While in school, there is little talk about what to do with your student loan debt.  However, upon graduation, the elephant in the room becomes an outsized companion on your professional journey.  As of 2022, graduating Physician Assistants faced an average debt of around $100,000 according to PAEA1. Nurse Practitioners carried a burden ranging from $100,000 to $150,0002.  In the same year, Advanced Practice Providers (APPs) earned an average base salary of $120,000, with potential earnings reaching up to $180,000 for those compensated based on performance, as reported by AAPA3.  So why do these numbers matter?  

Ignoring the elephant in the room doesn’t make it go away; it only makes a mess.  If APPs are not educated on managing $100,000 of student loan debt, they can end up with quite a financial mess.  At BBM, we recognize the significance of navigating this landscape.   Our mission is to empower you with insights and practical advice to manage your debt responsibly. We want you to cultivate spending and savings habits that lead to enduring financial success. 

Following the Financial Vitals Checklist 

We recommend you follow the Financial Vital’s Checklist, our strategic guide on what to do with your money.  Before aggressively paying off your educational loans, you must protect yourself with disability insurance and an emergency fund.

Financial Vital's Checklist

Additionally, you should take the easy wins by obtaining any available employer match and paying off your high-interest debts.  Step 4 of our checklist defines high-interest debt as exceeding an 8% interest rate.  With student loans typically carrying rates around 4-5%, it is optimal to prioritize debts with higher interest, such as credit cards.  Then, you can focus on taking other steps before aggressively paying off lower-interest-rate debt like student loans.  

However, we understand that some people are debt-averse and prioritize paying off student loans, even if that is financially suboptimal.  We will talk more about that below. 

Student Loan Debt Situation 

If you’ve graduated in recent years, you’re likely familiar with the student loan forbearance that began in March 2020. This was one of the government relief program courtesy of the impact of COVID-19.  However, as of October 2022, the hiatus has concluded.  Student loan payments are officially back, and you must set up your payment plan.  In light of this transition, we will explore different repayment options and strategies you can consider.  Whether you’re resuming payments after the forbearance or entering repayment for the first time, understanding these options can play a pivotal role in developing your financial plan. 

Repayment strategies 

1. Traditional Repayment Options

Traditional repayment plans are the most straightforward.  There are three different options under this umbrella.  

Standard repayment Plan 

The first option is Standard Repayment, where you make a fixed payment based on the amount and the interest rate of your loans, similar to how you pay your mortgage.  The standard length is ten years.  The advantage of this plan is the predictability of the payment and how quickly your loans are paid off.  This option may be attractive if you want to focus on swift repayment or have higher interest rate loans (above 5-8%) and find yourself repaying this debt in step 4 of the checklist.  

Graduated Repayment 

In Graduated Repayment, your initial payment will start lower for the first two years based on your income. The payment amount then increases every two years.  These payments are calculated with the expectation that your salary will increase by at least 5% every year.  This method ensures the loan is paid off within ten years.  The minimum repayment amount must at least cover the interest payment and won’t increase to be more than 3x greater than any other monthly payment.  

Extended Graduated Repayment 

In Extended Graduated Repayment, you have up to 25 years to repay your student loans.  The payments are either fixed or graduated (payments start low and increase every two years).  The advantage here is obvious: your payments will be lower than the other two traditional repayment options.  However, you will make payments longer and pay more interest over time.  

Type of Traditional Plan Amount Owed (Avg. Int Rate 5%) Monthly Payment Total Amount Paid  Repayment Length 
Standard Repayment Plan $130,000 $1,444 $166,421 Ten years 
Graduated Repayment Plan $130,000 $846-$1,108 $177,144 Ten years 
Extended Fixed Repayment Plan $130,000 $822 $242,491 25 years 
Extended Graduated Repayment Plan (variable) $130,000 $636-$1,128 $262,119 25 years 
Traditional Payment Plans

These are the Traditional loan repayment programs you can choose from.  As you can see, the monthly payments are higher in the Standard Repayment Plan than in the others discussed below.  Higher monthly payments might impact your ability to complete other steps in the Financial Vital’s Checklist. This includes vital steps such as saving for an emergency fund, disability insurance, and retirement savings. 

Although the monthly payments for the other two Traditional plans aren’t as high initially, they increase as the plan progresses, assuming your income will increase but your expenses won’t.  The other obvious downside is the amount of interest you pay doubles with the longer, extended plans.   

2. Income-driven plans 

Income Based Repayment (IBR) 

In IBR, your monthly payment will be 10-15% of your income.  Your monthly payment will never exceed the 10-year Standard Repayment plan amount.  Your payment will be recalculated yearly based on your income and family size.  The plan also considers the loan amount, your marital status, and your spouse’s income and debt if you file taxes jointly. 

