A Tale of Two OT Degrees

If you want a rewarding career in the medical field that focuses on helping others, occupational therapy (OT) is a natural choice. But the cost of getting an OT degree varies—a lot. Depending on the program you choose, you could end up with a degree that makes student loan repayment relatively easy—or one that makes your debt-to-income ratio more than 3 to 1. Let’s break down what this looks like and how you can influence the way OT student loan debt may impact you.

Two Student Loan Examples

If you want to be an occupational therapist, you typically need a master’s degree or a doctorate. Many students cannot afford the cost of such an advanced degree outright, so they turn to student loans to bridge the gap.

According to data from the Bureau of Labor Statistics, the median salary for an occupational therapist in 2018 was $84,270 per year. That can be a good salary if your student loan debt is reasonable. And how much you borrow depends a lot on the school you choose.

Example 1

Let’s say Laura wants to get a Doctor of Occupational Therapy (OTD) degree and chooses to attend Texas Woman's University. Texas Woman's University offers an in-state tuition rate of $5,020 per year.

According to the school’s website, the total cost of attendance—including tuition, fees, and room and board—is estimated to be $19,271 if you live off-campus. Let’s say it takes three years for Laura to complete the degree. Thus, she will graduate with approximately $60,000 in student loan debt.

Example 2

Paul is interested in getting his OTD from Nova Southeastern University, where tuition currently is $31,512. Yes, that’s just tuition.

According to the university's website, applicants should be prepared to pay for three and a half years of school. So, when Paul graduates, he will have $110,292 in student loans for tuition only. Let’s assume Paul will pay $20,000 per year in cost of living expenses and needs to borrow that, too. That comes to a total of $180,292.

The Impact of School Selection

As you can see, looking purely at the base cost of attending these two different schools, Paul is paying three times more for his degree than Laura is. That’s not including any other potential costs and fees.

And yet, despite the educational cost disparity, there’s no major difference in expected pay upon graduation. Both Paul and Laura will enter a profession with a median salary of about $84,270, and assuming that is what they end up making, one will owe less than her salary, while the other will owe nearly $100,000 more than his salary.

OT Student Loan Repayment Plans

Continuing with these two example scenarios, if Laura is earning $84,270 per year and owes $60,000, her monthly payment on a standard repayment plan would be $697. Total payments would be $83,598, assuming a 7% average interest rate—so the interest would tack on more than $20,000.

Paul is also earning $84,270, but he owes $180,292. With the same standard repayment plan, his monthly payments will be a whopping $2,093. His total payment amount would be $251,201—meaning he’d pay more than $70,000 in interest.

On the standard repayment plan, you’ll incur fewer interest charges due to a short 10-year repayment term. If you wanted to make your loan payments more affordable, you could sign up for an income-driven repayment plan (if you have federal student loans).

An income-driven repayment plan will limit your monthly payments to 10%–20% of your discretionary income. The good news is that under these plans, you can apply for student loan forgiveness if there’s a remaining balance after the repayment term, which is typically between 20 and 25 years.

But in our examples, both Paul and Laura make the same amount: $84,270. Yet, they owe a vastly different amount. Because Paul owes so much more, that 10%-20% of his income will only make a small dent in his student loans. He will likely need to get his loans forgiven.

And while loan forgiveness can be great, there’s one problem: according to current laws, any forgiven loans under income-driven repayment are considered taxable income. So, Paul may ultimately pay taxes on the loan amount being forgiven.

Laura, on the other hand, would pay off her $60,000 balance before the repayment term under an income-driven repayment plan, so she wouldn’t need student loan forgiveness and thus, would not be hit with a tax bill.

Other Debt Options and Considerations

As you can see from the examples, Laura and Paul will have very different journeys in student loan repayment. Paul’s most feasible choice is to opt for student loan forgiveness via income-driven repayment, while Laura likely will be able to pay back her loans relatively comfortably.

So, if you’re interested in becoming an OT—but you haven’t yet chosen a program—be sure to consider schools with more affordable degrees so you can keep your student loan payments in check.

If you’re a borrower like Paul with more than six figures of debt, you’re not alone. Although it can be difficult to repay your loans, income-driven repayment might be your best bet. If you decide to go the income-driven repayment route, be sure to start preparing for the tax implications now—perhaps by allocating a certain amount of your budget each month to a separate savings account. That way, you won’t be caught off-guard.

If applicable, you could also apply for Public Service Loan Forgiveness (PSLF) after 10 years of work and 120 payments. Under PSLF, your payments are on one income-driven repayment plan, and there’s no taxation on forgiven student loan balances.

Another option is to refinance student your loans to get a better interest rate, which saves a ton of money over the life of the loan.

Even if you have massive debt, you do have options—although repayment definitely won’t be easy. And if you’re just starting your OT education journey, be sure to consider costs, loan amounts, and repayment options before you make any decisions. This will help ensure you have a more comfortable—and financially secure—life now and in the future.

Travis Hornsby founded Student Loan Planner after helping his physician wife navigate ridiculously complex student loan repayment decisions. To date, he’s consulted on over $400 million in student debt personally, more than anyone else in the country. He is a Chartered Financial Analyst and brings his background as a former bond trader trading billions of dollars.

He brings that same intensity to analyzing the best repayment paths for graduate degree professionals with six figures of student debt. He's helped over 1,700 clients save over $80 million dollars on their student loans, and he’s been featured in U.S. News, Business Insider, Forbes, Huffington Post, Rolling Stone, ChooseFi, Bigger Pockets Money, and more.