highly qualified” as defined by the program and are full-time math or science teachers in an eligible school. Teachers working in special education that meet specific requirements may also qualify to have the higher amount forgiven.

Teachers are eligible to receive up to $5,000 if they are a “highly qualified” full-time elementary teacher or a full-time secondary school teacher in all other subject areas.

What does “highly qualified” mean? That the borrower has a full state certification as a teacher or has passed the state teacher licensing exam. With a few exceptions, you must also hold a state license.

How to apply:

Teachers are not eligible to apply until you’ve completed the five years of service. After completing this requirement, borrowers can fill out the Teacher Loan Forgiveness Application. (It may be helpful to get acquainted with the application now, because it clearly explains who qualifies for what amount of forgiveness.)

Public Service Loan Forgiveness Program

Amount forgiven:

Up to 100% of the remaining loan balance.

Which loans qualify:

Direct Loans, also known as Stafford Loans, and Direct Consolidation Loans

Qualifications:

•  Must be in certain public sector jobs and employed full-time

•  Must have made 120 qualifying payments (this takes 10 years if the borrower makes them consecutively)

•  Payments must be made as part of an income-driven repayment plan

•  Existing student loans cannot be in default

Details:

Unlike with the Teacher Loan Forgiveness Application , teachers don’t need to teach for a low-income school or within a particular academic subject when applying for the Public Service Loan Forgiveness Program (PSLF) .

The requirements for this program are that the borrower is employed by the government on a local, state, or federal level, or work for certain non-profit organizations that provide a qualifying public service—such as general education services.

To qualify for PSLF, borrowers must be on an income-driven repayment plan. An income-driven repayment plan will lower the monthly payment in accordance with the borrower’s income. This payment plan is required because under the standard repayment plan, the loans would be paid in full after 120 payments.

Related: A Look into the Public Service Loan Forgiveness Program

Sometimes, there is confusion about which forgiven loan balances are taxable and which aren’t. If a borrower meets the qualifications for PSLF, the forgiven amount will not be taxed. Borrowers who are utilizing an income-driven repayment plan to have their loans forgiven after 20 or 25 years (without participation in the PSLF program), it is possible that the forgiven amount will be taxed as income. To understand more about these tax nuances, consult a licensed tax advisor.

To qualify for PSLF, the 120 qualifying monthly payments do not need to be consecutive. For example, if a borrower has a period of employment with a non-qualifying employer, they will not lose credit for any prior qualifying payments made with a PSLF-approved employer.

While it is possible to partake in both the Teacher Loan Cancellation Program and PSLF, it’s not possible to do so concurrently. For example, your five years of service under the Teacher Loan Cancellation Program would not count toward your qualification for PSLF—you would have to qualify for PSLF under a different period of teaching service. Furthermore, payments made when working toward the Teacher Loan Cancellation Program would not qualify for PSLF—you would have to make 120 additional qualifying payments for the PSLF program.

To apply:

Borrowers may want to turn in the PSLF Employment Certification as soon as they are eligible to be certain that their employment qualifies for the program. Once received by the Department of Education, the borrower will receive a response telling them whether or not they qualify, and if they don’t, what needs to be done to qualify. If the borrower does qualify, they will tell them how many qualifying payments have already been made and how many need to be made.

Every time someone switches jobs, they’ll need to send in an updated Employment Certification form. Otherwise, borrowers will be required to submit an Employment Certification form for each of their previous employers when they apply for forgiveness.

Once a borrower has received notification that their PSLF Employment Certification has been approved, they’ll want to continue making those on-time student loan payments. After making 120 payments, they can apply for forgiveness.

Perkins Loans Cancellation for Teachers

Amount forgiven:

Up to 100% of the loan, done in increments over a five-year period.

Which loans qualify:

Federal Perkins Loans (The Federal Perkins Loan program expired in September 2017, but loans disbursed through the program may still qualify.)

Qualifications:

A minimum one year of teaching and at least one of the following requirements:

•  Teaching at a low-income school; search for a school in this directory

•  Teaching science, math, foreign languages, bilingual studies, or special education

•  Teaching a subject that has a shortage of qualified teachers in your state

•  Teaching in a school operated by the Bureau of Indian Affairs or on a qualifying Indian reservation

Details:

Those who are eligible for the Perkins Loans Cancellation for Teachers may have all of their Perkins Loans forgiven. The catch is, cancellation happens in stair-step increments over five years. And in order to qualify for this program, an employee must work directly for the school system—qualifying is entirely contingent on position duties. Here’s how the incremental forgiveness system works:

•  15% of the original Perkins loan balance is canceled per year for the first and second years of service

•  20% is canceled in both the third and fourth years

•  30% is canceled in the fifth year

To apply:

Each school has its own process, so borrowers should contact the school that administered the Perkins Loan.

