Chiropractors are in a bind between big-time student loan debt and income levels that pale in comparison to other medical career paths.
Student loan refinancing for chiropractors is an option, but is it a good decision?
Not all repayment strategies work for chiropractors. Let’s look at how debt and income effect how chiropractors should proceed when planning for the future.
Becoming a chiropractor leads to huge student loan debt
Regardless of school choice or the types of loans received, most chiropractic students will graduate with mounting six-figure student loan debt.
College Scorecard data shows that the weighted median debt for chiropractic students graduating in 2016 and 2017 was over $182,000. And those numbers are probably even higher now. Student Loan Planner’s chiropractor clients have averaged even more debt. The average student loan debt for our chiropractic clients is $245,340.
Federal loans for chiropractors
Most chiropractic students will end up taking out Direct Unsubsidized Loans or Grad PLUS loans through the federal government. Federal loans should be the first choice for most students because they provide access to valuable protections and programs like flexible repayment plans and loan forgiveness.
What are the differences between unsubsidized loans and subsidized loans?
- The Department of Education pays the interest on subsidized loans while students are in school full-time.
- Graduate students aren’t eligible for subsidized loans.
- Graduate Students are responsible for all interest charges on unsubsidized loans, including while they are in-school.
- Interest not paid on unsubsidized loans during school will accrue and capitalize when you leave school. This means it gets added to your total loan balance.
Grad PLUS loans are for any graduate or professional student enrolled at least part-time at eligible schools. Applying for Grad PLUS loans involves filling out a FAFSA form, just like other federal loans. You also need to submit a PLUS loan application.
Other federal loans are based on financial need. Grad PLUS loans are not need-based and require a credit check. They also have a higher fixed interest rate than other federal loans, currently set at 7.08%.
Private loans for chiropractors
Chiropractic students use less private loans, but they can be another option if federal aid doesn’t cover all of your school expenses. Private student loans also require a credit check. With good credit, you may qualify for lower rates than the ones offered by Grad PLUS loans, but private loans don’t have access to the flexible repayment plans of federal student loans.
With all three loan options, along with existing debt from undergraduate student loans, most Chiropractors will enter the workforce with massive student loan debt.
Refinancing isn’t the right choice for most chiropractors
Results from Student Loan Planner’s recent survey on student loan refinancing shows that most chiropractors aren’t refinancing student loans. Only 9% of chiropractors surveyed had refinanced their student loans, which was tied with social workers for the lowest amount.
How does that compare to the other professions that were surveyed?
What this survey shows is that most chiropractors realized something important: they are not the ideal candidates for refinancing.
Lenders weigh several factors when determining eligibility for refinancing, including three key numbers:
Most private lenders require a minimum credit score of 650. To secure lower rates, though, scores over 700 are ideal. If your credit score is lower than that, you may still qualify with the help of a cosigner.
Income plays a factor in determining eligibility for student loan refinancing for chiropractors too. There isn’t a set income level requirement, but lenders want to verify income to be sure you can afford the loan.
The Bureau of Labor and Statistics shows that the median salary for chiropractors in 2018 was $71,410. It also shows the lowest 10 percent of chiropractors earned less than $34,990. Median starting salaries for chiropractors fall between $40,000 and $45,000.
Debt-to-income (DTI) ratio is where refinancing falls apart for chiropractors. DTI ratios show lenders how much debt you have compared to the income you generate. Lower DTI numbers are more favorable, and we typically recommend refinancing if your DTI is less than 1.5.
College Scorecard shows that chiropractors who graduate in 2016 and 2017 had a weighted median DTI over 7.4. That’s extremely high. In comparison, look at the debt-to-income ratios of graduates from other degree programs:
Compared to other degree programs, chiropractic graduates have one of the highest DTIs.
The ideal situation for chiropractor student loan refinancing is to have lower student loan debt and higher income. A chiropractor making a starting salary of $40,000 with over $180,000 in loan debt should not be considering refinancing as a viable option.
Loan forgiveness is a better choice
Rather than looking to chiropractor student loan refinancing, you should explore student loan forgiveness options.
Unfortunately, the most well-known forgiveness option, Public Service Loan Forgiveness (PSLF), isn’t the answer. Most chiropractors won’t qualify. This is because most chiropractors work in private practices, not in the public sector. Physicians have more success with PSLF because most hospitals are nonprofit and there are more opportunities in the public sector.
So, if PSLF isn’t an option, what else is left?
Income-driven repayment (IDR) options
One of the perks of having federal student loans is access to repayment plans like income-driven repayment (IDR). Four repayment plans that fall under IDR:
- Revised Pay As You Earn (REPAYE)
- Pay As You Earn (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
People enrolled in IDR pay up to 10 to 20 percent of their discretionary income for 20 to 25 years. Each plan has different requirements and repayment structures. Any remaining loan balance after 20 to 25 years is forgiven.
Plan for taxes
There is a catch to IDR loan forgiveness. The forgiven debt amount is considered taxable income by the IRS, leaving you with a significant tax bill down the road. It’s wise to set aside savings over the next two decades to cover this tax bill. Student Loan Planner suggests planning for the future tax bomb by allotting:
- 10% of your income to retirement accounts
- 10% of your income to mutual funds like VTSAX
- 10% of your income going towards annual loan payments
Have an emergency fund in place
Many people can capitalize on refinancing to lower interest rates, paying off student loan debt fast and cutting thousands of dollars off their total debt. If you’re a chiropractor making a good salary, have a solid emergency fund and relatively low student loan debt, refinancing can be a viable option. However, most don’t fall into that category and need a better solution.
Finding the right repayment plan
If you need help creating a repayment strategy that works, Student Loan Planner has worked alongside over 150 chiropractors just like you to develop customized repayment plans that make sense. We can help you do the same.