Best student loan repayment strategies for medical residents & fellows

Student loan debt is a $1.5 trillion-dollar problem affecting more than 44 million individuals.

The average student loan debt of a new medical school graduate is $190,000 and more than 50 percent of graduates owe more than $200,000 of student loan debt.

Repaying student loans as a medical resident or fellow presents a unique challenge. During residency and fellowship, student loan debt represents about 320 percent of their annual salary. This debt-to-income picture doesn’t stay grim forever, because residents and fellows graduate and earn a significantly higher salary.

An important consideration, understated by many refinancing companies, is that residents and fellows often work for non-profit health systems, which count as eligible employers for Public Service Loan Forgiveness (PSLF). Depending on a particular resident’s financial situation and the duration of their residency and fellowship, PSLF may be a very good choice.

Here are the best strategies medical residents and fellows can use to repay their student loan debt.

Consolidation can be a good option if it’s done right away.
• Consolidating federal student loans combines individual federal loans into one large loan with an interest rate that’s the weighted average of the combined loans. This can be a big asset for anyone considering PSLF because it can convert older FFEL loans into Direct loans, which are the only type of student loans eligible for forgiveness.

• If consolidated immediately, residents can get a head start on making payments under an eligible repayment plan that count toward the 120 required for PSLF, instead of waiting for the six-month grace period to end.

• Residents and fellows want to avoid consolidation if they’ve already made eligible payments toward PSLF. Consolidation creates a brand-new Direct Consolidation Loan and the 120 payments required for PSLF start over.

Choose an income-driven repayment plan.
• As a medical resident or fellow, debt is high relative to income. This makes the 10-year standard repayment plan for federal student loans difficult, if not impossible, to afford.

• Income-driven repayment plans afford residents a low monthly payment that doesn’t strain their monthly budget. Making monthly payments, even small ones, helps offset accumulating interest. If residents have more aggressive repayment goals, they can always make extra monthly payments. At the same time, income-driven repayment plans qualify for PSLF and maintain all federal borrower protections.

Public Service Loan Forgiveness is an option for many.
• PSLF is a good option for anyone with high amounts of debt and is likely to work for a qualifying employer (non-profit and government organizations) for 10 years. Income-driven monthly payments made while working through residency and fellowship for three to nine years at a resident or fellows salary count toward PSLF. It makes a lot of sense for individuals to consider PSLF if it fits their repayment goals.

• Recently, a PSLF report was released that documented only 96 individuals from over 28,000 have received loan forgiveness. However, if residents consider their options, carefully identify program requirements and find PSLF to be best for them, it could save them tens or hundreds of thousands of dollars. Loans forgiven under PSLF are not taxable as income under current program rules.

There are common repayment choices that may not work best for many residents and fellows.

Refinancing requires very careful consideration.
• Once federal student loans are refinanced they are now private student loans forever. That means residents can never access federal student loan forgiveness again. That also means residents may lose several important protections such as income-driven repayment plans, which may be important while carrying such large amounts of debt on a relatively small resident stipend.

• However, if a resident or fellow has private student loans, it’s probably worth exploring refinancing the private student loans. If a resident or fellow is near graduation and wants to repay their federal loans very quickly and forgo loan forgiveness, refinancing is worth exploring.

Forbearance is rarely the right choice for a resident.
• Residents and fellows are able to put their federal student loans into forbearance during residency so they don’t have to make monthly payments. Unfortunately, interest continues to accumulate on the full balance of the loan during the entire period of forbearance. Grad PLUS interest rates range from 6.31-7.9 percent, which adds up quickly, at a rate of tens of thousands of dollars per year depending on principal balance.

• Forbearance doesn’t allow a resident to make any progress on their principal or make any progress toward the 120 payments required for PSLF. Unless a resident has extenuating circumstances, an income-driven repayment plan is likely a better option than forbearance.

It’s clear residents and fellows face many nuanced student loan repayment options. Understanding the choices and target outcomes for each option will help residents and fellows make the best decision for their unique situation.

Jeni Burckart is a licensed pharmacist, prominent student loan expert and Senior Director of Healthcare for

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