Medical School Loans
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Compare Medical School Loan Options
As students across America look into education that results in higher-paying opportunities, more and more are choosing to attend medical school. Whether it’s due to their love of medicine, willingness to help others, or simply seeking a well-paying job - the fact is that over the past 20 years, the number of medical school students in the US has doubled.
As the number of students in medical school continues to increase, so too does the tuition each student pays. Since 2013, the average medical school tuition has increased by $1,500 each year. With the average total cost now eclipsing $200,000, paying for school is difficult. Loans are one of the most common methods of paying for medical school, and luckily for students - there are many options to help pay tuition.
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What is a Medical School Loan?
Medical school loans are specialized loans that are intended to pay for educational expenses associated with medical school. With the average total cost of medical school now eclipsing $200,000, more students are finding it necessary to take out loans to pay for their education.
Medical school loans aren’t just for tuition. They can be used for any educational expense such as tuition, books, housing, food, travel, and even supplies such as a laptop. This allows the student to have everything they need to succeed in medical school, without the stress of worrying about where the money will come from.
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How do Medical School Loans Work?
Medical school loans work the same as any other educational loan. The main difference is that for medical school, you will likely need much more money to be able to pay all of your expenses.
We’ll cover the details of federal vs. private student loans in the next section, but here are the basics of how they work.
A federal loan all begins with the student filling out the Free Application for Federal Student Aid or FAFSA. Once that process has been completed, the school you are attending will provide you with information on all available financial aid, including scholarships, grants, and federal loans. Once you have accepted the loan and begin school, all payments will go directly to the school for any necessary expenses. Any leftover money will be sent to you for spending on meals, off-campus housing, and supplies.
Private loans are paid out the same way, with the money going first to your school and the remainder to you. The biggest difference lies in the application process. A private loan will involve a credit check and a check of your finances. If your finances are not good enough, you will need a cosigner to receive a loan.
Types of Medical School Loans
In the United States, undergraduate students have the option of receiving loans from the federal government, private lenders, or both. Medical school students have the same options, however, they are more limited in the types of loans they can receive.
Federal loans in the US are distributed by the Department of Education. While there used to be an option for private lenders to work hand-in-hand with the government on loans, this ended during the 2008 financial crisis.
As mentioned previously, to receive federal loans, you will need to fill out the FAFSA. Once this has been done, medical students will be eligible for two types of federal loans.
- Direct Unsubsidized Loans - These loans are provided by the government to any student regardless of financial need. The maximum allowed to be borrowed is currently $138,500.
- Direct PLUS Loans - These loans are offered to parents as well as students and can help cover the rest of your expenses. The maximum amount is the total cost of attendance minus any other received financial aid.
Federal loans come with benefits such as no credit check (except PLUS loans), fixed interest rates, and flexible repayment plans.
Private loans are those which are offered by private lenders such as banks, credit unions, and other financial companies. These tend to be taken out after you have exhausted the rest of your options, such as scholarships, grants, and federal loans.
With private loans, there is a financial check that is required when applying. This means that even if you demonstrate financial need, you may not be allowed to borrow from a private lender due to high financial risk.
In the case that you do not have good enough finances, you always have the option of taking out the loan with a cosigner. This means that the cosigner’s finances will be considered instead of yours. On the other hand, if you default on your loan, the cosigner will be responsible for all remaining payments on the loan.
Many private companies offer “specialized” medical school loans. However, these are really no different than any other loan except for certain repayment terms. Sallie Mae for example allows you to defer payment until your residency has been completed, which can be up to seven years after graduation.
Pros and Cons of Medical School Loans
Going to medical school is often one’s dream since they were young. Even so, the financial burden of attending is enormous, and taking out loans should be considered carefully. Here are the pros and cons of medical school loans.
- High Earning Potential - Medical school graduates average over $200,000 in salary, making it one of the highest-earning professions.
- Potential Loan Forgiveness - Many government programs offer loan forgiveness in exchange for your service in in-need areas.
- Strong Job Outlook - The medical field is more in demand than it ever has been. And with a growing population, the outlook is strong for doctors.
- Expensive - There’s no sugarcoating it - medical school is incredibly expensive. Finances should be considered strongly.
- Long Repayment - With such a high amount borrowed, it often takes many years to pay off medical school loans.
- Fewer Benefits for Private Loans - Private loans have fewer benefits and no potential loan forgiveness from the government.
