Should Doctors Pay Off Student Loans or Invest? A Framework That Actually Works
by Malik Amine
Key Takeaways
- There is no universal right answer — it depends on your interest rate, income, and tax situation
- Most physicians should do both: invest enough to capture employer match, then target high-interest debt
- Compound growth lost in your 30s is almost impossible to recover in your 50s
- The PSLF decision changes this math significantly — know your loan type before you decide
- A simple rule of thumb: if your loan rate is above 6%, pay it down aggressively; below 6%, invest the difference
I talk to physicians who are paralyzed by this question. They finished residency, they are finally making real money, and they freeze. Do I throw everything at these loans? Do I start investing? Do I do some of both? First, understand whether to refinance or pursue forgiveness.
I get it. You have $200,000 or $300,000 in debt staring at you and it feels irresponsible to invest a single dollar before that number hits zero. But that thinking can cost you more than the loans themselves. Let me walk you through how I actually think about this.
How Do Physicians Build Wealth Differently?
Physicians have a compressed wealth-building window compared to almost anyone else.
You spend your 20s in school and residency, making very little. You start earning a real income in your early to mid-30s. Then you have roughly 25-30 years to build everything before retirement. That sounds like plenty of time, but it is not as long as it feels when you are staring at $250,000 in student loans on day one of your attending year. Learn more about common attending physician money mistakes.
Here is the math that changes things for most physicians I work with.
If you invest $1,000 per month starting at 32, and it grows at 7% per year, you will have roughly $1.2 million by age 62. If you wait until 37 (five years lost to aggressive loan payoff), you will have about $820,000. That five-year delay costs you $380,000. And that is just from $1,000 per month. Scale that up to what a physician can actually invest and the gap gets painful fast.
The loans are a problem. But missing your compounding years is also a problem. That tension is the whole game.
What Taxes Affect Doctors Most?
Before you decide what to do with extra cash, you need to understand what you are working with after taxes.
Most new attendings are in the 32% or 35% federal bracket. That means every dollar you put into a 401(k) or 403(b) is essentially a forced 32-35% return before your money even hits the market. That is better than almost any loan payoff math.
This is why I always say: max your tax-advantaged accounts before anything else.
Your 403(b) or 401(k), your HSA if you have a high-deductible health plan, and if your employer offers it, your 457(b). These accounts reduce your taxable income today and grow tax-deferred. Realistically, that tax savings alone beats most loan interest rates in year one.
According to the American Medical Association, physicians typically pay effective tax rates 8-12 points higher than other professionals with similar incomes, largely due to the compressed earning window and limited access to business deductions. That is money left on the table every year you delay getting into tax-advantaged accounts.
Why Do Many Doctors Go Broke?
This sounds dramatic. But I see it.
You spend 12-15 years in training, delayed gratification your entire adult life, and then your attending salary hits and you spend. Nice car. Nice house. Nice vacations. All at once. Meanwhile the loans are on income-driven repayment and the retirement accounts are empty.
Then 50 hits and the panic sets in.
I am not saying do not enjoy your money. Part of my job is telling people, hey, you saved well, go live your life. But there is a pattern I see with physicians who wait too long to invest because they are fixated on the loans. They clear the debt, feel great, and then realize they are 42 with almost nothing in retirement accounts. They have to make up ground in a much shorter window with much higher income, which means higher taxes. The math gets worse, not better.
The mistake is treating debt payoff and investing as either-or. For most physicians, they need to run in parallel.
When Should Physicians Invest in Real Estate?
I get this question a lot, especially from attendings a few years into their career. My answer is usually: not yet, or at least not first.
Real estate can be a great investment. But it requires capital, time, and attention. If you are in your first two years as an attending, you should be building your emergency fund, getting your retirement accounts funded, and getting some clarity on your loan strategy.
Real estate as a physician investment makes more sense once you have your foundation locked in. Three to five years into your attending career, once you have real savings built up, is when it starts to make sense to evaluate rental properties or syndications. Not year one.
