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Paying for Medical School with Loans
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Paying for Medical School with Loans

Earning a medical degree means saving lives and providing care for the people in your community. It also means six-figure debt for the majority of graduates. 

For the 76% of medical students who graduate with student loans, the median debt is $200,000, according to the Association of American Medical Colleges. Students at private medical schools often pay down much larger loans —21% are carrying student loan debt of $300,000 or more.

That’s largely because of the ever-increasing cost to graduate from medical school. The average four-year cost at a public school is $243,902, and for private school, the average is $322,767.

In addition to tuition, room and board, equipment, and other education-related expenses, med students often face hefty fees that undergrads and other graduate or professional students do not. These include a $170 application fee for the first application to medical school and $40 for each additional application. Many schools then require a secondary application fee that varies in cost. 

Then there’s the MCAT exam registration fee of $320 and, after graduation, fees to apply for medical residency

It all adds up quickly. We’ve broken down your options for loans and repayment plans.

Federal Student Loans for Medical School

By the time you reach medical school, you may be well versed in loan applications and loan options from your undergraduate and graduate degree programs.

Just as with undergrad, you will need to start the federal loan process by filling out the Free Application for Federal Student Aid, or FAFSA, listing the schools you will be applying to. The schools will use the information in your FAFSA to put together a financial aid package around the time you receive an acceptance letter. Gift and non-gift aid will likely be included as well.

Though some federal loans are based on financial need, you may not receive a loan amount large enough to cover your expenses, especially with the high cost of medical school. Students can appeal for further financial aid in those cases. Otherwise, med school students — including those already in school — should look for additional gift aid such as scholarships and only borrow the loan amount needed to close the gap in funding. 

There are two types of federal loans available to medical students, but they come with borrowing limits.

Loan Type Loan Specifics

Borrowing Limits for 

Medical Students

Direct unsubsidized loans (also called Stafford loans)
  • Low interest rate
  • Available regardless of financial need
  • Interest will accrue on unpaid loans while you are in school
  • Credit history is not a factor
  • $40,500
  • $224,000 aggregate

*Aggregate limit includes all federal loans received for undergraduate study.

Direct PLUS loans
  • Approved for education costs not covered by other financial aid you are receiving
  • These loans begin accruing interest immediately
  • Must have a good credit score when applying
  • Annual cost of attendance minus other aid received during the enrollment period
  • There is no aggregate loan limit

Source: AAFP and Debt.org

Federal Loan Forgiveness and Repayment Options for Medical Professions

Just the thought of repaying a six-figure loan amount can be overwhelming. A good place to start are federal loan forgiveness and repayment programs. Some plans are specifically for doctors and health professionals, while others are open to all graduate and professional students.

The Public Service Loan Forgiveness Program, or PSLF, is available to graduates with direct loans who are employed by a government or not-for-profit organization. PSLF forgives the remaining balance on your direct loan after you have made 120 monthly payments under a qualifying repayment plan while working full-time.

There are also a number of federal forgiveness and repayment plans for various service-related programs or for graduates entering medical fields that currently have a shortage, such as primary care.

The National Health Service Corps, or NHSC, offers different types or loan repayment or forgiveness in exchange for working at one of their sites for a few years. Graduates or students in their final year of medical school may be eligible to earn between $50,000 and $120,000 toward the repayment of their loans through these programs.

The Health Resources & Services Administration also offers a variety of repayment plans. 

Whatever repayment plan you choose, make sure you ask your loan servicer about a grace period, commonly six-months after you graduate, before your loan payments begin. Just remember that interest will continue to accrue during that time.

If you find yourself unable to make your monthly payments, you will need to check in with your loan servicers about whether you qualify for deferment or forbearance to temporarily pause your payments.

If you find yourself unable to make your loan payments because of a significant financial hardship, you may qualify for a deferment, which can pause your loans for up to three years. Deferment qualifications include unemployment, homelessness, military deployment, or major medical treatments.

Deferment can pause your loans for up to three years and generally a better financial choice if your federal loans are subsidized because you may not accrue additional interest payments during your deferment period. Deferment qualifications are based on unemployment or significant financial hardship, such as homelessness or major medical treatments.

Private Student Loans for Medical School 

Federal loan limits may leave you without enough money to pay for your medical school expenses. Private student loans can be a good alternative to cover some, or all, of that gap in funding.

Medical students, those in school, and those preparing to start to apply directly with private lenders. While you may be able to get a quote without a credit check, lenders will need a full credit history before approving you for a loan, and that can affect your loan terms and interest rate.

If you have a less-than-ideal credit history or no established credit history at all, consider applying with a cosigner who has a good credit history. 

You have the option of refinancing private loans if you find a lower interest rate or better loan terms. 

What Happens to Your Student Loans When You Begin Residency?

Med school graduates will continue their education with residencies where they work with and alongside doctors and other health professionals. Managing residencies while paying down student loans can be a massive financial burden. There are a few options to relieve some of that burden while you are completing your residency requirements.

Mandatory medical residency forbearance can pause your federal loan payments while you are in residency. Interest, however, will continue to add up while you are not making payments so you will come out of forbearance owing more than when you started. Some residents continue to make interest payments during their forbearance or they set aside as much savings as possible to make a large payment after residency.

You will need to contact your loan servicer and apply for mandatory medical residency forbearance.

Rather than postpone your inevitable loan payments, many residents apply for income-driven repayment plans for their federal loans. These plans take into account several factors including your income, your household size, and any financial hardship you may have. Your monthly payments will shift each year based on changes to your income. 

Income-driven repayment plans also have an option for loan forgiveness after the repayment term has been satisfied.

Also check with your residency program as some include a repayment plan benefit. 

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.