Med School Hell – 7 Tips For Managing Your Student Loan Debt

This post is raw and holds nothing back. If you’re uncomfortable with vulgar language, please turn back.

August 28, 2007
By: Hoover


Are you concerned about educational debt? Have you stopped to ponder how exactly that debt will get repaid? What type of salary do you need to support your family’s current and future lifestyle?

Average educational debt

  • $130,571 – According to the Association of American Medical Colleges, the average educational debt of indebted graduates of the class of 2006 (including pre-med borrowing). The average debt of graduating medical students increased in 2006 by 8.5 percent over the previous year.
  • 72 percent of graduates have debt of at least $100,000
  • 86.6 percent of graduating medical students carry outstanding loans
  • 40.2 percent of 2006 graduates have non-educational debt, averaging $16,689

3-5 years of residency with a salary in the $40,000 per year range means 3-5 years of lost earning potential. Loan forbearance during residency multiplies the interest you owe on your loan. Student loan interest rates are on the rise.

7 Tips For Managing Your Student Loan Debt

  1. Just because you can borrow more doesn’t mean you should.
    Lenders will provide you with money to burn. Borrow smart and only borrow what you need now. Your actual repayment amount is going to be much higher once interest is calculated. Don’t assume that you’re paying back exactly what you’re borrowing. You need to budget and stick with it. Treat yourself, but not excessively. Play it smart.
  2. I still say buy versus rent.
    Even with the housing slump and record foreclosures, I am still an advocate for purchasing a home versus renting while in medical school. If you’re going to school in a large “college city”, there will always be buyers for your home. I purchased a town home when I began medical school and sold it for a huge 40.3% profit when I finished. I had no trouble selling the home, and I marketed it to incoming medical students. At the same time, my classmates were dumping $600-$700 per month in rent with nothing to show for it when they moved away.
  3. Max out your subsidized loan borrowing power first.
    Federal student loans typically come in two flavors: Subsidized and unsubsidized. Subsidized loans are loans where the government subsidizes the interest on the loan for the duration of your education. On the other hand, unsubsidized loan interest begins accumulating immediately. To save yourself some money in the long run, max out your subsidized loan borrowing power first. Most students need both types of loans.
  4. Pay interest on your unsubsidized loans if you can.
    If you find yourself with extra money every month and are able to pay your unsubsidized loan interest payments comfortably, go ahead and do it. You’ll find yourself facing lower loan payments when it comes time to repay your principle loan balance.
  5. Avoid private loans if possible.
    If it’s within your means, try to avoid private loans. While federal student loans are eligible for forbearance during residency, most private loans are not. This means you’ll be hit with loan payments on a $40,000 per year residency salary. If you are forced to take out private loans, borrow the least amount possible and pay off the balance of these loans first. For example, if you have the option of paying your unsubsidized loan interest or making payments on a private loan, pick the private loan payment.
  6. Get those credit cards paid off.
    Many students come into medical school with a fair amount of credit card debt. As you already know, interest rates on these cards are often times extremely high. If you’re making the minimum payment or something close to it, interest accumulation will make paying off your balance very difficult. If you have additional borrowing power on a federal student loan, borrow the extra amount to pay off your credit card in full. Do this only once. The benefits are obvious — you’re using a lower interest rate loan to pay off a higher interest rate loan. You have to be dedicated to yourself and your budget to not carry a balance on your cards in the future. Always budget and always pay off your credit card in full. If you can’t afford to pay off the balance in full every month, you do not need what you are buying and you need to take a closer look at your budget.
  7. Consolidate your loans while you’re still in school. – Thanks HalfMD for this tip.
    Students who come from undergraduate programs with multiple loans should consolidate their loans at the beginning of medical school to lower future payments. Also, having all of the bills come from one lender makes record keeping a lot easier.

Happy borrowing!

Are you convinced to leave medicine? If so, you may feel like you are alone. You may feel clueless about what to do next. However, quitting medicine could turn out better than you have ever thought possible. And here is why you should get out …

This article is part of Hoover’s Med School Hell series. Med School Hell reveals the crazy truth about the crappiness of the US medical education and healthcare system … while making you laugh so hard, you’ll crap in your pants.

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