This article was originally published in White Coat Investor.
It's likely no surprise that debt for medical school graduates has increased by nearly 12% from 2011 to 2015. This means that the average doctor who graduates with student debt does so with more than $180,000 in loans. $180,000! That's the cost of a house in Dallas, Texas!
The sheer amount of your student debt can make you feel like you'll be in debt forever. And without clear coursework in or guidance on financial management, many physicians are struggling to get out of debt quickly and set ourselves up for financial success.
Noah Heilbrun, an Anesthesiologist in Bend, Oregon, found himself in that same boat. After graduating from the University of Michigan Medical School and wrapping up his residency in 2013, he found he was struggling under the weight of $270,000 of student debt. We sat down with Noah to understand how he got his student debt under control while still saving for the other important financial goals in his life.
White Coat Investor: Did you have any sticker shock when you realized how much medical school would cost?
Noah: Absolutely. Like most of my friends, I didn't really appreciate the cost of medical school until I graduated. And at that time, you're just celebrating the fact that you graduated – you completed medical school and are a doctor, a goal you have likely been working towards for years.
To complete medical school is a feat in itself, but then you see the real cost of it. I knew enough about interest rates to know that I didn't have a favorable rate on my loans and in truth, I felt taken advantage of. I thought the total cost of getting an education to go into a field where I would be helping others was unfair. I believed (and still believe) that there had to be a better way to do this.
White Coat Investor: What were the steps you took to get your debt under control?
Noah: First, I looked into government programs to see if I was a fit for any of them. I came across two types of programs:
Programs that enabled me to lower my monthly payment by stretching my loans over a longer period of timeProgram where your loans could be forgiven entirely if you work in public service.
The programs that lower your monthly payment ultimately increased the total cost of your loan, and I knew I wouldn't work in public service for 10-consecutive years so I wasn't a great fit for any of these government programs.
Then, I came across a Facebook advertisement for student loan refinancing with CommonBond. The ad mentioned I could save more than $14,000 on my student loans, and so I was intrigued. I went to CommonBond's website, filled out the application, and was approved incredibly quickly. The process was so simple and CommonBond's customer service was so helpful that I thought there would be a catch. But there wasn't. In about a week, CommonBond had helped me refinance my student loans, saving me more than $16,000.
White Coat Investor: Did you do any research on refinancing before you decided to do it? What were the things you considered?
Noah: I did do my research. There were a few things that I knew mattered to me:
Savings: I wanted to make sure I refinanced with a company that would help me save. That's the whole point.Service: My student loans were, at the time, the biggest financial decision I had dealt with, and as a physician, I just didn't have the financial training that I know others get in college or graduate school. That's why it was so important to me that I chose a lender that would answer the phone when I called. For me, that was CommonBond.Other benefits and services: A lot of lenders provide protections that I knew would be important. For example, CommonBond provided the ability to defer my payments if I found myself between jobs, or if I needed to go back to school. They even mentioned that they would help me find a job if found myself between jobs. While I don't anticipate needing that, it was an interesting perk that I had never heard of with a lender. They also have what they call their "Social Promise." For every loan they fund, they fund the education of a child in need. When I dug around a bit, I learned that that meant that my loan was helping to send a child in Ghana to primary school. That meant a lot to me.
White Coat Investor: You mentioned the process was simple. What does it entail?
Noah: To start with, it took me literally two minutes to fill out CommonBond's online application. They then showed me the interest rate they could give me – it was significantly lower than the interest rate on my federal government loans and that's how I knew CommonBond would help me save. Then, I just uploaded a few documents (a pay stub to prove I was employed, a driver's license to prove residency, etc.) and before I knew it, CommonBond was my lender. The whole process only took about a week.
White Coat Investor: How are you using the money you're saving on your student loans?
Noah: The savings has allowed my wife and I to start college funds for our kids. We have two boys – a 3-year-old and a 1-year-old and we know that sending them to college won't be cheap!
White Coat Investor: If you had to give aspiring doctors in medical school any advice on dealing with their student loans, what would you tell them?
Noah: I'm passionate about this topic, and since graduating and starting my career, I've spent a lot of time trying to get the financial knowledge that I know will get my family on the right track. There's a few things I would share:
While you're in medical school, understand that every dollar adds up. I worked with financial aid officers who encouraged me to take out student debt and live comfortably during school. And while I agree with that to some degree, I then had to pay back that debt. I could have been a bit scrappier and lived with a bit less during medical school to reduce the amount of debt I had at the end of it. Refinance your student loans. As I mentioned above, I refinanced with CommonBond and they saved me over $16,000. That's no small amount of money. Take an interest in your personal finances. Medical school and residency are tough, and you really don't have a lot of money during those times, but when you graduate, you're fortunate, in many cases, to get a job where you will earn a great living. There's no substitute for having a basic knowledge of how to manage your money. It's critical to make sure you're looking out for your own best interests.
Noah Heilbrun is an anesthesiologist living and working in Oregon. He graduated from the University of Michigan Medical School and completed his residency at the University of Arizona.