Surveys have average physical therapist debt at about $96,000. Unfortunately, the reality we’re seeing in our student loan consulting business paints a different picture.
Physical therapists have been burdened with the requirement of obtaining a Doctor of Physical Therapy degree (DPT). Are the physical therapist student loans worth the money?
I must admit that the physical therapists who seek our help making a plan have higher than average student loan debt. We have a lot of borrowers who simply use our refinancing links to pick up a cash back bonus who we don’t speak to directly.
That said, physical therapist education has become way more expensive in recent years.
Incomes have not been keeping up, despite the goal of moving the profession to a doctorate level education.
What are the financial implications of becoming a physical therapist?
Physical Therapist Debt to Income Ratio Keeps Climbing
If we examine our internal data, the decision to become a physical therapist looks challenging. Our clients tend to be recent or new graduates of DPT programs. The sample size is roughly 20, so this group is small relative to our overall sample of more than 1300 clients.
Obviously, a physical therapist earning about $75,000 would have a lot of trouble paying back over $170,000 of student debt. These average numbers don’t show the DPT with $120,000 of debt but $110,000 of income.
They also don’t illustrate the $280,000 debt carried by a physical therapist graduating from the most expensive institutions.
They do paint a picture of a profession in crisis. Examine the debt to income ratio below.
How to Recover Financially from Getting Physical Therapist Student Loans
Many physical therapists who have help from family with the cost of school will be ok. Others who attend lower cost programs and who take efforts to keep borrowing low will be able to refinance.
New DPT grads with debt to income ratios above 2 generally need to use a forgiveness-based strategy. There are two key paths to follow.
Public Service Loan Forgiveness For Physical Therapists
If you work full time at a not for profit or government employer, you will be able to utilize the Public Service Loan Forgiveness (PSLF) program. You need to make payments for 10 years on a qualifying income-based program such as the REPAYE or PAYE plans.
If you do this, the remaining balance can be forgiven. To be honest, physical therapists who owe as little as one times their income need to be pursuing this strategy if they qualify.
Let’s pretend Amy is our average physical therapist with $170,000 student debt at 7% and $75,000 income. She just graduated in May 2018. Let’s pretend she’s looking at a not for profit hospital job and a private practice outpatient job.
For the non-profit job, here’s what the math looks like. The cost in 2018 dollars is essentially net present value. The refinancing row is just a control so we have something to compare the forgiveness strategy to.
Loan Forgiveness for Physical Therapists in the Private Sector
What if Amy took a $75,000 a year job in the private sector? Of course, that means she won’t be eligible for PSLF. However, all is not lost. She could pursue the 20-year PAYE program. She won’t get tax free forgiveness, and she will have to pay taxes on the forgiven balance in 2038.
While the total cost of the payments plus taxes is $255,387 overall, the cost in today’s dollars is over $40,000 less with PAYE.
Rules of Thumb for Physical Therapist Loan Forgiveness
In fact, most physical therapists with debt over two times their income should be pursuing a forgiveness strategy. Obviously, PSLF is the better of the two, but not everyone wants to work full time at a qualifying employer.
That’s why you can pursue physical therapist student loan forgiveness even if you work part-time or in the private sector if you owe too much to comfortably pay it off in less than 10 years.
Physical Therapist Student Loans Are Not the Best Financial Investment
If you are interested in money, it’s clear that it doesn’t pay to take out six figures of student debt and delay your earnings three years after undergrad for a salary that is under six figures typically.
You could be an engineer, corporate employee, tech employee, or a host of different jobs if you want to make a similar level of income quickly after graduation.
Becoming a physical therapist ensures you’ll likely always be able to find work of some sort. It does not guarantee that you’ll always be able to full-time hours in the location where you want to live.
I keep hearing stories about how there’s a new physical therapist school popping up every six months. I believe we’ll see trends continue to develop where the number of physical therapists grows to the point where employers of DPTs are the ones with leverage.
This will particularly be true in desirable places to live where the supply of DPTs is abundant.
You Can Still Get a Good ROI on Your DPT Degree
You can still make the math work out so that you can retire one day, buy a house, start a family, and accomplish anything you want to do, even with a huge amount of student debt.
Getting the right plan in place for managing your student loans is critical though. You need to know how to max retirement accounts, what to put away for the tax bomb, or be confident you’re making the right refinancing decision.
We can help figure that out for you of course. Making student loan plans is our primary business.
To make the most of your DPT degree, keep fixed costs low. Don’t just buy a house because everybody is doing it. Buy your car in cash, rent if you’re in a high cost of living area. Focus on having a high savings rate.
Even the most indebted physical therapist will be able to be financially secure with a high savings rate. It’s just a lot more difficult than it used to be thanks to the ridiculous cost of a physical therapist’s education.
Has physical therapy been a good long-term investment for you? Do you think you would do it over again if you had the choice? Why or why not?