State and Local Student Loan Forgiveness Programs

Some states offer loan forgiveness programs for teachers, especially for those that work in subject areas in high need. One place to start your search for a state and local teacher loan forgiveness program is through this database created by the American Federation of Teachers.

What About My Other Student Loans?

So far, all of the programs we’ve discussed only apply to federal loans. What can be done if borrowers have other loans (like private loans) that don’t qualify for federal teacher loan forgiveness?

One option is to look into refinancing the student loans. When a borrower refinances a student loan or multiple loans, they are essentially paying those loans off with a new loan from a new lender. Ideally, the new loan has a more competitive interest rate than the existing loan(s), which could potentially save the borrower money over the life of the loan.

Borrowers can refinance both private and federal student loans, so it is an option for teachers who don’t have loans that qualify for one of the federal forgiveness or cancellation programs.

Because refinancing happens with a private lender (not the government), a borrower would lose federal loan benefits such as access to the PSLF program and the Teacher Loan Cancellation Program.

The Takeaway

Teachers with federal student loans may be able to pursue loan forgiveness through programs like Teacher Loan Forgiveness or Public Service Loan Forgiveness. Borrowers who hold Perkins Loans may also be able to pursue Perkins Loan Cancellation for Teachers.

Get a quote for student loan refinancing with SoFi.

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SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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A medical fellowship after residency can provide the training you need for a successful career in your preferred specialty. But it also probably means you’ll make far less for a period of one to three years.

Do you get paid during a fellowship? Yes, you do. Medical fellows and residents earn a median salary of $58,305 a year, depending on how many years it has been since they earned a medical degree.

The Difference between Residency and Fellowship

Residency usually happens right after medical school and is designed to give residents the experience needed to serve patients. A fellowship usually follows residency and is designed to train fellows in a narrower specialty.

While some fellows may earn more than residents, the salary is still lower than for most working physicians. Usually fellows have to pay for the majority of their living costs, including housing and at least some meals.

Additionally, most fellows face a high student loan burden as well. Nearly three-quarters of medical students graduated with debt in 2020, and the median debt amount in 2019 was $200,000.

With a relatively low salary and a high debt burden, being smart with money during fellowship years can be a big part of creating a strong financial foundation.

Fellows may feel like they have too much on their plate to devote time to thinking about personal finance. But just a few savvy budgeting strategies can help fellows live within their means and potentially avoid getting deeper into debt.

10 Budgeting Tips for Living on Your Fellowship Doctor Salary

1. Finding a Budget that Works for You

The first step to smart budgeting is actually making a budget. This isn’t as hard as it sounds. Start by making a list of monthly expenses in two categories: fixed expenses (those that stay roughly the same every month, such as rent, utilities, and insurance) and variable expenses (those that fluctuate, such as eating out and entertainment).

Next, note how much money is earned each month from fellowship or any other income sources. Use take-home pay after taxes and deductions.

Ideally, expenses should be less than income. If they’re not, work out where costs could be trimmed. With a reasonable budget in place, the next step can be to track spending each month.

2. Living Within Your Means

It bears repeating: generally expenses should not exceed the money you bring in. On a medical fellowship, you might be tempted to bite off more than you can chew financially with the expectation that your salary will soon increase dramatically. But going into debt isn’t a savvy way to start off your career.

Credit cards generally have the highest interest rates (currently more than 16% on average), so even a small balance can balloon into substantial debt down the line. Failing to make payments, or using too much available credit, could impact an individual’s credit score, which could make a difference when, for example, when looking for a mortgage or car loan.

3. Choosing Housing Carefully

For most people, housing is their single largest monthly expense. That’s why it’s worth putting in the effort to find an affordable option that meets your needs. In a particularly expensive market, it may be worth getting roommates. Another factor to consider—the closer you are to your workplace, the more that can potentially be saved in commuting costs.

