Is Medical School Worth It?
For many students, attending medical school and becoming a doctor is the ultimate educational goal. Although attaining a four-year bachelor’s degree is good enough for many, a four-year degree is just the first step for those students who dream of becoming a doctor. In order to do so, an undergraduate education is followed by four years in medical school and then three to five years in residency to learn a specialty. The process is long, difficult, and expensive.
Given the high cost of attending medical school, an increasing number of students have begun to consider whether it’s even worth it. According to statistics published by the Association of American Medical Colleges, the median four-year cost to attend medical school in 2013 was $287,455 for private medical schools, while the cost for attending a public medical school was $207,866. Even when grants and scholarships are factored into the equation, the average amount of debt for students attending medical school was $170,000. Given that interest continues to accrue on that debt while students are still in the process of completing their residencies, that amount can increase even further. In fact, interest alone can tack on another 25 percent to a medical student’s total debt load.
Although physicians are typically well compensated, the eventual salary of a medical student can vary significantly based on the area of specialization. For instance, even though a physician specializing in hospice care and a thoracic surgeon will spend approximately the same amount of time in training and residency, their average salaries will be drastically different. A physician specializing in hospice and palliative care earns an average of less than $200,000 per year, while a thoracic surgeon has an average salary of more than $750,000 per year. Such a disparity in pay scale can make a significant difference in terms of how long it takes to pay off a large debt load.
Even a relatively high salary cannot remove the stress of carrying such a debt load, or mitigate the long hours required to study and complete a residency period, or the often-stressful work conditions related to being a physician. A report published by American Medical News found that almost 90 percent of doctors feel stressed or burned out on a daily basis. The burden of large student loan debt and the intense stress of training are frequently too much for younger physicians to handle. Yet, some students feel trapped because they have already taken on all of that debt.
Paying for Medical School
Given the level of debt often involved in attending medical school and the stress associated with it, it’s vital for prospective medical students to develop a solid plan for paying off their training while incurring as little debt as possible.
For those students who wish to borrow the least amount of money possible to pay for medical school, scholarships are a great option. The first step to receiving any type of financial assistance is to complete the Free Application for Federal Student Aid. The form should be completed as early as possible for students to maximize their chances of receiving the most financial awards at the school where they are accepted. Medical schools rely on the FAFSA to determine both the types and the amounts of assistance students may qualify for.
Two excellent sources for obtaining information regarding medical school scholarships are the American Medical Association and Association of American Medical Colleges. It’s also a good idea for students to contact their local medical association’s chapter as well as the financial aid office of the school where they plan to attend to ask about targeted scholarships. A vast number of both merit-based and need-based scholarships for medical students flow directly from universities and colleges rather than private organizations.
Medical schools, just as with colleges, often award scholarship aid based on the student’s financial need as a way of attracting students whose demographic characteristics or achievements match those the school is attempting to fulfill. Students who match the profile the school is seeking may be able to obtain larger scholarships. The same is also true for students who score above average on the MCAT for a particular school.
Some medical schools also offer what are known as service scholarships. These scholarships are provided to students who make a commitment to working with a particular population or within a specific field. This could include underserved communities.
Another option is for students to pursue military scholarships, such as the Health Professions Scholarship, which is available through the armed forces. This scholarship covers tuition and fees as well as provides students with a stipend. In exchange, students must make a commitment of four years of service in a branch of the military.
Other medical school scholarship opportunities include the National Medical Fellowships, which is a group of scholarships awarded to students who are underrepresented within the medical community and who are committed to practicing in underserved areas. These scholarships are awarded to students ranging from first-year medical students to residents.
Private scholarships are not as plentiful for medical students as they are for students at the undergraduate level, but that does not mean they do not exist. Among the more lucrative and prestigious medical scholarships is the American Medical Association’s Physicians of Tomorrow scholarship. This annual scholarship awards $10,000 to selected recipients.
In the process of searching for scholarships, students should spend time with their adviser discussing all of their financial aid options.
Other options to assist students in attending medical school while incurring the least amount of debt possible include grants. Unfortunately, when it comes to general medical students, there are few grants available. One possible option is actually a government program similar to a grant that provides students with complete tuition coverage. The Medical Scientist Training Program offers about 170 awards each year. This program is an excellent option for students who wish to teach or research in a clinical discipline.
Federal Medical School Student Loans
In many instances, students simply may not be able to secure enough scholarship and grant funds to cover the total cost of attending medical school. When that is the case, a student may have no other option but to pursue loans. Two options for student loans exist: federal loans and private loans. Along with the federal student loans that are made available to all graduate students, which include the Stafford and Direct PLUS loans, there are loans made available specifically to students attending medical school.
Benefits of Federal Student Loans
Federal student loans can offer a number of benefits, including affordable monthly payments, as there are numerous repayment plans available based on the borrower’s household income. Since the repayment plans are so flexible, borrowers can take advantage of the opportunity to change their repayment plan as their situation or financial goals change. Additionally, loan forgiveness may be available. Among the most challenging aspects that many medical students face is the prospect of repaying loans once they have completed medical school and begun their residencies. With federal student loans, it may be possible to postpone payments during residency and fellowship through forbearance, deferment, and grace options.
Types of Federal Student Loans
As of 2016, it’s possible to borrow a maximum of $20,500 per year through the Federal Stafford Loan program with a fixed rate of 5.84 percent.
Grad PLUS Loans
Students may borrow up to the amount of the school’s cost of attendance excluding the amount of any other financial aid the student may receive. The Grad PLUS Loan has a fixed rate of 6.84 percent as of 2016.
