I grew up in a country (Kuwait) where income was tax free. Additionally, having an Indian education means the finer points of a saving economy are drilled at school. We were taught how to calculate tax in the 9th grade. No kidding! The tax problem carries the highest points on our math exam; 10 points. Medical school debt is uncommon among Asians in general. School is cheaper and parents invest in education.

I was also blessed with parents who were very budget focused and so trained us at it. My father never had a credit card and my mother taught me to write a check at 12. So basic accounting in many Indian homes is part of homeschooling.

That said exams, applications, licensures in different countries, memberships to professional societies and running a medical practice can be expensive. It can be challenging to stay debt free. I’ve been in the black and solvent despite my business expenditures. Here are the ten best steps to eliminating debt.

10 Steps To Eliminate Medical School Debt?

Here are my ten steps which helped me. See if they work to make you debt free.

1. Decide to pay medical school debt off

That’s the first step. There are many schools of thought. The most popular I’ve heard is that you don’t pay it off. Let it accumulate and you don’t know what political and economic change will happen. Medical student loans are a crisis. The belief is that somewhere down the road the banks will forgive the debt or the interest. As a depositor I will not forget the interest owed to me by my bank especially if I’ve chosen a higher ROI against longer investment periods. And neither will the banks. They won’t “let go” of what’s owed to them. Banks have to pay their lenders money. That’s why this pay slowly, or never pay back is scary advice.

So, with time your debt keeps snowballing as the interest accrues. There is a lot of power in compound interest. Remember the longer you’re paying the loan, the lesser time you have to make investments. Financial gurus always suggest that you need to start investing early. My retirement fund started the day I got my first job not because I wanted it but my employer did. You can invest only if you are debt free. So decide to pay it off, just to keep the interest from crippling you and to be able to invest early.

Example: If you have $350,000 in medical student loan debt. With a typical 6.5% interest rate and a 15-year loan term, you’d be looking at a minimum monthly payment of about $3048. Because of interest, your total repayment amount would be $548,797—that’s $198,797.64 more than your original loan! 🤬

2. Try Refinancing Your Medical School Debt

There are various refinancing and consolidating options. However, I’d like you to consider Islamic banks. The good thing about these banks is that they don’t believe in usury or interest. They lend without charging you interest. You can use them to pay off your existing medical school debt loan and pay them back at a fixed rate over time without worrying about interest. Some of the Sharia bank loans need to backed against assets but I know friends who have used them for small loans based on their fixed income. The size of your paycheck will determine whether the loan is sanctioned and your repayment plan.

3. Tear up you credit card

Okay, so I haven’t done this. And I should. There’s no benefit to credit cards really. I’ve used my credit card sparingly this year through very dedicated fiscal planning but it’s still a crutch. 🙄 When I factor in the transaction fees and the conversion, I really don’t believe they’re necessary. If you’re disciplined about building an emergency fund that you can dip into and replenish, there’s no need for a credit card. We also tend to spend money we don’t have with a credit card. Credit cards don’t give you a good FICO score or help you buy a house or whatever. Those only measure debt.

Wealthy people are wealthy because they save appropriately for what they need and pay for their items when they can afford them. Having a credit card just tempts you into spending money that isn’t there. And if you fail to pay it, then the interest is going to smother you!

4. Spend Within A Budget

Review your expenses. I still do this. And I hate looking at it. Because, there are days when I could have done without that unnecessary spend on soda or takeout when I could have bought a whole week worth of groceries. Cook and eat at home. Track your incoming/outgoings at the end of every month. Cut back and make financial sacrifices. You can’t live debt free if you’re hitting every social event and party. Dave Ramsey says, ‘We buy things we don’t need with money we don’t have to impress people we don’t like.’

People often tell me that hitting this event is important for their image or needed to convey the right message. People’s opinion should not matter if they’re not clothing or feeding you. You need to be solvent as soon as possible.

