Student loans: two words that anyone considering a career in medicine should think about. Two words that many are afraid of. Two words that most have become desensitized to and hope not to think about until they are well into their careers.
For me, the idea of student loans isn’t as scary as not knowing the different ways to pay them back. It’s interesting how we are forced to withdraw tons of loans, but we receive little information on how we can and should repay them.
Unlike other professions where you work right out of school with steadily increasing overtime pay, in medicine we spend years earning almost minimum wage and living paycheck to the other before earning a regular level salary. This creates confusion as it is difficult to know how to repay student loans.
It may seem logical to just opt for an income-driven plan, but is it really the best plan for everyone? Is it better to refinance loans to get a lower interest rate, or should you just invest your earnings and get a higher return on investment than your loan interest rate?
I myself have pondered the endless possibilities and realized that you will find someone who will give you a different answer everywhere you look, depending on their personal circumstances and risk tolerance which skews their point of view. . Most people you ask will preach income-driven plans and tell you that it’s nothing to worry about when you have it.
I was ok with that until I learned about the civil service loan cancellation plan. With this plan, after 10 years of income-based monthly payments at qualified hospitals, your remaining loan amount is forgiven. Some say to avoid it because it will limit job opportunities at public and nonprofit hospitals in the future. However, most hospitals you would expect to work in do qualify, and you can check it out yourself.
On top of that, no one talks about how your training duration might influence that decision. For example, if you are planning a 3 year residency, you will essentially be paying large sums of money for your remaining 7 years of payments from your attendance pay. On the other hand, someone planning a 7 year residency with a year or two of stock market training may only have a year or two of salary to pay. There are online calculators this can show you how much you could save by going with this plan.
More recently, I’ve been thinking a lot about the idea of refinancing and then investing the earnings. Typically, graduate student loans have an interest rate of 5% to 7%. Good investment decisions generally return a minimum of 7%.
Essentially, you can grow your money faster than your loan growth rate. This is especially true if you can refinance your loan down to 2-4%. It might not be the best idea for someone who just wants to clean their training slate, but it’s for someone who’s willing to take the risk and not feel too stressed about having to so much.
Ultimately, there needs to be more resources that students can use on both the federal side and the school side to better understand reimbursement plans from the perspective of healthcare professionals.
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About Yusuf Mehkri
Yusuf Mehkri is a second-year medical student at the University of Florida (UF). After attending Carnegie Mellon University for undergraduate studies, he was accepted into the accelerated BS/MD program at UF in Gainesville. He is interested in academic neurosurgery, particularly neuro-oncology and spine surgery. He enjoys research, mentorship and community service, which allows him to give back to his community in various capacities.