Strategies to Pay Off Student Debts

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For most doctors, a medical degree comes with a hefty price tag. Many medical school graduates leave school with over $200,000 in student loans, and for nearly one in five, that debt surpasses $300,000. This level of debt can feel overwhelming especially with starting a new career, but with smart strategies, paying down medical student loans faster is achievable. We will be covering proven strategies to help doctors repay their loans sooner, reduce interest costs, and build a solid financial foundation.

1. Get on an Income-Driven Repayment Plan (IDR)

Income-driven repayment (IDR) plans are essential for doctors who may not yet earn a high salary but want manageable monthly payments. IDR plans calculate payments based on income and household size, potentially lowering monthly payments significantly. With plans like REPAYE and PAYE, you can qualify for forgiveness after 20-25 years. This can be a lifesaver for doctors in training or those with fluctuating incomes. One important note is that IDR plans do not work with private student loans. Life is ever changing and so are jobs. That is why an Income-driven repayment plan works for every stage of your life. 

• Benefits: Reduced monthly payments that adjust with income.

• Drawback: Extended repayment terms can mean more interest over time

2. Take Advantage of Public Service Loan Forgiveness (PSLF)

Public Service Loan Forgiveness (PSLF) is a game-changing option for doctors working in public or non-profit healthcare roles. By making 120 qualifying payments while employed full-time with a 501(c)(3) organization or government entity, physicians may have their remaining loan balance forgiven, tax-free. For many doctors, this means they can pay off loans within ten years instead of dragging out payments for decades.

However, qualifying for PSLF requires strategic planning and financial discipline. Here are some essential tips to maximize PSLF while safeguarding yourself financially:

🪄 Follow the Steps But Avoid Refinancing: If you’re aiming for PSLF, do not refinance your federal loans, as this makes them ineligible for the program. Instead, stick to an income-driven repayment plan to keep monthly payments lower and more manageable.

🪄 Create a PSLF Side Fund: Rather than sending extra cash to your lender, build a “PSLF Side Fund” by putting additional payments into a brokerage account. This fund acts as a safety net in case PSLF doesn’t pan out due to changes in your career or government policies. You can rely on this fund in three key scenarios:

• If you leave your PSLF-qualifying job and take a position that doesn’t qualify for PSLF.

• If there are changes to the PSLF program and you’re not grandfathered in.

• If dealing with the PSLF system becomes too challenging, and you want an alternative plan for paying off your loans.

🪄 If none of these situations arise and PSLF works out as planned, your side fund becomes a bonus nest egg. Having this fund means you’ve virtually “paid off” your loans years in advance, offering peace of mind and accelerating your financial independence.

🪄 Stay Diligent with Paperwork and Requirements: PSLF requires meticulous tracking of employment and payments, so complete annual certification forms and check in regularly on your loan servicer’s PSLF tracking.

Taking advantage of PSLF, while building a PSLF Side Fund for backup, allows you to be prepared for any scenario, giving you flexibility and financial security. You can check you eligibility at StudentAid.gov

• Benefits: Complete forgiveness after 10 years of payments.

• Drawback: Limited to doctors working in qualifying public or non-profit roles.

3. Work Locum Tenens or Per Diem Shifts to Make Higher Loan Payments

One effective strategy for early-career physicians looking to pay off student loans quickly is to take on locum tenen or per diem shifts. This approach allows physicians to boost their income significantly, thereby accelerating their loan repayment.

According to a CHG Healthcare study, physicians who work locum tenen jobs earn an average of $32.45 more per hour compared to those in permanent positions. This wage differential can lead to substantial additional income, making it easier to manage and eliminate student debt. Notably, 59% of surveyed physicians reported having worked locum tenen within their first decade in practice, highlighting its popularity and viability as a financial strategy. Working locum tenen is not only lucrative but also offers flexibility. Many physicians enjoy the ability to work on their own terms, which is particularly beneficial for those balancing family obligations or other commitments. Interestingly, over half (51%) of physicians who have taken locum assignments choose to work close to home, dispelling the myth that locum tenen work is only for those interested in travel.

By funneling earnings from locum tenen work directly toward student loans, physicians can significantly shorten their repayment timelines. For instance, if a physician is able to earn an additional $30,000 a year through locum shifts, applying this directly to their student loans can result in paying off a $150,000 balance in about three years, assuming the regular monthly payments are also maintained. This targeted approach helps to diminish interest accrual and reduces the principal balance faster.

For those in the medical field, working locum tenen or per diem shifts can be a game-changer in managing student loans. The extra income not only helps with immediate financial obligations but also positions physicians for a more secure financial future. 

• Benefits: Higher income, more flexibility, and faster debt repayment.