How Much Should a Resident Doctor Save?
Even during residency, when your salary is $60,000 to $75,000, you should be doing something. Not a lot, but something.
At minimum: contribute enough to get any employer match in your 403(b) or 401(k). That match is a 50-100% instant return. You cannot beat it.
If you can do more, max your HSA. The HSA is the only triple-tax-advantaged account that exists. Contributions are pre-tax, growth is tax-free, and withdrawals for medical expenses are tax-free. Realistically, most residents can contribute $3,000 to $4,000 per year without feeling it that much.
Do not wait until you are an attending to start. The habit matters almost as much as the dollars. You got to be smart about building the discipline early, not just the amount.
What's the Best Retirement Plan for Physicians?
This depends on your employment situation, right?
If you are employed by a hospital or health system: 403(b) is your primary vehicle. Max it. If they offer a 457(b), that is a bonus bucket, especially useful for physicians who want to defer income from a high-earning year.
If you are in private practice or a physician-owner: you have more options. A SEP-IRA lets you put away up to 25% of net self-employment income. A solo 401(k) is even more powerful for higher earners. And a defined benefit plan, while complex, can let some high-income physicians defer $200,000 or more per year.
Cash value life insurance comes up a lot and it is divisive. Done correctly, it can be a useful tax-free growth vehicle after your qualified accounts are maxed. Done wrong, it is an expensive product with high fees that underperforms. This is where having a fee-only, independent advisor matters.
A Simple Framework for Deciding
Here is how I walk physicians through it, step by step.
Step one: Get your employer match. Always. Non-negotiable.
Step two: Max your HSA if you have access to one.
Step three: Look at your loan interest rates. If you are on PSLF, the calculation changes entirely. (Check out our breakdown of how the PSLF rules changed for 2026 before you decide anything.) If you are not pursuing PSLF, the general rule is: loans above 6% interest deserve aggressive payoff. Below 6%, the stock market's historical returns make investing the stronger move.
Step four: Max your 403(b) or 401(k).
Step five: With anything left over, target high-interest debt or open a taxable brokerage account.
It sounds simple because it actually is pretty simple. The hard part is implementing it and sticking to it when lifestyle inflation is pulling in the other direction.
FAQ: Physician Loan and Investment Questions
Should I refinance my federal student loans?
Usually not if you are pursuing PSLF. Refinancing converts federal loans to private loans, which disqualifies them from forgiveness. If you are not pursuing PSLF and have stable employment, refinancing to a lower rate can save you real money, but only after you understand the full picture.
Is it better to pay off loans before buying a house?
Not necessarily. Carrying student debt does not automatically disqualify you from a good mortgage. But lenders look at your debt-to-income ratio. Getting your student loan payment lower through income-driven repayment can actually help with approval while you build equity. Talk to a mortgage lender familiar with physician situations before assuming you need to clear the debt first.
My loans are at 6.8%. Should I pay them off aggressively?
6.8% is right at the line. You could make a reasonable argument either way. What I usually suggest: split the difference. Put extra cash toward the loans AND keep investing in your 403(b). You are not leaving either side completely behind.
What if I can't afford to do both?
Then prioritize the employer match, keep your loan payments on income-driven repayment, and build a three-month emergency fund. Get stable first, then optimize. Not having a cash cushion and being forced to pause investing because of an emergency sets you back more than slower loan payoff.
The answer to the loans vs. investing question is almost never one or the other. It is a sequencing problem. Know your rates, know your tax situation, know your loan type, and build a plan that moves both forward.
If you are not sure where you land, that is exactly the kind of thing I work through with physicians. Sometimes it takes one conversation to get clarity on a question that has been sitting in the back of your head for two years.
Sources:
- Association of American Medical Colleges (AAMC): Medical Student Borrowing and Physician Debt Data
- American Medical Association: Physician Tax and Financial Planning Resources