Loan repayment strategies for medical students and residents

Medical students carry more debt than those in any other field of study. Becoming a physician is expensive, and eventually, those six-figure loans have to be paid back. Whether you start making payments during residency to keep interest costs down, or wait until you have the financial security of a physician’s salary, it’s important to know all your options.

The government offers several repayment options for federal loans. Private lenders will have their own terms and timelines. Loan consolidation or forgiveness may also be possible especially for those pursuing family medicine in underserved communities, though program availability can change.

Here we break down the various programs so you can pick the best fit for your situation. The AAFP recommends using a loan repayment calculator, like the MedLoans^® Organizer and Calculator (MLOC), to understand the costs of different loan repayment scenarios. The National Student Loan Data System (NSLDS) will show you what you owe the federal government.

Having an organized financial strategy in place before graduating from medical school will put you on the right track toward managing education debt during residency.

Here are some key areas to research so you can pay off your loans in a way that works for you, while working toward a prosperous financial future.

Most federal student loans have a grace period after graduation, usually six months, during which you don't have to make any payments while you move into residency and get settled. Interest does accrue, though, and will be added to your principal balance. You will need to contact your loan servicer(s) to learn what options you have for loan repayment or postponement over the next several years of your training. The two primary options are deferment and forbearance, which we explain in more detail below.

Federal loans offer standard, extended and graduated repayment plans, as well as four income-driven repayment plans based on income and family size. In some cases, payments are capped after a set remainder of your balance is forgiven. These may be good options during residency when your income is likely to be lower.

If you have multiple federal loans (and monthly payments), you can fold them into a Direct Consolidation Loan. This program may help your long-term debt situation by:

Other programs offer to consolidate federal and private loans into one monthly payment. But the resulting interest costs might not be worth the convenience.

While the Direct Consolidation Loan combines your federal loans under a single interest rate, moving your federal debt into a private consolidation program could lead to compounding interest, as private loans usually have higher interest rates. For this reason, some borrowers choose to consolidate their federal loans, while managing private loans separately.

There are other factors to consider with loan consolidation, such as whether you may lose credit for payments made toward income-based repayment or public-service forgiveness plans.

The PSLF Program forgives the remaining balance on an individual's direct loans after he or she has made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a government or not-for-profit organization.

However, a new rule from the federal government redefines how PSLF codifies “qualifying employer” starting on July 1, 2026. The AAFP’s position is that the rule introduces ambiguous criteria for disqualifying participation in the program and sets no clear appeals process. The Academy warns that these “overly broad” parameters would have a chilling effect on the health care workforce and disproportionately harm rural and underserved communities.

If you plan to enter this program, be sure that you have accurately researched requirements and eligibility for PSLF. There are strict guidelines regarding which payments qualify for forgiveness, and proper documentation is essential.

Both deferment and forbearance allow you to postpone paying your federal student loan balance or reduce the amount. The difference between the two—and a major factor in deciding which one to go with—is how interest accrues.

If you qualify for deferment, interest won’t accrue on direct, subsidized loans. However, interest will accrue on unsubsidized loans, and the interest will be capitalized (added to your principal balance) at the end of the deferment period.

In forbearance, interest accrues on all types of federal student loans. The interest isn’t capitalized at the end, but you still have to pay it.

MORE: Deferment vs. forbearance

Budgeting gets a little easier in residency, as your pay is a definite step up from life as medical student. But folding in student loan repayment makes it even more important to not just make a budget and follow it, but to review and update it during residency, especially if you’ve moved to a city or town with a higher cost of living.

AAFP Careerlink's cost-of-living comparison tool shows the average cost of rent, utilities and gasoline in different areas.

These AAFP partner programs offer member discounts on a variety of financial services.