Many people are unaware that chiropractors are not only licensed to practice medicine. In fact, only about 10% of chiropractors are licensed to practice medicine. The rest of the profession is comprised of chiropractic physician assistants (CPAs), chiropractic doctors (DCs), chiropractors (DCs), chiropractic assistants (CA), and chiropractic interns (CAIs). According to the American Chiropractic Association (ACA), “Most chiropractic students begin their formal education with a two-year chiropractic college, which is followed by a four-year program which is then followed by an internship year.”
Name an alliterative slogan that communicates what you do.
There are no good statistics on the average amount of student loans for chiropractors. In my work as a student advisor, I have helped several chiropractors whose student debt was incredibly high in relation to their income. This prompted me to investigate what I could find, and the results are not good for the future of the profession. Student loans for chiropractors are among the most stifling of any profession in the United States relative to income prospects. In this article, I’ll give you my best tips for saving thousands of dollars in interest when paying off your student loans for your Doctor of Chiropractic degree.
The average loan for a chiropractor is over $150,000
The last survey I could find, conducted in 2014 among recent chiropractic graduates, showed that 88% had a loan amount over $100,000. A university study from early 2014 found that 54% of graduates owe more than $150,000 in chiropractic student loans. And that’s literally the last statistic available today in 2021.
One would think that the American Chiropractic Association (ACA) would want to update the figure of average chiropractic debt for no other reason than to justify the inclusion of chiropractors in the NHSC loan repayment program. However, more recent studies have not been published. In addition, the College Scorecard still does not show debt and default rates for most major chiropractic schools, such as Palmer College of Chiropractic.
Given the paucity of data on the true cost of chiropractic care, we turn to another source of information from which we can speculate on the extent of the problem.
The average debt of my chiropractor clients
Of the people I worked with, the average student loan for a chiropractor was about $260,000. And this figure does not include any business loans my clients have taken out to open their chiropractic practice. This prompted me to investigate the extent of the student loan problem in the region. Since the Grad Plus loan rules were revised in 2006, graduate students can receive unlimited amounts of financial aid from federal loan programs.
Of course, since then, tuition has gone up at almost every vocational school in the country. And chiropractic schools are no exception. Even if you filled out the FAFSA and applied for all possible scholarships and grants, you probably finished your chiropractic education with six figures of debt.
The normal income of chiropractors is insufficient to meet their normal monthly payments
The Bureau of Labor Statistics (BLS) publishes wage information for various jobs across the country. The median income for a full-time chiropractor is $70,720. This is pretty much what I see in my student loan counseling practice with my clients. With such a modest income, the average chiropractor has no hope of ever paying off his or her student debt. Even when chiropractors set up their own practice, it is very difficult to make the necessary payments for chiropractic school loans and live your life at the same time.
What other reimbursement options are available?
I help chiropractic borrowers develop a strategy for repaying their student loans. If your debt-to-income ratio (DTI) will be greater than 2 throughout your career, it is critical to choose the right income-based repayment option. In addition, most chiropractors work in the private sector. As a result, most of them are not eligible for PSLF (Public Employee Loan Benefits). You can still get debt forgiveness at the end of a 20-25 year income-driven repayment plan.
But student loan forgiveness under these federal programs can be considered taxable income. I help my clients determine how much they need to save each month to cover their future tax liability. In most cases, I help a chiropractic client evaluate a revised REPAYE or PAYE program to see which option will save the most money.
If you are already using an income-based repayment plan (IBR), it makes sense to consider a change. You need to check how much interest you are owed, as it is added to your principal and starts to accrue when you change plans. However, there may be very good reasons for this.
Optimisation of the number of credits for chiropractic students
Let’s assume Brett graduates as a chiropractor this year with a total of $250,000 in federal loans at an average interest rate of 6%. He starts at $60,000 a year and expects his salary to increase by 3% with inflation. Here you can see how much her loans would cost under different repayment plans, calculated using a proprietary tool we use in counseling student loans to create customized repayment strategies:
Let’s break down this graph. Brett has three main options for repaying federal student loans based on income. The old IBR plan is the one that many of you probably use because it has been around for a long time. The old IBR required 15% of your disposable income and after 25 years the loans were forgiven and you paid tax on the balance. Both PAYE and REPAYE require 10% of free disposable income, which is a lower payment than the old IBR plan. Under the IBR program, Brett would be paying $509 a month. With PAYE and REPAYE, Brett will only owe $339 per month. If you look at the total face value column in the first table, it is clear that GDI is a big loser for most chiropractors. The standard 10-year plan is not feasible either, as it requires a loan payment of $2,776 per month. It is clear that the standard plan is no longer relevant. So we have to try to find the best plan for Brett: PAY or REPAY.