Perkins Loan Program
Under the Perkins Loan program, students may borrow up to $8,000 per year. As of 2016, this loan program has a fixed interest rate of 5 percent with no loan fees. Please note that some schools do not participate in these programs; check with the financial aid office to learn if Perkins loans are an option.
HRSA Primary Care Loan
Students who are considering the HRSA Primary Care Loan should be aware there are certain strings attached to this loan. Borrowers are required to practice within the primary care field for a specific period following graduation. This program offers a fixed interest rate of 5 percent with no loan fees. Borrowers who do not complete the service requirement will have their loans reverted to a 7 percent fixed interest rate.
Private Medical School Student Loans
When scholarships, grants, and federal student loans do not add up to cover the full tab for attending medical school, students may turn to private student loans.
Advantages of Private Student Loans for Medical School
Private student loans for medical school can offer a number of advantages. For instance, most private loan programs offer fixed or variable interest rates. It’s important to carefully consider which option is best for a borrower’s needs, as the rate will have a significant impact on the total cost of the student loan. The repayment for a private student loan may or may not be required while the borrower is in school, residency, or fellowship. The terms of the specific loan should be carefully reviewed in advance of signing the promissory note.
Disadvantages of Private Student Loans for Medical School
There are some potential disadvantages of private student loans that should also be considered. For instance, variable rates for a private loan may start out low and be quite appealing, but such rates can rise and fall as the rate indices fluctuate. Loan rates for private student loans are based on the creditworthiness of the borrower. A cosigner may be required in order for the borrower to obtain the best interest rate.
In comparing private student loans for medical school to federal loan options, it’s important to note that deferment, repayment, grace, forbearance, and even loan forgiveness options may be limited in nature. A loan discharge for death or disability may not be available based on the specific loan program.
Despite the fact that there are some disadvantages to private student loans, such loans may still make sense for borrowers who are not eligible for federal student aid or for borrowers who are assured of a significant income level in the near future and will be able to apply an aggressive repayment plan toward their loans.
Best Private Medical School Student Loan Lenders
In choosing the best private medical school student loan lenders, it’s important to take a variety of factors into consideration, including the potential benefits of the program as well as rates and repayment terms.
PNC Student Loans offer a private loan solution to students who need financial assistance in completing medical school. These loans are available for undergraduates as well as graduate students and those enrolled in a medical residency program. PNC loans cover expenses, such as tuition, travel, technology, etc.
The application process for PNC student loans is quite easy. Borrowers may use the online application. All that applicants need to enter is basic information, including their name, a reference, information about their school, employment info, and the amount they wish to borrow.
Borrowers who are under the age of 17 will need to have a cosigner with good creditworthiness. Even those borrowers who are over the age of 17 may find that it is a good idea to have a cosigner, as this increases the chances of being approved and obtaining a better loan rate.
Rates for PNC loans currently range from 3.39% to 12.99% based on the type of interest selected, the creditworthiness of the borrower and cosigner, and the length of the loan term. To be deemed creditworthy for a PNC loan, borrowers must have two years of employment or credit history and must be able to provide proof of income.
The benefits of using PNC student loans can be enormous. The PNC Solution Loan is one of the company’s most popular loan products. With this option, borrowers are able to select a fixed or variable interest rate. Additionally, there are no application fees with this loan. Terms for this loan can range up to 15 years. Borrowers who use automatic payments can receive up to a 0.5 percent discount. This is actually one of the largest autopay discounts in the private student loan industry. It’s also available for borrowers to wait up to six months after graduation to begin making payments.
PNC also offers borrowers a wealth of resources that can be used for understanding student financial aid and loan options. The company even provides a planning tool that can be downloaded by prospective and current students and includes a timeline to help students plan for what needs to be done at what time.
The PNC Solution Loan for Health Professions is often a good option for medical students who have exhausted federal loan options. This loan option is for undergraduates and graduate students. Funds from this loan may be used toward any education-related expense. Borrowers may choose a variable or fixed rate. Variable interest rates for this loan currently range from 3.8% to 10.75%, while the rates for a fixed rate loan currently vary from 6.49% to 12.99%. Funds from this loan are sent directly to the school. Upon the death of the borrower, all outstanding debt is forgiven. Borrowers may take up to 15 years to repay this loan.
College Ave Student Loans may be another good private loan solution. Since this company was launched in 2014, it has become one of the leading providers of private student loans. Both variable and fixed rate student loans are available through College Ave. Among the benefits of these loans is that rates are highly competitive. In fact, in some instances, the rates for College Ave loans are even lower than the rates for federal student loans.
The goal of this company is to provide student loans in a streamlined manner with no surprises. Created by former Sallie Mae executives, College Ave offers private student loans to undergraduates as well as graduate students and parents of college students. With this company, borrowers are able to take advantage of a wide range of loan options.
At the undergraduate level, variable rates for student loans through College Ave currently begin at 2.84% and range up to 9.35%. Fixed rates begin at 5.74% and range up to 11.85%. These are some of the most competitive rates currently available on the market. If you select the auto pay option, you are eligible to receive a discount of 0.25 percent.
For graduate student loans, variable rates currently begin at 3.34% and range up to 7%. Fixed rates begin at 5.68% and range up to 7.83%.
Variable rates for the College Ave Parent Loan currently begin at 4.19% and range up to 6.16%, while fixed rate loans are available from 6.54% to 10.82%.
A number of repayment plans are available through College Ave. For instance, borrowers can choose from deferred, flat payment, interest only, and full principal and interest payments. It’s important to be aware that interest rates may change based on the type of repayment plan selected.
