The average CRNA salary makes a nice income, but the many years of education means racking up 6-figure student loan debt. How can CRNAs figure out the best way to pay back their student loans?
Certified Registered Nurse Anesthetists (CRNAs) work in a tremendous field and help patients in a very meaningful way. When patients are at their most vulnerable state, CRNAs are there to make sure things go smoothly.
According to the American Association of Nurse Anesthetists:
Every day, nurse anesthetists monitor patients during surgery. This requires preparing and administering drugs before anesthesia, managing patients’ airways, and pulmonary status during surgery and closely observing their physical reaction to drugs.
With everything at stake, it takes a disciplined, detail-oriented, hard-working person to become a CRNA.
Requirements to become a CRNA
Becoming a CRNA is a worthy pursuit, but it is also a long path that requires students to pay the price in terms of time and money.
The first requirement is to earn a bachelor’s or graduate degree in nursing. After that, a person pursuing that career path needs to work at least one year as a registered nurse (RN) in a critical care setting. Then they must go to an accredited program to get their masters in nurse anesthesia which usually takes 2-3 years for most to complete it.
All in all, CRNAs spend about 7-8 years in their pursuit of the career. The good news is that it pays very well. The average CRNA salary by state may vary but is about $165,000 annually, according to the Bureau of Labor Statistics. CRNAs are in all US States and the District of Columbia.
The downside is the amount of student debt they have to deal with upon graduating.
CRNA student loan debt
With the grueling curriculum, it’s nearly impossible for CRNA students to earn enough to pay cash for school along the way.
Nurse Blake of NurseBlake.com says, “You can’t work in school, it’s too hard,” and says CRNA students have to be ok accruing debt.
Most of the CRNAs we work with are staring at paying back more than $200,000 of student loan debt. It’s very intimidating even with the nice income.
Worse yet, pursuing the wrong student loan repayment strategy could end up costing them tens and possibly hundreds of thousands of dollars.
The best student loan repayment strategy for a CRNA
In our experience, CRNAs have 3 solid options that will save the most money paying back their student loans:
1. Pay off their loans aggressively with a goal of being debt free in 10 years or less. This could involve refinancing student loans if it would lower their interest rate and they could afford the payment.
2. Work for a non-profit hospital or government employer (like a school) and go for Public Service Loan Forgiveness (PSLF).
3. Sign up for an income-driven repayment plan like PAYE or REPAYE, make payments based upon income for 20-25 years, then pay taxes on the forgiven balance.
With the first option, a CRNA should throw every extra dollar they can find to be debt free. The remaining options are the exact opposite, pick an income-driven repayment plan that will keep payments as low as possible and maximize forgiveness.
Anywhere in between could be a needless waste of thousands of dollars. We’d rather CRNAs keep that money in their pockets.
To figure out which one of these options would be best for a CRNA depends on their specific situation.
Case study: A CRNA career decision – private employer vs. non-profit hospital
Brittany is a CRNA who owes $220,000 in student loans with a 6.5% interest rate and also has about $10,000 of credit card debt.
She’s has two job opportunities. One is a non-profit hospital with a CRNA salary of $145,000 and the other is with a private practice at $175,000.
Right now, she’s leaning toward the private practice job and is considering the extended plan to keep her payments low. The only thing stopping her from choosing the private job is the lure of PSLF with the non-profit hospital.
Let’s compare the numbers to see what that decision looks like from a pure financial perspective.
The extended repayment plan is one of the most expensive plans a CRNA can choose
First , we’d take a look at her repayment options with a private job.
With the nearly 1,500 consults we’ve done, the extended plan is one of the worst options 99% of the time. First of all, she’d pay a very high-interest loan back over 25 years. That lower monthly payment may prove to be very costly in the long run.
Let’s compare refinancing to a 10-year term with a 5% interest rate to the extended repayment plan where she’d pay back a 6.5% loan over 25 years:
When people look at paying back debt, often they fixate on the monthly payment. Yes, the monthly payment is about $850 a month more vs the extended plan which can be somewhat intimidating on the surface.
But let’s reframe the numbers here.
Refinancing would save Brittany $172,000 paying back her loans. Instead of paying $1,485 per month for 25 whole years, she could pay $2,333 per month for 10 years then have no more student loan payments.
Student debt free with no payments after 10 years instead of 25? That’s a huge difference!
Brittany and I discuss budgeting an extra $850 per month to put toward student loans so she can refinance. After seeing how much she’d save on her loan repayment combined with the drastically higher income on the way, she is committed to using a portion of that high income to throw at her loans and committing to refinancing.
CRNA Public Service Loan Forgiveness (PSLF)
Now that we’ve eliminated the extended plan from the discussion, we know that Brittany has two options, refinance or go for PSLF. Both options would get her student debt free in 10 years.
