Doctors with Student Loan Debt Face Increased Need for Disability Insurance

James Crook

Student loan debt has become a growing concern for many Americans, but for doctors, it has become a significant burden.  73% of medical school graduates carry student loan debt, and the average amount is $250,990.  Although many doctors earn high incomes, many are still concerned with the amount of student loan debt they carry and feel uncertain about their ability to stay afloat financially should the unexpected occur.

“I don’t think I know anyone personally who doesn’t have debt in my profession,” Tom Nigro, a nurse anesthetist, told CNBC . He lamented his inability to buy a house, start a family, or serve the underprivileged because of his $1,400 monthly loan payments – even though he makes a respectable $200,000 salary.

Nigro can get by through a more lucrative job at a private company for now. But if a disability were to strike that impeded his ability to work, how would he continue to make the loan payments?

What happens if a doctor cannot pay off their debt due to a disability?

Insurance advisors need to help their clients understand the real risk of a disability and the financial impacts of outstanding debt, such as student loans, should they not be able to work. The U.S. Social Security Administration found that over one in four of today’s 20-year-olds will become disabled before the age of 67 and that most of the private-sector workforce has no long-term disability insurance.

There are also no real options for doctors to manage their loan debts – except through insurance – if they are suddenly unable to work.

Income-driven repayment plans or loan refinancing reduce the amount they must pay each month but do not eliminate the need to pay. Loan forgiveness programs require a commitment to work in underserved areas for a certain employer or period, which they cannot do if they become disabled. Even the six-month student loan reprieve passed by Congress during the pandemic did not apply to loans financed through a private lender.

Brokers can provide peace of mind by providing sufficient disability insurance

Overlooking a doctor’s student loan burden could mean financial devastation in the event of a disability. Some questions to ask doctors as you help them navigate coverage options are:

  • How much total student loan debt do you have, and what are your monthly payments?
  • Have you considered the real possibility that you could become disabled during your career?
  • What percentage of your living expenses do your loan payments comprise, and how much longer do you have left to make payments?
  • Do you know how much of your disability benefits are taxable at the time of payment, and is that final payout going to be enough to cover your loans?
  • If you have a rider or separate disability insurance policy for student loan debt, do you know under what circumstances it would go into effect?

After having an initial conversation, a broker can explore potential income-protection solutions for their client. An adequate income-protection plan may include some combination of individual disability insurance (IDI), group long-term disability insurance, and high-limits disability insurance.

MGIS Disability Guard for Doctors™

When considering group LTD plans, brokers must ensure that the plan has been designed exclusively for healthcare professionals.

Medical school graduates face a daunting financial reality, often taking on massive amounts of debt with no easy way to pay it off in the event of a disability. To help protect themselves and their families against potential hardship, doctors should consult with an experienced insurance advisor to explore income-protection options such as individual and group disability insurance. With proper planning and guidance, doctors can have peace of mind knowing that their debts are taken care of if something unexpected happens.

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