For many new doctors, paying off your medical school debt can feel like an almost insurmountable challenge. Fortunately, there are many options to help you repay your medical student loans without sacrificing your financial future. Two common ways of paying off medical school debt are the Public Service Loan Forgiveness (PSLF) program and working locum tenens. Here are the pros and cons of each and how you can efficiently use one or even both to pay down your loans.
Option 1: Public Service Loan Forgiveness (PSLF)
What is Public Service Loan Forgiveness or PSLF?
PSLF is a federal loan program designed to help those who work in public service by forgiving the remaining balance of your loan after working 10 years for a qualified employer or until you make 120 monthly payments. PSLF may be a good option if you know you’ll end up at a non-profit hospital (or already work there).
PSLF eligibility requirements:
- Work full time (at least 30 hours) for a qualified employer: This includes nonprofit hospitals, the VA, or other employers with a 501(c)(3) tax-exempt status.
- Have a qualifying loan: Your loan must fall under the category of a direct loan such as Direct Stafford, Direct Grad Plus, and Direct Consolidation.
- Enroll in an income-driven repayment (IDR) plan: Income-driven repayment (IDR) plans base your monthly loan payments on your income and family size, which can help make monthly payments more manageable, and also fulfill a requirement for the PSLF. Find out which IDR is right for you.
- Make 120 qualifying payments: These are payments that are made under a qualifying IDR plan while you work for a qualifying employer. In other words, you must have the first three stipulations in place before making your 120 payments.
The process is not as simple as it sounds, so paying close attention to documentation is essential to fulfill all requirements and receive your loan forgiveness. While the PSLF program has stringent and sometimes complex criteria, it is also reliable as it’s been well established and unchanging. Jan Miller, student loan consultant, says “As long as you dot all the I’s and cross all the T’s, then you can bank on the program.”
Pros and cons of PSLF:
- Pros:
- Loan forgiveness after 10 years: If you meet all the criteria, the remaining balance of your federal loans is forgiven tax-free after 10 years or 120 qualifying payments.
- Reliable: While we are in a changing climate, millions of people have gotten their loans forgiven through PSLF. It may be the case that even if the program is discontinued later, it won’t impact your existing loans and forgiveness. There are also other steps you can take as a backup, for example, creating a PSLF side fund as a safeguard.
- Cons:
- Complicated: Navigating the PSLF process can be tricky. You’ll need to keep thorough records and ensure all the necessary steps are followed.
- Not for everyone: To qualify, you need to work for a nonprofit, which may not always be a long-term option for many physicians, especially those in private practice fields.
- A long commitment: If you want to pay off your loans quickly or move to a non-qualifying employer, you may find a 10-year commitment isn’t worth the amount that will be forgiven.
Tip: If you choose to use PSLF, stay on top of the requirements. We recommend regular check-ins with your loan servicer to ensure you meet all the criteria.
Option 2: Working locum tenens
What is locum tenens?
Locum tenens is when physicians (or other healthcare professionals) fill in for employees at a facility when there are gaps in care. Locum tenens work can give you more flexibility and better work-life balance than traditional employment. It’s also a way to pay off your medical school debt more quickly with higher earning potential.
When you choose to work locums, you’ll work closely with a recruiter who will help you find jobs that fit your lifestyle. For example, if you want to stay close to home, they’ll help you find jobs within driving distance. If you only want to work certain days of the week or avoid certain hours, you can also look for jobs that satisfy those preferences!
What to expect: Locum tenens 101 for physicians: A newcomer’s guide.
Factors to consider before using locums work to repay medical loan debt
Everyone’s medical school loan situation is different, so you’ll want to find out, for example, if you have more private loans than government loans or if any of your loans are already on an existing IDR plan. Depending on your loan situation, PSLF may be preferable to using locums.
Some physicians choose to work locum tenens exclusively with the goal of paying off their loans quickly. Pediatrician Dr. Trevor Cabrera chose to aggressively pay down his loans in three years. This involved working locum tenens full time, choosing a strict schedule, and careful budgeting. For Dr. Cabrera, the key to maximizing his earnings with locums was maintaining a resident-level budget. By keeping his expenses low and directing the extra income toward his loans, he was able to reach financial freedom even faster. He says it’s a disciplined approach, but the long-term payoff can be well worth it.
Other physicians choose to work locum tenens on the side and use the extra money to make extra loan payments. Emergency medicine physician Dr. Ali Chaudhary started out working locum tenens on the side, but eventually switched to full-time locums.“Eventually, I realized I had full flexibility and was getting paid more doing locums than I was at my full-time job,” he says. “I could work the same amount and make a lot more money or work less and make the same amount of money as I was at my job.”
Either way, Dr. Jim Dahle, otherwise known as the White Coat Investor, recommends living like a resident until your debt is paid off. “Living within your budget isn’t any easier when you earn $400,000 vs $40,000 a year. You’re just moving more money around. Additionally, living like you earn $40,000 annually gives you perspective on how your patients live,” says Dr. Dahle.
Want to learn more? How Dr. Trevor Cabrera used locum tenens to pay off his loans.
Pros and cons of locums:
- Pros:
- Extra income: Locums pay is often higher than standard salaries, allowing you to aggressively pay down debt. "By making loan repayment a priority, I’m watching the total figure dwindle at an ever-increasing rate," says Dr. Trevor Cabrera.
- Improved clinical skills: Working in different environments can help you hone your skills and build your professional network.
- Tailored to your needs: You can adjust your schedule and work as much or as little as you want. "I give myself roughly 4 – 6 days off per month, but by focusing on loan repayment, I’m making significant progress," says Cabrera.
- Cons:
- No employer-sponsored benefits: Most locum tenens jobs don’t provide benefits like health insurance, retirement plans, or paid time off. You will need to secure these on your own and should account for this when budgeting.
- Locum tenens work is temporary: This means your life circumstances may change every few months. However, you also have more control over this, especially if you choose to use an agency to help you find the right placement.
For more on benefits: Health insurance options as a locums physician
Option 3: Combining PSLF and locums
Doing both PSLF and locums to pay off your debt
PSLF and locums are not mutually exclusive. Here’s how you can use both PSLF and locums to pay off your debt:
- Work at a nonprofit for PSLF: If your primary position is with a nonprofit organization, you can qualify for PSLF. Refer to the above criteria to ensure you meet all the requirements. If you do, your payments under the qualifying employer will count toward forgiveness after 10 years or 120 payments.
- Use locums for extra income: You can pick up locum shifts for additional income in addition to your full-time position at a non-profit. With locums, you’ll have the flexibility to decide when and how often you’re working, but it can help pay off your debt more quickly.
Dive deeper: How locum tenens pay works
Things to consider when combining both PSLF and locums:
- Debt-to-income ratio: Take a close look at your debt relative to your income. If your debt is large and you will be practicing in a lower-paying specialty after residency, locums could be a good way to boost your income and speed up repayment.
- Income after residency: Consider how much you will earn once you’re fully employed. This will help you determine if PSLF alone will be sufficient.
- Scheduling: If you're balancing PSLF and locums, be mindful of how much time you spend working. It’s important to strike a balance that works for your career and personal life.
Which option is right for you?
Many physicians have found creative ways to pay off their medical school debt at a rate that matches their goals. While PSLF, locums, or doing both are not the only ways to pay off your debt, you can take control of your financial future and live freely without the stifling weight of medical school debt.