Welcome to the latest episode of the Physician Cents Podcast, where we explore complex financial topics tailored specifically for physicians. Whether you're a medical student, resident, fellow, or attending physician, you're going to find valuable insights that can help you increase your financial IQ, further your financial journey, and improve your overall well-being. Hosted by Chad Chubb and Tyler Olson, let’s dive in! 

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Managing Debt as a Physician: Strategies for Repayment and Refinancing

Debt is a fact of life for most physicians, with nearly 78% of graduating medical students carrying significant loans. While discussions about debt can feel overwhelming, understanding your options can positively shape your financial future. Whether you're navigating loan repayment, weighing refinancing options, or planning for long-term goals, having a clear strategy is key.

Let’s break down debt basics, explore refinancing, and provide actionable advice for physicians at every career stage.

What is Debt and How Does it Work?

Debt is borrowing money with a promise to pay it back, usually with added interest. Here’s the breakdown:

• Principal: The original amount borrowed.
• Interest: The cost of borrowing. For example, if you borrow $50,000 at 8% annual interest, you'll owe $4,000 in interest after one year.
• Term: The repayment period agreed upon.

When you borrow money, the lender expects you to pay back more than you took—this keeps them in business. For students, interest often begins accruing immediately after the loan is disbursed. This means debt grows even while you're completing your education, making it crucial to understand loan terms from the start.

Fixed vs. Variable Interest Rates

Choosing between fixed and variable interest rates can feel confusing. Each one offers pros and cons that depend on your financial situation.

• Fixed rates: These stay the same throughout the loan term. They provide predictability, making budgeting easier.
• Variable rates: These can increase or decrease based on market conditions. While they may start lower than fixed rates, they can rise unexpectedly.

Many experts recommend fixed rates for stability and peace of mind. If interest rates drop in the future, refinancing can allow you to secure a better deal. Variable rates, though sometimes tempting, can lead to financial strain if rates spike.

Why Financial Literacy Matters

Student loans differ drastically from other types of debt. For instance, getting a mortgage involves an exhaustive approval process, while borrowing hundreds of thousands of dollars for school requires little more than a signature.

Unfortunately, many students don’t fully grasp their loan agreements until repayment begins. In a recent survey by Earnest, 91% of respondents said they wish they’d had a financial literacy class before taking out loans. This lack of understanding can lead to regret, with 16% stating they wouldn’t have gone to college at all if they’d known how much debt they’d accumulate.

For physicians, debt isn’t just about numbers—it’s about understanding how loans fit into your broader financial goals.

Federal vs. Private Loans

Physicians often hold a mix of federal and private loans, so understanding how they differ is essential.

• Federal loans: These come with benefits like income-driven repayment plans, Public Service Loan Forgiveness (PSLF), and deferment options. Interest rates are typically higher, but the flexibility and protections make them a good choice for many.
• Private loans: These come from lenders like Earnest and often have lower interest rates. However, they lack federal benefits and are less forgiving if you run into financial trouble.

Private loans are more straightforward. For example, you can refinance private loans without worrying about losing federal benefits. But federal loans require careful handling to avoid giving up valuable perks.

When NOT to Refinance

Refinancing isn’t always the best move, particularly if you hold federal student loans. Once you move to a private loan, you lose access to federal protections like:

• PSLF eligibility.
• Income-driven repayment options.
• Loan deferment or forbearance during financial hardship.

If you’re in training or unsure about your career trajectory, refinancing federal loans could limit your options. For example, imagine you’re a second-year internal medicine resident with $175,000 in federal student loans. You’re leaning toward private practice and think refinancing to a lower rate is smart. But what if you change your mind and pursue a public-service role or fellowship? You’ve now shut the door on PSLF forever.

The key takeaway: Stay flexible early in your career unless you’re 100% sure of your long-term path.

Scenarios Where Refinancing Makes Sense

On the other hand, some situations scream for refinancing. It’s a great tool for consolidating loans and lowering interest rates. Here’s when it may make sense:

1. Private Practice Specialists: If you’re a gastroenterologist joining a high-earning private practice, PSLF likely won’t apply. Refinancing to a lower interest rate can save thousands.
2. Dentists or Other Indisputable Private Earnings: Dental professionals, for example, rarely work in roles that qualify for PSLF. Refinancing their loans is often a no-brainer.
3. Mid-Career Physicians: If you’ve been paying off loans for several years and are confident in your financial standing, refinancing could help you secure a lower rate and pay them off faster.

