Naturopathic Doctors graduate with crushing student loan debt. But they do have student loan forgiveness options even if they work in a private practice.
Naturopathic Doctors (NDs & NMDs) are some of the most versatile medical professionals. They have been trained in both Western & Eastern medicine as well as cutting-edge medical practices.
That training comes with a significant cost.
Not only do NDs and NMDs need a 4-year bachelor’s degree, but they also go to a 4-year naturopathic doctor graduate program.
And what about if they live in the 30 states that don’t license naturopathic physicians? Well, then they would have to get a medical degree that is recognized by the state like an MD, DO, DC.
Either way, just about all naturopathic doctors are left with $200,000+ naturopathic doctor student loans debt and most we’ve spoken with at Student Loan Planner owe more than $300,000.
NDs & NMDs are much more limited in their loan forgiveness options compared to other medical professionals but they still have some great options.
In this guide, we’ll cover how NDs and NMDs can get public service loan forgiveness (PSLF), and taxable loan forgiveness to pay as little out of pocket as possible while becoming student debt free.
The 3 best options for naturopathic doctors to save money paying back their student loans – an overview
We’ve done more than 1,500 student loan consults and covering more than $400,000,000 in student loan debt. In our experience, we’ve found 3 overall approaches that save people the most money paying back their student loans.
1.Public Service Loan Forgiveness (PSLF)
This is one of the most powerful programs out there for naturopathic doctor student loans. It’s available for people who have “direct” student loans, work full-time for a non-profit or government employer (including universities), and have been paying on an income-driven repayment plan for 120 total months.
NDs & NMDs would want to keep their payments as low as possible, save on the side, and stay on track for PSLF.
2. Aggressive repayment in combination with other available loan forgiveness programs
Honestly, this might not be the best path for most NDs and NMDs. It’s for those who aren’t eligible for PSLF and owe 1.5x their income in student loans or less (eg owe $120,000 or less and make $80,000). This strategy is all about throwing everything including the kitchen sink to pay off the debt as quickly as possible (10 years or less).
3. Taxable loan forgiveness using an income-driven repayment plan
For households that owe more than 2x their income in student loans (eg. NDs and NMDs who owe $200,000 and earn $100,000 or less) and don’t meet the PSLF criteria could be best served by selecting an income-driven repayment plan like PAYE or REPAYE for 20-25 years. In the end, the remaining loan balance is forgiven but taxes will be owed on the forgiven amount.
The idea here is to keep student loan payments as low as possible, save up for the “tax bomb”, and work towards other financial goals along the way.
Naturopathic doctors, unfortunately, don’t have access to some of the other medical professional loan forgiveness and repayment options like the National Health Service Corp (NHSC) Loan Repayment Program for underserved areas as of yet.
The American Association of Naturopathic Physicians (AANP) is hard at work advocating for NDs & NMDs to get jobs at the VA and also to qualify for NHSC Loan Repayment which would open up doors for loan forgiveness programs that other medical professionals are eligible for.
For now, the two best options are PSLF or going on an income-driven plan and getting taxable loan forgiveness.
Public Service Loan Forgiveness (PSLF) for naturopathic doctor student loans done right
Any ND or NMD who works for a non-profit hospital, a practice owned by a university or hospital or government employer including a university could be eligible for PSLF.
How would a naturopathic doctor know if they’re eligible? These are the 3 primary criteria:
1. Direct Federal Student Loans
Most people who borrowed after 2010 will have “direct” loans. The clue is that it will actually say “direct” or “DL” in the loan title (eg “Direct Stafford Unsubsidized”). It’s important to check this out before going for PSLF, because this is a major cause of people who applied for PSLF not getting loan forgiveness.
How to tell if your loans are direct: The fastest way to find out if your loans are direct would be to login to the NSLDS website and see the breakdown of your federal loans.
Any loans that are FFEL loans and not direct are not eligible for PSLF and may require consolidation. Beware of consolidating already direct loans because consolidation wipes away any credit toward loan forgiveness. Read more about that here.
P.S. It is FREE to consolidate your loans so don’t pay anyone to do this for you!
2. You are on an income-driven repayment plan like PAYE, REPAYE or IBR.
Here’s more information on the different income-driven repayment options available.
