Becoming a doctor requires a lot of sacrifices. Countless hours spent studying and honing your craft take time away from the classic college experience and play havoc with your sleep cycle. And then there’s the money: lots and lots of money. In 2022, medical students are graduating with an average of $250,000 in student debt.
Student loan debt is a heavy burden for most medical school graduates. It’s tempting to look for an easy solution, but often long-haul strategies are the ones that put the biggest dent in your debt.
One set of solutions that many medical school grads are looking to these days is student loan forgiveness programs. The question is, which category do these programs fall into, easy solution that’s likely to underdeliver, or long haul loan smasher? The answer is a little of both, and we’ll explain why below.
Student loan forgiveness programs are available to doctors or health care workers who work for a certain period of time for nonprofit hospitals or underserved areas. For example, Public Service Loan Forgiveness is a U.S. Department of Education program that erases any remaining student debt after ten years of making payments on federal student loans while working for a nonprofit or the government.
Another program is the National Health Service Corps Loan Repayment Program, which offers up to $50,000, tax-free, to primary care physicians who work in a Professional Healthcare Shortage Area. The NHSC offers up to $120,000 to fourth-year medical students who agree to for full-time for a minimum of three years in a Healthcare Professional Shortage Area. Additionally, the NHSC offers up to $75,000 in student loan repayment work in an approved substance abuse treatment center for at least three years.
There is also the Indian Health Services Loan Repayment Program, which offers up to $40,000 in student loan repayment for doctors in work in communities that serve American Indian or Alaskan Native populations for at least two years. Additionally, many states have student loan repayment programs for doctors who serve in rural or underserved areas.
Serving in rural and underserved areas – a prerequisite for most loan forgiveness programs – has other unexpected benefits as well. As one of only a few healthcare options around (sometimes the only one), you are guaranteed a steady inflow of patients – something you don’t get in highly competitive areas with high-earning demographics. However, due to the low population in rural areas, there is generally a limit to what you can achieve financially.
In terms of the loan repayment amount and time requirement for rural and underserved areas, it varies depending on the state, from some to all debt, and the required time varies as well.
Loan forgiveness programs can be a fantastic way to help pay down student loans if you are already considering a career in one of the fields that qualify. But if you aren’t passionately devoted to pursuing a career in a rural or underserved area, or a nonprofit, then these programs do not offer much value. Most of these programs will only pay off a portion of the average medical student’s student loan debt. And because they require a lot of time spent in relatively low-paying positions in order to qualify, it might take you more time overall to pay off your loans. With today’s interest rates, student loan debts double every ten years. The longer it takes to pay them off, the more it costs you overall. Accepting a higher-paying position and paying your debts down quickly could save you more money in the long run.
Add to that the fact that loan forgiveness isn’t guaranteed – in fact, only 1.6% of PSLF applicants have qualified since 2020 – and the benefits of these programs really lose their luster.
How Hippo Can Help
At Hippo Lending, we help healthcare professionals consolidate their debts – including their student loans – into one low-interest monthly payment. Unlike forgiveness programs which can leave you in more debt than you started with, which slows the development of your career and your income, debt consolidation can lower your total loan payments by offering a lower interest rate combined with a repayment period that takes your preferences into consideration. So, you have a choice between paying less now – which sometimes is the preferable option – or paying less overall – which also has its advantages.