Medical School Debt: Strategies for Smart Borrowing and Smart RepaymentEmail This Article
Medical school is expensive. But you already know that. And you may have incurred staggering amounts of debt to finish your degree and residency. Or perhaps you are still grinding it out. Either way, congratulations on your accomplishments to date and thank you for choosing a profession that serves others. Before we review the best tactics and strategies for tackling costs associated with medical school, let’s establish a baseline by taking a look at the average debt for medical school students.
Average Medical School Debt
According to the Association of American Medical Colleges’ (AAMC) annual Medical School Graduation Questionnaire (GQ), the median education debt reported for the class of 2018 was $200,000. This includes both pre-med and medical school (i.e., aggregate education loan debt). More than 16,000 medical school graduates participated in the survey. On top of this, when asked about other, non-education related consumer debt, 22% of respondents indicated they carry an additional debt burden which includes credit cards, auto loans, home mortgages, etc. This may seem like a lot of money (it is), but understanding your options for loan repayment can make the process much less intimidating.
FUN FACT: In 2018 the most expensive (private) medical school in the country was Columbia University (NY). In case you’re curious, here are the other schools ranked by U.S. News & World Report that rounded out the top 10 most expensive medical schools in the country for academic year 2017-18:
|School Name||Tuition and Fees|
|Columbia University Vagelos College of Physicians and Surgeons||$66,257|
|University of Southern California (USC) Keck School of Medicine||$64,132|
|Case Western Reserve University School of Medicine||$63,666|
|Dartmouth College Geisel School of Medicine||$63,551|
|Northwestern University Feinberg School of Medicine||$63,470|
|Washington University School of Medicine in St. Louis||$63,230|
|Brown University Alpert Medical School||$62,917|
|Harvard Medical School||$61,535|
|Tufts University School of Medicine||$61,464|
Let's tackle medical school debt from three angles:
- The types of loans you may be facing
- The best repayment strategies to consider, even while in school—including consolidation and refinancing
- Helpful resources for doctors and doctors-to-be
NOTE: We’re covering a lot of very important ground. Before you read further, we recommend that you bookmark this page as a go-to guide.
Medical School Loans
The types of loans available to cover medical school include both federal and private options:
- Direct Unsubsidized Loan (Federal)—Borrow up to $40,500 annually for health professional students, including aspiring doctors. The aggregate borrowing limit is $224,000 and the fixed interest rate for the 2019-20 academic year (for loans first disbursed between July 1, 2019 and June 30, 2020) is 6.08%. There is also a 1.059%* origination fee (commonly referred to as a loan fee) to borrow funds.
- Grad PLUS Loan (Federal)—Borrow up to the cost of attendance minus other aid. The fixed interest rate is 7.08% with a 4.236%* origination fee for academic year 2019-20. A credit check is performed to ensure you do not have adverse credit history, as defined by the U.S. Department of Education. In some circumstances, a cosigner may be required.
- Private Loans—Borrow up to the cost of attendance less other aid. Some private loan terms may be more favorable than those found in federal programs. For example, many lenders offer zero origination fees and more competitive (i.e., lower) interest rates. There is an exhaustive credit review which includes a debt-to-income analysis to determine eligibility. Cosigners may be used.
*For loans disbursed from Oct. 1, 2019 - Sept. 30, 2020
FOR YOUR CONSIDERATION: When it comes to borrowing private vs. federal loans, you will want to keep repayment and loan forgiveness programs in mind. If you plan to pursue Public Service Loan Forgiveness (PSLF) through the federal government after medical school, take note that private student loans are not factored into the equation. In other words, only federal Direct Loans may be included and are eligible for that forgiveness option.
- Institutional Loans – Availability and options will vary between schools. Check with your school to see if a campus-based loan program is available.
- Loan for Disadvantaged Students (LDS) – Loan limits are determined by the Financial Aid Office based on your eligibility and availability of funds. The U.S. Department of Health and Human Services (DHHS) is the loan provider and eligibility is limited to students from economically disadvantaged backgrounds. Maximum award is cost of attendance less other aid. Check with your financial aid office for details.
- State Based Loan Programs – Depending on the state in which you are located and attending school, there may be specific, state-based loans available that offer savings over traditional private loan programs. Examples would include non-profit, state based lenders who offer financing to students who are either permanent residents of, or attending school in, a particular state. Check with your financial aid office for more details.
- Income Share Agreements (ISAs) – An ISA is a contract between the student and either a private investor or the school (if it offers an ISA program). It can be used in place of a traditional loan to fund your education in exchange for a percentage of your post-graduate earnings for a fixed amount of time.
Paying for medical school is one thing. Getting through your residency is another. If you counted on federal loans to help pay for medical school, it should be noted that federal loans are not available as a funding option for your residency.
Loan amounts from private lenders vary but are typically between a minimum of $1,000 and a maximum of $20,000. As the name may imply, residency loans may be used for:
- Medical residency, including expenses tied to board exams and interviews
- Relocation, including expenses tied to your big move
Some of the lenders we work with and recommend who offer residency loans include the following*:
- Sallie Mae – Sallie Mae® Medical Residency and Relocation Loan
- Discover – Discover® Residency Loan
- PNC – PNC Solution Loan® for Health Professions Residency
Visit Edvisors for a broader overview regarding medical residency and relocation loans.