When we’re talking about whether or not to give up PSLF for a higher paying job, we’d want to compare how much more she’d pay if she were to refinance vs. PSLF.
Refinancing is kind of like a mortgage. You make level payments which are comprised of both principal and interest. The payments are based upon how much you owe and at the end of the term, the entire loan is paid off.
When we talk about PSLF, it’s the opposite. The amount of debt doesn’t matter in terms of calculating payments. They would be based solely upon income. In other words, payments change with changes in income, not with the loan balance.
The payment plan we’re focusing on with Brittany is PAYE (pay-as-you-earn). Payments are based upon 10% of “discretionary income” and it has other features that could make it appealing as she’s going for PSLF.
Let’s compare the numbers between PSLF using PAYE vs refinancing:
You can see by the chart that PSLF would end up saving her about $170,000 over 10 years paying back her loans. That’s a huge number and looks on the surface to be a no-brainer to go for PSLF. But that’s not the whole picture.
The difference in pay between the two jobs makes a huge difference too. It’s the most important calculation to compare the true benefit of PSLF.
Generally, the types of jobs that qualify for PSLF pay less. But if they pay too much less, taking the job for PSLF purposes only could end up being more costly. We have to break it down to see what amount of salary is worth it to give up the benefit.
Here’s how we do it
PSLF would save Brittany $170,000 over 10 years paying back her loans vs refinancing at 5%. That works out to an average of $17,000 a year for 10 years.
In other words, if she were to take the private job, she’d have to make an extra $17,000 in take home pay so that she could cover the higher refinancing payments. That number would make PSLF vs refinancing a wash.
That number would be her take-home pay (aka after-tax dollars), so she’d probably have to make around $25,000 more in salary to take home $17,000 after taxes. In other words, the non-profit compensations is $145,000 in salary, so she’d have to make at least $25,000 in the private job to give up the PSLF benefit from a pure numbers perspective.
Well, the private job is offering her $30,000 more in salary ($175,000 vs. $145,000). It would be “okay” to give up PSLF because she’d be getting paid more than enough to compensate for it vs. the non-profit hospital job. She’d be able to not only cover the higher payments with the higher salary, but she’d probably have extra money to spare after those higher payments too.
Since she was leaning toward the private job anyway, the numbers show that it’s okay to go that route too.
Refinance and be student debt free in 7 years
Brittany decides to take the private job. She was so motivated after seeing the numbers and getting clarity around her situation that she’s going to make room in her budget to pay more than $3,000 each month towards her loans.
At that rate, she’ll be debt free in 7 years and save another $20,000 in interest paying back her loans vs paying them off in 10 years at the same interest rate.
Before finalizing refinancing though, she’d want to clean up about $10,000 of credit card debt. It should take her 3-4 months with her fantastic income prospects.
Once she works through that, she refinanced through Student Loan Planner and got a nice cash back bonus too.
Compared to her original strategy of going on the extended plan, she’ll save nearly $200,000 paying back her loans! Plus, she’ll be debt free 18 years sooner (7 years vs. 25 years).
Way to go Brittany!
Certified Registered Nurse Anesthetists can get a solid student loan plan
CRNAs can find a clear path to pay back their student loans. A path that could not only save them significant mone, but give them a clear path that they understand and actions steps to get it done. A CRNA salary is pretty good, but is the student loan debt you accumulate to get there worth it?
Student Loan Planner has done over 1,300 student loan consults for clients totaling over $370,000,000 of student loan debt. Whether you work for a private practice, a hospital going for PSLF, or another employment situation we can help you figure out the optimal path in just one hour. Plus we include email support after the consult to continue to answer your questions and help you implement the plan.
I work with borrowers who owe between $200,000-$400,000 in student loans and am usually the point person for our CRNA student loan consults. Feel free to email me at rob@studentloanplanner.com.
Our team can help anyone though, so feel free to choose the right consultant for you based on your individual circumstances.
Are you wondering if you’re paying too much toward your student loans? Book a consult with us!
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In the PAYE example, you’re forgetting the tax hit she will take on the forgiven balance. Assuming a 32-35% federal tax rate on that 245K figure (for 2018), she will owe an additional 80K. This is not including any state tax she may also owe. The savings are still substantial and the plan worth implementing, but they are not as rosy as the article makes it seem (savings of potentially less than 100K instead of 170K).
That’s true if she was in the private sector. That context above for that example is for PSLF, where no taxes are owed at the end of the 10 years of payments.
Are there taxes on Federal student loan repayment programs…
If you’re not utilizing the Public Service Loan Forgiveness program, then yes you have to pay income tax on the forgiven balance at the end of 20 to 25 years under current rules.