Starting a Medical Private Practice With Student Loan Debt

After graduating from medical or dental school, you may be considering the possibility of starting a private practice with student loans. Opening your own practice can be lucrative and rewarding, but going into the process with a lot of educational debt can undoubtedly be a challenge. The good news is, your loans don’t have to stop you from fulfilling your dreams. 

Here’s what you need to know about opening a private practice with student loans. 

Taking on more debt isn’t necessarily a bad thing 

One of the biggest concerns you may face when starting a practice with private loans is that you’ll likely need to borrow more money to get your business off the ground. But you don’t necessarily need to be afraid of doing that.

Both student loans and business loans are generally considered good debt because they are likely to increase your net worth in the long run. As long as you have a solid business plan and are proactive about paying down your student debt, there’s no reason not to borrow more if you need to when starting a private practice with student loans. 

You will, however, need to make sure that you can qualify for your new loan based on your debt-to-income ratio. Working with a lender familiar with medical and dental school graduates can be a good idea, as they are used to seeing the types of student loan balances that most medical professionals graduate with. 

Choose the right kind of debt when starting a private practice with student loans

While there’s nothing wrong with borrowing to finance your practice, you’ll want to look for a low-interest business loan and avoid taking on expensive debts such as credit cards with high interest rates. The lower the interest rate on your new loan, the more affordable your monthly payments will be – especially when combined with student debt. 

Be proactive about your student loans

If you are starting a private practice with student loans, you’ll need to take steps to avoid having your educational debt become a burden.  Here are a few tips:

Consider making payments during your forbearance

Medical school and dental school residents will generally be entitled to student loan forbearance during residency or internship programs. You may also be able to apply for optional forbearance for your loans while you are building your practice.

The problem is, interest doesn’t stop accruing during this time. If you don’t make payments, your loan balance will continue to grow and eventually the accrued unpaid interest will be added onto your loan balance. This is called capitalized interest, and it can run your debt totals up quickly.

To avoid this outcome, aim to at least cover the costs of interest if you can. The sooner you can begin making payments on your loans, the more you can prevent your balance from growing and the sooner your loans will become a thing of the past. 

Be strategic about debt payoff

Student loans tend to have low interest rates, and many borrowers enjoy federal student loan benefits like flexible repayment plans. As a result, you may be tempted to cover only the minimums on your loan payments and not pay extra, instead using your spare cash to focus on funding your new practice until you get it off the ground.

If you do want to focus on becoming student loan debt-free even as you are building your medical practice, consider making extra payments on your highest interest debt first. By eliminating your high-interest loans ASAP, you can reduce the total cost of debt payoff. 

Pick the right student loan repayment plan

When you have federal student loans, you can stick with the standard repayment plan to become debt-free in 10 years. Or you can choose extended repayment options, income-driven options, or a graduated repayment plan that starts you with low payments and increases them over time.

If you aren’t making a lot while you’re trying to build your practice or you prefer to put most of your money back into your business, consider choosing a graduated or income-driven repayment (IDR) plan initially. You can change your plan later to pay down debt faster as your income grows.

Consider refinancing student loans

Refinancing could also be helpful when you’re trying to start a private practice with student loans. That’s because refinancing can allow you to reduce your interest rate and change your loan repayment terms. 

Student loan refinancing generally makes the most sense if you have significant private loans because you must refinance with a private lender. You’d have to give up federal borrower benefits if you refinanced, but that’s not a concern with existing private loans.

If you apply for a new private loan to refinance your student debt, you may be able to lower both your interest rate and monthly payment. And depending on your new repayment timeline, you could lower total payoff costs as well. 

It’s worth shopping around for a refinance loan as interest rates are near historic lows, and being able to reduce your student loan costs could take some of the financial pressure off as you start your private practice. 

Starting a private practice with student loans is possible

Although it might take a little extra effort on your part, starting a private practice with student loans is possible and, in fact, it may even be the best way to get your career off the ground. If you can work for yourself, you’ll be in control of your own destiny — and can hopefully build a lucrative practice that will make loan repayment easier than you imagined it could be.