Debt Demolition: How Single Mom Physicians Can Tackle $250K+ Student Loans
Sep 05, 2023
As a single mom physician, managing substantial student loan debt can be overwhelming. But fear not! In this guide, we'll share proven strategies to tackle your $250K+ student loans and pave the way to financial freedom. Let's embark on the journey of debt demolition together!
I overloaded an already full schedule to defer interest. While in residency, a clever medical student suggested I return to college part-time to keep my government subsidized loans (Pell / Perkins then known as GSL/NDSL) in deferment. I even took real estate course exams just days after a difficult C-section.
Once in private practice, though, I was only able to continue that schedule while my husband was still with us. After that, the time constraints made it impossible. So here are some other ways I used to pay off my $250k debt that ultimately cost me $1.3M.
- Assess Your Loan Portfolio
Start by organizing your student loans. Understand the types, interest rates, and repayment terms. This knowledge will help you prioritize loans and devise a repayment plan. I’m a fan of paying off the highest interest rate first but understand others want to “simplify” by paying off the smaller ones to “get them out of the way.”
Please remember to never combine government sponsored loans with personal loans. The government ones would die with you. Personal loans attach to your estate and are the responsibility of your heirs if anything happens to you.
- Create a Budget Battle Plan
Craft a realistic budget to allocate funds towards loan repayment. Minimize non-essential expenses and prioritize debt elimination. Utilize budgeting apps to stay on track can be useful.
Keep in mind that budget is not a dirty word. It’s about mindful spending. Choosing to say no to one thing means you get to say yes to something else!
- Explore Loan Forgiveness Programs
Research loan forgiveness options tailored to medical professionals. Federal and state programs may offer relief based on your employment and loan type. Determine eligibility and apply. When I came out of residency, this program was closed due to government shutdowns. Closely consider the options and determine if it’s the right option for you and your family.
- Refinance Wisely
Consider loan refinancing to secure lower interest rates. Be cautious of refinancing federal loans as you may lose certain benefits. Analyze offers and choose the best fit. I managed to refinance my loans down from over 10% to around 4%, which made a huge difference in my cash flow.
As mentioned above, never consolidate personal loans with federal loans.
- Implement the Debt Avalanche Method
Prioritize high-interest loans for accelerated repayment while making minimum payments on others. Once the first loan is paid off, redirect the payment to the next in line.
If you’re working on credit card repayments at the same time, you may be using this for both.
Check with your accountant if there’s any difference from a tax standpoint over which should be paid off first. There are frequent changes with the laws around paid student loan interest being tax deductible. The government traditionally, though, limits the salary allowance so significantly that most physicians wouldn’t qualify for the tax break.
- Enroll in Income-Driven Repayment (IDR) Plans
IDR plans adjust your monthly payments based on your income and family size. This eases financial strain and offers forgiveness after a set period.
- Boost Income with Side Gigs
Explore telemedicine opportunities, medical consulting, or medical writing to boost your income. I like considering the difference between real property (like renting out extra space on AirBnB or participating in real estate syndications) and intellectual property (writing) when earning more income that wouldn’t be employer specific.
There’s an entire section in our Physician’s Better Way course just on earning additional income via side gigs.
Dedicate the additional earnings to loan repayment.
- Employ the Snowball Method for Quick Wins
Alternatively, pay off the smallest loans first to build momentum. The psychological boost of crossing loans off your list can be empowering.
Discuss this with your financial planner and accountant for the best option for you.
- Negotiate with Lenders
Contact loan servicers to negotiate lower interest rates or temporary forbearance during financial hardship. Lenders may be willing to work with you.
If not, consider consolidating loans with someone else who is. Again, don’t consolidate personal loans with federal loans.
- Seek Employer Support
Check if your employer offers loan repayment assistance as part of your benefits. Most frequently available as a sign on bonus when you start a new job, leverage this perk to expedite debt demolition.
Be mindful of how many years the employer requires you stay with them to offset this support. And check with your accountant about the tax implications of any loan forgiveness or employer repayment.
Debt demolition may seem daunting, but with determination and a well-crafted plan, single mom physicians can conquer $250K+ student loans.
Assess your loans, create a budget, explore forgiveness programs, and refinance strategically. Use debt avalanche or snowball methods, explore side gigs, and negotiate with lenders. Seek employer support and maintain unwavering focus. Remember, every step brings you closer to financial freedom.
Join our Single Mom MD community for ongoing support and guidance on your journey to a debt-free future! Together, we'll rise above and thrive in both our medical careers and motherhood. Let's demolish that debt and embrace financial empowerment!
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