College Ave also allows borrowers to choose their own term length for their loan. Borrowers may choose from 8-year, 10-year, 12-year, and 15-year term lengths. This company is one of the only private loan providers that offer this benefit. Lower rates are available with shorter term lengths.
SunTrust Banks, Inc. is another leading provider of private student loans for both graduate and undergraduate students. The types of expenses that can be covered with a private student loan from SunTrust include tuition, housing, books, and more.
The Custom Choice Loan is one of the most popular student loans offered by SunTrust. This loan option provides several repayment options and competitive interest rates. Furthermore, there are no application, origination, or repayment fees associated with this loan. Yet another benefit of the Custom Choice Loan is that it offers a graduation reward.
Interest rates for the Custom Choice Loan are based on the creditworthiness of the borrower and cosigner, if applicable. Other factors that may affect interest rates include the term of the loan and the amount of money requested. Variable interest rates for this loan currently range from 3.24% to 8.67%. Fixed rates range from 4.75% to 10.41%.
Repayment terms for this loan include 7-year, 10-year, and 15-year options. Borrowers may also choose immediate repayment, interest-only repayments, full deferment, and partial-interest repayments. The minimum amount for a SunTrust loan is $1,001. The maximum amount that can be borrowed through a SunTrust loan is $65,000 per year.
SunTrust also offers a variety of helpful online tools, including a cost calculator to assist students and their families in planning their finances. Other tools include a scholarship-finding tool and information to assist students in learning how to pay for the cost of their education.
Sallie Mae is among the largest and most well-known student loan providers in the country. In fact, Sallie Mae is responsible for about 20 percent of all student loan debt in the United States. Originally known as the Student Loan Marketing Association, Sallie Mae is a publicly traded corporation and is based in Newark, Delaware. This company focuses on the origination and servicing of private student loans. Two years ago, Sallie Mae branched off on its own with the launch of Navient student loans. The goal of this move was to assume responsibility for the servicing duties of Sallie Mae.
A variety of loan options is available through Sallie Mae. Loans issued through Sallie Mae can be used for any type of college expenses, including technology, books, housing, etc. Additionally, these loans may be used for undergraduate college expenses and medical school.
The Smart Option Student Loan is one of the most popular options available through Sallie Mae. Competitive interest rates are available through this loan. Such rates currently range from 2.25 percent to 8.56 percent. There are no origination fees with this loan, and borrowers may choose from three repayment options. With the Deferred Repayment Option, borrowers can benefit from making no payments while they are in school. The Fixed Repayment Option only requires borrowers to make payments of $25 per month while they are in school and provides a savings of 10 percent for the total amount of the loan in comparison to the Deferred Repayment Option. The Interest Repayment Option gives students the ability to pay the interest on their student loan while they are in school, providing a savings of more than 20 percent.
Sallie Mae is the only lender that offers flexible repayment options for borrowers. The Smart Option Student Loan offers multiple benefits, including a 2 percent bonus for borrowers who make payments on time while they are still enrolled in school. In addition, borrowers have the opportunity to earn up to a 0.25 percent interest rate reduction when they use automatic payments.
The Medical and Dental Residency and Relocation loans offer between $1,000 and $20,000 based on the needs of the borrower. No payments are required while borrowers are still in school or for three years following graduation.
Citizens Financial Group is one of the largest retail banks in the country and was founded back in 1828. Today, Citizens Bank offers a range of products, including student loans. Three main private student loan options are available through Citizens Bank for undergraduate students, graduate students, and parents of students. Each loan program differs somewhat and, as a result, it’s important to understand the differences between those loan programs to determine which one is best for you. All of these loan programs can be used for any expense associated with attending college, including tuition, supplies, room and board, etc.
The Citizens Bank Student Loan is a private loan ranging from $1,000 to $170,000. Funds are disbursed directly to the school. Loan amounts can be repaid over a period of 5 years, 10 years, and 15 years.
Variable interest rates are currently available as low as 2.63 percent, while fixed rates are as low as 5.25 percent. Such rates are based on the creditworthiness of the borrower, the repayment option selected, and whether a cosigner is used.
The Citizens Bank Student Loan offers numerous benefits, including the fact that there is no application, disbursement, or origination fee. Furthermore, there is no penalty charged for prepaying a loan. Another great advantage of this loan is the ability to reduce interest rates by as much as 0.25 percent simply by enrolling in the automatic payment program. Borrowers who have an existing account with Citizens Bank when they apply for a loan can also receive an additional 0.25 percent discount.
Borrowers may also choose whether they wish to begin paying back loans while they are in school or whether they wish to make interest-only payments.
The Citizens Bank Private Graduate Student Loan is available for students enrolled in graduate programs, including medical school. The same benefits and interest rates of the Citizens Bank Student Loan are available with the Citizens Bank Private Graduate Student Loan. There are a few key differences, including the fact that borrowers can defer payment on this loan for up to eight years while they are enrolled in school.
The Citizens Bank Student Loan for Parents is available specifically to help parents with alleviating the cost of sending their children to college. There are no prepayment penalties or fees with this loan. In addition, the same interest-reduction incentives apply. Available amounts for these loans range from $1,000 to $170,000. These loans can be repaid over a period of 5 to 10 years.
Private student loans are available through LendKey. One significant difference between LendKey and other private loan lenders relates to who actually performs the lending. This company is technically comprised of many different community banks and nonprofit credit unions. As a result, borrowers are able to take advantage of a range of benefits as well as competitive terms.
