The ads from debt relief companies can be alluring, particularly for residents nearing the end of their training and doctors just starting out, when disposable time and money are short.
“Resolve debt in 24 months!” “Free consultation,” and “No hidden fees” are common refrains in pitches that end up in residents’ e-mail inboxes and text messages.
Practicing physicians with business loan debt from opening their offices often fall for these pitches as well, experts say. Many promotions claim to be able to cut debts to a fraction of their face value, which is false, regulators warn.
Beyond outright scams, busy residents and physicians alike can fall prey to deceptive advertising. Avoiding both is a must and requires borrowers to stay alert.
As a financial aid officer for a large academic medical center, Christine McDonough, MBA, has seen more deceptive ads than outright fraud when private lenders swarm around residents and fellows who are nearing graduation, but these ads can still do serious damage in the long run to borrowers.
“The ads will list all these fabulous rates, but I’m not seeing anybody actually getting them [after going through approvals],” says McDonough, director of student financial services at The Ohio State University College of Medicine in Columbus, Ohio. Often these are simply teaser rates that lure borrowers into refinancing, but by the time a refinancing offer is made, the terms are far less favorable to the physician, she says. Often, she says, borrowers accept the unfavorable terms simply because they have invested time into the process, an unfortunate outcome.
She tries not to scare physicians completely away from seeking to improve their debt repayment plans, particularly those who may benefit from shorter payback periods and who aren’t going to qualify for income-based repayment plans, which typically go to those working for nonprofit institutions. But she points out they may be targeted by lenders who prey on physicians’ large medical school debt and their potentially high salaries after training. Many of them are banking on physicians reaching a point where they can see higher attending-physician pay on the horizon but are so busy finishing their training that they needlessly pay for loan services they could easily have handled themselves, such as consolidating payments and making automated bank withdrawals.