Physician Financial Wellness Matters

New course battles financial stress and physician burnout

Because financial anxiety is one of the primary drivers of physician depression, burnout, and suicide, a third-year medical student has created Financial Wellness for Physicians course available to students at the School of Medicine and Public Health at UW-Madison.

In this series of podcasts, course co-creator Rufus Sweeney speaks with Wisconsin Medical Society COO, Peter Welch about each of the course modules.

Rufus has is also writing a blog about each module and they are available in our FYI section of the Wisdom Bank.

Income-Driven Repayment Plans

The ins, outs, upsides, and downsides you need to know

By Rufus Sweeney

Looking forward to residency also means looking forward to repaying your student loans.
Sounds like fun… doesn’t it?

OK, perhaps not a lot of fun, but unavoidable. So, to reduce your stress and feel good about your financial progress, you need to make the best choice. And, making the best choice for how to repay your student loans takes a little thinking.

Before we look at the different types of repayment plans here are two important things to remember:

  1. It’s critical to start loan repayment while in residency rather than use deferment or forbearance. This will save you thousands.
  2. In many cases, you can switch repayment plans if your financial situation changes. This relieves some of the uncertainty you may feel when making your initial choice.

Now, the basic premise of income-driven repayment (IDR) plans is simple; you repay your federal student loans based on your ability to pay.

Here are your choices:

  • Standard repayment plan
  • Graduated repayment plan
  • Extended repayment plan
  • Income-driven repayment plans (Yes, there’s more than one!)

Phew! Seems complicated… and it is, but here are some basic definitions to help you figure out how you can best navigate the loan repayment landscape.

Standard repayment plan: You pay off your loans in 10 years. Your monthly payments are fixed based on adding the amount you owe to the projected interest and dividing by 120. WARNING: If you do not choose another type of repayment plan, you will be automatically enrolled in this repayment plan

As a resident, because your monthly payments will most likely be more than you can afford, this is not the way to go.

Graduated repayment plan: These also run for 10 years, but monthly payments start out low and increase every two years. But, as with standard plans, even the lower monthly payments are still likely higher than you can afford on a resident’s salary.

Extended repayment plan: Now we’re looking at the long term. With this type of plan, you’re facing 25 years of fixed or graduated payments. This type of plan is good if you don’t qualify for an income-driven repayment plan. And, sorry to do this to you, but even thinking about this type of plan is a waste of time because, as a resident, you qualify for income-driven repayment plans.

Income-driven repayment plans: These plans peg the size of your monthly payment to your income.

The four types are:

  • Pay-As-You-Earn (PAYE)
  • Revised-Pay-As-You-Earn (REPAYE),
  • Income-Based Repayment (IBR)
  • Income-Contingent Repayment (ICR)

Generally speaking, these plans cap monthly payments at 10% of your discretionary income. (Very simply, your discretionary income is your income minus whatever the poverty line is for your family.)

Low income = low payments. Your payment size is recalculated every year after you file taxes. The good (great?) news is that after 20 to 25 years, what remains of your student loans is forgiven. (Next blog we’ll look at public service loan forgiveness; which are forgiven in only 10 years.)

As you have probably realized, IDR plans work well for residents who are trying to get by on a $60,000 salary and owe a lot of money (roughly $50,000 or more).


PAYE differs from REPAYE in two significant ways.

First, to qualify for PAYE you have to prove you can’t afford to make the payments a standard 10-year repayment plan requires. REPAYE doesn’t ask for this proof… no matter what your salary, your payments will never be more than 10% of discretionary income.

Secondly, PAYE is limited to the repayment of William D. Ford Direct Loans received after Oct. 1, 2007 and funds disbursed on or after Oct. 1, 2011. These loans include Direct Loans, subsidized and unsubsidized, Graduate PLUS loans and Direct Consolidation Loans made after Oct. 1, 2011, unless they include Direct or FFEL loans made after Oct. 1, 2007. Phew!

REPAYE is available to people who borrowed from the Direct Loan program, except for parents who took out PLUS loans. You qualify for REPAYE no matter when you took out your loan and as long as you borrowed from the list of qualified William D. Ford Federal Direct Loan programs.

A major benefit of REPAYE is you remain eligible for the Public Service Loan Forgiveness program.

Payments on the REPAYE program are adjusted every year based on income and family size. If you file your taxes separately, PAYE won’t take your spouse’s income into account when calculating your payments. With REPAYE, your spouse’s income is taken into account.

The best part of these programs is that after 20 years of on-time loan payments, your debt is forgiven.

