It’s easy to think of doctors and lawyers as being immune to financial problems. Just about any doctor or lawyer in movies or television is portrayed as wealthy, and anyone in those professions would be hard-pressed to stir up sympathy from friends and family because of financial trouble.
What those people don’t see are the crushing student loan debt totals plaguing just about everyone in those professions.
While medicine and law may lead to wealth down the road, it almost always comes with a high cost. These are some of the most prestigious degrees available, but also some of the most expensive. Couple that with the stress of climbing the ladder at a law office or working double shifts as a resident, and maybe you’ll start to see why doctors and lawyers need financial help just like everyone else.
Options for Doctors
Almost every doctor with Federal loans should immediately sign up for Income-Based Repayment (IBR) or Pay-As-You-Earn (PAYE) after graduation if they qualify. The reason is that these repayment plans will cap your repayment at 10% of your discretionary income. For doctors, after graduation is typically a period of high debt, with low income due to residency. That means your payments will also be low. However, after residency, when you see a boost in come, you'll still never pay more than you would have on the standard repayment plan. As such, you can realize a great savings on your student loan payments up front, and make standard payments later.
Student Loan Forgiveness Options For Doctors
Beyond just your repayment plan, there are forgiveness options. The National Health Service Corps is a program that repays up to $120,000 in student loans for doctors who work in an area lacking quality physicians. This program, run by the federal government, requires students to serve for at least three years to receive the maximum financial benefit.
Doctors not in the NHSC program can also opt for Public Service Loan Forgiveness (PSLF) for their federal loans. They must work for a nonprofit or other eligible institution and make 120 payments (10 years or more) before the remainder of their loans will be forgiven.
Those who choose this option will likely benefit from choosing the smallest monthly payment program, since their loans will be forgiven tax-free. Another reason why it can make a lot of sense for doctors to opt for the income-based repayment programs.
Some doctors who enter private practice may be able to receive a significant signing bonus when starting a new job. Doctors who apply these bonuses toward their loans – which average $24,000 – could knock down their balance substantially.
Private Loan Options For Doctors
Many doctors do end up with private loans because the cost of college can be so high. And while there are no forgiveness options for private student loans, doctors are in a great position to refinance their student loan debt. Student loan refinancing is the process of getting a new loan to replace your old loan (or multiple loans).
Some student loan lenders have designed programs specifically for doctors, and they take into consideration higher loan amounts, lower up front income, and more, because they know that doctors incomes rise over time. For example, Link Capital Student Loan Refinancing offers medical loans up to $450,000, with very low interest rates. You can also compare all of your private loan options with a free comparison service like Credible. See if it makes sense to refinance your loans and save.
Student Loan Debt Options for Lawyers
Like doctors, lawyers typically struggle with the burden of having high student loan debt payments with low income after graduation. Entry level jobs in law firms are typically a lot of work, for relatively low pay. It can take several years before a lawyer can start earning an income to really make a dent into their student loan debt.
As such, lawyers should also opt for an income-based repayment plan if they qualify. Options like PAYE and IBR are great, because, once again, you can get a low up front payment, and it will rise as your income does. If your payment would ever exceed that Standard Repayment Amount, you would default to no more than that amount. It's a great way to save right after graduation.
Student Loan Forgiveness For Lawyers
Lawyers are also rewarded for public service. Lawyers who work for the government or a nonprofit may also be eligible for the PSLF program. Like doctors, they should also choose a lower monthly payment if going down this route.
Lawyer-specific options include the following:
- The John R. Justice Student Loan Repayment program gives up to $60,000 in loan repayment for lawyers who work either as prosecutors or public defenders for three years. Lawyers must work for six years to earn the full $60,000.
- The Department of Justice’s Attorney Student Loan Repayment Program allows graduates to work for the federal government in exchange for student loan repayment. They require three years of work in exchange for matching payments made by the attorney (up to $6,000 a year).
- Various states and universities have their own assistance programs for lawyers trying to pay off their student loans. Currently 24 states offer repayment assistance, including Florida, Illinois, Texas and Pennsylvania. The law schools that offer loan repayment include Duke University, New York University and Notre Dame.
You can find a lot more student loan forgiveness options by state here.
Student Loan Options for Both
If you don’t have federal loans or don’t plan to work in the public sphere, you should try refinancing your student loan to save money. Companies such as DRB Bank, SoFi, and CommonBond can work with you to refinance your loans. Even better is a service called Credible, which compares over 10 different lenders to help you find the best rate and fee structure.
To be eligible for refinance, most of these companies require a solid credit history and a steady income. A credit score of 640 is usually necessary, but some require 700 or higher. The better your credit score, the more likely you’ll be approved for a refinance receive the best rates.
We have a great resource for comparing private student loan lenders. Check out our Student Loan Lender Review Tool for more.
Remember, you’ll lose any federal protections you have by refinancing your loan, so it may be a gamble if you lose your job and need to defer loan payments. However, if you owe more than six figures in debt and can decrease your interest rate by refinancing, you stand to save thousands or tens of thousands of dollars over the course of your loan. Here's our guide to when it makes sense to refinance a Federal student loan.
Beyond refinancing or finding a repayment program, doctors and lawyers need to learn to budget their salaries. While they usually earn more than the average college graduate, they should also be careful to not scale their lifestyle up with their salary. Living like a college student for even a few years after college can make a huge difference.
One of the best ways to repay your loans quickly is to live on less than you earn and apply the difference to your student loans. Keeping a budget and making extra payments on those loans will teach you smart financial habits that will continue to be helpful once you’re debt free.
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