Simple Steps to Pay off Medical School Debt Faster
Pay off medical school debt faster by setting a strategic budget, adding side-gig income, using forgiveness programs, and trimming expenses to erase loans years early.
The aspiring physician typically enters medical school with high expectations and a strong sense of altruistic intentions. Along the way to reaching their doctoral goal, they also accumulate significant debt — an average of $264,519, to be precise.
This debt load only includes the money owed for education. It doesn’t consider the non-educational debt accrued for cost of living, too!
The good news is that your higher student loans come with the chance to spend the rest of your career earning a greater income than the average citizen. What you do with it can mean the difference between being in debt for decades or getting out of it early. With these tips, you can use your determination and intelligence and apply them to paying off your med school debt!
1. Set and Stick to a Strategic Budget
Some people thrive on budgets, while others feel like they’re too restrictive or overwhelming. No matter where you stand on the idea of having a budget, if you truly want to pay off debt and start building a strong financial future, you’ll need to create some kind of guide to get there.
The type of budget that will work for you depends on factors like how often (regular) you get paid and when your bills are due. Many doctors find the 50/30/20 budget is helpful because you can use the principles behind it regardless of your income, so it grows with you as your earnings change.
In the 50/30/20 budget, you take 50% of your after-tax income and pay off the essentials: mortgage, car payments, minimum payments on debt, groceries, etc. Be sure to include your insurance policies in the “needs” column. (Note: Look at any employer-provided insurance and check its coverage. You may want to invest in outside insurance that suits your goals and lifestyle. Some insurers have exclusions that might be relevant to you, as discussed in this article by OJM Group.)
Then, 30% of the rest is applied to wants: things you want to do that aren’t necessary, such as going out to dinner.
Finally, the remaining 20% is put straight to debt — in this case, your student loan payments. However, some financial experts suggest other methods of paying down debt, such as the Snowball Method coined by Dave Ramsey.
2. Make Extra Money Just For Your Debt
Once you start sticking to a budget, you begin living within your means naturally. From there, you can make extra money and apply it to your student loans without the temptation to use it on splurges.
Physicians have a variety of ways they can bring in more funds, even with busy schedules. For example, you might be able to do one or more of the following income-creating activities:
- Negotiate your contract to request a pay raise or perks that reduce your monthly expenses.
- Work locus tenens for other doctors on your days/hours off.
- Offer your experience to courts as an expert medical witness.
- Review medical charts for insurance companies or other organizations as a neutral source.
- Write articles or blogs for companies in need of medical experts.
These side gigs can be consistent or occasional, but they pay well and can make a dent in the interest and principal of your student loans.
3. Sign Up for Student Loan Forgiveness
Doctors who work in nonprofit hospitals or universities may qualify for Public Service Loan Forgiveness (PSLF). PSLF is a federal program that forgives your student loan debt after a specified time of working for a qualified employer.
Not only do you get paid for your work, but your student loans are wiped off the board, tax-free. This option can be cost-effective for those with high medical debt and limited income potential. It isn’t always the best choice for those in higher-paying fields, like surgeons.
4. Reduce Your Expenses
Here we have the final, yet often most effective, action step toward debt reduction. Reducing your expenses can save you hundreds or thousands of dollars per month (depending on how you live). Those savings can be applied to your student loan debt.
Thinking about cutting back might seem restrictive or overwhelming, but it could be simple. Pull out your bank statements from the last three months and start reviewing them. If there’s any repetitive charge you don’t recognize, it could be from something you don’t use. Cancel those extra streaming services — do you really need all of them?
Check into different auto insurance and phone plan quotes. Switching to a new provider could save you hundreds of dollars annually. Look into plans that include extra benefits. For instance, some phone or grocery delivery providers partner with streaming services, so you might be able to cancel a service you pay for and still get it free!
Cutting down on expenses helps you boost the 50/30/20 budget by putting your money where it matters.
Conclusion
It might seem like those student loan balances aren’t moving quickly enough to ever get paid off, but that doesn’t have to be true. Once you start making more than the minimum payments, you’ll see marked changes. Keep putting everything extra toward your debt, and soon, you’ll have all those years of medical school off of your financial shoulders (and credit report).
