I recently heard someone say, “Why do we give free rent in our minds to negative thoughts, ideas, and people”? I don't know if it resonates with you but it does with me.

For some reason, we allow “negative interest,” as I call it, to dwell in the incredibly valuable space of our minds and to roam through our thoughts as it pleases. So often we choose to give mental space to people we don’t even know because they cut us off while driving, made a rude comment, or said something publicly with which we strongly disagree.

Overall, I get it. Most of us naturally seek to please when it comes to our personal interactions, but what benefit is it to us to stew with anger over someone we don’t even know or something we can’t change? Put simply, there is none. Your mental space and time need be reserved for things that are life-giving, nurturing, and inspiring. Everything else should pay a high price to get in.

So, you ask, how does this tie into planning for physicians and dentists?

One word: Debt.


In my experience, debt receives more free rent in the mind of physicians and dentists than most any other stressor. All too often clients come into my office consumed with stress because the amounts they owe seem insurmountable. The thought of repaying the debt can be daunting - even overwhelming - and often creates an irrational sense of fear and worry.

So I want to specifically talk about how to prevent worry on the topic of debt and create healthy boundaries that keep this stressor out of sight and out of mind. 

In general, unresolved issues are what linger in our mind. For example, when you mow your lawn, you don’t stand back and think about the next time you need to mow. No, you enjoy the view of a freshly-manicured lawn.

While this may sound like common sense, I believe the real reason debt creates stress is because it’s an unfinished project looming in the distance. Sadly, I see so many physicians and dentists, driven by this irrational pressure, throw every dollar they have at debt to self-medicate the anxiety. They panic and, because the thoughts about debt have consumed their minds for so long, they believe the only path to mental freedom is to get rid of it as quickly as possible.

I propose a different solution. I believe you can find the mental freedom from debt through rational, calculated planning. While it may be beneficial to aggressively pay down the debt, you must take the time to do the appropriate math to determine if that aggressive course is truly best for you. Ambiguity and disorganization cause further stress to the weight of debt, so creating clarity for your own situation will provide healthy boundaries for your thinking and put the many unknowns to rest.


Question 1: How fast or slow should I pay the debt?

To answer this question, you’ll need to calculate the opportunity cost of several scenarios. We typically run a calculation that compares the advantages and disadvantages of the Public Service Loan Forgiveness Program and debt refinancing over a longer repayment term to the option of aggressive repayment.

Public Service Loan Forgiveness (PSLF) is tax free, meaning the debt cancelled is not considered as income for tax purposes. For the comparison calculation, find out what the total cost of repayment would be if you continued to make eligible payments at the current interest rates for 120 months. Some assumptions will need to be made about income during that 120 months, but as long as the income assumption is the same when calculating the alternative, the comparison should be accurate. You’ll also need a discretionary income assumption, as well as a rate of return assumption. This will give an accurate depiction of what the leftover income is accomplishing while paying the minimum amount owed over the 120 months, as compared to the use of that income in the aggressive repayment scenario. At the end of 30 years, you will have a fully paid-off debt with an investment account balance of something.

Next, we would calculate the outcome if you were to choose aggressive repayment as your preferred method. The time period needs to be the same in both calculations (30 years). In the aggressive repayment calculation, no savings will occur until the debt is completely paid since all discretionary income is being used toward debt repayment. We are using excel, but you could easily use a combination of online calculators to do this part of the calculation. However, once the debt is fully paid, the calculation needs to reflect saving that money at the assumed growth rate until the end of the 30th year.

At the end of this lengthy equation, you should have two account balances to compare, and the largest balance is the one that makes the most sense for you.

Question 2: Have I considered my liquidity needs?

Once you contribute money to a loan company, you cannot call them and ask to have it back if an emergency occurs. I understand the desire to get rid of debt, but please do it within the context of a thoughtful plan. Alleviating your debt burden should not come at the expense of foregoing appropriate disability insurance, life insurance, umbrella coverage, and an emergency fund that has enough cash to cover expenses for at least 90 to 120 days.

While I’m on the point of what not to do, make sure you contribute what is required in your group 401k to maximize the employer match. I see physicians delay contributions in order to maximize income so they can aggressively pay debt, and that can potentially be a costly mistake. You are leaving additional compensation on the table that your employer is willing to give you. After all, what benefit is it to pay income taxes on $10,000 (netting maybe $7,000 that can be contributed to debt) at the expense of gaining a match of $10,000 from one’s employer and the $3,000 in tax savings?