5. Hold Off on that Car/ House

You know the people who take on the new car or new house and its a millstone around their neck for the rest of their lives. They don’t own the car or the house. Rather the car/house owns them. I’m not really into brand cars. My philosophy is that whether you drive an Audi or a Honda, everyone stops at the same traffic light and shares the same road. It was my dad’s philosophy and now mine. There’s nothing more to driving, except to get from point A to point B, according to me. 😏

Your new car will depreciate by 60% in the first five years. The housing issue is another subject. Besides, with all the taxes, I’m not a fan of a real estate investment portfolio unless I’m seeing an appreciation of a whopping 200% within my lifetime minus taxes. Ask yourself do you need to be wedded to housing/car debt when you can make do with a cheaper substitute like public transport? This also depends on where you live. You can save on insurance, gas and taxes, and pay off the debt instead.

In his book, The Total Money Makeover, author Dave Ramsey says “If you keep a $495 car payment throughout your life, which is “normal,” you miss the opportunity to save that money. If you invested $495 per month from age twenty-five to age sixty-five, a normal working lifetime, in the average mutual fund averaging 12 percent (the eighty-year stock market average), you would have $5,881,799.14 at age sixty-five. Hope you like the car!”

6. Live Within Your Means

It’s common sense. You stop borrowing, you stop spending and you balance the budget. You have extra, invest. Look at your lifestyle. That expensive cable subscription. Gym subscription when you can train at home. Takeout every week? Can you sell extra stuff? This is extreme financial planning. Budget your meals. (I still meal plan.)

Take advantage of discounts and sales at the supermarket. Consider a minimalist lifestyle and live frugally. Devote every dollar towards paying your medical school debt. It may seem like I’m suggesting that you don’t have fun but you can have fun without spending money. Find those ways.

7. Use Your Bonuses

Many doctors and medical graduates get all sorts of sign on bonuses. Don’t use all of that to go on a cruise or a vacation. Divert it towards your medical school debt. In some countries you get bonuses during certain festivals. Or your IT returns, all these funds can be funneled towards any debt payments. Apply your bonus, raises and tax refunds to squaring this away.

8. Use the Snowball Method to Pay

If you have other debts, then use the snowball method and pay the smallest amount first. Then move on to a bigger payment. Start paying the tiniest student loan balance first. Throw extra money into paying off the first debt. Keep adding to the balance until you pay all of it off. Make a spreadsheet and here’s how the Debt snowball works.

9. Pay more than the Minimum

Let’s go back to our example. If you decided to pay just slightly more than your minimum payment each month of $3048 and bump that up to $4923. That would mean you’d pay off your entire loan in about eight years and pay only $93000 in interest. If you paid more than 20% of the minimum payment each month, you’d pay off your loan and pay much less in interest. Nearly half of the original amount.

10. Create A Side Hustle

Create a side hustle. Use any of your talents to create a side hustle. I know doctors who moonlight, do telemedicine, hospice care, become peer reviewers or teach to make more money on the side. I’m not saying work yourself into the ground. Don’t go get a second job, start your own business whatever that may be. There’s nothing like being CEO of your own gig! 😉

For myself, I built a writing career in keeping with my long term goals. I started medical writing while I was in college and my mother still keeps cuttings of all my articles. It’s also something which I’m passionate about and mostly it doesn’t feel like work. It has taken me years to build this side of the business but I never let myself be in the red. Rather, I used it to supplement my existing financial needs.

Bonus Tip

Be generous. Give to charity. I believe in tithes. Give back to God what belongs to God and give back to Caesar what belongs to Caesar. Be fair with your taxes and tithes. God has no need of your money but your community does. Pray and give where needed. Trust me, you will get back more than overflowing what you’ve given away. This is not easy. Christians believe that generosity is a gift of the Holy Sprit. Not everyone can be generous but you can try.

There are no shortcuts

I wish I could say there is some magic wand that can get rid of debt. Staying debt free can be challenging. I have days where I do feel, forget all this and let me splurge but with constant discipline those days are less. The burden of medical school debt can weigh you down and the sooner you’re done with it, the more financial freedom you will have. To invest, run your business and plan for the future. There’s nothing more freeing than a debt free life. Do you have any tips to becoming debt free? Let me know.