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What To Do If You Can’t Afford Your Medical Student Loan Payments

If you’re looking at the total of your medical student loan payments as a newly graduated physician or dentist, and you can’t afford it, here’s your next step.

If you find yourself in this situation and feel you need some assistance, check out our offer at the bottom of the article.

Getting your first notice about how much you owe each month on your medical student loan payments is one of the unique – and uniquely stressful – parts of graduating as a newly minted physician or dentist.

You’re in the lowest-earning years of your career, you’ve just spent a decade in school, and you’re now carrying hundreds of thousands of dollars worth of medical student loan debt. When you get that first letter (or those 10 first letters from your different loan servicers) that informs you how much you owe every month, it can be a highly stressful moment, and that’s an understatement.

However, there’s no need to panic, even if you’re worried that there’s no way you can afford to pay your medical student loans at the monthly amount currently staring you in the face on that letter from your loan servicer.

Here’s exactly how to handle it if you can’t afford your medical student loan payment during your lower-earning new grad years.

First up: Can you really not afford them?

Your initial shock when you saw the monthly payment number is understandable, especially since you’ve been (hopefully) living like a student for a decade or more. But before you jump straight to “I can’t afford this,” it’s important to make sure you actually can’t afford the payment.

To get a realistic sense of how much you can afford, start with the budgeting basics. Look at how much you’re making every month, and make sure you’re sending 10% of your pre-tax income to a 401K (or other retirement plan) through your employer.

Next, make sure you’re saving 10% of your take-home income, aka the number on your paycheck, for personal savings like your emergency fund, a house down payment, and other goals that are important to you.

Now factor in your reasonable monthly bills for things like food, utilities, housing and transportation. Emphasis on reasonable here, since as a newly graduated physician or dentist, you can wait a few years until your salary goes up to justify the fancy car. Once you’ve accounted for your reasonable bills, how much is left over?

It might be enough to cover your loan payments, even though it does seem like an astronomical number on first glance.

And if you’re 100% sure there’s no way you can swing those medical student loan payments, here’s what to do next.

Are your loans federal or private – or both?

The strategies for getting your loan payments down to a monthly number that fits your life are different depending on the type of loans you have. Your very first step is identifying whether you have federal loans, private loans, or a mix of both.

Once you have that information, you’re ready to tackle the strategies associated with lowering each type of loan payment.

For federal loans…

The good news with federal loans is that your payments are likely flexible through one of the established federal programs.

To get your payments adjusted under one of the several programs available, like income-based repayment plans, your very first step is to find out who services your loans and give them a call.

On that call, they’ll ask you details about your current financial situation, and based on that, will be able to tell you which programs you qualify for, as well as what your payments would be under that program. If you don’t qualify for certain plans, ask what happens if you consolidate your loans – this can help you qualify for more plans.

If you’re really struggling to make your payments work, this is a great option to lower your payments, with one caveat: lowering your payments does nothing to lower the total amount you owe, and the longer it takes you to pay back your loans, the more interest you’ll pay overall.

That trade off might be one you need to make right now, but it’s important to make sure that you keep an eye on how that balance changes as your income goes up. What works for your current financial situation might not be true in a few years – or a few months – if other parts of your financial life change. That’s the beauty of true financial planning: You revisit your plan and make tweaks that work for you proactively, instead of waiting for things to happen to your money.

For private loans…

If your loans are private, not federal, the first step of the process is the same: call your loan providers to ask about the options available to you.

While private loans don’t offer the full range of flexible payment programs that come standard with federal loans, you’ll have one key area where you do have flexibility: your interest rate.

Some lenders will give you a break on your interest rate for things like graduating, or setting up automatic payments, but they’re not going to offer you a discount proactively. You’ll need to ask for them, which is a good rule for getting discounts from banks overall.

Then there’s the refinancing question. Should you refinance your loans to score a lower payment and a lower interest rate?

For new physicians and dentists, you’re in a unique situation where you’re going to be making significantly more money in a few years, and you’ll be able to get an even better deal on your refinancing if you wait until that happens. However, if you do need to refinance now to make your payments work, there are great companies out there like Earnest, SoFi and CommonBond that will make it easy for you to do so.

Just remember that as a newly minted medical professional refinancing your loans, you’re at your lowest income and highest debt level – so the deal you get now won’t be quite as good the one you’ll be able to get in a few years.

If your bank or lender is adamant that there’s nothing they can offer you to help you with your payment amounts, it’s time for your final step, and you need to start shopping around. Call up other banks and see what they can offer you if you transfer your loans to them.

And remember: you need to understand the full picture

This might seem like an obvious statement, but when you’re discussing your loans with lenders, you need to understand that they don’t always have full information about your financial situation – which makes it harder for them to give you solid advice.

For example, let’s say that under a federal loan program, you can reduce your payment to a whopping $50 a month. You’re understandably excited, because it’s a very manageable number, but what they don’t tell you is that your loan repayment timeline just got much longer – and that your total loan balance is still accruing interest while you’re making those lower payments.

You might be paying $50 a month, but accruing $500 a month in interest, which means your loan balance is actually going up every single month.

Your biggest challenge right now is to balance the need to reduce your payments to an affordable amount, while keeping your overall financial picture in mind – to ensure you don’t end up paying more over the course of your loan than you need to, especially given your unique career and earnings trajectory as a dentist or physician.

So what’s the best next step?

When I work with new physicians and dentists, we focus on getting clear on that total picture, so that if they do need to reduce their current medical student loan payments to an affordable amount, they do it without extending their loan too much – and with a plan to handle their loans effectively as their income increases.


If you’re in this situation, we’re making a special offer over the next two weeks. I’d be happy to book a free half-hour call to go over your current loan payments, your available options, and how to make sure your loans are in line with your whole financial life, click here and book your call right now.