3. You work full-time for a non-profit or government employer. This can also be accomplished if you have 2 or more part-time jobs with qualifying employers totaling 30+ hours a week.
How naturopathic doctors can save even more money on PSLF
The ultimate goal when going for PSLF is to pay as little as possible and maximize loan forgiveness. This might mean your loan balance will go up over the 10 years, but that’s ok if you go the distance on PSLF
Here’s how to make sure you’re not spending too much money paying back your loans:
1. Select the repayment plan that requires the lowest monthly payment even if this means your loan balance will grow. Typically, this is either PAYE or REPAYE since the payments are 10% of discretionary income. Occasionally the best plan could be IBR for naturopathic doctors who are married and aren’t eligible for PAYE.
2. Lower adjusted gross income (AGI) by maxing out pre-tax retirement plans and health savings accounts (HSA). If you have a spouse whose income is factored in to calculate your payment, they should max out pre-tax retirement plan as well. We don’t want you to make less money but it’s best to do everything you can to maximize those deductions to AGI. (FYI, standard or itemized deductions come AFTER AGI, so it will not reduce your student loan payment).
3. Do not make extra payments toward your loans. This is a huge mistake that many make trying to keep their loan balance from growing. Any extra payment will be money that goes into the oblivion since any unpaid balance will get forgiven anyway.
Naturopathic doctors would be better off saving aggressively on the side. That way, if you see PSLF to the end, you get to keep the extra money in your pocket instead of losing it forever because you threw it at your loans which were eventually forgiven. It also acts as a defense in case there is a change to the PSLF program or your career path. That way, you’ll have a chunk of money to throw at the loans if you need to.
After 120 qualifying monthly payments (which don’t have to be consecutive by the way), you can apply to have your remaining loan balance forgiven tax-free.
We suggest filing the Employment Certification Form (ECF) at least once a year then checking each loan to make sure that they received the credit toward PSLF that you applied for. For people who are a few years in but haven’t sent in their ECF yet, do it immediately so you can get an accurate count of credit toward PSLF.
For more information on PSLF, check out our top tips here.
Taxable Student Loan Forgiveness for naturopathic doctors using income-driven repayment
NDs & NMDs still have a loan forgiveness option paying back their student loans even if they aren’t eligible for PSLF.
This strategy will work well for naturopathic doctors because they owe more than 2x their income in student loans. So we’ll spend some time here.
This process is very similar to what we covered in the PSLF section:
1. Select an income-driven repayment plan that will keep your payments as low as possible.
2. Do what you can to lower your AGI by contributing to pre-tax retirement accounts and an HSA if you have one available.
3. Don’t make any extra payments toward your loan than what’s required. If you get the urge, save the money instead of throwing it at the loans.
The major differences between PSLF and taxable loan forgiveness are as follows:
1. Payments span from 20-25 years.
2. The amount of loans forgiven will be treated as income in the year it’s forgiven so you’ll end up owing taxes. We call this the “tax bomb”.
First, let’s explore why keeping student loan payments as low as possible and maximizing the amount forgiven makes sense.
In this example, let’s say that Jessie has $290,000 in student loans at 6.8%. She works in private practice and is earning $70,000. She is projecting her income to increase at a normal 3% rate for her career.
She’s choosing between REPAYE where her payments would be based upon 10% of her income or IBR where her payments would be 15%. Both are 25-year2 programs with taxable loan forgiveness at the end. Let’s project that the forgiven balance will be taxed at 40% in the 25th year.
|REPAYE (10% |
|IBR (15% |
REPAYE is the clear winner here and is projecting to save Jessie nearly $110,000 vs IBR. The main reason is that she saves on her payments and only has to pay back the taxes on the extra accrued interest.
That extra accrued interest makes her loan balance higher on REPAYE, but she’ll save so much more on her payments vs IBR that even the extra taxes still make it financially worth it.
The other main driver of REPAYE projecting much more favorably has to do with the interest subsidy.
REPAYE interest subsidy for naturopathic doctors – annual interest forgiveness
For people who have 3-4x their income in debt, the REPAYE interest subsidy wipes away a bunch of interest that would otherwise accrue on the loan. Here’s how it works:
Under any other of Jessie’s repayment options, the interest on her loan is going to be $19.720 for the year ($290,000 x 6.8%).
