July 12, 2019

Medical School Loans

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Medical school can lead to a lucrative career as a doctor. But the price tag is pretty steep. Read on to learn how you can afford med school without risking your financial future.

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About 47% of medical school students graduate with $200,000 debt. Luckily. Even as the demand for physicians grows, the cost of education may scare off some potential doctors.

There are ways to pay for medical school, sometimes even without taking on substantial student loans. We cover them all below.

Pay for Medical School Without Loans

Before you consider taking out student loans, comb through ways to pay for your education that you don't have to pay back.

Free Tuition
If you're willing to serve your country for a few years, you can get through medical school with NO added financial debt. While tuition-free programs are far and few between, they do exist.

The Uniformed Services University of the F. Edward Hébert School of Medicine offers free tuition in return for seven years of service. You'll be paid a $64,000 or higher salary to train as a future physician or medical leader.

Upon completion of residency, graduates are promoted to a military ranking of O-3. You can apply for the program on their admissions site.

Scholarships and Grants
Scholarship providers know that most students cannot afford to pay for medical school programs without assistance. Some scholarships will cover 100% of the cost of your tuition.

Look at these opportunities:

  • NYU School of Medicine offers full-tuition scholarships to all current students and future matriculated students in their MD degree program, regardless of merit or financial need. Each student must maintain satisfactory academic progress in accordance to their policy. (You still have to cover fees, books, and room and board.)

  • National Health Service Corps Scholarship Program
    (NHSC SP) awards a full or partial year scholarship in exchange for a commitment of at least two years of full-time service to communities in need. This includes payment of tuition, eligible fees, and annual payment of reasonable education costs. You'll also get a monthly stipend to help with living expenses while pursuing your health professions degree.

529 Savings Plan
A 529 plan helps you earn money on your savings through investments. They are penalty- and tax-free if you use the money for qualified education expenses. It is better to start 529 plans many years before entering school, which allows investments to grow. But any amount of money saved lowers your need for student loans.

Personal Savings
You can use your accumulated savings to chip away at the cost of your education. Even if your savings are not substantial, every dollar decreases the need for debt.

Don't drain your savings account to pay for medical school. Always make sure to maintain an emergency fund of 6-9 months' savings for unexpected expenses.

Keep reading to learn about the types of student loans for medical school you can obtain.

Medical School Loans

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Loans can supplement any resources you've already exhausted. Read on to learn about your options.

Federal Student Loans

Federal loans should be your first option for loans. Here are some of the reasons federal loans take precedence over private loans:

  • Better interest rates

  • Better loan terms

  • 6-month grace period when you graduate from school (interest will still accrue)

  • Loan forgiveness options

Direct Student Loans
Medical students are eligible for Federal Direct Unsubsidized Loans. Unsubsidized loans begin accruing interest the day the loan is disbursed until the loan is paid in full.

A credit check is not required to apply for Direct loans. Complete a free application (FAFSA form) here. In 2019, you can borrow up to $20,500 per year in Direct unsubsidized loans and $138,500 in total.

You are not required to make any payments on Direct Unsubsidized Loans while you are enrolled in school. However, we do advise you to make payments if at all possible, to reduce the overall cost of accrued interest on your loan.

Grad PLUS Student Loans
Grad PLUS loans typically cover the cost of attendance minus any other financial assistance you receive.

A direct PLUS loan is commonly referred to as a grad PLUS loan when obtained for a graduate or professional student. The two terms can be used interchangeably.

The biggest perk of a grad PLUS loan over a direct loan is that interest does not accrue while you are enrolled at least half-time in school. You have a fixed interest rate, meaning no major fluctuations in the amount you pay after your enter repayment.

Here are some downsides to Direct PLUS loans:

  • Direct PLUS loans have some of the highest interest rates of all federal loans. For loans disbursed after July 1, 2018 and before July 1, 2019, the interest rate is fixed at 7.6%.

  • Direct PLUS loans are subject to a credit check for approval. If you have an adverse credit history, you may not be approved for the loan or may be required to use an endorser. An endorser is required to pay your loan if you fail to do so.

Most schools require that you apply for Direct PLUS loans online with the StudfentLoans.gov site. You can complete a free application for FAFSA form here.

When you select your school from the list on the site, the site will advise you if your school requires a different application process. Contact your school's financial aid office if that is the case.

Keep reading to learn your private loan options.

Fixed rate federal loans are disbursed with the interest rate set on July 1st of the year and retain the same interest rate over the life of the loan.

Private Medical School Loans

Banks and credit unions offer private medical school loans. Private loans are not affiliated with the government, so the loans come with no federal loan perks.

Private loans are not granted on a financial need basis. You, or your parents, must qualify for the loan. Lenders complete credit checks on loan applicants. Normally, you'll need a cosigner to be approved.

Loan programs vary from lender to lender, but here are a few things you should consider:

  • Fixed or Variable Interest Rates
    Private loans may not offer fixed interest rates, compared to federal student loans.

    You may obtain a loan with a variable interest rate, which means the rate will adjust annually. As interest rates climb, the overall cost of the loan increases. Monthly payments can also increase as interest rates increase.

  • Early Payoff Penalties
    Some private loans penalize borrowers for early payoff. If you want to pay ahead, make extra payments, or pay off your loan early, make sure you understand any penalty fees you'll incur.

  • Term Length
    Repayment terms vary between lenders. The shorter the repayment period, the higher your monthly payments are. Longer repayment terms typically result in more interest paid over the life of the loan.