Only a variable rate is available with private student loans from LendKey. The minimum rate currently available is 3.28 percent and can range up to 8.93 percent. As is the case with other types of private student loans, LendKey offers a number of chances to reduce the interest rate. One way is to set up automatic payments, which results in a 0.25 percent interest rate reduction. If the borrower has paid back at least 10 percent of the loan amount by the time he or she enters the full repayment period, then 1 percentage point can be dropped from the existing interest rate. LendKey’s private student loans have no origination fees or application fees. Repayment terms are available for 5, 7, 10, 15, and 20 years.
Among the major benefits of private student loans from LendKey is the application process, which can be completed in about three minutes. After answering a few simple questions, the applicant simply submits the application, which is immediately sent for review.
Private student loans through LendKey are good options for borrowers who are looking for flexible repayment plans, competitive interest rates, and interest rate discounts.
Repaying Medical School Debt
For students who find it necessary to take out student loans to complete their undergraduate work and medical school, it’s important to develop a plan for repaying medical school debt.
Average Medical School Debt
Although every medical student is different, the average amount of medical school debt for graduates in 2015 was $183,000, according to data released by the Association of American Medical Colleges. That’s not even counting the debt that many students carry over from their undergraduate studies.
Given the decline of physician reimbursements and continually increasing costs for medical schools, students must think about loan repayment. This subject can be somewhat complex and confusing. While it’s relatively common for many graduates of medical school to simply place their student loans into forbearance while completing their residencies, doing so can result in interest increasing rapidly, which can cause an already massive amount of medical school debt to increase even more. Avoiding forbearance is critical to keeping debt under control. Below are some strategies for doing so.
Refinancing Medical School Loans
Student loan refinancing is a good option for many medical school graduates. With this option, you are able to take out a new loan with a private lender and pay off existing loans using the funds from the new loan.
Since you are creating a new loan, you have the opportunity to obtain a lower interest rate and adjust your payment schedule. With that said, you will also need to meet eligibility requirements for the new loan. Those requirements will be based on your credit history and current income. There are also some other possible disadvantages to consider, including the fact that you will have to give up access to federal repayment plans.
Refinancing is often the best choice for medical school debt that carries a high interest rate. Even being able to knock a couple of points off the interest rate for a loan through refinancing can help you to save a tremendous amount of money.
What is Student Loan Refinancing?
Let’s take a closer look at refinancing for medical school debt. When you become approved for a new loan, you receive a different interest rate, monthly payment schedule, and maturity schedule for the loan. The new lender will essentially pay off your current student loans, and you will be issued a new loan with a new monthly payment. Both the monthly payment as well as the interest rate should be lower on the new loan. While some borrowers opt for a shorter loan repayment period, it’s also possible to choose a longer payment period, which can help you to save money each month. It should be kept in mind that this strategy will result in a higher loan balance over the life of the loan.
The Advantages of Medical Student Loan Refinancing
Medical student loan debt refinancing can offer a range of benefits, including:
Lower Monthly Payments
By refinancing your student loan debt, you can lower your monthly payments by obtaining a lower interest rate, which reduces your monthly payment and helps you save money over the duration of your loan. Many graduates find they are able to obtain a better interest rate simply because their credit scores have improved since the time they first took out their loan. Refinancing can also help you save money because you have the option to extend the repayment period for your loan. For example, by refinancing a 10-year loan to a 20-year loan, you can significantly slash your monthly payments.
Releasing a Co-signer
Many medical school students find they must obtain a cosigner in order to secure a student loan because their credit is not good enough to obtain a loan on their own. Refinancing medical school student loan debt is a good strategy for releasing a cosigner from that loan. Cosigners are usually parents or close family members, so releasing them from a loan can help to relieve tension within familial relationships. Once the cosigner is released from the loan, he or she will benefit from a higher credit score and be able to more easily access new lines of credit.
A Single Payment
On top of trying to pay back a massive amount of debt, juggling multiple loan payments can be extremely stressful for medical school graduates. Refinancing offers the opportunity to consolidate multiple loans into a single loan. If you enroll in an automatic payment program, you could even benefit from an interest rate discount, which can help you save money every month. Automatic payments can also help to ensure you never forget to make a payment, thus protecting your credit.
Flexible Repayment Terms
When refinancing medical school loans, you have the option to choose the length of your repayment period. Additionally, you can choose a variable or fixed rate for your new loan. While a variable rate may be lower than a fixed rate, it is important to keep in mind that there are risks associated with a variable rate because rates could increase at any time. This is not the case with a fixed rate.
The Disadvantages of Medical Student Loan Refinancing
While there are certainly many advantages associated with refinancing medical school debt, there are also some possible disadvantages to refinancing that should be considered.
Paying More Over the Long Term (in Some Cases)
Refinancing to a lower interest rate will help you save money. If you opt to refinance to obtain a longer repayment period, however, your monthly payments will decrease, but the total amount of money you pay over the duration of your loan will increase. Due to accruing interest, you could actually pay tens of thousands of dollars more over the life of your loan.
Losing Out on Federal Benefits
It’s generally not a good idea to consolidate private loans and federal loans. Doing so can result in your federal student loans being disqualified for cancellation programs and loan forgiveness. Furthermore, federal loans offer the opportunity to take advantage of Income-Driven Repayment Plans and Income-Based Repayment Plans. With these plans, your monthly loan payments are based on how much you can afford to pay or how much you earn. These options are taken off the table if you refinance federal loans with a private lender.