4. Make Payments During Residency

Paying down student loans during residency may seem daunting given the financial constraints of being a trainee. However, making even small payments can have a significant impact on your overall debt and interest accumulation. Here are some effective strategies and considerations for managing loan payments during this critical period:

Most medical students graduate with substantial debt, and the residency years are a prime time to start addressing that burden. Even if you can only afford to make minimal payments, starting early can save you thousands in interest over time. For instance, making payments on your loans while in residency can prevent the interest from capitalizing, meaning you won’t pay interest on the interest accrued. According to the Student Doctor Network, any amount paid—even $50 a month—can make a difference.

If you have private loans with high-interest rates, consider refinancing as soon as you start residency to take advantage of lower rates. Some lenders offer specific residency refinancing programs that can provide additional benefits, such as deferred payments for a limited time.

While residency can be financially challenging, it’s an essential time to take charge of your student loans. By making payments whenever possible, you can significantly reduce the impact of student debt. 

• Benefits: Keeps loan balance from ballooning during residency.

• Drawback: Budget constraints may make payments challenging.

5. Refinance for a Lower Interest Rate

Refinancing your student loans to achieve a lower interest rate can have a huge impact on how quickly and affordably you pay off your debt. Reducing the interest rate on your student loans can mean saving thousands in interest payments over the life of your loan, allowing more of your monthly payment to go toward the principal balance. 

Refinancing allows you to replace your existing loans with a new one from a private lender, ideally with a lower interest rate and better terms. This process is particularly advantageous for physicians with high-interest federal or private loans who do not plan on taking advantage of forgiveness programs such as PSLF. By refinancing, you can secure interest rates as low as 2-4% if you have a good credit score and a favorable debt-to-income ratio, compared to the average federal student loan rate of 6-7%.

For example, refinancing a $300,000 loan from a 7% interest rate down to 3% can save approximately $12,000 per year in interest alone. These savings can then be redirected to accelerate your principal payments, helping you pay off the loan much faster. Many physicians take advantage of "variable-rate" refinancing options as well, which offer the lowest rates. A shorter loan term (such as five years) generally offers the lowest rates, though the monthly payments are higher.

It’s important to shop around and compare multiple lenders to ensure you’re getting the most competitive rate. Consider using online comparison tools, which can provide you with side-by-side rate estimates without affecting your credit score.

• Benefits: Reduces interest rate and consolidates loans.

• Drawback: Refinancing federal loans means losing federal benefits like PSLF and IDR plans.

6. Live Like a Resident

Living like a resident is a powerful yet simple strategy to accelerate debt repayment and secure a strong financial foundation early in your career. This approach involves continuing the frugal lifestyle you maintained during residency—even as your income significantly increases. By temporarily resisting the urge to increase your lifestyle and using that income surplus to pay down debt, you can drastically reduce your financial burden in just a few years. 

The average new attending physician’s salary often sees a jump to $250,000-$300,000 or more annually after residency. If you maintain your current lifestyle (spending about $60,000 - $75,000 annually as you did during residency), you can allocate a substantial portion of your new income toward debt reduction. For example, using an extra $100,000 per year to pay down a $200,000-$300,000 loan could enable you to eliminate it in as little as two years.

Physicians who live like residents for two to five years can pay off their loans, build an emergency fund, and even start investing, laying a foundation for future wealth building without the added stress of debt.

Once your debt is paid down, you can redirect the funds you were using for loan payments toward wealth-building activities. For instance, contributing to retirement accounts, saving for a down payment on a house, or even investing in a brokerage account will help secure long-term financial goals. By postponing lifestyle upgrades just a few years, you can set yourself up for greater financial security and potentially retire earlier than peers who immediately increased their spending.

In short, by living like a resident for just a few years, you can not only conquer student loans but also create a foundation for a financially independent and stable future. This approach may require sacrifice and discipline, but the long-term benefits—freedom from debt, financial security, and a comfortable lifestyle—make it well worth the effort.

• Benefits: Enables aggressive loan repayment and builds financial discipline.

• Drawback: Requires lifestyle sacrifices for a few years post-residency.

The standard repayment plan for federal student loans is 10 years, but with high debt loads, this may not be feasible. By choosing the right repayment plan and making extra payments through side work like moonlighting, doctors can often pay off medical school loans in less time. Private loans have flexible terms, and refinancing or making extra payments can significantly cut down the repayment period. Locum work, especially, can fast-track repayment by generating the income needed to wipe out loans faster.

Medical school debt can feel like a permanent burden, but there are strategies to conquer it faster. From income-driven repayment plans and PSLF to taking on locum tenens work or per diem shifts, doctors have a range of options to help manage and reduce their loans. Whether you’re still in school, starting residency, or already an attending, the right approach to your loan repayment can set you up for financial success and freedom.

Start exploring these options today, and take control of your financial future so you can enjoy the rewards of your medical career without the weight of student loan debt. For more tips and helpful advice on all things moonlighting, residency, and more follow us on social media!