Match Day 2023: Five Debt Management Tips for New Doctors

Match Day is an exciting yet stressful time for new doctors. One of the more stressful things is that you’re now transitioning from a debt accumulation stage to a sort of stalled-out debt payment stage. This is really the first time young doctors need to start planning and thinking about their debt. Here are some debt management tips to help you on your way.

Background

If you’ve experienced or are about to experience Match Day, you’ll know it’s an auspicious time. But from a financial perspective, it can be very stressful.

You’re about to go through a major career transition. That transition often comes with relocating, increased living expenses, and student loans repayment. Unfortunately, you also may be years away from earning the salaries that physicians command after their residencies and fellowships. This combination of events often adds even more stress to an already stressful time.

(I do also recognize that not everyone will match. So, here are some tips and alternatives for unmatched doctors.)

What Not To Do

When you enter training, don’t do what I did — which was to completely ignore my finances. Now don’t get me wrong, your primary focus in training is to learn to be the best doctor possible. But you can’t ignore your financial well-being. Trust me.

One of my biggest mistakes was completely ignoring my debt during my 7 years of training. This non-strategy led my debt to compound on itself, worsening the situation when I finished training.

That is what I want you to avoid. That’s also why it’s important to form healthy personal finance habits like these from the start.

Tips for New Doctors

So, here are 5 debt management tips so you can get started on the right foot!

1. Understand the ins and outs of your spending

The first step to taking control of your finances involves gaining awareness of all of your income and expenses. Get to know everything coming in and going out. To accomplish this, some people use a spreadsheet or browser-based software. Others use phone apps. I use a spreadsheet that you can also use.

To newer medical practitioners, this may not seem practical (or desirable). Many medical students allow themselves to continue growing in debt, knowing they’ll be able to pay everything off later in their career. However, if you take control of your finances now, you’ll be in a much better position later. This habit will also help you avoid accumulating unnecessary high-interest credit card debt.

Doc2Doc Lending importantly points out that people often forget to add up their monthly subscriptions. In an increasingly subscription-based economy, it can be easy to lose track of all the little fees.

Therefore, to clarify your expenses, use your actual bank statements from the past few months and identify where you’re spending your money. This is also a good time to get rid of any subscriptions you don’t really need.

2. Tabulate all of your debt

This was something I avoided until the end of my training when I began my financial comeback story. I avoided it because I was scared to see how much debt I had. However, this fear led me to make a ton of mistakes with my debt — like deferring all my loans for 7 years.

So, one of my top recommendations is to create a spreadsheet listing out all your debts separately. This will include:

• Credit card debt
• Student debt
• Car debt
• Home debt
• And anything else

This will give you a full perspective of your debt situation. You can then use this to make informed decisions.

Lastly, this has a therapeutic effect. While I was scared of tabulating my debt, when I finally did it I felt relieved. I finally knew what my situation was and could work to make it better.

3. Manage high-interest debt

Now that you understand your debt landscape, the next step is to take action.

Start with high-interest debt — the most damaging kind of debt. The most common forms of high-interest debt are credit card or other private debt. The best way to manage high interest debt is to avoid it. That’s why tracking your expenses is so important. But if you already have high interest debt, that advice doesn’t help.

While I strongly advise avoiding high-interest debt, sometimes it’s unavoidable for a medical student or trainee. So, what can you do?

Consolidate high-interest debt: If you currently make multiple monthly payments to different high-interest lenders, consider saving money by consolidating them. Consolidating loans simply means putting them all in one place, usually using a larger, single loan from a different financial institution that lowers your payments, reduces your interest rate, simplifies your finances, or a combination of all three.

Reduce high-interest debt rates: Sometimes newer physicians use credit cards to offset expenses during training. This might help in the short term but often creates a high-interest debt to pay down later. Most credit cards today have an APR of 13% or above, which adds up quickly when you leave debt unpaid. Consider reducing high-interest debt, such as that from a credit card. You can do this by getting a personal loan with lower interest and a longer term. This gives you some flexibility as far as repayment goes, and enables you to tackle the interest head-on.

4. Create your student loan payback strategy

The previous advice was largely applicable to high-interest debt like credit card debt or other types of private debt. After you determine a course of action for that debt, you will want to start thinking about your plan for any student loan debt. Now that you are no longer a student, your loans will go into repayment. So, you really need a plan. Here are some student debt management tips:

Federal student debt

For trainees with federal student debt, the answer is usually simple. During your training, you can enroll in an income-based repayment plan for federal loans. Since your income is low, your payments are low. These payments also qualify for the Public Service Loan Forgiveness (PSLF) program — a government program where doctors making these types of payments for 10 years while working for a non-profit medical institution get their debt forgiven.

Even if you’re not sure you’ll work for a non-profit institution after training, it still makes sense to make these payments as a trainee. Then, when you become an attending, you have less time to forgiveness. And if you decide not to work for such a hospital/clinic, you change your plan to aggressively pay off your debt within 5 years of graduating, like I do.

The one thing I generally do not recommend doing in training is refinancing your federal student debt. This precludes you from PSLF eligibility in the future. And there is no reason to do that when your payments are so low based on income anyway.

Private student debt

If you are like me, you have the distinct pleasure of having both federal and private student debt.

Unfortunately, private student debt does not qualify for any forgiveness like federal student debt. Therefore, you need a plan to pay it off. There are a few options:

• Use any deferment or forbearance options. Keep in mind that your interest continues to accrue during any forbearance period.
• Call the loan company and arrange a special payment option. When all my deferment and forbearance options were used up, I was able to negotiate an interest only payment for some of my private loans.
• Refinance the loans to a better interest rate and pay them off through training (if possible).

5. Don’t stress too much

If there is one thing that I would tell my former self in training about my huge debt, it would be not to stress too much.

I stressed about it a lot. I didn’t seek out any debt management tips because my stress paralyzed me. I’m sure many of you can relate. However, I am now proof that it will be okay and you will be able to effectively manage your debt and greatly improve your financial well-being.

Jordan Frey, MD, is a plastic surgeon at Erie County Medical Center in Buffalo, New York, and founder of The Prudent Plastic Surgeon, where a version of this post originally appeared. These debt management tips were crafted in partnership with Doc2Doc Lending.

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