Losing Your Grace Period
It’s important to be aware that the repayment process for your loans begins immediately when a new lender approves your refinance. As is the case with many student loans, it’s possible to delay payments on your loans while you are still actually in school or once you have entered a graduate program. If a grace period is still intact on your current loan, it may be a good idea to wait until that grace period has expired prior to beginning the refinance process.
Income-Driven Repayment Plans
Trying to meet the financial obligation of paying back student loans can be a tremendously stressful and even financially unfeasible for many physicians, despite their rather large incomes. One strategy for mitigating the effects of paying back student loans is an income-driven repayment plan. This can be a good option for borrowers who need to keep up the payments for a federal student loan but have a small income. With this type of program, monthly payments are set up to match your costs of living and income, ensuring that payments are kept affordable. Of course, it should be noted that an income-driven repayment plan is not the least expensive or fastest way to pay off medical school loans. This strategy will help to combat continually accruing interest, however, something that is not possible with forbearance.
There are several income-driven repayment plans med school graduates can utilize:
- Income-Based Repayment
- Income-Contingent Repayment
- Pay As You Earn
- Revised Pay As You Earn
It should be kept in mind that each program has different eligibility requirements as well as repayment structures.
You may be eligible for Income-Based Repayment if you have federal student loans. Eligibility for such programs is typically based on family size and income, but all programs vary somewhat. Borrowers who are simply not able to afford the monthly payments on their federal student loans usually choose Income-Based Repayment. Under Income-Based Repayment, payments will be capped at a maximum of 15 percent of the borrower’s discretionary income but could be as little as 10 percent. This is based on the date when you first took out your student loans. Borrowers who took out their loans on or after July 1, 2014, can take advantage of having their loans capped at 10 percent, while borrowers who were issued their loans prior to July 1, 2014, can have their loan payments capped at 15 percent of their discretionary income. It should be kept in mind that the term discretionary income is not based on what the borrower deems his or her discretionary income to be but is instead based on a specific formula.
Another great advantage of the Income-Based Repayment Plan is loan forgiveness. After making payments for 20 or 25 years, based on when you first took out your loan, it’s possible to have the remainder of the outstanding balance forgiven. To stay on the plan, you will need to recertify your income each year.
Income-Based Repayment can work in your favor to lower the monthly payments on eligible federal student loans such as:
- Direct Subsidized Loans
- Unsubsidized Loans
- Direct Graduate PLUS Loans
- FFEL Consolidation Loans
- Federal Direct Consolidation Loans
- Stafford Loans
Be aware that not all types of loans qualify for Income-Based Repayment. Loans that are generally not eligible for such programs include:
- Parent PLUS Loans
- Private Loans
- Direct Consolidation Loans that were used to repay loans made to parents
- Any other type of federal loan that was made to parents
It should also be noted that you might not qualify for this program if your income is too high.
While taking out student loans in medical school could help you obtain the education you need to one day enjoy a high salary, that is not always the case. For instance, not all specializations lead to the same salary level. It’s quite possible that many medical school graduates will go into a highly rewarding but relatively low-paying field that will not allow them to funnel a significant portion of their income toward loan payments. In such cases, an income-contingent repayment plan could help.
The income-contingent repayment plan is different from other options in that there is not a financial hardship requirement in order to be eligible. In most cases, borrowers must meet certain income requirements. Monthly loan payments for this plan are typically calculated at 20 percent of the borrower’s discretionary income. It’s important to note that individual situations vary, so this means the monthly payment under the income-contingent repayment plan may not be lower than the original loan payment. The repayment term for this plan is 25 years. Any remaining balance after 25 years is forgiven. Any debt that is forgiven under this plan is considered to be taxable income. Since there is no eligibility requirement there are some tradeoffs, including the fact that this plan has the highest interest rates and payments of all income-driven plans.
The following types of loans are eligible under income-contingent repayment plans:
- Direct Consolidation Loans
- Direct Loans; both Subsidized and Unsubsidized
- Direct PLUS Loans
If the borrower consolidates the following loans into a Direct Consolidation Loan, he or she is also eligible for income-contingent repayment plans:
- FFEL PLUS Loans
- Federal Stafford Loans; Subsidized and Unsubsidized
- FFEL Consolidation Loans
- Federal Perkins Loans
Interest rates for income-contingent repayment plans are fixed for the life of the loan.
Pay as You Earn (PAYE)
The Pay As You Earn plan is relatively new. First introduced in 2012, this plan is designed to assist borrowers in better managing their student loan payments. The guidelines to qualify for this plan are fairly strict. Your loan must have been taken out on or after Oct. 1, 2007. In addition, you must be able to prove that you require help in repaying your student loans and that the disbursement for your Direct Loan was made after Oct. 1, 2011. Monthly payments for your student loans must be smaller than the standard payments. Your monthly payments will be calculated at a rate of 10 percent of your discretionary income.
With this program, all loans are eligible to be forgiven after 20 years, but forgiven loan amounts are viewed as taxable income.
Revised Pay as You Earn
The Department of Education introduced the Revised Pay As You Earn program in 2015. Under this program, more borrowers are able to qualify. Basically, it removes the date requirement for when you took out your loan and there is not a partial hardship requirement in order to be eligible. Loan payments under this program are still limited to 10 percent of the borrower’s discretionary income. For borrowers with a professional or graduate degree, loan forgiveness is made available as an option after 25 years.