Full disclaimer: This is an advertisement because we do work with these lenders. However, we evaluate each lender we partner with and only recommend loan programs we believe are a best fit for our audience.
Medical School Scholarships and Fellowships
Our team spent an exhaustive amount of time researching the best and most legitimate places to find medical school scholarships. The list below represents our top picks, in no ranked order. Also note: we update this list periodically so check back every so often.
- AMA Foundation Physicians of Tomorrow Scholarship $10,000 scholarships for students entering their final year of med school.
- National Health Service Corp (NHSC) Scholarship Program For students pursuing eligible primary care health professions training who commit to work at least 2 years at an NHSC-approved site in a medically underserved community. ‘Award amounts’ will either be a full or partial year of scholarship support in exchange for the 2-year commitment.
- U.S. Department of Labor This is the link to CareerOneStop which is a pretty robust database containing more than 8,000 scholarships, fellowships, and grants that you can filter by educational level and geographic region. Tip: you can also use the search feature for terms like “physician,” “nursing,” etc. for even faster results.
- The Pisacano Scholars Leadership Program Up to $28,000 for 4th year medical students committed to family practice.
- Piscano Leadership Foundation Scholarships, Resident opportunities, fellowships and some service-based loan repayment programs can be found here.
- Association of American Medical Colleges (AAMC) Loan Repayment/Forgiveness/Scholarship and Other Programs More than just scholarships, this site also contains state-specific repayment and forgiveness programs. It offers a robust number of potential awards, but because so many of them are state-specific, you will likely get mileage out of their filtering capability.
- National Medical Fellowships A resource for students from underrepresented communities pursuing healthcare. The website features scholarships in addition to mentorship [service learning] opportunities.
- Herbert W. Nickens Medical Student Scholarships $5,000 scholarships for third year medical school students who have demonstrated leadership in addressing inequities in medical education and healthcare.
- U.S. Air Force Health Professions Scholarship Program Scholarships cover all tuition/fees, including textbooks and supplies for all US citizens enrolled in or possessing a letter of acceptance from an accredited medical school (MD or DO) in the US or Puerto Rico.
- U.S. Army Health Professions Scholarship Program Qualifying students may be eligible for a full-tuition scholarship, a monthly stipend of $2,200+ and $20,000 sign-on bonus.
- U.S. Navy Health Professions Scholarship Program Tuition assistance for up to four years of school; monthly stipend of $2,200. $20,000 signing bonus. Medicine and Dentistry only. Must work with a Navy Medical Programs Recruiter, no online application exists.
Paying Off Medical School Debt
In this section, we offer tools, tips and resources to help you figure out the best ways to tackle your medical school debt.
Association of American Medical Colleges (AAMC)
A good resource for loan repayment after medical school is the AAMC’s program called FIRST. FIRST stands for Financial, Information, Resources, Services and Tools and the website contains fact sheets, webinars, videos, and more. If you don’t already have an AAMC account, you will need to register to access the products and services on the site.
Loan Consolidation and Refinance Options
We have partnered with the industry’s leading lenders to offer you competitive rates and programs that help you simplify your repayment and potentially save money by lowering your interest rate. Review our preferred lenders to start your search.
If you would like to learn more about the difference between the federal consolidation program and private student loan refinancing, which is the only way to combine both your federal and private loans together, or release a parent cosigner, we recommend reading Should I consolidate my student loans?
Medical School Loan Repayment Calculators
- Student Loan Refinancing Calculator – This straightforward calculator is a quick and easy way to estimate payments and total interest to be repaid using a refinanced loan. You can add your individual loans and their associated interest rates for more accurate results.
- AAMC Medloans® Organizer and Calculator – Only enrolled medical students have access to the premium version. You must have an AAMC username and password. Guest users will be unable to save information. Go directly to the Medloans® Calculator.
- Federal Student Aid Repayment Estimator – The official, federal website you can use to estimate payments under each repayment plan for which you may be eligible, including income-driven repayment plans and PSLF.
Medical School Loan Forgiveness
It may be possible to have a portion of your federal student loans forgiven. And this may include both your undergraduate debt (if you have any), as well as medical school debt. That said, there are a number of considerations to learn about, in addition to different programs you may choose to pursue.
Public Service Loan Forgiveness (PSLF) – You may be in for some “aha” moments when it comes to the PSLF Program. Essentially, this forgiveness option is available to Federal Direct student loan borrowers which forgives the remaining balance on your direct loans after making 120-qualifying monthly payments. However, there are several steps you need to take to make sure you qualify.
- Ensure you have an eligible federal student loan. The types of loans that qualify for PSLF are Direct Loans only. Not Perkins Loans. Not loans under the former Federal Family Education Loan (FFEL) Program. Not private loans. (private loans are never eligible for forgiveness under the federal program.)
If you have federal loans that are not Direct Loans (like Perkins or FFEL loans), you CAN consolidate them and then qualify for PSLF under the newly consolidated loan (Direct Consolidation).
