How to prepare for student loan repayment while in pharmacy school

Tim Ulbrich, PharmD, is the co-founder and CEO of Your Financial Pharmacist (YFP). Founded in 2015, YFP is a fee-only financial planning firm and connects with the YFP community of 16,000 plus pharmacy professionals via the Your Financial Pharmacist Podcast, a weekly newsletter, and speaking engagements.

The median debt load for the pharmacy class of 2023 was $158,000. While this amount is down from a high of $170,000 in 2021, it’s no small chunk of change!

If I’m being honest, my student loans felt like monopoly money when I was a student pharmacist. It didn’t feel real, and I didn’t understand its magnitude until the first payment came due approximately 6 months after graduation.

Considering the high student debt loads of today’s graduates, a natural question is “What can I be doing now as a student to prepare for this?”

Here are four strategies you can employ as a student pharmacist to prepare for loan repayment.

1. Learn the lingo.

Your federal loans are either subsidized or unsubsidized. If one were “good” and another “bad,” subsidized would be “good” and unsubsidized “bad.”

With subsidized loans, the cost of borrowing money (interest) does not accrue while you are in school, in the grace period, or deferment. In other words, the original amount you borrow (principal) does not accrue interest because it's being subsidized by the federal government.

With unsubsidized loans, interest does accrue while you are in school, in the grace period, or deferment. Most, if not all, of your federal loans taken out during pharmacy school are unsubsidized. With unsubsidized loans, you accrue a separate interest pot added to the principal once you enter active repayment.

Due to the large number of unsubsidized loans, most borrowers underestimate the total amount they will end up repaying.

Let’s take a closer look.

2. Understand the total cost of loans.

Let’s assume a 4-year (8-semester) PharmD program in which a student pharmacist borrows an average of $18,000 per semester for tuition, cost of living, and fees at 6% interest. At the end of the 6-month grace period, this individual would have a balance due of approximately $168,000 (of which approximately $24,000 is from interest accrued while in school). Unfortunately, we can’t stop there, as we also need to consider the interest that will accrue throughout the repayment period.

If we assume the standard 10-year repayment (the default option if you choose no other option), this individual would accrue an additional $55,000 of interest, so at the end of the repayment period they would have paid approximately $223,000.

If we were to consider only the $18,000 per semester (for 8 semesters), we might assume this individual would owe $144,000. However, the math above shows us that the total cost of the loans will be closer to $223,000.

3. Borrow the least amount possible.

I get it. It’s easier said than done. However, as we can see from the example above, any reduction in the amount of borrowed unsubsidized loans will be beneficial because of the interest that accrues in school and during the repayment period. Cutting back on cost-of-living expenses and/or pursuing scholarship opportunities are two great ways to minimize the burden.

There are numerous scholarship opportunities available. Below is a short list of scholarship opportunities for student pharmacists to consider:

• Military scholarships: Navy Health Services Collegiate Program and Air Force Health Professions Scholarships Program.
• Underrepresented minority scholarships: Indian Health Service Scholarship, Native Hawaiian Health Scholarship, National Hispanic Health Professional Student Scholarship Program, and American Foundation for Pharmaceutical Education Pre-Doctoral Fellowship in Pharmaceutical Sciences for Underrepresented Minorities.
• Pharmacy organization scholarships: APhA Foundation Scholarships, American Society of Health-System Pharmacists Pharmacy Student Leadership Award, National Community Pharmacists Association Foundation Scholarships, LKS Grant Program.

Your pharmacy school, state government, or state/local pharmacy organization may also offer scholarships. Inquire with your school’s financial aid representative about scholarship opportunities.

4. Research the repayment options.

When paying back your loans, there are a variety of options to consider, including the following:

• Tuition reimbursement programs: These are state or federal programs where, in exchange for working for a certain period of time, a portion of your loans will be covered. The most common federal tuition reimbursement programs include The Education Debt Reduction Program through U.S. Department Veterans Affairs, the Indian Health Service Loan Repayment Program, and military programs such as the Navy Health Professions Loan Repayment Program.
• Forgiveness: There are two federal forgiveness programs. The first, Public Service Loan Forgiveness (PSLF), provides tax-free forgiveness of any remaining loan balance after 120 qualifying payments are made. The second, non-PSLF forgiveness (commonly referred to as income-driven repayment or IDR forgiveness), offers an opportunity for forgiveness (not tax-free) after 20 to 25 years of qualifying payments.
• Non-forgiveness: Outside of tuition reimbursement and forgiveness programs, you can pay off pharmacy student loans on your own. You can pay these off as quickly as you would like (and your budget allows) or as long as possible (generally up to 25 years, depending on the type of loan and selected repayment plan).

For more financial tips and information, check out YFP’s book Seven Figure Pharmacist (use coupon code APhA for 15% off), visit the YFP website, and listen to the Your Financial Pharmacist Podcast.

Disclaimer: The information in this article is provided to you for your informational purposes only and is not intended to provide, and should not be relied on for, investment or any other advice. Read our full disclaimer here.

Reference

1. American Association of Colleges of Pharmacy. American Association of Colleges of Pharmacy graduating student survey: 2023 national summary report. Arlington, VA: AACP. Available at: www.aacp.org/sites/default/files/2023-08/2023-gss-national-summary-report.pdf. Accessed April 18, 2024.