Becoming a doctor can be prohibitively expensive for many. According to the Association of American Medical Colleges, the average amount of debt among medical students in $183,000. Once you factor in interest charges and fees, medical school loans can end up costing as much as $480,000.
To pay for medical school, you’ll likely need to turn to student loans to cover at least some of the cost. But, the type of loans you choose can have a big impact on your overall student loan debt burden. By understanding your options and choosing the right loans, you can minimize the impact student loans will have on your finances.
Medical school loans: Understanding your options
When it comes to medical school loans, there are two main categories of debt: federal student loans and private student loans. Here’s what you need to know about your options.
Federal loans for medical school
Federal student loans should be the first place you start when it comes to taking on debt for medical school. They tend to have lower loan interest rates and have more benefits than private loans, including:
- Access to income-driven repayment (IDR) plans: Federal loans are eligible for IDR plans, where the loan servicer extends your loan repayment term and caps your monthly payment at a percentage of your discretionary income. IDR plans can dramatically reduce your monthly payments, giving you more breathing room in your budget.
- Ability to place loans into forbearance or deferment: Federal loans can be placed into deferment or forbearance, meaning you can temporarily postpone making loan payments without becoming delinquent or entering loan default.
- Eligibility for Public Service Loan Forgiveness: If you work for a qualifying non-profit organization or government agency, your federal loans might be eligible for Public Service Loan Forgiveness, where your remaining balance is forgiven after making 120 qualifying payments.
As a medical school student, there are two main types of federal loans available to you:
- Direct Unsubsidized Loans: Available to graduate students and professional degree students, Direct Unsubsidized Loans are for anyone attending school, regardless of financial need. Unlike some other types of federal loans, interest begins to accrue right away, and you’re responsible for paying all interest charges. Loans disbursed for medical school after July 1, 2018, and before July 1, 2019, have an interest rate of 6.6%.
- Direct PLUS Loans: If you’re enrolled in an accredited school at least half-time, you’re eligible for Direct PLUS Loans, which are for graduate students and professional degree students. PLUS Loans have an interest rate of 7.6%.
Also, while you’re in medical school, you’re eligible for mandatory medical residency forbearance, which means you can postpone making payments until your residency is complete.
Private loans for medical school
Federal loans might not be enough to cover the cost of your education. You might exhaust your federal aid, or simply need more time to complete your degree. If that’s the case, private student loans can help fill the gap so you can finish medical school.
Private loans tend to have higher interest rates and stricter repayment terms than federal loans, but by comparing the best private student loan lenders, you can qualify for a competitive interest rate. In fact, if you have a good credit score and credit history, you could qualify for a lower rate than federal loans offer.
Some private student loan lenders offer loans specifically designed for medical students going through residency, allowing you to skip making payments until your residency is complete. Interest will continue to accrue on your loans during this time, but this option can give you some breathing room while you finish your education requirements.
You can find out how much your student loans will cost you over time with our student loan calculator.
Frequently asked questions about medical school loans
As you enter medical school, you likely have several questions about your loans and repayment. Below are just a few common questions and answers to help you.
1. Are medical school loans eligible for forgiveness programs?
Federal medical school loans are eligible for Public Service Loan Forgiveness (PSLF), a loan program which forgives the remaining balance on your loans after you make 120 qualifying payments while working for an eligible non-profit organization or government agency.
Private student loans are not eligible for PSLF. However, there are some state repayment assistance programs that will repay a portion of your federal or private student loans in return for your commitment to work in an underserved area for a certain term.
2. Is there a way to reduce the amount of interest I’ll pay on my loans?
If you’ve already completed your residency and have high-interest federal or private student loans, one way to save money is to refinance your student loan debt. With refinancing, you work with a private lender to take out a loan for the amount of your current debt. The new loan has completely different terms, including a new interest rate, repayment term, and minimum monthly payment.
While you’ll lose out on federal benefits like access to income-driven repayment plans by refinancing, the savings can be significant, which could save thousands over the length of your payment term.
3. How should I pay off my medical school debt?
If it all possible, try to pay at least the interest that accrues on your loans while you’re in school and during your residency. Keeping up with the interest charges will keep your balance from ballooning out of control, and will help you save money over the life of the loan.
Once you’re done with school and are working, consider student loan refinancing to reduce your interest rate; it can help you save money over the length of your repayment. Credible allows you to compare prequalified rates from multiple refinancing lenders.
|Lender||Fixed rates from (APR)||Variable rates from (APR)|
|5.09% - 12.49%||3.15% - 11.37%|
|4.74% - 11.85%9||2.87% - 10.75%9|
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Citizens Bank Student Loan Rate Disclosure
Variable rate, based on the one-month London Interbank Offered Rate ("LIBOR") published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of November 1, 2019, the one-month LIBOR rate is 1.80%. Variable interest rates range from 2.83%-11.16% (2.83%-11.01% APR) and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.40%-12.19% (4.40% - 12.04% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co-signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan.