If you dream of becoming a doctor, paying for medical school may be one of your biggest barriers. Median education debt for medical school graduates is a staggering $180,000, minus scholarships and grants they may receive. With accrued interest, borrowers can end up owing hundreds of thousands of dollars for school.
That’s not to say managing your medical school loans isn’t doable. If you choose the right med school loans ahead of time and sign up for repayment plans that work, you can make your debt manageable, keep up with your payments and still build your career.
Loans for medical school
The federal government offers several loan options to help you pay for your education. In general, federal loans have lower interest rates and more generous repayment terms than private loans. It usually makes sense to take out federal loans before turning to private loans to save money.
Med school students may be eligible for four types of federal loans:
Direct Unsubsidized Loans are available to graduate and professional studies students, and are distributed to individuals regardless of financial need. Unlike other types of loans, interest begins to accrue immediately, and you are responsible for paying off the interest added to the principal. The current interest rate for a Direct Unsubsidized Loan is 5.31 percent.
To be eligible for a Direct PLUS Loan, you need to enroll in an accepted school program at least half-time. A Direct PLUS Loan does require a credit check, so if you have a poor credit history, you may need an endorser or cosigner to guarantee the loan if you cannot pay it. The government has set the current interest rate at 6.31 percent.
HRSA Primary Care
If you have a financial need and are struggling with how to pay for medical school, another option to consider is a Primary Care Loan. Separate from the Department of Education, the government-run Health Resources & Services Administration offers low-interest loans to low-income students.
For students who agree to train and practice in primary care, HRSA offers an interest rate of 5 percent. If students fail to fulfill the requirement, they increase the interest rate to 7 percent.
Private med school loans
Unfortunately, some students cannot solely rely on federal loans to pay for medical school. Either they exhaust federal loan limits due to their school’s cost, or they need more time to complete their education. Private loans can fill an important gap and let you finish med school.
Private loans through lenders like Citizen’s Bank or College Ave offer competitive interest rates and can help you get through school. Depending on your credit score, you may be eligible for a rate that’s lower than federal options, helping you save money over time.
An advantage of federal loans is access to income-driven repayment (IDR) plans. Under an IDR, the government caps your student loan payment at a percentage of your income, and they extend your repayment term. Your monthly payment can be greatly reduced, freeing up more money in your budget each month.
If you are carrying six figures of debt, opting for an IDR plan will mean years of making student loan payments, but if you’re just starting out, an IDR can give you the breathing room you need to build your career. As you become more established, you can opt to accelerate your payments and pay off your debt faster.
There are four IDR plans to choose from based on your needs:
- Income-based repayment plan
- Income-contingent repayment plan
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
If you have private loans or high-interest federal loans, refinancing may make your medical school loans more manageable. Through refinancing, you take out a new loan from a private lender and use it pay off your other debts. With the new loan, you may qualify for a lower interest rate, better repayment term, or smaller monthly payment.
If you have federal loans, refinancing will cost you the ability to apply for an income-driven repayment plan or forbearance. If you are in a strong financial situation, refinancing can help you save money over the length of your repayment term.
Paying for medical school is possible
Choosing to go to med school is a huge (and expensive) commitment. But if you’re worried that you can’t pay for medical school, know that you do have many options available to you to make it doable. Federal loans, private loans, and income-driven repayment plans can make your debt payments easier to manage after you graduate.
For information on how to handle student loans after medical school, check out this repayment guide for doctors.
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