This plan might be beneficial to you for a few reasons.  Your payment will be lower if you have high debt relative to your expected income or if you are your family’s primary breadwinner and your spouse also has federal debt.  It is also a good option if you seek Public Service Loan Forgiveness.  You will be eligible for loan forgiveness of your unpaid balance after 20-25 years.  However, you will still pay more for your loan over time than you would for a standard repayment plan. You will also pay ordinary income tax rates on any forgiven amount.  

Income Contingent Repayment (ICR) 

With an ICR plan, payments are calculated by taking the lesser value between 20% of your income and the amount you would pay on a fixed payment plan for 12 years.  The payments are recalculated yearly based on your income, family size, and remaining loan balance.  One caveat to this plan is that your monthly payment can exceed the standard repayment 10-year plan amount. 

Your spouse’s income and loan debt are also considered with this repayment option if you file your taxes jointly.  This might be a good option if you are seeking Public Service Loan Forgiveness.  You will pay more for your loan over time than a standard repayment plan. However, you do have the opportunity for loan forgiveness after 25 years of payments, subject to taxes, similar to IDR. 

Pay As You Earn (PAYE) 

With the PAYE plan, your maximum monthly payment will be 10% of your income and will never exceed the 10-year Standard repayment plan amount.  Payments are recalculated each year based on income and family size.  Your spouse’s income and debt are considered if you are married and file a joint tax return.  

After 20 years, any outstanding balance will be forgiven but is subject to income tax after 2026.  This might be a good option if you seek loan forgiveness or have a large debt relative to your income. 

Revised Pay As You Earn (REPAYE) 

REPAYE plan payments are based on 10% of your income, similar to PAYE. The main difference here is your payment can exceed the 10-year Standard Repayment plan amount.  Payments are recalculated based on income and family size each year, and your spouse’s income and loan debt are considered whether you file jointly or separately.  

After 20-25 years, the unpaid balance will be forgiven, but you might be subject to paying taxes on this amount after 2026.  Again, this might be a good option if you are seeking loan forgiveness or have a large debt.  However, one con is that if your income continues to increase, your monthly payments can increase indefinitely and even exceed the standard repayment amount.  

Type of IDR Amount Owed (Avg. Int Rate 5%) Monthly Payment Total Amount Paid  Estimated Forgiveness Amount Repayment Length 
Income-Based Repayment Plan $130,000 $689- $1,402 $208,696 $0 15 years 
Income Contingent Repayment Plan $130,000 $1,439 $163,437 $0 Ten years 
Pay As You Earn Repayment Plan $130,000 $459- $1,402 $213,913 $44,466 20-25 years 
Revised Pay As You Earn or (SAVE) Repayment Plan  $130,000 $283- $1,686 $250,240 $7,750 15-20 years 
Types of IDR Plans

As demonstrated above, Income-Driven Repayment (IDR) plans vary in duration, from 10-25 years.  They might be a viable option for those seeking lower monthly payments or those planning on obtaining loan forgiveness.  The loan forgiveness you would get here differs from the other loan forgiveness programs listed below.  

IDR Loan Breakdown

The primary difference between the loan forgiveness you would receive with these options and the loan forgiveness you would receive using one of the programs listed below (PSLF or NHSC) is that the forgiven amount may be taxable with IDR plans.  If your student loans are forgiven by December 31, 2025, you will be exempt from tax implications on the forgiven amount. This is due to the American Rescue Plan Act implemented in 2021.  However, in 2026, unless something changes, any forgiven amount in the IDR plans will be subject to ordinary income tax at your marginal tax rate.  For APPs, that will typically be between 22-25%. 

In general, IDR repayment plans can be a good option for those with very high loan amounts, those seeking student loan forgiveness, or those with loans that have lower interest rates seeking a smaller payment.  There are a few things to keep in mind when considering an IDR plan.  First, if you choose an IDR plan because you have a low-interest rate loan and want a lower payment over 20 years, then make sure you invest the funds you save. 

Next, ensure you have the discipline to save money for the balloon tax payment if you choose to get some of your loans forgiven (such as in a high-yield savings account or your retirement account).  Finally, I would choose an IDR or ICR payment plan if you are married, make the majority of your income for your family, and your spouse also has Federal student loan debt because your payment will be more manageable for your budget.  