  • Repayment Options
    Federal student loans offer repayment options, such as income-based repayment and forbearances if you suddenly lose your job. But private loan repayment options are not guaranteed by the government and differ from lender to lender.

Shop around if you must obtain a private student loan.

Compare interest rates and term lengths. Seek loans with the most flexible repayment options and try to avoid loan contracts with early payoff penalties.

If your credit score is under 650, shopping around for the best private loans is even more important. Do not jump head-first at the first loan approval.

Loans for Disadvantaged Students

HRSA (Health Resources & Services Administration) offers need-based loans for disadvantaged students (LDS Program).

HRSA funds selected schools with long-term and low-interest rate loans to needy students who pursue a degree in specific areas of medicine: allopathic, osteopathic, and podiatric, as well as veterinary and some health professions.

The LDS program comes with some outstanding benefits:

  • Grace Period
    A one-year grace period during which repayment of principal is not required and interest does not accrue. The grace period begins immediately after completion or termination of full-time student status and cannot be postponed with a deferment.

  • Deferment
    Once the grace period has expired, loans are eligible for deferment based on active duty in the uniformed services, Peace Corps volunteer, advanced professional training, leave of absence to pursue a related educational activity, and particular training fellowships and programs for graduates of health profession schools.

LDS program loans are eligible for options such as hardship forbearance, LDS loan consolidation, and death and disability forgiveness and cancellation.

Find out if your school participates in the Loans for Disadvantaged Students program here.

Paying Off Loans After Graduation

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When students first graduate from medical school, they may be faced with lower salaries until they gain experience. This may necessitate the need for repayment assistance. Keep reading to learn your options.


You can save thousands of dollars in interest by refinancing your student loans. The best options include:

  • Lower interest rate
  • Fixed interest rate
  • Loan term

When shopping around for refinancing options, watch out for lenders that charge origination fees. They are often tacked onto the principal balance of your loan.

Also, seek out loan options that allow prepayment or early payoff without penalty. Check out Best Student Loan Refinance Companies.

ELFI Refinance
One of the newest refinance options on the market is ELFI (Education Loan Finance). ELFI is a loan refinance program that assists borrowers by combining multiple student loans into one single loan with lowered interest rates. Their low interest rates are known as one of the best refinance options in the industry.

Education Loan Finance's options include:

  • Flexible repayment terms
  • Inclusion of parent PLUS repayment loans
  • Inclusion of private student loans

Loan Consolidation

Consolidating your loans into a single loan with one interest rate can help simplify the repayment process. The options vary whether you have federal or private loans. Read on to learn more.

Federal Loan Consolidation
Federal loan consolidation involves combining all your federal student loans into one debt with a weighted interest rate. You will not obtain a lower interest rate with federal loan consolidation.

The Department of Education uses these calculations to determine your interest rate:

They determine the weighted average of all your current student loan interest rates. Then, they round the weighted average up to the nearest 1/8th. For example, 6.85% rounds up to 7%.

This interest rate may be lower than some of your loans, but it will also be higher than some of your loans.

You may be given the option to extend the term of your loans through consolidation, which may lower your monthly payment. But the longer you pay on your loans, the more interest you pay over the life of the loan.

Private Loan Consolidation
Private loan consolidation could lower your monthly payment. You can use this option for both private and federal student loans.

You may obtain a lower interest rate than you would with a federal loan consolidation because interest rates are based on the current rates available versus a weighted interest rate.

Private loan consolidations are typically more difficult to obtain. Some lenders require credit scores in the 700s to qualify. Other lenders may allow credit scores in the mid-600s.

Private loan consolidation repayment terms vary from lender to lender.

Loan Forgiveness

Loan forgiveness options for doctors widely range from:

  • National Health Services Corps
    Could yield as much as $50,000 towards your medical school debt. You must work in an NHSC-approved serviced site in a Health Professional Shortage Area (HPSA) for at least 2 years.

  • Public Service Loan Forgiveness
    A 10-year program for Direct Student Loans. It requires employment in public service jobs, including healthcare providers working in a government or nonprofit agency. After 10 years of service, your entire student loan balance may be forgiven if you meet all the PLSF requirements.

  • All Military Branches
    Offer a form of loan forgiveness, loan repayment, or financial assistance in exchange for working in specific areas of the military.

    The U.S. Army has a Healthcare Professionals Loan Repayment Program in which you can receive up to a total of $250,000 for your lifetime. This might pay your medical school loans in full.

Do your homework—check out the full spectrum of military forgiveness programs for doctors, including Indian Health Service, NIH Loan Repayment Programs, as well as state programs for loan forgiveness.

Work Your Way to Repay Student Loans

Loan repayment assistance is available through service work repayment programs, such as:

NHSC Loan Repayment Program is available for licensed primary care clinicians in eligible disciplines. In exchange for loan repayment, you are required to serve at least two years of service at an NHSC-approved site in a designed health professional shortage area.

Bottom Line

Medical school is expensive, but there are ways you can afford it. Scholarships and grants are one great option. And some schools, like NYU, offer a program with FREE tuition.

Always research free options first. And don't forget the repayment options that are available to you, including refinance, consolidation, and loan forgiveness.

Write to Mary Humphrey at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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Read Next:

Average Medical School Debt

Loan Forgiveness for Doctors

How Student Loans Work

Student Loans

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Student Loan Refinance

What is the best company to refinance student loans? Read this guide to compare interest rates and find out if it is still a good idea.

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