Refinancing isn’t one-size-fits-all. Stay intentional and ensure you’re calculating the total costs of any new loan terms.

Refinancing for Better Cash Flow

Sometimes physicians refinance not to save money but to free up cash flow. Balancing a new mortgage, setting up a private practice, or covering family expenses may require a lower monthly payment.

Many lenders, including Earnest, allow borrowers to adjust terms to match their budgets. For example, Earnest offers a payment slider that lets you see exactly how your payment schedule impacts total repayment costs. While spreading out repayment over a longer term increases the total cost, it may free up cash for other priorities in the short term.

The lesson here: Refinancing doesn’t have to be about aggressive repayment—it’s about creating a loan plan that fits your life.

The Importance of PSLF for Physicians

Public Service Loan Forgiveness is a game-changer for many doctors. Physicians working at nonprofit hospitals or academic institutions can have their remaining federal student loan balance forgiven after 120 qualifying payments (10 years).

PSLF works well for:

• Hospital-based specialists who plan to stay in academic or nonprofit settings.
• Physicians with high loan balances relative to their income.

Conversely, private practice physicians or those in high-income specialties may benefit more from refinancing and aggressive repayment.

If you’re considering PSLF, patience pays off. Despite past skepticism, the program has evolved, and more borrowers are receiving forgiveness. For many physicians, staying on an income-driven plan and pursuing PSLF is a sound strategy.

Managing Debt for New Attending Physicians

The leap from residency to attending income is significant, but it comes with financial challenges. Many new physicians face:

• Lifestyle inflation.
• Moving to new cities.
• Learning the ropes post-training.

Jumping into a high monthly loan payment or making rushed refinancing decisions can lead to financial strain. Take time to settle into your role, understand new expenses, and map out a repayment plan that aligns with long-term goals.

Tips for Managing Debt Effectively

Here are practical steps for physicians tackling debt:

1. Track Your Loans: List servicers, interest rates, and repayment terms in one place.
2. Know Your Options: Stay updated on federal protections and private refinancing opportunities.
3. Keep the Big Picture in Mind: Balance loan repayment with savings, investments, and other goals.
4. Consult Professionals: Don’t go it alone. Financial advisors specializing in physicians can guide your decisions.
5. Avoid Small Mistakes: Pay attention to accrued interest during training or delaying payments unnecessarily.

Exploring Refinancing with Earnest

Earnest offers features tailored for borrowers looking to streamline repayment:

• Precision Flexibility: Use their payment slider to design a plan suited to your needs.
• Credit-Safe Estimates: Check loan rates without impacting your credit score.
• Real People, Real Support: Earnest’s client happiness team provides personalized service, not automated responses.

Whether you’re refinancing to pay loans off faster or free up cash flow, Earnest provides tools to make debt management smarter and less stressful.

Take Control of Your Financial Future

Debt doesn’t have to dictate your life as a physician. By staying informed, weighing your options, and creating a plan, you can take control and build a secure financial foundation. Whether PSLF fits your goals or refinancing is your path to freedom, every decision matters.

Physicians face unique financial challenges, but with the right strategies, you can tackle debt while pursuing the career (and life) you’ve worked so hard to achieve. Stay tuned for more insights on asset protection, wealth building, and other critical topics on future episodes of the Physician Cents podcast!

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_{The best of the best list is a paid sponsorship, but these are professionals/companies that Tyler and Chad collaborate with within their own practices or have been vetted to earn a spot on this list. By supporting our sponsors, it allows Chad & Tyler to dedicate more time to you and the Physician Cents community. If you ever have a question (or not a great experience, which we don’t expect!) about a sponsor, please let us know. We call it the “best of the best” for a reason, and we will maintain that standard for our listeners & viewers.}

_{This information is for general purposes only. This information is not intended to be a substitute for specific professional financial, tax, or legal advice, as individual circumstances vary. Please see a financial professional, CPA, and/or an attorney in regards to your own individual situation.}

_{Wealthkeel’s Advisory Services and Financial Planning offered through Vicus Capital, Inc., a Federally Registered Investment Advisor. WealthKeel LLC, 615 Channelside Drive, Suite 207, Tampa, FL 33602 -- 267.590.9533.}

_{Olson Consulting LLC, Offering Advisory Services and Financial Planning, is a State-Registered Investment Advisor.}

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