Her annual loan payments on REPAYE are going to be $5,218 based upon her discretionary income. Basically, these payments would pay off some of the interest but not touch any principal of the loan.
So if her interest is $19,720 and she’d make $5,218 in payments over the year, she should accrue $14,502 in interest for the year ($19,720 – $5,218). In other words, her loan balance should grow from $290,000 to $304,502.
The interest subsidy on REPAYE wipes away half of the accrued interest not covered by payments aka it cuts the loan growth in half.
If Jessie’s loan is projected to grow by $14,502, then she’d get an interest subsidy of $7,251 (50% of the growth). That works out to be $7,251 of loan/interest forgiveness that year.
This is good for a number of reasons. First of all, Jessie will save $7,000+ that year (Yay!). Secondly, it effectively lowers the interest rate of her loan from 6.8% to 4.3% for that year since the interest goes down from $19,720 to $12,469.
That makes it a little more palatable to save up for other financial goals like retirement, buying a house, etc.
Income-driven repayment vs refinancing
Now let’s examine why naturopathic doctors would choose taxable loan forgiveness rather than paying off their student loans in full.
Let’s say that Jessie was deciding between PAYE (20 years of payments based upon 10% of her income – no interest subsidy) vs refinancing to a 20 year 5.75% interest rate. That refi would lower her interest by more than 1% vs keeping them in the federal program. On a $290,000 loan balance, we’re talking about $2,900 per year in interest.
On the surfac,e it seems like that extra interest savings of $58,000 ($2,900 a year for 20 years) would be enough to give up PAYE and just pay back the loan in full, but…
It doesn’t, not by a long shot.
PAYE is still the clear winner. Both PAYE and refinancing would have her debt free in 20 years, but paying off her loans in full by refinancing is projected to cost her $156,000 more out-of-pocket than going with PAYE. That’s about $7,800 per year!
The other reason refinancing is not nearly as attractive is that Jessie’s required loan payment would be much higher, almost 5x. That makes affording a house and reaching her other financial goals much more challenging. PAYE would allow her to keep her payments low and save the extra money that would otherwise go to student loan payments.
The bottom line is that loan forgiveness even when it’s taxable could still a great benefit for those not eligible for PSLF.
What about saving for the tax bomb on income-driven repayment?
Naturopathic doctors should be saving up for the tax bomb on top of their student loan payments if they’re going for taxable loan forgiveness. It can seem daunting to see such a large number owed in the future, but it’s actually fairly manageable when it’s broken down to a monthly savings.
Let’s just say that Jessie is saving in an investment account that is projected to earn 5% a year for the next 20 years.
If she put equal monthly payments of $619 per month into that account, it is projected to grow to the $213.448 in 20 years when the tax bomb would be due.
Saving up for the tax bomb over the years would also save Jessie money because her money would be working for her too.
The taxes owed is projected to be $213,448. But if she saves $619 per month for 240 months (20 years), she only has to save $148,560 total. The other $64,888 doesn’t come out of her pocket. It comes from investment growth.
That means she’d spend $64,888 less paying the tax bomb than if she had tried to put together the money last minute when she gets the tax bill in 20 years. That lowers her out of pocket cost to $279,620.
It may seem counterintuitive but taxable loan forgiveness using an income-driven plan where your loans actually grow could end up saving money compared to refinancing and paying off the loans in full.
Plus it allows NDs & NMDs to save and invest for other financial goals along the way.
How naturopathic doctors can save the most money with Student Loan Forgiveness Programs
Naturopathic doctors have good, albeit limited options for loan forgiveness.
I have laid out a general framework here, but your situation is unique. Marriage, career and life trajectories, and financial goals are different for everyone and can change over time.
With all the money at stake when we’re talking about paying back 6-figure naturopathic doctor student loans, it makes total sense for an expert to review your specific situation including family size, career path, household income, etc.
By the end of a consult with us, you’ll understand the path that will save you the most money paying back your loans and gain the clarity you need to feel in control.
I’ve worked with many naturopathic doctors, and I’d love to help you finally feel confident about how you’re handling your student loans.
These are good student loan forgiveness options for naturopathic doctors. Do you agree? Let’s discuss!