Reducing student loan costs for physicians

By Michael Jerkins, MD

Physicians often accumulate significant debt during medical school, with many owing hundreds of thousands of dollars by the time they graduate. Once in residency or practice, it’s time to begin paying off these loans.

While every physician’s financial situation is unique, some aim to minimize their total repayment amount over time. Here are strategies to help you achieve that goal.

1. Explore loan forgiveness.
For physicians with federal student loans, loan forgiveness programs can offer substantial relief. One option, Public Service Loan Forgiveness (PSLF), allows eligible physicians who work for qualifying public service employers to have their remaining loan balance forgiven after making 120 qualifying payments.

If you aren’t working for a qualifying employer, Income-Driven Repayment (IDR) programs are another option to reduce your total loan cost. IDR plans allow for loan forgiveness after 20-25 years of qualifying payments.

2. Make extra payments.
If forgiveness programs don’t align with your goals and career path, making extra payments can significantly reduce the total interest paid over the life of your loans. Even making one extra payment per year can help shorten your loan term and reduce overall costs. Keep in mind that if you plan to utilize PSLF or IDR forgiveness, extra payments might actually increase your total out-of-pocket costs.

3. Choose a shorter repayment term.
Another way to lower your total repayment cost is by opting for a shorter loan term. While shorter repayment periods require higher monthly payments, they reduce the amount of interest that accrues over time. This option may not be feasible for physicians still in residency or fellowship, but it’s worth considering once you're established in practice.

4. Set up automatic payments.
Federal student loan servicers often offer a 0.25% interest rate reduction for borrowers who enroll in automatic payments. Over time, this discount can lead to meaningful savings, especially on large balances. Setting up automatic payments not only provides a financial benefit but also ensures you never miss a payment.

5. Refinance/consolidate loans.
Physicians with high-interest loans may find it beneficial to refinance their student loans, particularly with a private lender offering a lower interest rate. Refinancing can help reduce monthly payments and total repayment cost. However, this option should be considered carefully. Refinancing federal loans with a private lender will make you ineligible for PSLF or IDR plans.

Consolidating multiple federal loans into one can simplify your repayment process and may also lower your monthly payments, but it won’t necessarily reduce your total repayment amount unless you also refinance at a lower interest rate.

Refinancing built for doctors
Carefully evaluating the pros and cons of these options can help you chart the best course toward financial freedom. If refinancing could help you save over the life of your student loans, Panacea Financial is ready to help with transparent rates, no maximums, and exclusive discounts for FMA members. Learn more about student loan refinancing from Panacea at https://panaceafinancial.com/our-partners/fma-members/ .

Michael Jerkins, MD, is the president and co-founder of Panacea Financial and a practicing physician in Little Rock, Ark. Panacea works with the FMA to provide member-exclusive discounts on personal loans, student loan refinancing, and practice loans. Panacea Financial is a division of Primis Bank, member FDIC. To learn more, visit panaceafinancial.com/our-partners/fma-members/ .