If you want to compare/contrast these plan options based on your personal student loan debt, use the student loan simulator here

3. Refinancing/Consolidating with private lender 

Opting for refinancing with a private lender can be labeled as “aggressive” student loan repayment.  Refinancing your student loans through a private lender can get you a lower interest rate. This is a good option if you choose to pay your student loans off in 10 years or less.  However, it’s essential to note that this strategy requires a good credit score and a low debt-to-income ratio.  While the potential interest savings can be significant, it comes at a cost.  Refinancing and consolidating loans with a private lender render you ineligible for government loan forgiveness programs and federal benefits.  

The Biden Administration has proposed various bills concerning student loan forgiveness, but they have yet to be approved.  The proposed amount is up to $20,000 in debt cancellation to Pell Grant recipients and $10,000 in debt cancellation to non-Pell Grant recipients.  Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples), which may be a barrier for higher-earning APPs.    

If you are following the Financial Vital’s Checklist, it is a reasonable option to refinance your loans, get a lower interest rate and payment, and pay them off in step 9.  A few other things to consider: if you are debt averse and want to focus on paying off your student loan debt quickly, this might also be a good option, getting a lower interest rate and payment but still paying them off in a reasonable timeframe.  Just make sure you don’t neglect the steps to protect yourself.  Lastly, if you also have significant undergraduate debt, consider consolidating into one affordable monthly payment with a lower interest rate.  

4. Loan Forgiveness Programs  

Public Service Loan Forgivingness (PSLF)

Several programs offer student loan forgiveness, provided you meet specific qualifications and work in designated sectors or areas.  One such program is the Public Service Loan Forgiveness (PSLF), designed for professionals in public service roles.  Eligibility details can be found here.

The number one qualifying factor is being employed by the government or a non-profit entity during the time you are applying for forgiveness.  You need an IDR plan to be considered for this type of loan forgiveness.  After ten years or 120 payments (not consecutive) while working for an eligible employer, the remaining balance can be forgiven tax-free.  Also noteworthy are periods of forbearance or deferment accepted during your employment with a qualifying employer. 

National Health Service Corps

Another program is the National Health Service Corps (NHSC) Loan Repayment Program, where working in underserved areas for two years could lead to up to $50,000 in loan repayment.  Detailed criteria can be found on the NHSC website, here

  These programs present compelling opportunities for loan forgiveness, relieving some of your debt burden.  However, it’s essential to weigh the pros and cons.  While loan forgiveness is attractive, qualifying jobs typically pay less than those in the private sector.  This income discrepancy must be considered, particularly in the case of public service roles.  However, this could be an attractive option if you are drawn to public service, find yourself working in an underserved area, or have a large amount of student loan debt.  

Building a Long-Term Financial Plan 

If your student loan debt carries an interest rate of less than 8%, prioritizing repayment may not become your focus until reaching step 9 in the Financial Vitals Checklist.  For instance, my student loan interest rates fall between 3-6%, making the immediate payoff of this low-interest debt a secondary concern.  If you choose a lower payment option, consider investing the money you save in the stock market, which has traditionally produced an average return north of 8%.  Or, you could consider placing extra funds in a high-yield savings account with virtually no risk, earning 5% on your money with the current interest rates. 

However, if you are someone who knows you are not disciplined enough to take the amount you save on your payments and invest it in other ways, or if you are more debt averse, maybe you should consider paying off your loans quicker with a lower interest rate. 

Conclusion 

We recommend you follow the Financial Vital’s Checklist, live within your means, and avoid lifestyle inflation, allowing you to establish a stable financial trajectory post-graduation.  You can become financially independent despite your student loans.  Check out this article comparing an MD to a PA to explore when they achieved financial independence and identify their financial break-even point here. 

    There are many options when it comes to repaying your student loans.  Hopefully, this article will allow you to weigh the pros and cons of each.  Choose the route for loan repayment that works best for you, your financial plans, and your life goals.  You don’t have to feel rushed to pay off your student loans as long as you have a solid financial plan in place.   

  1. (n.d.). PAEA RESEARCH By the Numbers | Data from the 2021 Matriculating Student and End of Program Surveys Student Report 5. PAEA Online. https://paeaonline.org/wp-content/uploads/2023/06/FINAL_student-report-5-20230628.pdf
  2. . (n.d.). How Much Student Loan Debt is Normal For Nurses? Nursa. https://nursa.com/blog/how-much-student-loan-debt-is-normal-for-nurses
  3. (n.d.). 2023 AAPA Salary Report. AAPA. https://www.aapa.org/wp-content/uploads/dlm_uploads/2023/07/2023-Salary-Report_Full__v4.pdf
  4. (n.d.). FEDERAL STUDENT LOANS Repaying Your Loans. Student Aid. https://studentaid.gov/sites/default/files/repaying-your-loans.pdf