Chiropractic Loan Forgiveness vs. Refinancing: Which Is Best?

Chiropractors often find themselves 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 doctors of chiropractic is an option, but is it a good decision? Or would pursuing chiropractic loan forgiveness be a better course of action?

Not all student loan repayment strategies will work for all chiropractors. Let’s look at how debt and income effect how chiropractors should choose between chiropractic loan forgiveness and refinancing.

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.

The latest College Scorecard data shows that the median debt for graduates of Palmer College of Chiropractic (the largest chiropractic school in the U.S.) is $177,415 . 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, flexible repayment plans and loan forgiveness programs.

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's 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 base eligibility 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, set at 5.30% as of April 2021.

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.

Related: Chiropractor Student Loans are Back Breakingly High

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?

This survey shows that most chiropractors realized something important: they're not the ideal candidates for refinancing. Lenders weigh several factors when determining eligibility for refinancing, including three key numbers:

Credit Score

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

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 2020 was $70,720. It also shows the lowest 10 percent of chiropractors earned less than $35,390.

Note that chiropractors who own their own chiropractic practices may be able to earn much better salaries than these averages. In Student Loan Planner®'s experience with consulting chiropractors, we've consistently found a correlation between being a business owner and earning an above-average income. Learn more about chiropractic small businesses.

Debt-to-income ratio

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.

In a recent survey of Student Loan Planner® clients, chiropractors were found to have an average DTI of 4.9. That was the highest of all professions analyzed in the debt study. In comparison, look at the average DTI ratios of the next five worst degrees in terms of delivering more debt than income.

• Acupuncture: 4.6
• Social Work: 3.5
• Optometry: 3.4
• Psychology: 3.2
• Occupational Therapy: 3.2

The ideal situation for chiropractor student loan refinancing is to have lower student loan debt and higher income. But 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.

Chiropractic loan forgiveness is often a better choice

Rather than looking to student loan refinancing, most chiropractors should look to their chiropractic loan forgiveness options.

The most well-known forgiveness option, Public Service Loan Forgiveness (PSLF), most likely isn’t the answer. This program offers 100% full tax-free forgiveness in as little as 10 years (120 qualifying payments) for those who work for a non-profit employer or a government agency.

In additional to public education teachers and military service members, many health care professionals are eligible for PLSF by virtue of working for a public hospital. Unfortunately, most chiropractors won’t qualify. This is because most chiropractors work in private practices rather than in the public health sector.

Chiropractors are also currently ineligible for the National Health Service Corps (NHSC) loan repayment program, despite the consistent pleadings from the American Chiropractic Association (ACA) for their inclusion. So, if PSLF loan cancellation and NHSC Loan Repayment aren't options, 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)

IRD plan participants 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 may be 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% to mutual funds like VTSAX, and 10% towards annual loan payments.

It's important to point out that President Biden's COVID-19 relief bill has temporarily made IDR student loan forgiveness tax-free through 2025. Learn more.

Build your emergency fund

Once you refinance your student loans with a private institution, you'll no longer be eligible for federal forbearance and deferment or repayment plans that are based on your income. In other words, you'll lose a lot of payment flexibility.

This is why it's important to have a fully-funded emergency fund in place before you apply for refinancing. Most experts recommend having three to six months of expenses stashed away for emergencies.

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. Unfortunately, many don’t fall into that category and will need a different solution.

Finding the right loan repayment plan

If you need help creating a repayment strategy that works, Student Loan Planner® has worked alongside hundreds of chiropractors just like you to develop customized repayment plans that make sense. We can help you do the same.

Our advisors will look at your specific income and debt situation to help you compare refinancing vs. chiropractic loan forgiveness. They'll also consider your employment and family situation and any other factors that could impact your repayment options. Click the button below to book your consultation.