Janice Lozano
Paying for medical school is a challenge for many students. Loans are a necessity for most, and aspiring doctors may borrow up to $40,500 per year in Direct Unsubsidized Loans. Federal loans are generally preferable to private loans as they have more repayment options and allow for debt consolidation. However, federal loan amounts are capped, so many students take out a mix of loans from different lenders. Private loans can have variable interest rates and some require repayment while the student is still at school. Scholarships, fellowships, and tuition-free medical schools are other options for students to consider.
| Characteristics | Values |
|---|---|
| Loan Necessity | Most medical students need loans to cover the cost of attendance and living expenses. |
| Loan Types | Federal loans, private loans, residency and relocation loans, Direct Loans, Direct Unsubsidized Loans, Stafford Loans, Direct PLUS Loans, Direct Consolidation Loans. |
| Interest Rates | Variable interest rates for private loans; fixed interest rates for federal loans. |
| Repayment Options | Flexible repayment options, including income-driven plans, grace periods, extended deferment, and forbearance. |
| Scholarships and Fellowships | Some scholarships and fellowships are available that do not need to be repaid. |
| Tuition-Free Medical Schools | A small but growing number of medical schools offer tuition-free options. |
| Financial Aid | Financial aid is available, but it may not cover all costs. |
| Loan Repayment Assistance | Some hospitals and organizations offer loan repayment assistance in exchange for service in physician-shortage areas. |
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What You'll Learn
Scholarships, fellowships, and free tuition
Scholarships, fellowships, and tuition-free medical schools are great options for medical students to avoid taking out loans. Scholarships are awarded based on merit, financial need, or both. They can be partial or full tuition scholarships.
There are several scholarships available for medical students, such as the BoardVitals Scholarship, which awards three medical students with strong academic standing $2,000, $1,000, and $500 respectively. The Tylenol Future Care Scholarship is another option, awarding ten $10,000 scholarships and twenty-five $5,000 scholarships annually to students pursuing careers in healthcare. The White Coat Investor Scholarship also provides funding for medical students, giving out multiple awards each year. The National Medical Fellowships (NMF) scholarships and awards aim to provide financial support to underrepresented minority medical students, including African Americans, Hispanics/Latinos, Native Americans, Asian Americans, and Pacific Islanders. The Herbert W. Nickens Medical Student Scholarships offer five $5,000 scholarships to students entering their third year of medical school who have demonstrated leadership in addressing the educational and healthcare needs of racial and ethnic minorities in the United States.
Additionally, the Worcester District Medical Society Scholarship is available for legal residents of Central Massachusetts enrolled as second, third, or fourth-year students in an accredited MD or DO medical program. The Alliance Medical Education Scholarship is offered by the Foundation of the Pennsylvania Medical Society for Pennsylvania residents attending a Pennsylvania medical school as second or third-year students.
There are also tuition-free medical schools, such as NYU's Grossman School of Medicine, which offers full-tuition scholarships to all accepted students, regardless of financial need. Johns Hopkins University also received a $1 billion financial aid gift, allowing most medical students to attend tuition-free.
Fellowships are another option for medical students to receive financial support. The Simon Scholar Physician Assistant Program, for example, offers full-tuition scholarships to first-generation, underserved college students pursuing their MMS degrees through Chapman University's Physician Assistant Program.
Applying for scholarships, fellowships, and considering tuition-free medical schools can significantly reduce the financial burden on medical students and help them graduate with less or no student loan debt.
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Federal loans vs. private loans
Loans are a necessity for most medical students. They help cover the costs of tuition, fees, books, housing, meals, travel, technology, board exams, and licensing fees. While scholarships, fellowships, and tuition-free medical schools are other ways to fund medical school, they often do not cover all the costs.
Federal loans and private loans are the primary sources of medical school loans. Each lender and loan type has its own provisions, qualifications, and requirements, and the interest rates they charge vary greatly. Being knowledgeable about the types of loans you apply for and accept can help in your decision-making.
Federal Loans
Federal student loans are generally preferable to private loans. They have more loan repayment options and loan forbearance options, which some medical students take advantage of during residency. They also allow for debt consolidation, which can lower monthly payments. Federal loans typically have lower (and fixed) interest rates compared to many private loans. Additionally, federal benefits like student loan forgiveness and income-driven repayment make federal loans a better option than private loans. Federal Direct Unsubsidized Loans, for example, are not based on financial need and have lower interest rates and fees compared to PLUS Loans.
Private Loans
Private student loans can help cover the costs of residency and relocation. Some private lenders, however, will require you to begin paying back your loans while you are still in school. Private loans can sometimes have variable interest rates, which means that the interest rate will change or increase over time. Some students also need a cosigner, such as a parent, to help them qualify for private loans.
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Flexible repayment options
Federal loans are a common way for medical students to finance their education. These loans typically have lower, fixed interest rates compared to private loans and offer more flexible repayment options. One such option is the Direct Consolidation Loan, which combines all federal loans into a single monthly payment. While this simplifies repayment, it may also extend the repayment period and increase the total interest paid.
Direct Loans, offered by the federal government, have fixed interest rates and flexible repayment terms. Borrowers can defer payments while enrolled in medical school and during the grace period after graduation, although interest may accrue during this time. Additionally, income-driven repayment plans are available, allowing payments to be based on income once the borrower begins working.