Try to Earn a Physician Signing Bonus
Another option for paying off student loans incurred while attending medical school is to try to earn a physician signing bonus. Many employers are now quite willing to offer a signing bonus as a type of incentive to attract physicians to work for them. This could be a good option for medical school graduates who would prefer to join a hospital or practice rather than opening their own office. The amount of a signing bonus can vary, but it’s important to keep in mind that if a practice or hospital really wants to hire you, everything is negotiable. Due to the shortage of primary care doctors, such bonuses are becoming more and more common. Bonuses can typically range from $25,000 to $150,000. If you are offered a bonus, it’s important to carefully read your contract and ensure it's just a bonus and not a loan or an advance that you will need to repay through paychecks in the future. A large signing bonus could go a long way toward repaying your student debt.
Student Loan Forgiveness for Doctors
Loan forgiveness for physicians could be another option for borrowers who are struggling to repay massive amounts of student loan debt from attending medical school. There is a tradeoff of fewer employment choices with this option, however. In order to take advantage of this offer, you would need to work for a nonprofit hospital or in an area of high need. In order to remain eligible for this program, your choice of specialty, pay, employer, and location could remain limited.
Public Service Loan Forgiveness (PSLF) for Doctors
Doctors whose work can be qualified as public service may be eligible for the Public Student Loan Forgiveness program. Whether the work qualifies as public service is largely determined by one’s employer. Examples of public service include full-time employment in a tax-exempt nonprofit organization, working in an underserved area, or working in an area that is in need of medical professionals.
Under this plan, you must make 120 payments, which equals to monthly payments for a period of 10 years while conducting qualified work. The federal government would then forgive the remaining debt.
Military Programs for Medical School Loan Repayment Assistance
Medical school students who are interested in serving their country and becoming physicians may find that a military program could be a good option for obtaining help with repaying the cost of their education. Even if you have already graduated from medical school and you are a practicing physician, you can still enroll in a branch of the military to receive help with your student loans. It’s important to be sure you understand the service requirement for any program you consider.
Army Student Loan Assistance for Doctors
There are actually several options available for Army physicians to assist with repaying student loans. Among them is the Financial Assistance Program. This program awards grants for up to $45,000 annually along with a monthly stipend of at least $2,000. To qualify, members of the Army must be enrolled in an accredited residency program.
The Active Duty Health Professions Loan Repayment Program provides up to $120,000 to assist physicians with repaying medical school loans. To qualify, doctors must be on active duty. The amount of this benefit is paid out over three years in $40,000 disbursements.
The Health Professionals Special Pay program provides for up to $75,000 to be paid to active-duty physicians who have completed a residency within a qualifying specialty and who are members of the U.S. Army Reserve. Benefits are paid out over a period of three years in disbursements of $25,000.
Navy Student Loan Repayment Assistance for Doctors
Members of the Navy who are physicians are provided with similar incentives. Among them is the Health Professions Loan Repayment Program. Under this program, physicians who are members of the Navy can take advantage of an annual maximum payment of $40,000. The benefit is paid directly to medical school loans. It should be noted that federal income taxes are withheld, which usually amounts to about 25 percent.
The Navy Financial Assistance Program pays up to $275,000 in student loan assistance to medical residents. The benefit is paid in grants of up to $45,000 annualy for up to four years. In addition, this program includes a monthly living stipend of up to $2,200 for up to 48 months.
Practicing physicians who join the Navy may also be able to qualify for very attractive sign-on bonuses that can range between $220,000 and $400,000 based on experience and specialty.
Air Force Student Loan Repayment Assistance for Doctors
The Air Force also provides assistance with loan repayments for doctors through the Health Professions Scholarship Program. This program is primarily for students who have not yet attained a degree. The Air Force Financial Assistance program is designed to assist doctors enlisted in the Air Force with help paying their medical school loans. Benefits are available for up to $45,000 for each year of residency. A monthly stipend of $2,000 is also available. After completing your residency, you will be obligated to fulfill one year of service for each year that you received the benefits plus an additional year.
Indian Health Services Loan Repayment Program
American Indians and Alaska Natives can benefit from a loan repayment program for health professionals. The Indian Health Service program features a two-year service commitment. In exchange, the program will repay up to $40,000 in medical school loans. Doctors can continue renewing their contract to receive additional benefits until all of their medical school debts are completely repaid.
National Institute of Health (NIH) Loan Repayment Programs
The National Institutes of Health also provides awards to physicians to help them pay off the burden of their student loan debt. To qualify, you must be a health professional in a research career and must agree to at least a two-year contract for performing research that is funded by a nonprofit organization located in the United States.
Doctors participating in the program can qualify to receive up to $35,000 annually in student loan repayment. The funds can be applied to undergraduate loans as well as medical school debts.
Eight different plans are available through the NIH Loan Repayment Program. There are also two loan repayment programs that are made available specifically to clinicians.
National Health Service Corps Loan Repayment Assistance
Loan repayment assistance is provided to doctors under the National Health Service Corps. The NHSC Loan Repayment Program requires doctors to commit to working a minimum of two years at a site approved by NHSC. Physicians can earn up to $50,000 toward student loan payments. Those participating in the program may serve as a primary care medical physicians or behavioral and/or mental health clinicians.
This program features tax-free student loan payouts. Disbursements are made at the beginning of service to help participants make the most of interest savings. If participants wish, they may apply to have the benefit extended beyond the first two years. The level of assistance and length of assistance will vary based on the area of service. For instance, high-need areas tend to qualify for larger student loan repayments.
Student to Service Program
The Students to Service Program is offered by the NHSC for medical students who are in their last year of school. Under this program, participants can receive up to $120,000 that can be applied toward student loans and educational costs. In exchange, medical students make a commitment to provide primary health care for three years following graduation at an NHSC-approved site.
