For most people who want to achieve their higher education goals, student loans are a necessary evil. This is especially true for those who choose to attend any form of graduate school, where scholarship opportunities and financial aid are typically harder to find. During my four years of college and my four additional years of medical school, I certainly accrued a vast amount of student debt. I will admit that during those eight total years as a student, I only thought fleetingly about those student loans. Once I graduated and started residency, however, I came to the stark realization that I would indeed be responsible for paying off this debt. In this article, I will discuss my experiences living with student loans during residency, and will hopefully offer tips to those in similar situations.
When I started residency after graduating from medical school, I had over $200,000 in federal student loans (which I had consolidated), and about $40,000 in private student loans. Fortunately, I had heard about income-driven repayment options for my federal student loans through a couple of personal finance talks that I had attended during medical school. As previously mentioned on this website, income-based repayment and public service loan forgiveness allow borrowers to pay a set percentage of their income to student loans each month for ten years, and after these payments are made, all remaining federal student debt is forgiven. When I applied for this option (and got approved), I realized that the government would use my income from the prior year to tabulate my monthly payment amount. As I had worked as a tutor throughout most of my medical school years, my income from the previous year amounted to about ten thousand dollars.
Once all the data was analyzed, I discovered that my required monthly payments under income-driven repayment my first year after medical school would be a whopping amount of zero dollars! Because of this, living with student loans during residency was easy for the first year, as I did not have to make any payments towards my federal student loans. This was a welcome surprise, as it would have otherwise been very difficult to live comfortably in New York City on the paltry income I earned as a first-year medical resident.
The following year, the good news continued. Since I began my residency in July, my expected monthly payments were tabulated based on only six months of income. While I did end up having to pay several hundred dollars per month towards my government loans, this still represented a reasonable amount given my income and expenses. Over the years of my training, I continued to recieve annual payment adjustments, and although the monthly payments have continued to rise (in proportion to increases with my income), living with student loans during residency has been relatively manageable.
While income-driven repayment might be a great option for medical residents, there are certainly some downsides. For instance, in the six years of my residency and fellowship training, my total amount of student debt has actually increased significantly because accrued interest on my debt has far surpassed my monthly payments, and I now owe nearly $290,000 in student debt (and this amount increases every day!). Moreover, the idea of student loan forgiveness is a fairly new government policy, and the first group of borrowers have only recently received debt forgiveness. We have all probably heard stories about student debt borrowers having difficulties getting their debt forgiven, but I suspect this will be easier in the coming years as the government gets better at processing applications for debt forgiveness.
While living with student loans during residency, the key point to remember about income-based repayment is that regardless of how small your monthly payment may be, you are still working toward debt forgiveness. I have several colleagues and friends from medical school who, instead of applying for income-based repayment, opted for periods of deferment and forbearance. While this may seem beneficial in the short-term (more disposable income…yay!), you are doing yourself a disservice. Interest on your loans will continue to accrue, and so picking either of these options will only increase your overall student debt balance when you finally decide to start paying off your loans. At the very least, by not applying for income-based repayment as early as possible, you’ve delayed your ten-year plan towards student loan forgiveness, and thereby extended your overall time spent burdened by student debt.
Of course, some people living with student loans during residency will not be eligible for loan forgiveness and income-based repayment, since they may have substantial private loans. In these cases, other than deferment and forbearance (which should only be used in emergencies), repayment strategies are limited. Even if income is tight, it is imperative to at least pay the minimum on each of these loans, or risk going into default (I know all too well the perils of loans going into automatic default). It is also important to note that many private students loans have higher interest rates, which may even increase periodically over the course of repayment. It is therefore wise to pay more than the minimum whenever possible to potentially lessen your final payoff amount on private student loans.
Throughout my years of residency and fellowship, I have been able to pay off two of my private student loans in addition to making monthly payments on my federal loans through income-based repayment. Of course, these were no easy feats, and required careful consideration on my part. For example, I continue to live in housing subsidized by the hospital system where I work. This enables me to live alone (albeit in a studio) in New York City on an otherwise modest annual salary. I also had to occasionally miss out on several vacations in favor of doing extra moonlighting shifts to earn additional cash.
But by methodically continuing to make monthly student loan payments during my six years of residency and fellowship training, I am inching closer to debt forgiveness. And my credit score has never been better! With simple, but important decisions and strategies shorty after graduating from medical school, living with student loans during residency (or the first few years of any job, really) is not only feasible, but easily achievable.
Adam Rothman is a guest writer for Student Debt Diaries and is currently a medical professional in the New York City area. He is a brother of Jordan Rothman, the founder of Student Debt Diaries. You can reach Adam through email at adam@studentdebtdiaries.com