Congratulations—it’s finally over. After years of rigorous studying, training, and overall hard work, you’ve managed to graduate from medical school. At this point, you’ve likely made it through Match Day , are ready to start a residency, and are finally on the road to becoming a fully-fledged doctor.
Though the relief of graduation is certainly well deserved, unfortunately medical school isn’t totally behind you yet. If you’re like most medical students, chances are that you finished school with a considerable amount of debt.
Like students in any discipline, the average med school student graduated with a good amount of debt. According to the Association of American Medical Colleges , 84% of medical students in 2019 had education debt of $100,000 or more, with 54% of all students owing $200,000 or more.
And while the average doctor can potentially make quite a bit of money—pediatricians earn an average of $225,000 and orthopedic specialists make $482,000 , for example—the average resident does not.
So, what’s a resident to do? Unfortunately, for some finances may continue to be a challenge in the years immediately after graduating from medical school, so it could be helpful to take steps to lessen the financial anxiety that can accompany such a significant debt load.
The good news is most physicians could be on track to pay off their debt quicker than those in other fields with lower earning potential. But, even once you make the big bucks as a doctor and negotiate a sizable physician signing bonus, you’ll likely look to maintain your financial well-being.
Here, we take a look at some tips that may help you to get the most out of your money post-med school so that you can manage your student loans without unneeded stress.
Making a Post-Med School Budget and Sticking to it
Residency can feel like a time when you’re struggling to make ends meet while working 12-hour shifts on your way to becoming a doctor. But the reality is, the average resident salary in 2019 was $61,200, according to the latest annual Medscape report.
The good news is, depending on where you’re matched, this actually could be above the median salary for the area.
If you find yourself placed in a city with a relatively low cost of living, you could be at an advantage and may be able to better make ends meet as a resident, if you budget appropriately and stick to it.
If you find yourself living in a big, expensive city or somewhere where frugal living is harder to come by, you may find yourself facing some challenges when it comes to budgeting.
Either way, it’s helpful to create a budget that makes sense for your current circumstances. This might not include a fancy car (yet), and unless you’ve already signed a medical contract to stay in the same city after your residency, then it may not include buying a house either—even if you might be tempted by a mortgage loan.
Budgeting doesn’t end once you’re done with residency, either. If you can stick to your resident budget for an extra year or two, you may be able to save up money to pay down more on your student loans and start your medical career with some cash.
After all, the rate at which you are able to become debt-free may largely depend on your budget and lifestyle, not just your income.
Having an Emergency Fund and a Retirement Account
Typically, a good financial wellness rule of thumb is to aim to have a few months’ worth of your income saved up for an emergency fund. And yes, this is even applicable for doctors, who will likely still need the fallback if something happens that ends up being a huge expense.
You may want to keep in mind down the road that after paying for things like student loans, a car, and potential house payments, you might not have as much left over from your paychecks as you think.
Given this, one good idea may be to start stashing away money whenever you can, and putting this emergency money into a separate account from your regular checking account. This way, you can know that it’s there but not be tempted to use it.
Though retirement may seem like a lifetime away—especially after recently finishing up school—i saving for retirement as soon as is practical is a common financial goal. Though your post-practice life likely feels far away, it’s helpful to get into the habit of putting away something regularly. With a solid budget in place, You may be less likely to have to pick between paying down student loans or setting aside for retirement, either: it’s possible to do both.
Depending on what makes the most sense for your situation and goals, you may want to invest your money in a 401(k), 403(b), or a traditional or Roth IRA. It may be helpful to keep in mind that the first rule of retirement savings is to maximize your savings, so if your new employer offers a match, this is something you may want to consider taking advantage of.
Considering an Income-Driven Loan Repayment Plan
You might find yourself feeling tempted to put your medical school student loans (if they’re federal student loans) on hold or into forbearance while you finish residency, but that move could still rack up interest and leave you further in debt.
Instead, you might consider an income-driven repayment plan that establishes monthly payments based on your income and family size.
It may not be as fast as sticking with traditional repayment plans, but if it’s necessary, this method could potentially help you avoid ballooning interest payments while you’re in residency, and typically lowers your monthly payments by lengthening your loan term. (Repayer beware: longer loan terms mean more interest payments, so it’s likely you’ll pay more for your loans overall.)
For med school graduates, there are a few federal income-driven repayment plans you may want to consider: income-based repayment (IBR), income-contingent repayment (ICR), and Pay As You Earn (PAYE).
The eligibility requirements will vary for each type of plan, and you may have to pay more once you sign a medical contract or earn more as a doctor, as income for plans such as PAYE is reviewed on an annual basis. Still, it’s helpful to consider the different options out there and choose what works best for you. And if you choose to practice medicine in underserved communities—as we’ll explain in more detail below—an income-driven repayment plan may be part of that picture.
Checking out Student Loan Forgiveness Programs
Another potential option you may want to look into is going into a public service program. This option allows for a particularly attractive perk for doctors: student loan debt forgiveness.
Public Service Loan Forgiveness (PSLF) is one such program run by the U.S. Department of Education that forgives the remainder of federal loans after participants have met certain eligibility requirements, such as ten years’ worth of on-time, eligible monthly payments and working for a qualifying employer, which typically includes government or certain nonprofit organizations.
The good news is that these programs may tie in nicely with the work you already want to do as a doctor. If you’ve always wanted to go into public service and also find yourself feeling overwhelmed by the prospect of paying off all of your debts, then this may be a great option.
Even if you’re not entirely sure, it may be a good idea to get started with the process now because you will need to ensure your repayment plan is on track in order to qualify later—and that may require one of the income-driven plans mentioned above.
To set yourself up financially for this situation, first you may need to consolidate your federal loans into a Direct Consolidation Loan, but it’s wise to carefully review the PSLF program requirements first. A word of caution: Refinancing with a private lender means you’ll lose federal benefits such as PSLF and income-driven repayment.
And if public service just isn’t your thing, the National Institutes of Health (NIH) and the National Health Service Corps (NHSC) also have med school loan repayment programs for doctors who are interested in doing medical research for a nonprofit organization (through NIH programs) or health care work in a high-need area (via the NHSC program).
Many states also run their own loan forgiveness and repayment programs for doctors, which are worth looking into if you’re interested in this route. Keep in mind, there may be several different options that can help you get your loans forgiven.
Looking into Refinancing Your Student Loans
Dealing with student debt can be one of the most stressful things people experience in their lifetime. After years of hard work, graduating into a world of six-figure debt can sometimes feel anti-climatic, but rest assured that there are options.
Even if the above strategies aren’t a fit for you, there are other ways to move forward. Depending on your exact situation and needs, you may be a good candidate for student loan refinancing, which allows you to consolidate outstanding loans and may reduce your interest rates, as well as your stress levels.
(Keep in mind, again, that refinancing your student loans with a private lender will mean that federal loan benefits, like the ones mentioned above, will no longer be available to you.)
Refinancing your loans at a lower interest rate can be a fairly simple way to save money on your life of loan interest cost. SoFi has a number of student loan refinance options for medical school graduates, with variable or fixed interest rates and no application fees.
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