Another option is the Perkins Loan, which is administered through the medical school to students with exceptional financial need. Federal loans also offer loan forbearance options, which can be beneficial during residency if the borrower faces financial hardship. Forbearance temporarily pauses or reduces payments, preventing loan default. However, interest continues to accrue during this period.
Private loans are another source of financing for medical students. These loans may require a cosigner and often have variable interest rates that can change or increase over time. Some private lenders, such as Sallie Mae, offer residency and relocation loans to cover expenses associated with board exams, interview travel, and moving costs. While private loans may provide additional funding, it is important to understand all the terms of the agreement, as some lenders require repayment while the student is still in school.
Scholarships, fellowships, and tuition-free medical schools are alternative options to reduce reliance on loans. Scholarships, in particular, do not need to be repaid and can help students take out fewer loans. Additionally, gift aid may be available, although it may not cover all medical school costs.
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Loan forgiveness and forbearance
Loan forgiveness programs are a popular option for medical students to manage their debt. These programs are sponsored by national, state, and local governments, as well as some private organizations. For example, the Public Service Loan Forgiveness (PSLF) program forgives the remaining balance on an individual's Direct Loans after they have made 120 qualifying monthly payments while working full-time for a government or not-for-profit organization. This program has been particularly beneficial for medical professionals serving in high-need areas or specific roles, such as family doctors, dentists, and orthodontists.
Another example is the Indian Health Service (IHS) Loan Repayment Program, which awards up to $40,000 for loan repayment in exchange for a two-year commitment to practice in health facilities serving American Indian and Alaska Native communities. The NHSC Students to Service Loan Repayment Program offers a similar opportunity, providing up to $120,000 in the final year of school for a three-year commitment to serve at an approved NHSC site in a high-need area.
Additionally, the Health Resources and Services Administration (HRSA) offers the Primary Care Loan program, providing long-term, low-interest loans to full-time, financially needy students pursuing a degree in allopathic or osteopathic medicine. This program requires participants to complete a residency in primary care within four years of graduation and practice in that field for the life of the loan. The HRSA also has a Faculty Loan Repayment Program (FLRP), where they repay up to $40,000 of health professional student loan debt over two years.
It is important to note that federal student loans offer more loan repayment options and loan forbearance opportunities than private loans. Federal loans, such as Direct Unsubsidized Loans, GradPLUS Loans, and Perkins Loans, often have lower and fixed interest rates, making them a more popular choice for medical students. Private loans, on the other hand, may require repayment while the student is still in school and typically do not offer forgiveness or flexible payment plans. However, private loans can be useful when federal loans are insufficient to cover all expenses, including residency and relocation costs.
In recent years, there have been efforts by the Biden administration to provide student debt relief through changes to the PSLF program and the Saving on a Valuable Education (SAVE) plan. These initiatives aim to cancel student debt, tackle "runaway interest," and provide relief to public service workers. However, the SAVE plan has faced legal challenges, resulting in borrowers being placed in interest-free forbearance until the case is resolved.
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Loan refinancing
Refinancing is a common strategy for paying off medical school debt. When you refinance your medical school loan, you get a new loan with lower interest rates and better payment terms. This new loan replaces your old loan. When consolidating loans, multiple loan amounts are combined into one lump sum, leaving you with one monthly payment.
There are a few factors to consider when refinancing:
- How many medical student loans do you have, and what are your current student loan payments?
- What is the total amount of medical school debt that you currently owe?
- Would a student loan refinance lower these payments?
It is important to note that not everyone with medical student loans is eligible for loan forgiveness. Only federal loans are eligible for forgiveness (private student loans do not qualify). If you complete your residency at a for-profit hospital, you will not be eligible for Public Service Loan Forgiveness (PSLF). Federal loans also allow for debt consolidation, which can lower your monthly payments, but consolidation will not lower your interest rate.
If you plan to work in the private sector, you may qualify for PSLF because your employer is not a non-profit organisation. In this case, your situation is straightforward. However, if you are unsure and still in residency, it is recommended that you do not refinance.
- Laurel Road: Offers residency and fellowship refinancing and an additional 0.25% rate discount based on membership to different medical and dental associations.
- Earnest: Provides payment flexibility and consistently low rates.
- Splash Financial: Get up to a $1,000 bonus when you use their link to apply and refinance.
- College Ave: Offers flexible student loan refinancing options specifically for physicians, with various repayment options.
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Frequently asked questions
There are several types of loans available to medical students, including federal loans, private loans, residency and relocation loans, and Direct Loans. Federal loans are generally preferable to private loans as they have more repayment options and allow for debt consolidation. Direct Loans are federal education loans with fixed interest rates and flexible repayment terms.
Medical students can benefit from flexible repayment options, such as deferment during school, grace periods, extended deferment, and income-driven repayment plans. They can also consider loan consolidation, which simplifies repayment by combining multiple loans into one monthly payment. Additionally, some hospitals and employers may offer student loan repayment as an incentive to recruit physicians.
Yes, scholarships, fellowships, and tuition-free medical schools are options to consider. Additionally, gift aid and school-based scholarships may be available, although they may not cover all the costs.
