Paying the piper

6 smart ways to manage your student loans during residency

Trade-offs abound in loan repayment options for residents.

This story initially ran in The DO on Oct. 6, 2017, and was updated in June 2018.

When it comes to handling student debt during residency, flexible payment plans provide the option of paying now or later, but it’s important to factor in the trade-offs to determine what’s best for your situation.

In 2016, about 86 percent of new osteopathic medical school graduates were burdened by education debt, according to a survey by the American Association of Colleges of Osteopathic Medicine. Among graduates with education debt, the average amount rose to $240,331 from $229,934 in 2015.

Here are six smart moves you can make now to successfully manage your student loans.

Take inventory. Create a comprehensive list of what’s in your student loan portfolio and when repayments will begin so that you can develop a strategy for paying off loans and keep track of the total amount you have borrowed. Be sure to include credit card and private loan debt in your payment strategy.

Consider meeting with a certified credit counselor to understand your options and to discuss your overall financial position. You may consider the comprehensive loan consultation service offered by Doctors Without Quarters, which includes a review of your loan portfolio and a recommended action plan with a refinancing suitability analysis. AOA members receive discounted pricing and incentives.

You can get information about all of the federal student loans you have received and find the servicer­ for your loans by logging in to

Set up a repayment plan. The sooner you can begin repayments on your loans, the greater the benefit in money saved, says Gordon Oliver, student loan counseling manager at Cambridge Credit Counseling Corp. in Agawam, Massachusetts.

He recommends taking a staged approach to repayment strategies, including looking at your budget, expenses and what you can handle based on your job status, income and family size. Over the long term, weigh how you will get the debt paid off with less interest.

At the very least, Oliver recommends paying the interest that accrues on your loans during your grace period to save hundreds of dollars.

“The debt is only accumulating, and on unsubsidized loans, the interest will be capitalized,” Oliver says, meaning the unpaid interest will be added to the principal amount of the loan at the end of the grace period.

Know your repayment options. Staying on top of your loan payments will help you avoid default. As you sort through options to pay off debt, choose a strategy that will align with your financial status and goals. These choices include using a grace period to your advantage, deferment, forbearance or making reduced payments through a payment plan.

Most federal student loans offer a grace period that typically lasts six months after you graduate. During this time, you aren’t required to make payments, but interest usually keeps accruing. Use this time to financially prepare for paying back your loans. It’s important to know the status of your grace period because it affects when your deferment begins.

Deferment allows you to postpone making payments or to temporarily reduce your monthly payment amount if you meet eligibility requirements.

If you experience difficulty making scheduled loan payments, you can request a forbearance. It’s a period in which your monthly loan payments are temporarily suspended or reduced, though you’ll have to wait until it’s approved before you can stop making your scheduled payments or start submitting reduced payments. Although principal payments are postponed, interest continues to accrue, which will cause your balance to increase.

Four income-driven repayment plans for federal loans are designed to make your student debt more manageable by reducing your monthly payment amount. The plans, which include Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay as You Earn (PAYE) and Revised Pay as You Earn (REPAYE), are based on your income and family size.

After residency, the dramatic increase in your income will affect the amount of student loan payments, says Oliver. However, if you are enrolled in a federal PAYE plan, in which the payment amount is generally 10 percent, or IBR program, monthly payments are not more than the 10-year standard repayment plan amount.

See if you qualify for loan forgiveness. If you have a full-time job at an eligible employer (government or not-for-profit agency or organization) and repay your federal student loans based on your income, you might be eligible for loan forgiveness after you have made 120 monthly payments, or 10 years’ worth of payments, under a qualifying repayment plan.

Keep in mind that the 2018 White House budget called for the elimination of the Public Service Loan Forgiveness (PSLF) program. However, the program survived and was temporarily expanded in March 2018, but this opportunity is only for PSLF applicants who were denied because some of their payments were not made on a qualifying repayment plan.

In December 2017, legislation was introduced to the House of Representatives to overhaul the Higher Education Act (HEA). The Promoting Real Opportunity, Success and Prosperity through Education Reform (PROSPER) Act threatens to eliminate the PSLF program for new borrowers, among other measures.

Beyond the federal loan forgiveness option, many states have forgiveness programs that physicians often overlook. See here for a state-by-state breakdown that might save you money.

[story-sidebar sidebar id=”204344″]

Consider loan consolidation. If you have federal student loans with various loan servicers, consolidation is an option. It will simplify loan repayment by giving you a single loan with just one monthly bill.

Consolidation will lengthen the payback period and reduce your monthly payment. The drawback is you could forfeit some benefits of individual loans such as interest rate discounts, principal rebates or cancellation provisions. And if you lower monthly payments and extend the payment period, you will pay more in interest over the life of the loan.

Borrowers of Family Federal Education Loans, or FFEL program loans, who intend to pursue public service loan forgiveness must consolidate FFEL loans into a Direct Consolidation Loan. This is a serious caveat, Oliver points out, because only payments made on the Direct Consolidation Loan will count toward the required 120 qualifying payments. If you intend to pursue PSLF, make sure you tell your servicer that’s your goal. And if you’re considering consolidation but are already making payments that qualify for PSLF, think twice, Oliver says. Consolidation re-sets the clock on the march toward 120 payments.

Keep good records. In light of lawsuits accusing Navient, the nation’s largest servicer of student loans, of mishandling student loan repayments and deliberately steering borrowers away from income-based repayment plans that could have lowered their loan costs, Oliver warns it’s critical to keep good records and notes of all loan documentations and transactions.

“Anything that you get transmitted, whether it be the loan application or a form of correspondence, should all be kept and stored away in case they are needed down the road,” he says.

If you are struggling with your loans, Oliver says the most important thing to do is to communicate with your loan servicer or creditor, noting: “Communication is important. Not communicating can only hurt and not help.”


  1. Philip Costany

    How about the AOA, AAO, and COCA use their lobby power to decrease the interest rates of graduate school loans to medical students? Why I’m paying the same rate as somebody getting a masters in interpretive dance is beyond me… if the us system needs physicians, especially primary care, then make it financially feesable to do so. Grad loans for highly needed fields (computer engineers, healthcare, engineers, mathematicians, etc) should be subsidized to get the rate to about 3-4% interest or lower (its 6+% now). I don’t care about the price per say, but the damn interest is crazy!

Leave a comment Please see our comment policy