Medical School Loan Repayment Assistance Programs by State
There are also numerous programs that are state-sponsored and can help doctors repay their student loan debt from attending medical school.
Many such programs are made available through the NHSC State Loan Repayment Program. This program offers incentives to physicians to practice in areas that have been designated as Health Professional Shortage Areas. If you are interested in researching these areas, they can be found in the database published by the AAMC.
Additionally, some states also operate their own student loan repayment assistance plans for doctors. Frequently, these plans provide special pay or student loan repayment assistance for physicians who make a commitment to practicing in areas that are medically underserved.
Below, we present the student loan assistance programs that are available in each state.
SHARP provides awards that include repaying qualifying education loans as well as paying direct incentives to attract primary care physicians to medically underserved Alaska communities.
Arizona State Loan Repayment Programs includes the Rural Private Primary Care Provider Loan Repayment Program and the Primary Care Provider Loan Repayment Program. Under both of these programs, physicians are required to commit to at least a two-year contract. The award is $65,000. A third year of service will generate $35,000, and the fourth year will provide $25,000.
Doctors who practice within an HPSA in the state of Arkansas may be eligible to receive $50,000 in loan repayment assistance in exchange for a two-year contract.
The Community Match Rural Physician Recruitment Program also provides doctors with up to $80,000 in exchange for a four-year commitment to practice within a rural Arkansas community.
In exchange for a two-year commitment for full-time work or four years of half-time work in an HPSA, the California State Loan Repayment Program will provide loan repayment assistance.
Awards for up to $90,000 for doctors who commit to a three-year contract practicing within an HPSA in Colorado are granted through the Colorado Health Service Corps.
Awards to physicians who practice at approved HPSA sites in Delaware are granted through the Delaware State Loan Repayment Program. Doctors may receive up to $100,000 to be applied toward student loan repayments for a two-year contract. Awards are based on specialty and experience.
Up to $25,000 is made available annually in student loan repayment assistance through the Rural Areas Assistance Program in Georgia. Awards are granted for each 12-month commitment to practice in a rural community. For up to four years, physicians could receive as much as $100,000.
Repayment of student loans for doctors is made available through the Hawaii State Loan Repayment Program. Recipients must make a two-year commitment to provide service at a site approved through the program.
Awards between $5,000 and $25,000 are made through the Idaho State Repayment Program for a two-year commitment working at a public employer in an area designated as a health professional shortage area or in a nonprofit organization.
Repayment for up to $100,000 over a period of four years for primary care, pediatric care, internal medicine, and family medicine is also made available through the Rural Physician Incentive Program.
The Illinois State Loan Repayment Program offers up to $25,000 in student loan repayments per year for a two-year commitment to providing health care services in an area designated as a health professional shortage area.
Full-time doctors may earn up to $50,000 per year through the Primary Care Recruitment and Retention Endeavor in exchange for a two-year commitment working at a public employer in an HPSA or at a nonprofit.
The Rural Iowa Primary Care Loan Repayment Program offers up to $40,000 per year that can be paid toward student loans. This program is limited to students attending Des Moines University College of Osteopathic Medicine or the University of Iowa Carver College of Medicine. A five-year commitment to working in an eligible service area in Iowa is required.
Under the Kansas State Loan Repayment Program, physicians can receive $25,000 per year for making a two-year commitment to practicing in an ambulatory outpatient setting. The Kansas Bridging Plan also provides up to $26,000 in student loan forgiveness for residents of Kansas. In order to be eligible, participants must make a commitment to practicing full time in a rural community for 36 straight months following the completion of their residency.
Under the Kentucky State Loan Repayment Program, loan repayment assistance is available to primary care physicians who are committed to working for a minimum of two years within HPSAs.
Physicians may receive up to $30,000 per year in student loan repayments when they make a three-year commitment to practicing in HPSAs. The incentives are provided through the Louisiana State Loan Repayment Program.
The State Loan Repayment Program in Maryland offers up to $50,000 annually in medical school loan repayments for making a two-year commitment to practicing in an HPSA.
Under the Massachusetts Loan Repayment Program for Health Professionals, physicians may receive up to $50,000 for serving two years in an HPSA.
Physicians who make a commitment to practice in an HPSA for a minimum of two years in Michigan may receive up to $200,000 in student loan repayments over an eight-year period under the Michigan State Loan Repayment Program.
The Minnesota State Loan Repayment Program offers up to $20,000 per year for physicians who make a two-year commitment to serving in an HPSA in Minnesota. Participants who make a three-year commitment to working in a designated Minnesota rural area may also receive up to $25,000 annually toward student loan repayments under the Minnesota Rural Physician Loan Forgiveness Program. This program has a maximum cap of $100,000 for four years of service. Additionally, the Minnesota Urban Physician Loan Forgiveness Program offers up to $25,000 per year with a maximum of $100,000 for four years for making a commitment to practicing within an underserved urban community.
Physicians who make a commitment to practice two years within an HPSA may receive up to $50,000 toward student loans under the Missouri Health Professional State Loan Repayment Program.
Physicians may receive up to $15,000 per year under the Montana NHSC Student Loan Repayment Program for practicing two years in an HPSA. The Montana Rural Physician Incentive Program also allows physicians to earn up to $100,000 in student loan repayment assistance over a period of five years for practicing in an underserved or rural community.
The Nebraska Loan Repayment Program offers up to $60,000 annually in loan repayment assistance to doctors who practice within a state-designated shortage area. To qualify, physicians must make a three-year obligation and be willing to accept Medicaid.