Question 3: Does refinancing my loans make sense?

According to the American Hospital Association (AHA), in 2014 about 78 percent of the 4,974 US community hospitals were nonprofit entities (58 percent private nonprofit and 20 percent operated by state or local governments). The remaining 22 percent are for profit, investor-owned institutions.*

I'm bringing this up because many of you will have the Federal Loan Forgiveness Program as an option if you work at a non-profit. However, working at a non-profit doesn’t mean the program is automatically right for you.

As of the writing of this post, interest rates are very low and several companies (SoFi, Meet Earnest, Common Bond, and DRB to name a few) are offering low fixed and variable-rate loans for those willing to refinance. When we run the numbers to see if the Federal Loan Forgiveness option makes sense, we typically compare it with an aggressive repayment plan at a much lower interest rate than the Federal Loan because those lower interest rates are available to most physicians with good credit.

From doing these comparisons weekly, the Federal Loan Forgiveness Program typically will have an edge if you begin Income-Based debt repayment during your first year of residency. However, it gradually loses its edge with each year you elect to defer.

Question 4: If it is determined that the Federal Loan Forgiveness option is inferior to rapid repayment, is it beneficial to pay off the loan any faster than necessary if the interest rate is as low as those above?

The calculation needed to compare paying the loan off over 5 years, 7 years, or 10 years at a much lower rate of 2.2% or 3.5% will be similar to the one I walked through in the first question above. The objective is to determine whether or not the dollars available beyond the required payment are better off advancing the debt reduction or being invested.

Question 5: Does the aggressive repayment allow for my family goals?

School debt has increased by 6.3% since 1992 and the median level of medical school debt in 2015 was $183,000. These numbers are significant, which is why 24% of physicians are still paying off debt into their mid-forties.**

Many physicians that solely focus on debt repayment end up getting a late start on education funding for their children, which means they may have to pay out of pocket for that expense rather than save for it. This could further delay retirement savings if you move from finally paying off student loan debt to preventing student loan debt for your children.

Part of assessing how to pay off debt involves considering a few things:

  • When do you wish to retire?

  • What will the income at retirement look like in each scenario if you gradually pay debt vs. aggressively pay debt?

  • Will you be able to give to your church or charity as you feel you should?

  • Are you leaving enough money for your kids early education and higher education cost?

  • Do you have enough money to buy in as a partner at your practice within a year or two?

These are just a few examples, but hopefully the point is clear. Eliminating the stress associated with debt requires a sound strategy that has weighed and considered all possible scenarios. What good is it to pay off debt with all that I have if it creates tension within myself or with my spouse as it relates to other family plans?

As I’ve said before, create strategies for each isolated issue in the context of a comprehensive plan, because if you pay down debt aggressively to the detriment of your future plans, you just trade one stress (past debt) for another (future uncertainty).

Question 6: Once I know the best path forward, how do I prevent worry about whether or not it's getting done?

The natural tendency is for someone to trust themselves way, way too much. Perhaps it's the "survival of the fittest", "fight or flight" piece in all of us, but I see physicians and dentists manage the execution of the plan manually because of fear. When asked, many will say they want to do it manually so they can play it by ear in case something comes up. But that’s what your emergency fund, disability, home, car, and life insurance are for!

Let's be honest, the money most likely won't be used for emergencies. It'll be used for a new something that's inaccurately labeled as a need instead of a want.

But, when you have the critical components in place, you have the freedom to trust that the plan will work and you can avoid the pitfalls of manual execution. Automating the payments, investment transfers, and building a structured plan, is the only way to overcome our lack of discipline and tendency to splurge.


Once you've calculated the best use of the dollar in light of the comprehensive needs of your family planning and set the plan on auto pilot, you should feel the stress from past debt slowly melt away.

You don't have to wonder how you’re ever going to pay off this debt because you know how.

You don't have to wonder if it's jeopardizing future opportunities because you’ve planned for that and you know it doesn't.

You don't have to wonder if there's lost opportunity cost in your strategy because you've done the math.

You've successfully convinced your mind that these answers are sufficient and the mind is free to dedicate its energy toward other, more life-giving thoughts.

Remember, charge high rent to stress and free rent to its opponent.

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*- https://www.aha.org/statistics/fast-facts-us-hospitals
**- https://members.aamc.org/eweb/upload/Physician%20Education%20Debt%20and%20the%20Cost%20to%20Attend%20Medical%20School,%202012%20Update.pdf