I'm a Resident Physician and I Feel Overwhelmed by Debt

Almost every resident I speak with expresses concern about their debt situation. And no wonder when it’s not uncommon for residents to carry hundreds of thousands of dollars in student debt alone. Many of you are looking at your Income Driven Repayment plans and realizing that your monthly payments don’t even cover the interest accruing on your loans. It can feel like bondage.

Over the course of the next several weeks we will embark on a review of questions related to debt. Though we won’t cover everything, I hope that you will find the information valuable to save you time, money, and perhaps provide you with some relief.

Having a vision - Why being debt free makes you free

I encourage you to dream a little about what it might feel like to be completely debt free. Imagine for a moment that you get your paycheck and none of it goes to a student loan payment. You walk out to your car that you own completely. You drive home and pull into your driveway after a long day’s work. You made your last mortgage payment a month ago and you owe nothing on it. As you climb into bed to get some shuteye, your head hits the pillow and you’re out in a minute. You aren’t thinking about credit card debt because you don’t use credit cards for credit at all. You pay them off timely and completely every month and only use the cards for convenience and for points. Because you’re no longer making student loan payments, car payments, and mortgage payments, your cash flow has increased substantially. With every loan that you paid off, it felt like a raise.

That feels pretty nice doesn’t it? It doesn’t have to be just a dream. That can be your reality. Each of us is at a certain point along the journey to being completely debt free, so it doesn’t make a whole lot of sense to compare ourselves to others. Just begin where you are.

Your unique situation will dictate the right timetable, but with the right planning and discipline, many of you should be able to rid yourself of student loan debt within five years out of residency, while still giving yourself a “raise” and working towards your other goals; such as saving 20% of your income for retirement, starting college savings plans for your kids, and saving up money for a down payment for your dream home. It’s something worth striving for.

Beware of lifestyle creep

For you residents who are getting closer to completing your training, there will be a big temptation to allow your lifestyle to increase to the level of your income. Doctors aren’t unique in this. Most of us increase our lifestyle and our spending to a level that matches our income. When we get a raise, it’s often more tempting to buy more goodies than to set it aside and to save it.

I encourage you to be different than your peers and start off your life as an attending on the right foot. As Dave Ramsey says, “Live like no one else now, so later you can live and give like no one else.” I think that sounds like pretty good advice.

Credit cards and debt games

It’s pretty fashionable these days to “card hack” so that you can rack up travel rewards or cash rewards from credit cards. Financial bloggers are writing about it so I assume that they’re getting a lot of readers from those types of stories.

Look, rewards are nice, and I use a credit card for travel rewards, but make no mistake, credit card companies aren’t losing money because they’re paying out rewards to people. If you’re using a credit card, don’t be surprised if you spend more than if you paid with cash, or even a debit card. Many card companies offer “bonus” rewards if you spend a certain amount of money in the first few months, strongly incentivizing you to go on a spending spree that you wouldn’t otherwise have done.

The bottom line is that credit cards should not be used for credit.

Student loans

While debt is the topic I’ll be writing about over the next few weeks, I expect that most of the articles I’ll be writing will focus on student loan planning.

I brought up credit cards first, because you likely need to crush your credit cards before you really start to tackle your student loans. Credit card interest rates are just too high.

Once high interest debt is taken care of, you can move on to student loans. I’m going to focus on the questions that I believe residents are most interested in learning about. These questions include:

  • Should I take advantage of mandatory medical residency forbearance?

  • What Income-Driven Repayment plan is right for me?

  • Should I go for Public Service Loan Forgiveness?

  • Should I consolidate or refinance my student loans?

  • When I complete my training, should I keep living like a resident?

I don’t have time for this. I want to hire someone to help me.

Considering how complicated debt and student loan planning can be, it’s not uncommon to want to hire it out. For those who are looking for some help with their student loan planning, there are two options. One option is to hire a company that specializes in student loan planning. For a couple hundred dollars, they will look over your student loans, discuss with you your goals and current situation, and make a recommendation. It’s a transaction service model, and after the transaction you respectfully part ways unless and until there is a future need.

Alternatively, there is a growing number of financial advisors who offer student loan planning as a part of their financial planning and investment management package. If you’re interested in an ongoing relationship and want a trusted individual to help you with more than just your student loans, it’s worth exploring a relationship with a financial advisor. Just make sure that you’re getting good advice for a reasonable price.

Some final thoughts

Eliminating your debt is a process of freeing yourself from bondage. The feeling of being completely debt free is reward enough to make this goal desirable to many residents and attendings. There is comfort and security in knowing that you truly own your belongings and that you don’t owe anything to anybody.

Again, whether you find yourself taking your first step to tackle credit card debt, or you’re making the last few payments on your mortgage, I look forward to sharing a few steps with you on your journey to debt freedom.


These are my opinions, unless I’ve specifically cited other material. The information and ideas I’ve presented are for informational purposes only. Before you implement anything, make sure you have a thorough discussion with a qualified professional who understands your situation.

Donovan Sanchez