The great debate: Should doctors pay off debt or save for retirement first?

By Physician Sense
Published March 13, 2020

Key Takeaways

Eliminate debt or save for retirement? It’s a decision most doctors will face during their careers. According to W. Ben Utley, head of Physician Family Financial Advisors, it’s a decision complicated by the desire to “get on track.” You might have even used those words yourself. Your friends who went straight into the workforce got a head start on saving for retirement. You took on med school, likely some student loan debt, and years in residency. So, what’s the priority, debt or retirement? 

While your layperson friends might have been able to start saving for retirement immediately, doctors have unique financial circumstances that bar them from jumping on the financial bandwagon. Utley has some physician-specific guidance; here’s what you need to do.

First, debt

According to Utley, the first step in answering this question is determining what type of debt you have and what type of job you want to hold. If you have student loan debt, those loans most likely originated from either a private bank or are federal direct loans. Once you know the type of loans that you have, it’s time to examine your career goals.

If you have federal loans, are you working for a qualifying non-profit and participating in a Public Service Loan Forgiveness (PSLF)-eligible repayment plan? Do you want to continue working in the non-profit space? In that case, it doesn’t make sense to attack your student loans, Utley says. Why pay more than you have to? Meet the program requirements and eliminate as much of your debt as possible. 

“That’s something we wouldn’t want to blow up because the return on PSLF is almost infinite,” Utley says.

Not sure if you’re PSLF-eligible? Then it’s time to talk to an expert. This will be money well-spent if you can wipe out your debt.

Let’s say you’re a surgeon working for a small group practice (aka, not a non-profit). You know that this is the work you’d like to do for the remainder of your career. In that case, it’s likely best to refinance your loans.

“Before you pay off loans, you refinance them,” Utley says. “You get the very best terms that you can.”

When you refinance your student loans, all of your loans are combined into one held by a private lender at a lower interest rate. Right now, interest rates are hovering around 2-3%. If they go even lower, you can refinance again, Utley says.

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