According to the Association of American Medical Colleges (AAMC), half of newly minted doctors graduate with over $200,000 in student loan debt.
With large loan balances and low salaries during residency (and sometimes during a secondary fellowship), figuring out how to get the loans to zero can be a huge challenge. If you’re one of the unlucky few who graduated with over $500,000 in debt, paying back the loans can seem nearly impossible, especially if you opted for a lower-paying specialty such as pediatrics.
But if you’re a doctor, some upfront work can help you to qualify for partial or complete loan forgiveness, so you can do the work you’re trained to do without the burden of debt.
This is a step-by-step guide to student loan forgiveness for doctors.
Step Zero: If You’re in Medical School, Keep Looking for Scholarships
Still in medical school? If so, loan forgiveness starts now.
There are several medical school scholarships that may help you keep your medical school debt to a minimum. Some places to look include the following.
The Health Resources & Services Administration offers a variety of loan and scholarship programs for needy or disadvantaged students.
The National Health Service Corps offers scholarships for students who commit to working in underserved areas.
The military has several training programs that offer free medical school and living stipends in exchange for military service. Programs vary by branch and include the Army Health Professions Scholarship Program, the Air Force healthcare training and education programs, and the Navy Financial Assistance Program.
It’s also worth checking whether your school offers scholarships for medical students. One option may be an MD-PhD combination program where you get an MD, and PhD, so you can focus on medical research. This obviously takes a huge commitment to academia, but it can be worthwhile for the right person.
Step One: Don’t Refinance Your Federal Loans Yet
If you’re considering student loan forgiveness, you don’t want to refinance your Federal student loans before looking into your loan forgiveness options. Some forms of loan forgiveness only apply to Federal student loans. Other times, going onto an income-driven repayment plan is the best course.
Once you refinance your loans, they become private loans and ineligible for Public Service Loan Forgiveness and income-driven repayment programs. These are advantages that doctors will not want to lose quickly. You only want to refinance Federal loans if it is clear that you will not qualify for loan forgiveness.
Here's the scary part: most doctors will get bombarded with student loan refinancing offers. And it can make sense... but only do it once you're sure you won't need to take advantage of any government programs (like income-driven repayment plans or loan forgiveness). See our best places to refinance your student loans if you're considering this path.
Step Two: Get on an Income-Driven Repayment Plan
An income-driven repayment plan is critical to loan forgiveness for doctors. Under an income-driven repayment plan, your loan payment depends on your income.
Since doctors generally earn less than $70,000 during residencies and fellowships, your loan payments will be relatively low during that time. If you’re working at a hospital or other non-profit health center during residency, the payments you make during this time will qualify towards Public Service Loan Forgiveness.
Since you’re working towards loan forgiveness, the lower the payment, the better. LoanBuddy is a software tool that you can use to help you pick the perfect repayment plan for your situation.
Step Three: Look Into Loan Forgiveness Options
Note: all of these options require some type of career and/or location commitment. But it can be worth it! The key is to create a plan, then stick to the plan until you achieve your loan forgiveness goals.
You might also enjoy this article: 80 Ways To Get Student Loan Forgiveness.
Public Service Loan Forgiveness
Public Service Loan Forgiveness is the number-one loan forgiveness program for doctors to know about. After 120 on-time payments on your student loans, while you’re working at a qualified non-profit (including many hospitals), your Federal loans will be discharged.
For doctors, there are a lot of options for public service - especially during residency. Many hospitals are non-profits. Then you have a variety of public service positions in local clinics, state and federal research, and more.
The amount forgiven under Public Service Loan Forgiveness is tax free.
You must have your loans in an income-driven repayment plan during the repayment period.
National Health Service Corps
The National Health Service Corps offers three loan repayment programs for doctors.
To qualify for loan forgiveness, you must commit to working in an underserved area for two or three years. Many of the NHSC-qualified locations are in rural areas.
After the service period, up to $100,000 of your loan balances are forgiven, but the exact amount forgiven varies from location to location.
In general, full-time work at an NHSC site will also put you on track for Public Service Loan Forgiveness.
Indian Health Service Loan Repayment Program
The Indian Health Service Loan Repayment Program offers loan forgiveness for doctors who work in Indian Health Service clinics which are operated through the Indian Health Service or a tribal organization. Many of the clinics will be located on or near Native American Indian reservations.
This program offers up to $40,000 in forgiveness after two years of service. It can be combined with loan forgiveness from the National Health Service Corps and Public Service Loan Forgiveness.
National Institutes of Health (NIH) Loan Repayment Programs
The NIH Loan Repayment Programs are designed to recruit doctors into areas of medical research.
A qualified researcher may receive up to $50,000 of loan forgiveness annually. A researcher may qualify for the awards for a total of two or three years depending on the exact program.
Military Active Duty Health Professions Loan Repayment Program
This program provides up to $40,000 of loan forgiveness per year for active-duty military members in qualifying medical professions.
This program is renewable, and work with the military counts towards the 120-month requirement for Public Service Loan Forgiveness.
Income-Driven Repayment Loan Discharge
If you’re on an income-driven repayment plan, and you make timely payments for 20 or 25 years, the loan will be forgiven. This “secret” method for loan forgiveness can be especially important if you cannot qualify for PSLF, and you have large loan balances.
You will have to pay taxes on the amount discharged, which can be a very large tax bill for some doctors.
Step Four: Keep Your Paperwork Up-to-Date
Many of the loan forgiveness programs for doctors require you to keep track of your eligibility status each year. You may need to re-certify your income to stay on the income-driven repayment plan of your choice.
Remember, for Public Service Loan Forgiveness, there are two sets of forms:
- Your income-driven repayment plan certification that must be done annually.
- Your Public Service Loan Forgiveness Employment Certification Form, which should be done at least annually, or if you ever change employment.
If you struggle to keep on top of your paperwork, consider using LoanBuddy or another program to keep you on track.
Step Five: Re-evaluate Your Plan Annually Until You Have No Debt!
One of the keys to success in loan forgiveness is to stick with one plan until you’re debt-free.
Unfortunately, life doesn’t always work out the way loan forgiveness programs would dictate. You may decide to step away from a loan forgiveness program so you can advance your medical career in another way.
If you decide to open your own practice, or otherwise leave non-profit medicine, it may make sense to refinance your student loans and rapidly pay them down.
Regularly evaluating your plan can help you decide if the plan works or whether you need to change.
When To Consider Refinancing
As we mentioned earlier, most doctors will get bombarded with student loan refinancing requests. And it can make sense for some doctors to refinance - especially those in private practice with high incomes.
So, when does refinancing your student loans make sense?
Here are the criteria we recommend you meet in order to refinance your student loans:
- You are NOT eligible for any loan forgiveness programs
- You are NOT using any income-driven repayment plans (or you're back at the standard payment level due to your income)
- You plan to pay off the loans within 5 years or less
The sweet spot for student loan refinancing is a loan term of 5 years or less. Plus, you combine that with high income and excellent credit, and you can see rates at 3% or less. Given that most Federal loans (and especially graduate loans) are around 6% or more, cutting your rate in half during a 5 year repayment term can provide substantial savings.
If you do go the refinancing route, make sure you get at least 3 quotes from difference lenders. See our list of student loan refinancing lenders here.
Becoming a doctor is a career path that opens a lot of opportunities. Some of these opportunities may provide a way to get student loan forgiveness for doctors. Others may provide a high income and other options where loan forgiveness won't make sense.
The goal is that you should create a plan and work the plan.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.