How to Pay Down Your Student Loan Debt
I have made almost every financial mistake that new physicians should avoid, including going into forbearance and deferment, buying the doctor house and car, not living on a budget, and not prioritizing paying down student loan debt. To be clear, I had significant debt—similar to that of the average graduating medical school student in the US today. Yet at some point, I was able to turn the ship around and pay off my student loans. I only wish I had figured it out sooner.
First a disclaimer: I am not a financial expert, nor do I claim to be one despite majoring in business and economics in college. What I learned about supply and demand curves and the factors that shift those curves did not help me in any way with the practical aspects of personal finance. Resources like The White Coat Investor by James Dahle, MD, The Physician Philosopher’s Guide to Personal Finance by James Turner, MD, and The Doctors Guide to Eliminating Debt by Cory Fawcett, MD, were not available to me when I graduated medical school. And the recent proponents of minimalism and frugality were not yet blogging (like The Frugal Physician and Frugalwoods). All of these resources would have provided valuable insight and information that could have pointed me in the right direction sooner.
For years now I have been interested in the concept of being content with what you have. This concept lies behind much of the advice from The Physician Philosopher and The White Coat Investor, at least for the first few years out of residency or fellowship. The purpose of this approach is to start paying down debt and building wealth early on in your medical career to benefit from compound interest. In my opinion, living below your means for the first few years as an attending is the best advice out there and is a surefire way to get on the right course. Another key tip is to use 10% of any pay increases or bonuses to buy whatever you want and the other 90% towards paying down debt, or adding to savings or investment accounts. That allows a reprieve from the delayed gratification that most physicians have been living with for years, while still setting them up for long-term financial success.
Here’s some of the advice I have gleaned that can help start you on your journey towards financial freedom:
- Live below your means or “live like a resident” as James Dahle suggests, and live on a budget for the first few years out of residency or fellowship
- Do not go into forbearance or deferment
- Immediately make a financial plan for student loan repayment. This may include entering an income-driven repayment program or a forgiveness program like Public Service Loan Forgiveness (PSLF) or pursuing private loan refinancing to obtain a lower monthly payment and lower interest rate
- Prioritize paying down student loan debt over investing as a resident and fellow and for the first few years as an attending
- Build your emergency fund
- Pay down high-interest consumer debt as soon as possible
- Start saving toward retirement with 401K/403B with match, if offered, or a Roth IRA
- Get disability insurance and consider if life insurance should be purchased now or later
But please don’t just take my advice. Read the books mentioned above and others on personal finance and paying down debt. Do your homework and hire a professional if you like. Read blogs, and talk to other physicians and successful family members or friends. Thoroughly research loan repayment and refinancing options. This investment of time early on will more than pay off later and may help you avoid some of the common mistakes physicians make with their money. It may even help you achieve financial freedom. The benefit of paying down debt and working toward financial freedom is that it can provide you with flexibility and peace of mind, and it may even help prevent burnout that can occur or worsen when physicians feel trapped by their debt.
With personal finances, as with the practice of medicine, it is important to read and prepare, but there is also a significant amount of learning as you go and learning from your mistakes. Hopefully you can avoid making some financial errors by learning from the mistakes of physicians who have come before you.
The book and blog recommendations above are purely recommendations—I am not affiliated with them in any way.