Paying back your medical school loans: what are your options?

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Gap Medics student Liam in the pediatric department, Iringa Regional Hospital, TanzaniaOnce you’ve made it through medical school, you have a lot to celebrate—but with all the excitement comes a little bit of reality. It’s time to face the music and pay back your medical school loans, but paying back your medical school loans does not have to be as overwhelming as it sounds. Educating yourself on the process, knowing your options and having a plan can make it go smoother.

Know your terms

A large percentage of people would not be able to pay for medical school without student loans. But when you take out a loan, you may not pay close attention to repayment terms. After all, repayment seems a long time away, and you figure you’ll worry about it later. But later will be here before you know it. 

It is helpful to be proactive and develop a repayment plan before you graduate. If you understand your options, know the terms of your loans and have an idea what your monthly payments will be, you will be better prepared to deal with loan repayment once the bill rolls around.

Medical school loans have different repayment terms. For example, some loans may allow you a grace period after you graduate before you need to start paying back the loan. Typically, student loans have a six month grace period, although it can vary. Be sure you know when payments start.

Additionally, the number of years you have to pay back your loans can also vary. Some private loans may have repayment options up to 25 years. Federal loans often need to be paid back in 10 years. You may also be able to consolidate loans, which may change the number of years you have to pay it back.

Before you finish medical school, it’s helpful to come up with a game plan. If you have an idea of what your salary will be, develop a budget. Setting a budget will help you determine how large a student loan payment you can handle.

Options to consider

Once you know when you will start repayment and for how long, you can look into your payment options. Depending on the types of medical school loans you have, you may be able to arrange a specific type of payment plan.

One option is to make equal payments each month for the entire time you are paying back the loan. Equal payments for the duration of the loan can be helpful for future budget planning and is the most predictable option.

If you prefer to start out with a smaller payment and have it increase after the first few years, a graduated payment plan may work. You may have a couple different ways to arrange your graduated payments.

One type of graduated payment plan allows you to pay interest only for the first two years. After that, payments increase to equal installments in which you pay the principal and the interest.

A second graduated payment option also involves paying the interest for two years, but after two years you continue to pay interest and only a small portion of the principal. This payment arrangement continues through year five. At that time, you pay interest and a larger percentage of the principal in equal installments until the loan is paid off.

Lastly, income sensitive payments may also be an option. Payment required is based on your annual gross income and is adjusted as your income changes each year. Considering you will likely make more in the future than you do in residency, you may be able to handle larger payments later on down the road.

Trouble paying: now what?

You also have a few other choices when it comes to medical school loan repayments. For example, if you are having trouble making payments, you may be able to postpone payments through deferment or forbearance depending on the terms of your loans.

Requirements for deferments and forbearances may be different depending on what type of loan you have. For instance, you may only qualify if you are unemployed or experiencing an economic hardship. You are usually only allowed a certain number of months in which you can defer your loan, and interest may still accrue. It is best to talk with your lender for specifics.

Loan forgiveness

Imagine being told you can forget about paying back a portion of your medical school loans. A loan forgiveness program is exactly what it sounds like: you are not required to pay back some of the money you borrowed. But to get a little, you’ll need to give a little. Currently, there are a few different loan forgiveness programs available to medical school graduates.

The Health Service Corps has a loan forgiveness program for primary care physicians who agree to work in underserved communities. Students in their final year of medical school can apply for the program. Students complete a residency of their choice in internal medicine, family practice, pediatrics, geriatrics, gynecology or psychiatry. After completing a residency, doctors obtain a job at an approved Health Service Corp Site. After completing three years of full time work, doctors are awarded $120,000 to repay medical school student loans.

The National Institute of Health also offers a loan forgiveness program to qualified doctors who agree to conduct clinical research funded by a city, state or federal government entity. Research can also be funded by a nonprofit organization in the United States. Doctors must commit to two years of clinical research and receive $35,000 of loan forgiveness for each year they participate in the program.

Indian Health Service has a medical school loan forgiveness program for emergency room doctors. After an application for the program is approved, a physician secures a job as an emergency room doctor at a tribal hospital or American Indian service unit. Each year of service completed can result in $20,000 of student loan forgiveness. Currently, doctors can complete two years of service. 

Additional loan forgiveness programs may be available through local state and city government for physicians who agree to serve in specific underserved communities.

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