Most physicians, dentists and veterinarians graduate with significant student loan debt. Some choose to pay off this debt early, while others use their money in other ways. We asked three financial planners what benefits and downsides they see with eliminating this debt burden early.

Read what Meredith Jones, DVM, CSLP®, associate financial planner at Vincere Wealth and veterinarian, Benjamin Bush, CLU, ChFC, managing partner at Northeast Sequoia Private Client Group, and Josh Lantz, CRPC®, chief investment officer & financial advisor at MD Financial Advisors, experience with their clients.

Answers have been edited for brevity and clarity.

What are the benefits of paying off student loans early?

BB: The benefits of paying off early are you have now reduced your obligations to anybody. There’s no longer a requirement of your monthly cash flow, which can be emotionally a reward.

Financially, it’s just playing a little bit more of a long game because you now have the freed up cash flow to go build up that liquidity. You’re just starting at a later date, and time is extremely valuable in this discussion. Now you have more choices with your current cash flow than you did before.

JL: There’s definitely an emotional benefit. We find the number one thing for doctors when they’re stressed out, a lot of time, it’s the student debt. Outside of what they’re dealing with on their day job, their student loans really pull them down, so there’s a tremendous benefit in not having this weight on your shoulders.

That’s the biggie for a lot of them. Then, obviously, if you eliminate the debt sooner, then you’re paying less interest over time.

MJ: There are doctors of all kinds who just want to pay off the debt as soon as possible and are looking at knocking that out in 3 to 5 years. For folks who can do that, that can be really awesome. They’ve got all of this freedom and they’ve got this huge weight of the debt that is suddenly off of their shoulders. They can travel more and feel like they have more freedom, not just financially, but also in their careers as well.

I see a lot of doctors who have a lot of student debt and that affects their career decisions. Doctors who pay off the loans early may be more likely to take a risk like moving into a different sector of the career, moving from working for someone else to starting their own practice, or going from a clinical setting to a non-clinical setting. You may be more likely to do that if you have paid off your student debt than if you haven’t.

What are the downsides of paying off student loans early?

BB: Downsides are you’re shifting capital to a place that you can’t get it back. If I want that money back, I have to go ask permission to get it. If I pay off debt aggressively and then an opportunity comes to my door in two, three, four or five years, and I don’t have the capital to invest into that opportunity, I’m going to go back to a financial institution and ask them for the money. They’re going to dictate the terms which could be better or worse than what I just paid off.

JL: You could miss out on some forgiveness. I know a lot of doctors learned that the hard way over these last few years. They didn’t expect these programs. We had a lot of doctors that suddenly, through this PSLF waiver, realized: I can have some of my loans forgiven, even though I wasn’t pursuing PSLF. So, if you were in the category where you prepaid them then have that realization later, you missed out on some forgiveness. 

Also, sometimes doctors move to a new job, and maybe their employer provides some kind of benefit towards student loans—that’s becoming much more popular. Or, maybe the resident state that you work in provides some kind of benefit towards the loans, and you miss forgiveness or repayment from the state. 

The other big downside is it could prolong your financial freedom. Everyone, doctors included, need to save up money to be financially free at some point. I define financial freedom as that point where you’re working because you choose to, not because you have to. That takes accumulating a bunch of assets that you’re going to convert to income later on in your life. If you wait to start doing that, you’re going to miss out on a bunch of compounding returns between now and then.

Often, the doctors that are in that category are the ones that prepay their debts. They spend all their dollars essentially prepaying their debts to get them done as soon as possible, and that prolongs saving for financial freedom. They don’t have money compounding for them or money going in the market because they’ve been using all their dollars to essentially get rid of their debt ASAP.

MJ: There’s a lot to unpack here because not every doctor, whether it’s a physician, a dentist, a veterinarian, can afford to pay off their student loans early. I am typically recommending paying off student debt if they can pay it off in full in less than five or six years, and there are some folks who can afford to do that. There’s a growing number of doctors who unfortunately can’t afford to do that and are probably looking at income-driven repayment.

A lot of physicians are eligible for PSLF. In ten years, the balance of the debt is forgiven, and it’s tax free. 

Most dentists and most veterinarians work in private practice, and most of them aren’t working for employers who qualify for PSLF. So, those who are on income-driven repayment plans and are going for forgiveness, they’re paying the minimum on their student loans. Then, they’re having the rest of it forgiven in 20-25 years, and they’ve got a tax bill at the end of that. 

[Income-driven repayment] allows them to pay smaller payments on their student loans and it frees up more cash flow so that they can put the money toward other financial goals, like saving for retirement, buying a house, or saving so that they can start their own practice. 

Doctors who have a high debt-to-income ratio who are trying to put all their money toward the debt may not actually be able to afford to pay it off in full. And they’re often putting off other financial goals that they might have.

Read more about student loans

We spoke to Meredith, Benjamin, and Josh about several other topics surrounding doctors’ student loans. Check out:

• You’re Not Alone: Many Doctors Need Help Navigating Student Loans
• How Are Doctors Handling the Student Loan Payment Pause?
• One Thing Financial Planners Wish Doctors Knew About Student Debt

If you need help navigating your debt burden, there are people who can help. Our Build Your Team program connects you to a financial advisor for free. Don’t face the challenges of becoming and being a doctor alone.