4. Delaying the Purchase of a New Car

For those living in an urban area, think about whether public transit or carpooling may be options for getting to work. If a vehicle is non-negotiable, consider a used car rather than a new one. Cars lose much of their value when they’re driven off the lot for the first time, so it may be worth seeking out used cars that are in great shape at a great price.

5. Saving on Food

As a variable expense, food is an area with plenty of opportunity to save. If you have any meals provided for you as part of your fellowship, take advantage of the free food. Eating out can be tempting with a busy schedule, but it may be wiser to limit how often you go to restaurants and how much you spend there.

Since you won’t always have time to cook, preparing meals in batches to eat throughout the week could help you resist the temptation of going out.

Grocery shop knowing what’s on sale, what produce is in season, and even take a chance on generic versions of brand-name foods. Look for nonperishable items in bulk at discount stores. If you’re feeling extra thrifty, clipping coupons could save you some change, too. Some stores even offer coupons through their app—no clipping required.

6. Traveling with Rewards Points

During your fellowship, you’ll probably want to go on vacation and take a well-deserved break. But your trip doesn’t have to break the bank. Fellows with a decent enough credit score, may qualify for credit cards that offer significant point bonuses, which can be redeemed for travel costs like flights, hotels, or rental cars. Some cards may require cardholders to spend a certain amount up front to qualify for a bonus, so double check you’re not taking on unnecessary expenses or carrying a balance if you don’t need to.

Related: Top Travel Hacks

7. Taking Advantage of Income-Based Repayment Plans, Deferment, or Forbearance

Those with eligible federal loans who cannot afford to make payments, may be able to pause their payments through deferment or forbearance options if they meet certain qualifications.

Income-based repayment plans allow borrowers to tie their monthly payment to what they make, and the balance is generally forgiven after a certain number of years (currently anywhere between 20 to 25 years).

Eligibility for these programs largely depends on the types of student loans that the borrower holds and when they were borrowed. Those who are in a qualified graduate fellowship, may be able to request to defer your loans.

If successful, they likely won’t have to make payments during the fellowship. In some cases, borrowers may not be required to pay accrued interest, for example, if they hold subsidized federal student loans.

Borrowers who don’t qualify for deferment, but are still struggling financially, may be able to apply for forbearance, but would likely be responsible for paying the interest that accrues.

Fellows who are interested in pursuing a career in public health may also consider the Public Service Loan Forgiveness program . In that program, borrowers who work for a qualifying non-profit establishment, may be able to get their loans forgiven after 10 years of income-based payments.

8. Trying to Save

Living on a fellows salary may not leave much room for saving, but if at all possible, setting small savings goals could be helpful.

For example, if you don’t already have an emergency fund, you could try to put away some money every month until you have about three to six months of living expenses saved.

Once you have a cushion for emergencies, consider contributing to a retirement account, such as a traditional or Roth IRA. The power of compound interest means investing early can translate into gains over time. The longer money is invested, the more time it potentially has to grow and withstand any volatility.

9. Considering Passive Income

As a fellow, you probably don’t have much extra time to take on a side hustle. If you’re looking for ways to potentially boost your pay, consider looking into low-effort side hustles as sources of passive income, which can allow you to earn money without investing much time or energy.

Examples include renting out your room or car, wrapping your car in ads, or creating an online course. It may require some up front effort, but if you can increase your cash flow without working too much, it could be worth it.

10. Refinancing Your Student Loans

Dealing with student loans, potentially from both undergraduate and medical school, can be challenging when you’re living on a medical fellowship salary.

Refinancing your medical student loans is one way to help make your debt more manageable and potentially free up some extra cash.

When you refinance your loans—both federal and private—with a private lender, you typically get a new loan at a new interest rate and/or a new term.

Depending on your situation, refinancing can lower your monthly payment. Many online lenders consider a variety of factors when determining your eligibility and loan terms, however, including your educational background, earning potential, credit score, and other factors.

Keep in mind that when refinancing with a private lender, you do give up the benefits that come with most federal student loans, like deferment, forbearance, or income-based repayment programs, so it won’t make sense for all borrowers.

The Takeaway

Fellowships can be an excellent opportunity to learn about a specific medical field, but the relatively low salary may require some creative budgeting in order to keep expenses in line with income.

Some ideas to consider include creating a passive income stream, shopping smarter at the grocery store, establishing a realistic budget, and finding an affordable living situation.

Interested in refinancing student loans? Learn more about options available with SoFi.

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