Facing Loan Repayments? There’s Forgiveness for That.

Dealing with Medical School Loans May Come with a Cost

For most people, student loan repayment involves some type of sacrifice. That could mean penny-pinching lifestyle changes or a willingness to commit time to a specific employer.

James Dahle, MD, practicing physician and founder of The White Coat Investor, said he — like most doctors — received almost zero personal finance, investing or business information in medical school or residency.

“That was a major motivation behind why I started The White Coat Investor,” Dr. Dahle says. “I’m convinced that financially stable doctors are better partners, parents and physicians.”

Dr. Dahle says understanding all your options can help you decide what you are prepared to do to reduce your debt. And, he says the earlier you can plan, the better.

Dr. Dahle also noted that, “Every medical school graduate needs a plan to deal with their student loans,” and that it “is a good idea to be thinking about this right from the beginning of medical school, but, certainly by the time of medical school graduation, a plan should be in place to deal with the loans in some way.”

That plan, he says, might involve “living like a resident” for a couple of years beyond residency while you refinance your loans and pay them off rapidly. Or, you might choose to seek loan forgiveness for medical school debt.

Consider These Five Loan Forgiveness Programs

From federal student loan forgiveness programs to state-based programs, there are dozens to consider. These five are a good place to start and give you an idea of the incentives and opportunities medical school student loan forgiveness programs offer.

1. National Health Service Corps

The National Health Service Corps (NHSC) Loan Repayment Program pays up to $50,000 to qualified clinicians who commit to two years of full-time clinical practice at an NHSC-approved location. Doctors who make half-time clinical commitments are eligible for up to $25,000 in loan repayment.

Funds awarded through NHSC’s Loan Repayment Program are tax exempt. NHSC also offers the option of a continuation contract. This contract allows you to commit to an additional year of service in exchange for continued loan repayment funding.

To qualify for the NHSC Loan Repayment Program, you must:

• Be a U.S. citizen or U.S. national.
• Be licensed to practice in an NHSC-eligible primary care medical, dental or behavioral health discipline within the state where you are applying to serve.
• Have qualified student loan debt for education that led to your health profession degree.
• Work at an NHSC-approved site.

Applications for the NHSC Loan Repayment Program are typically due each December for employment beginning in July of the following year.

Learn more about the NHSC Loan Repayment Program.

2. National Institutes of Health

The National Institutes of Health (NIH) Loan Repayment Programs offer loan forgiveness for medical school graduates — or graduates with other qualifying degrees — engaged in at least 20 hours per week of research relevant to the NIH mission.

Successful NIH loan forgiveness applicants benefit from up to $50,000 each year in loan repayment. One- and two-year award renewals are also offered.

The NIH offers a few options through their programs. Their “extramural” awards are available to researchers not employed by the NIH. “Intramural” awards are offered to NIH employees.

The NIH offers a few options through their programs. Their “extramural” awards are available to researchers not employed by the NIH. “Intramural” awards are offered to NIH employees.

To qualify for the extramural NIH Loan Repayment Program, you must:

• Be a U.S. citizen, U.S. national or permanent U.S. resident.
• Possess a qualified degree (as determined by the NIH) from an accredited institution.
• Participate in qualified research (as defined by the NIH).
• Have qualified student loan debt greater than 20% of your institutional base salary.
• Be employed by a domestic, nonprofit institution.

Get the complete list of eligibility requirements.

Application deadlines vary based on the type of NIH award you seek. The application period for extramural awards opens in the fall, closing in November. The intramural award application period opens in January and closes in March.

Learn more about the NIH Loan Repayment Programs.

3. Indian Health Services

The Indian Health Service (IHS) Loan Repayment Program offers up to $40,000 in loan repayment to eligible clinicians who commit to serving for two years in health facilities that serve American Indian or Alaska Native communities.

Contract extensions are available, and qualified applicants can extend their service each year until student debt is paid.

To qualify for the IHS Loan Repayment Program, you must:

• Be a U.S. citizen.
• Possess a qualified health professional degree or be in the final year of academic or post-graduate training.
• Have a valid license to practice. Student or trainee applicants are required to show proof of licensure before becoming eligible for an award.
• Be able to begin their two-year service commitment on or before September 30.

IHS Loan Repayment Program applications are typically available at the start of the calendar year and are accepted on a rolling basis until loan repayment funds are exhausted.

Learn more about the IHS Loan Repayment Program.

4. Military Loan Repayment Programs

Doctors who commit to military service can benefit from military loan repayment programs. The Army, for example offers the Active Duty Health Professions Loan Repayment Program. This program provides up to $120,000 in loan repayment ($40,000 annually for three years).

Military loan repayment programs and application processes vary based on the branch in which you choose to serve. Consult a recruiter for additional information.

5. State Loan Repayment and Scholarship Programs

Many states offer their own loan repayment, forgiveness or scholarship programs. State-based programs are often tied to service commitments within specific health care areas of need.

The Association of American Medical Colleges (AAMC) maintains a list of available state-based programs. Application periods and deadlines vary for each program.

You Still May Need a Repayment Strategy

Even if you take advantage of a loan forgiveness or repayment program, you’ll still need a plan to pay your remaining loan balance. You have options when it comes to repayment plans for federal student loans.

If a traditional payment plan isn’t right for you, an income-driven plan may be appealing. These programs, like Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE), base payments on specific income parameters and family size.

“REPAYE is the usual default choice for most residents as it effectively subsidizes the interest rate on federal student loans by forgiving half of unpaid interest,” Dr. Dahle says.

Loan Refinancing

Many private loans won’t qualify for loan forgiveness programs. If you have private medical school loans, refinancing may be your best option.

Per Dr. Dahle, “private loans can safely be refinanced any time you can get a lower interest rate.” His website maintains a list of some of the best loan refinancing deals.

Refinancing federal loans is a bit more complicated. Dr. Dahle cautions against refinancing federal student loans until you’re sure you aren’t going to seek Public Service Loan Forgiveness (PSLF) or another loan forgiveness program. PSLF offers forgiveness of student loan debt after 120 on-time payments. To qualify for PSLF, you must meet specific employment requirements.

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