Choose the right repayment plan
The total payment before debt forgiveness under the REPAYE program is approximately $148,000. The comparable figure for PAYE is approximately $109,000. The reason for this difference is that PAYE has a 20 year statute of limitations instead of the 25 year statute of limitations in REPAYE. So in terms of total wins in Brett’s career, PAYE wins here.
Now let’s look at the balance of Brett’s chiropractic student loans if they are forgiven by the federal government. With REPAYE that’s about $363,000 and with PAYE about $440,000. Why does Brett have a lower repayment balance if the loans can grow for another five years? The reason for this is that REPAYE contains interest rate subsidies. If you don’t pay all the interest, which many chiropractors don’t, the state pays 50% of the remaining interest.
For this reason, REPAYE generally results in a lower balance when the debt is written off. Remember, the cancelled balance is taxable income to the IRS. I assume the tax rate would be 32% because that amount would be added to Brett’s income, resulting in a higher marginal tax rate. That means Brett would face a six-figure tax bill of about $116,000 with REPAYE and $141,000 with PAYE.
It is important to note that the US bailout package recently made all student loan forgiveness tax-free until the end of 2025. We will continue to monitor the legislation over the next few years to see if there is a discussion about extending this tax credit. But for now, we recommend that borrowers who have not fully repaid their loans by 2025 plan as if taxes would be levied on the forgiven amounts.
How to save for the student loan tax bill
If you look at the far right of the chart, you will see the monthly savings column in the tax penalty account. That’s the amount I calculated Brett would have to set aside monthly in an investment account to cover the corresponding tax penalty for each installment plan. In the case of REPAYE, this amount is lower because the tax penalty is lower.
So Brett would have to save about $220 a month for 25 years to cover his tax bill. For PAYE, the savings required are greater because the remittance tax penalty is imposed earlier and the balance remitted is higher, resulting in a higher tax bill. By my calculations, Brett would have to save about $390 a month to pay this penalty. Finally, I would discuss with Brett how much he wants to spend each month on his student loans.
If he chooses to make them disappear in 20 years using PAYE, he will spend about $340 a month on payments and $390 a month on tax savings, for a total of $730. Perhaps he would prefer to spread the cost over 25 years. In this case, Brett would make about $340 per month in payments and $220 per month in savings in a tax penalty account, for a total of $560 per month.
A tailored repayment strategy for your chiropractic loan
The above examples describe optimal repayment strategies for a given situation. But things may be very different if Brett has many children (in which case IDR becomes an even better option) or private loans (in which case refinancing to lower interest rates becomes almost the only way to save money). If you took out a six-figure loan when you graduated from chiropractic school, click the button below to ask us a question about your situation.
Our team helps chiropractors by providing low-cost, flat-rate advice against high student loans. We perform a comprehensive credit analysis using our proprietary modeling tool to determine the best repayment options for your loan type. (Government repayment plans, refinancing with private student loans, etc.) We have helped over 90% of our clients with an average of $50,000 over the life of their loans. Get a plan for your DC student loans Refinance your student loan and receive a bonus in 2021.
Frequently Asked Questions
Do chiropractors qualify for student loan forgiveness?
In 2017, a large number of students who have enrolled to become chiropractors have started to apply for student loans. Some of these students are supposed to have been taking out the loans to help with their education and to cover living costs, but the fact is that they are taking on debt that they may not be able to afford. Any student whose loan is not yet paid back will have to go through a lot of hassle before the debt is forgiven.
The cost of a college education has never been higher, with costs estimated to be over $200,000 for four years. If you’re about to enter one of the most expensive years of your life, may I suggest that you consider a career in medicine? I know, I know. It’s no secret that chiropractors are notorious for being underpaid, and for not providing much in the way of health services.
What do I do if my student loan is too high?
As many of us know, student loans have been a nightmare to pay off. Here at University of the Universe, we are dedicated to providing the best service possible to our students and their families, helping them pay off their loans, and providing hope and encouragement for those that struggle with debt. If you rely on student loans to attend your post-secondary institution, you may find that your monthly payments are higher than you expected. This doesn’t have to be a disaster; there are things you can do to lower the amount you pay each month starting now.
What percentage of students pay back their loan?
Last Spring, I was in undergrad and I know that if I was a student today, I would have never made it to graduation. The college I attended was average at best. It is the same for many students, today. They spend their money on brand name clothes, eat at those expensive restaurants, and buy those expensive cars. All to impress, get a job, and get a bigger paycheck, so they can take out more loans.
I wanted to write this post after seeing the headlines of Post Grad Problems, and how students are now getting loans to study for a PhD, and are unable to pay them back. When I started studying at university, I was able to pay my loan back within the first 6 months, whereas now I am in year 11 (I am a mature age student) and I still cannot afford to pay off the loan, and am therefore still paying back.