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What Is The Average Debt For a Medical Loan Student?
While the cost of medical school varies widely depending on where you go to school, what scholarships you receive, etc. - the average debt is still an astounding number.
For the graduating class of 2020, the average medical school debt was over $215,000. When cumulative education debt is considered (undergrad and other schooling), the average overall debt for medical students is over $240,000.
On average, it takes students 13 years to pay off their medical school debt. This is even with an average salary of $218,000 for those with a medical degree.
How Much Can You Borrow For Medical School?
The amount you can borrow for medical school depends on what loans you receive and what school you go to.
The only loan with a hard dollar limit attached to it is the federal Direct Unsubsidized Loan. Medical school students can only borrow a maximum of $20,500 per year, and a total maximum of $138,500.
For federal PLUS loans, the maximum you can borrow is the cost of attendance minus any other financial aid received. This is usually also true for private loans. The school will determine the cost of attendance and relay that info to the government or lender who will then determine how much you can borrow.
Can International Students Apply For a Medical School Loan?
International students are not allowed to receive any federal or state funds, making them ineligible for either Direct Unsubsidized or Direct PLUS federal loans.
Certain private lenders do allow international students to take out loans, but not all of them do. There are many scholarships and grants often available to international students, so be sure to max out those options before borrowing money.
What Is The Average Cost of Medical School?
No matter which way you look at it, medical school is expensive. While private schools are more expensive, even public universities are increasingly expensive when it comes to medical school.
Today the average cost of medical school in the United States is:
- $54,698 per year
- $49,842 for public schools
- $59,555 for private schools
- $218,792 total
Average Medical School Loan Interest Rates
When you are taking out loans for medical school, one of your number one concerns should be the interest rates.
For federal unsubsidized loans, the interest rate is fixed at 5.28%.
Federal PLUS loans have a fixed rate of 6.28%.
Private loans have a wide range of interest rates and offer both fixed and variable rates. The fixed rates currently average around 3.5% at the low end and reach into the mid-teens depending on your financial picture.
Will I Need a Cosigner to Qualify For a Medical School Loan?
Depending on which loans you are taking out and what your financial situation is, you may require a cosigner to take out a loan.
Federal Direct Unsubsidized loans do not require a cosigner. This is because your financial situation is not taken into account. Everyone is eligible for these loans.
Federal PLUS loans and private loans do require a credit and financial check. While this doesn’t mean you need a cosigner, it means you need to have a decent credit score and a good financial picture to receive favorable terms. If you have no credit history or a very low score, you will likely be required to have a cosigner to receive one of these loans.
Can a Medical School Loan Be Used to Pay Living Expenses?
Yes, medical school loans can be used for living expenses. They are intended to be used for all educational expenses including:
- Travel (for educational purposes)
Can Medical School Loans be Refinanced?
Refinancing federal loans through a private lender will remove your federal benefits such as potential loan forgiveness and income-driven repayment options.
However, they can often result in a lower rate. Refinancing is done through private lenders and involves the lender paying off your old loan and issuing you a new loan. This new loan will come with new repayment terms and a new (often lower) interest rate which should save you money in the long run.
What Minimum Credit Score Do I Need to Qualify For a Medical School Loan?
For federal unsubsidized loans, there is no minimum credit score as a credit check is not performed.
Federal PLUS loans do require a credit check, but there isn’t a minimum score requirement. Rather, they consider all of your history such as overdue payments, outstanding balances, income, and more.
Most private lenders lean towards requiring at least a 650 credit score. While some have lower requirements, you will likely receive a high-interest rate in that case.
What Is The Best Type of Loan For Medical School?
The most common recommendation for paying for education is what’s known as the “1-2-3” rule. This is:
- Max out all scholarship and grant opportunities as they do not need to paid back
- Utilize federal loans as much as possible due to their possible loan forgiveness and other various federal loan benefits
- If money is still required, utilize private loans for the rest of your expenses
Apply for a Medical School Loan
In summary, here are some of the current rates available for medical school loans:
|Lender||Fixed Rates||Variable Rates|
|Ascent||3.16% and up||1.49% and up|
|CollegeAve||2.94% and up||0.94% and up|
|InvestEd||3.83% and up||1.69% and up|
|Sallie Mae||3.5% - 12.6%||1.13% - 11.23%|
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