Navigating medical school debt: A guide to loan repayment options

After four years of undergraduate studies, followed by four years of medical school (and possibly a master’s degree in between) an email may hit your inbox telling you to complete your required student loan exit counseling. I remember reaching my fourth year of medical school and being excited to not have to submit another FAFSA application, while also wondering how much more I would be in debt once I graduated.

Everyone has a different path to medical school and a different loan statement (or no loans) by the end of it, but intern year comes quickly for all, and so does the end of that repayment grace period. While loan repayment definitely seems complicated and stressful, don’t let that loan balance at the end scare you!

There are many loan repayment options available, especially if you applied for aid through FAFSA (just keep in mind that private loans will not qualify for some of these options and must be paid back through the original lender).

As a recent medical school graduate (class of 2024), I am currently navigating the process of beginning loan repayment. I wanted to share a breakdown of the different loan repayment options along with some details that are specific to physicians. Most of the information I share below is from the Federal Student Aid website and from my own experience discussing medical school loans with my peers and colleagues.

Loan repayment basics

Let’s start with what you can expect after medical school graduation with direct subsidized, direct unsubsidized or Federal Family Educational Loans (FFEL). Your school will submit your graduation status, which will then begin a six-month grace period before repayment must begin. While this allows you to temporarily forego repayment, keep in mind that interest does accrue during this time.

If you do not choose another plan, your loans will automatically be put into a standard repayment plan. You can enroll into another payment plan at any time. The loan servicer will provide you with the information about how much repayment will be per month, for how long, etc. It’s important to remember to check your loan accounts periodically to ensure payments are being made. If nine months go by without payment, your loans will go into default, which will affect your credit and future borrowing ability. Try your best to not go into default. Below are the plans available for federal loans.

Please note that medical residents have the option of deferring repayment of their student loans until after they finish residency. This course of action is generally not recommended, however, as interest continues to accrue on the loans during your residency, and you may miss out on the opportunity to apply your time in residency toward loan forgiveness later.

Repayment plan options

• Standard plan: This will be the automatic repayment plan if you do not enroll in another plan. This plan is a 10-year fixed payment repayment plan, which potentially can have a high monthly cost per month for new interns.
• Fixed payment plans: This includes the standard plan and will base your monthly payments off of information such as total loan amounts owed, interest rates and a fixed time period for repayment. Within this plan subgroup, there are the standard, graduated and extended options.
• Standard fixed: Payments are a fixed amount that ensures your loans are paid off within 10 years (within 10 to 30 years for consolidation loans).
• Graduated fixed: Payments are initially lower and gradually increase over time, usually every two years. Payment amounts are designed to ensure your loans are paid off within 10 years (within 10 to 30 years for consolidation loans).
• Extended fixed: Payments can be fixed or graduated and will ensure that your loans are paid off within 25 years.
• Income-driven plans (IDR): IDR plans base your monthly payment on how much money you make and how large your family size is. There are four types of plans based on discretionary income, which is a factor used in determining a borrower’s payment amount for certain loan repayment plans and/or loan rehabilitation.
• SAVE plan: Also known as the REPAYE plan, the payment is 10% of your discretionary income (difference between annual income and 225% of the poverty guideline for family size/state of residence). Please be aware that a federal court blocked SAVE plans in July; in August, the U.S. Supreme Court declined to lift the block. The Education Department is currently waiting for a final decision from the Eighth Circuit Court. More details about the current state of SAVE plans are available on the Federal Student Aid website.
• PAYE: This plan is 10% of your discretionary income, but never more than what you would pay under the 10-year standard repayment plan. Keep in mind: To be eligible, you must be a new borrower on or after Oct. 1, 2007, and have received a loan or disbursement on or after Oct. 1, 2011. Discretionary income in this case is the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.
• IBR: This is either 10% or 15% of your discretionary income depending on when you received your first loan. This will never be more than what you would pay under the 10-year standard plan. Discretionary income in this case is difference between your annual income and 150% of the poverty guideline for your family size and state of residence.
• ICR: This plan is based on whichever is less—20% of your discretionary income, or the amount you would pay on a repayment plan with a fixed payment over 12 years adjusted to your income. Discretionary income is the difference between your annual income and 100% of the poverty guideline for your family size/state of residence.

Finally, there is the Public Service Loan Forgiveness Plan, otherwise known as PSLF. This program is for those who want to seek student loan forgiveness. If all you heard was loans can be forgiven through this, you heard correctly. The only caveat is you must be employed by a governmental entity or a nonprofit organization.

The main points of this program are you must make a total of 120 qualifying payments under an accepted repayment plan (this can be the SAVE plan, PAYE plan, income-based repayment or income contingent repayment), work full-time under a qualified employer (you can search employers on the PSLF website), have direct loans or consolidate federal loans into a direct loan. Remember: You must apply for this program and fill the form out annually!

Repayment resources

There are many different options for loan repayment. What works best for you will depend on your personal financial situation and how quickly you want to pay off your loans.

At the end of medical school, I was advised to consolidate my loans by June 1 or whenever the loans went into graduated status and apply for PSLF when I could. Near the end of your fourth year, I recommend talking to a student loan advisor, who can put you on a schedule and give you direction on loan repayment.

I was fortunate enough to have a loan advisor appointed to me through my school and was able to discuss these options and my personal needs. Like many others, I am waiting for the SAVE plan to go into effect, with plans to eventually enroll in the PLSF program, as these plans fit my needs and financial situation the best.

Until then, many others and I are in forbearance. If you are also waiting for the SAVE plan and were placed on a standard repayment plan, I encourage you to call your loan provider and ask to be placed in forbearance until the SAVE plan starts.

For more guidance on money and medical school, see the AOA’s financial planning resources. AOA members can receive discounts on certain financial services from Student Loan Professor (formerly Doctors Without Quarters) and SoFi. You can also join the AOA in calling for student loan relief via our Advocacy Action Center.

Take a deep breath, relax a bit during fourth year, prepare for graduation and celebrate on Match day. If you have time to explore, check out the Federal Student Aid website. Good luck on your journey in medicine and loan repayment.

Related reading:

4 money tips for medical students and new physicians

Making your money grow: A guide for physicians