HealthMarch 09, 2020

Medical school loan repayment: Seven things to do once you’re debt-free

By: Bana Jobe
Almost done with your medical school loan repayment? First, celebrate the milestone, then roll those savings into a long-term financial plan. Here’s how.

Are you nearing the finish line for medical school loan repayment? If so, count yourself in rare company: Medscape found that 60% of physicians under 35 and 46% of those between 35 and 49 are still dealing with medical school debt.

Once you’re out from under the weight of loans, it’s certainly cause for celebration. However, it’s also the perfect time to figure out what to do with the money you’ll now be able to save.

First, recognize the milestone

It’s a big deal when you mail your final check or click the “pay now” button for the last time. Still, don’t expect a standing ovation from your loan servicer—you likely won’t get a framed certificate and confetti won’t poof out the laptop, either. Despite the huge accomplishment, the payoff process can seem a little… anticlimactic.

The onus is on you to celebrate your own achievement, and you should: When you feel accomplished after paying off a loan, you may feel more motivated to keep making good financial choices, whether that’s paying off other debts or reaching new goals.

So it’s important to recognize the milestone in a meaningful, but not financially irresponsible, way. If you can take the time off and find a good deal, consider a vacation. That’s the top thing borrowers give up as they pay off student loans, according to Student Loan Hero. Or just go out for a nice dinner and a movie. Whatever you do—as long as you don’t slide back into debt—you’ve earned the celebration!

Seven things to do after loan payoff

Once you’ve given yourself a well-deserved treat, it’s time to use your medical school loan repayment savings to create a more solid financial plan for the future. Here are some tips specifically focused on personal finance for physicians.

1. Meet with a financial adviser

If you don’t already have a financial adviser, get one now. They can help you create a sustainable strategy to reconfigure your budget, restock your savings, prioritize charitable giving, build up your investment and retirement portfolios and pay off other debts like car loans and credit cards. They can also help you tackle other goals you may have been putting off, like buying a house.

2. Consider your career post-payoff

If you’ve committed to a career in government, nonprofit or rural medicine in order to get the benefit of a federal or state loan forgiveness program, assess whether that career still meets your professional and personal goals. Now that you’ve fulfilled your commitment, you may have new, exciting options.

3. Focus on retirement planning

According to an article in Medical Economics, many doctors miss out on the retirement-saving potential their non-MD peers have, partly because of all the years spent in medical school. As a result, physicians plan to retire an average of five years later than other Americans. Catching up can be hard without the right financial plan, which is yet another reason to check in with a financial adviser.

4. Review your insurance policy mix

Check to make sure your coverage aligns with your new financial situation and goals. Yes, that includes life insurance, but disability factors in, too: According to the American Medical Association (AMA), you’re more likely to face a disability that caps your income potential than you are to die early.

5. Engage in legacy planning

The AMA also notes that nearly four in 10 doctors fear they don’t have the right estate documents drawn up. Nobody wants to think about it, but working with an attorney to get your will, testament and trusts in order can be a huge relief, and it’s especially prudent to do so after a major life event or change in financial status. As your assets grow, you might also want to think about legacy planning for charities and nonprofits that are near and dear to you.

6. Nurture your liquid savings

If you don’t already have a liquid nest egg saved up, you might want to prioritize that now. In general, experts recommend stocking up to six months of expenses into an emergency savings account, or even 20% of your monthly salary if you can swing it. On the other hand, some physicians, including one writing on KevinMD, think an emergency fund loses out on investment potential for high earners. Talk to a financial planner to weigh that decision and see what makes sense for you.

7. Invest back into your business

For private practice owners, reinvesting your loan payment savings into your business—at least partially—can pay off in dividends. Assess the investments that could give you the biggest bang for your buck, such as practice marketing, equipment or office improvements. These can all help build and sustain your patient pipeline.

Starting your new debt-free path

Whether it took two years or 20, paying off your medical school loans is a party-worthy feat. Celebrate it! Then dig into creating healthy financial habits. Some of these steps may seem small, but they’ll set you up for a lifetime of financial wellness. Congrats!

Bana Jobe