Loan repayment assistance is available under the Nevada Health Service Corp for physicians who make a minimum commitment of two years to practicing within a state-designated area that is currently underserved. Awards may vary by applicant and are based on available funding.
Physicians who make a minimum commitment of three years to practicing within an underserved area may qualify for up to $75,000 in medical school loan repayment assistance under the New Hampshire State Loan Repayment Program. There is also an option to earn an additional $40,000 through a 24-month service extension.
Up to $120,000 in student loan repayment assistance over a four-year period of service is available through the Primary Care Practitioner Loan Redemption Program of New Jersey. To qualify, participants must make a two- to four-year commitment to working in a state-designated underserved area of HPSA.
Physicians who commit to practicing for two years within a designated medical shortage area in the state of New Mexico may qualify to receive up to $25,000 per year in medical school loan payment assistance under the New Mexico Health Professional Loan Repayment Program.
Physicians in New York who commit to practicing in underserved areas may receive a payment of up to $150,000 over a five-year period under the Doctors Across New York program. The Regents Physician Loan Forgiveness Award Program offers grants of up to $10,000 per year for doctors who practice for two years in physician shortage areas. Those participants who have more than $20,000 in eligible expenses may also apply to receive an additional two-year award.
Physicians in North Carolina may receive loan repayment assistance of up to $100,000 for a four-year commitment to practicing within an underserved rural community.
In addition, the NCMS Foundation Community Practitioner Program provides grants of up to $70,000 to doctors who make a commitment to practicing five years within an HPSA.
The North Dakota State Loan Repayment Program provides participants with up to $50,000 annually for making a two-year commitment to practicing in a nonprofit or public site in areas of need. The North Dakota Health Care Professional Student Loan Repayment Program also provides up to $150,000 in student loan repayment assistance for making a five-year commitment to serving in a designated area of need within the state.
Under the Ohio Physician Loan Repayment Program, doctors who practice in high-need areas may earn up to $25,000 annually in medical school debt repayment assistance for making a two-year commitment. The award can be increased to $35,000 a year for making an additional two-year commitment.
Under the Oklahoma Medical Loan Repayment Program, awards of up to $160,000 are available to students over a period of four years. The awards break down to $25,000 for the first year of service, $35,000 for the second year, $45,000 for the third year, and $55,000 for the fourth and final year of service. To qualify for the program, physicians must make a commitment to working a minimum of two years in an underserved or rural area. The program allows the commitment to be extended for up to a maximum of four years.
The Oregon Partnership State Loan Repayment program provides payment assistance of up to 20 percent of total eligible educational debts each year. To qualify, participants must make a commitment to serving two years within an HPSA in the state of Oregon. The Medicaid Primary Care Loan Repayment Program offers up to $150,000 in student loan repayment assistance for making at least a three-year commitment to working within an underserved area in Oregon that serves Medicaid patients.
Doctors who make a two-year commitment to practicing at an approved site may qualify to receive up to $100,000 in student loan repayment assistance under the Pennsylvania Primary Health Care Loan Repayment Program.
Student loan assistance is provided to approved doctors who make at least a two-year commitment to practicing within an HPSA in the state under the Rhode Island Health Professionals Loan Repayment Program.
Primary care providers who commit to a four-year contract practicing in underserved or rural areas of South Carolina may receive between $60,000 and $100,000 under the South Carolina Rural Physician Incentive Grant.
An incentive of more than $196,000 is available to primary care physicians who make a three-year commitment to practicing in qualified rural communities is available through the South Dakota Recruitment Assistance Program.
The Tennessee State Loan Repayment Program offers up to $50,000 in student loan repayment assistance to physicians who make a two-year commitment. This program also provides an option for the contract to be renewed for an additional $20,000 per award year. Primary care practitioners who work at qualified practice sites are eligible under this program.
Under the Texas Physician Education Loan Repayment Program, awards of up to $160,000 are available over a four-year period for practicing within a Texas HPSA. The St. David Foundation Public Health Corp Loan Repayment Program also provides awards of up to $30,000 for doctors over a period of four years for serving at eligible sites. The Rural Communities Health Care Investment Program provides partial student loan reimbursements of up to $100,000 for doctors who practice in Texas communities that are medically underserved.
The Rural Physician Loan Repayment Program works to match loan assistance awards with qualifying hospitals located in rural areas. The maximum amount doctors can receive under this program is $15,000 annually.
Under the Vermont Educational Loan Repayment Program for Health Care Professionals, yearly awards of up to $20,000 are available to primary care practitioners. Physicians must make a commitment to working in a medically underserved area for 12 to 24 months.
Physicians who make at least a two-year commitment to practicing in an HPSA in Virginia may receive up to $140,000 in educational loan repayment assistance under the Virginia Student Loan Repayment Program.
The Washington Federal-State Loan Repayment Program offers a maximum of $70,000 for doctors who contract to work within a qualifying HPSA site for two years. The Health Professional Loan Repayment Program offers up to $75,000 in exchange for making a commitment to working at least three years within an eligible practice site designated by the state.
Under the Health Professions Loan Assistance Program, up to $100,000 is available in student loan assistance for making a four-year commitment to practicing in an HPSA in Wisconsin.
The Wyoming Healthcare Professional Loan Repayment Program offers a maximum of $30,000 annually for three years for serving in a medically underserved community in Wyoming. The Wyoming Veterinary Loan Repayment Program offers a maximum of $30,000 annually for three years for doctors specializing in veterinary medicine who practice in the state for six months.
Author: Jeff Gitlen
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