- To qualify as a doctor or health professional, you need to be employed full-time by a qualifying employer. Qualifying employers include, a government organization (including the military), a 501(c)(3) not-for-profit organization—which most hospitals are, or another eligible not-for-profit (determined by the U.S. Department of Education) that provides certain qualifying public services.
- Make 120 qualifying monthly payments. Qualifying payments are payments made:
- After Oct. 1, 2007
- Under an eligible repayment plan
- For the full amount due as shown on your bill
- No later than 15 days after your due date
- While employed full-time by a qualifying employer (note, you must still be employed full-time at the time you apply for forgiveness)
This could mean the clock starts from the time you begin your residency (following your grace period) and enter your loan repayment term.
- Repay your loans under an eligible repayment plan, which includes:
- 10-year standard repayment
- Income-driven repayment plans
IMPORTANT NOTE: The 10-year standard repayment plan can be a bit misleading when it comes to PSLF. If you were to successfully repay your loans within 10-years (120 monthly payments), you would have nothing left to forgive. We know, it is confusing and we’re just the messenger here. The way PSLF works is forgiveness applies to a remaining balance after 120 qualifying monthly payments have been made. Therefore, if PSLF is your repayment strategy, it is recommended that you repay under an income-driven repayment plan instead.
Note for Parent PLUS Loan Borrowers: Due to the restrictions of the eligible repayment plans, Federal Direct Parent PLUS loans are only eligible for PSLF if they are consolidated and repaid under an income-contingent repayment plan. This is only an issue for Parent PLUS loans, not for Grad PLUS loans.
- Complete an annual Employment Certification Form (ECF). Okay, so this isn’t required but it is highly recommended. The ECF is submitted to the U.S. Department of Education and they will verify that you are on the right track to forgiveness and let you know how many qualifying payments you have made. Therefore, you can take the guess work out and fix any issues if needed. The U.S. Department of Education’s PSLF Help Tool will help you generate an ECF to print and have your employer certify.
- When it’s time, submit your application for forgiveness to the U.S. Department of Education. The PSLF Help Tool will help you partially complete your forgiveness application.
Let’s talk about the impact of student loan consolidation for just a minute because it’s important. Federal loan consolidation can be used to make an ineligible federal student loan eligible for PSLF (see PSLF Step 1), however, consolidation can restart the clock. Meaning the countdown for the 120 qualifying monthly payments—10 years’ worth of effort—would start over once your new consolidation loan enters repayment. And if you had been in repayment for any period of time prior to consolidating, none of those payments would count toward your PSLF eligibility. Therefore, it would be best to consolidate sooner than later.
PSLF is a loan-based forgiveness program. Meaning, you could have loans become eligible at different times. Keep that in mind, it can help you strategize your repayment.
National Institutes of Health (NIH) Loan Repayment Programs – Congress established this program to help recruit and retain highly qualified health professionals. Award amounts could be as high as $35,000 per year in exchange for commitment to NIH related research.
National Health Services Corps Loan Repayment Assistance – Assistance is available for primary care medical professionals’ (including dental, mental, behavioral health providers) service in a qualifying urban, rural, or tribal community. A 2-year full-time or half-time service commitment is required and award amounts are as high as $50,000.
National Defense Student Loan Discharge (NDSLD) – If you are a Federal Perkins Loan holder who served in a military location that meets the definition of hostile-fire or imminent-danger, you may qualify for loan forgiveness. The amount of Perkins Loan forgiveness typically ranges between 50% and 100%. This option is only provides forgiveness for a Federal Perkins Loan. It is not an option for any other student loan, including a Federal Consolidation Loan which includes a Federal Perkins loan. . Contact your loan servicer if you feel you qualify. You will be required to send a copy of your DD214 military discharge form.
Creative Ways to Pay Off Student Loans
Physician Signing Bonus – Negotiate This
According to Sarah Mann’s article entitled “Research Shows Shortage of More than 100,000 Doctors by 2030,” (as published in AAMC News), the number of new physicians and medical specialists entering the workforce is not keeping up with growing demand. As a result, employers may be more inclined to offer a sign-on bonus. This is something you should negotiate if offered employment or a contract. Asking for a bonus in the vicinity of $30,000 is not unheard of. In fact, the “average physician signing bonuses accepted [in 2017] grew a bit more than expected, to $30,000," according to The Medicus Firm. Of course, the amounts may vary drastically depending on specialization, geographical location and other factors.
Our advice? Keep your ears peeled, talk to colleagues and advisors about what you can anticipate, and ensure you consult with an attorney to review any contract offers that come your way. But above all, negotiate wisely and advocate for yourself.
Employer Student Loan Repayment Assistance
While this is certainly not universal, some employers are offering benefits that include a student loan repayment assistance component. Based on (fairly recent) IRS guidance, employers may have an easier time of offering a voluntary student loan benefit by tying 401(k) contributions to student loan repayment. Do note that there could be tax implications. In essence, student loan repayment benefits will not necessary share the same tax benefits as 401(k) contributions. This is something you may want to discuss with your HR office. At a minimum, explore whether or not such a benefit exists or could be coming down the pike.
What to do next?
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