Income-Based Repayment (IBR)

Income-based repayment (IBR) is another income-driven repayment plan that caps monthly payments at 10 to 15% of discretionary income. This type of plan is an option if you don’t qualify for PAYE and don’t want to include your spouse’s income into your discretionary income. (That said, almost every resident qualifies for PAYE.)

Income-Contingent Repayment (ICR)

This type of repayment plan work well if you are paying back student loans your parents took out on your behalf. They also work well for parents themselves who need an affordable way to pay back the loans they took for you. If you aren’t paying back loans from your kids or loans from your parents, ICR is probably not the plan for you.

A final word on flexibility

You can switch from on repayment plan to another. For example, if you graduated recently, you could choose REPAYE to take advantage of the government interest subsidy. Then, if you’re lucky enough to marry someone with a high income, you could switch to PAYE to avoid having your spouse’s income included in your monthly payment calculations. And, sometime down the road, you may quit your income-driven plan altogether because you want to make larger payments.

If you need help managing your debt, one of your best resources is your financial aid officer. And, I highly recommend visiting the White Coat Investor website. It’s a great source for guidance on how to acquire and manage the “good” forms of debt.

Different Kinds of Debt: The Good, the Bad, and the Just-Don’t-Do-It!

By Rufus Sweeney

Amassing a considerable amount of debt during medical school is “situation normal” for practically every medical student. Even though debt is rarely seen as a good thing, you need to know the difference between good debt, bad debt, and debt to be avoided at all cost.

Choosing wisely now makes paying off your debt much easier.

In the category of “Just-Don’t-Do-It”, all sorts of credit cards are available and in many cases, actively promoted to medical students with special offers that include an interest free period, cash back on purchases, and all too easy sign up terms. But once that interest free introductory offer ends, you’re on the hook for anywhere from 12 to 25 percent interest on any balance you carry from month to month.

When you use a credit card to finance your lifestyle choices or, worse case, pay for essentials without a plan for paying off your balance each month, you’re playing with financial fire.

The “bad” in comparison to credit card debt, doesn’t look all that bad, but still with interest rates ranging from six to 10%, unsubsidized student loans are an expensive choice.

The “good” are those loans with the lowest possible interest. For example, interest rates for institutional loans from medical schools range from four to five percent. If low interest was the only criteria for determining “good” debt, then a mortgage at three to five percent and car loans at four to five percent would also fall into this category. That said, check out my previous blogs and podcasts on the pros and cons of buying a home and the reasons why it is a good idea to live like a resident, even after you become an attending physician.

Paying the piper

No conversation about interest rates is complete without a word or two about repaying debt.

Generally speaking, there are two popular methods: the snowball method and the avalanche method.

Popular financial expert Dave Ramsey recommends the snowball method because he says, “… personal finance is 20% head knowledge and 80% behavior. You need some quick wins in order to stay pumped enough to get out of debt completely.”

Here’s how it works:

Step 1: List your debts from smallest to largest regardless of interest rate
Step 2: Make minimum payments on all your debts except the smallest
Step 3: Pay as much as possible on your smallest debt
Step 4: Repeat until each debt is paid in full

Here’s an example using four different debts:

  1. $500 medical bill—$50 payment
  2. $2,500 credit card debt—$63 payment
  3. $7,000 car loan—$135 payment
  4. $10,000 student loan—$96 payment

Using the snowball method, you would make minimum payments on everything except the medical bill. You would pay as much as possible each month on the medical bill until it is paid off.  You would then take the money you used for the minimum payment on the medical bill, plus as much extra as you can afford and use it to pay off your credit card debt. As soon as that debt is paid, you take all the money you previously used to pay the medical bill and credit card debt off and apply it to your car loan.

By the time you are ready to pay off your student loan, you’ve got a pretty big debt repayment snowball working for you.

The avalanche method takes a more practical approach… at least mathematically speaking.  You make minimum payments on all debt and use any remaining money to pay off the debt with the highest interest rate. Like I said, this method is a more practical approach because it allows you to save hundreds of dollars in interest payments and reduce the time it takes to pay off all your debt.

When it comes to choosing which method to use, remember what Dave Ramsey says… “personal finance is 20% head knowledge and 80% behavior”.

In my next blog, we will explore the different ways in which interest rates are calculated.

If you need help managing your debt, one of your best resources is your financial aid officer. And, I highly recommend visiting the White Coat Investor website. It’s a great source for guidance on how to acquire and manage the “good” forms of debt.