Medical School Loans & Loan Repayment Facts

Pursuing higher studies is a costly affair and medical school tops the list. In this article, we have discussed about the types of medical school loans, medical school loan repayment plans and the key points to remember for medical school loan repayment. Read on to know more..

Updated by Shrestha Dey on 25th February 2020

Medical schools are expensive. And, if you decide to study in a medical school, you must be well aware of the expenses that come along with it. According to AAMC (Association of American Medical Colleges), the average student loan debt of a graduating medical student stands to $1,83,000. Then, there are years of residency to be completed where your yearly stipend is $55,000. 

Some students gain scholarships & grants, some recieve help from their parents who have saved up for their kid’s school. But, in most cases, scholarships and parents savings aren’t enough. Most students take the aid of student loans to fulfill their career goals.

In this article we shall discuss about student loans that are available for medical students and a few student loan repayment options

Table of contents:

Student Loans for Medical Students

Students planning to pursue medical studies can take up the following loans :

Unsubsidized Direct Stafford Loans

Unsubsidized Direct Stafford Loans are available for both undergrad and grad students. For students whose needs surpasses  with what subsidized loans provide may opt for Stafford Loans. The maximum amount that stafford loans out is $40,500 per year, with a maximum of $2,24,000 for the entire course duration. The interest rate stands at 5.84% on outstanding balance until the loan is paid off. Students do not have to start repayments when in school and are granted a grace period wherein they can look out and obtain jobs. FAFSA is a must to qualify for Stafford Loans.

Perkins Loans

In order to be eligible for Perkins Loans, you must demonstrate exceptional financial need. The maximum amount that Perkins loans out  is $8000 yearly with a maximum of $60,000 for the entire course duration. The interest rate stands at 5% per year. In order to be eligible for Perkins Loans, it is a must to fill and submit FAFSA. Perkins Loans is one of the most student friendly loans available.

GradPLUS Loans

You don’t need to demonstrate any financial need in order to qualify for GradPLUS Loans. However, it is a must to maintain a good credit score. The interest rate for gradPLUS loans stands at 7% , way higher than the rest of federal student loans. The amount you borrow is the cost of attendance minus other financial assistance received.

HRSA Primary Care Loans

For those planning to train in and and work with primary care, HRSA primary care loans is a great option. The interest rate stands at 5% with the stipulation of 10 years of work in the primary care or until the loan is repaid. However, it is important to remember that the interest will increase from 5% to 7% in case you fail to meet the required service period.

Learn more about Federal Student Loans here

Private Medical School Loans

For students who cannot qualify for federal student loans or scholarships or the loans received  do not suffice, may opt for private student loans. There are many private lenders available and the interest rate that they offer varies from lender to lender. The interest rate can either be fixed or variable. Although private loans usually offer better interest rates than federal student loans, know that opting for private student loans also means missing out on federal student loan forgiveness programs.

Worried about how to pay your college tuition fees? Find about best student loans here

Student Loan Repayment Options for Medical Students

Following are the student loan repayment options for medical students:

There are traditional ways and income driven ways to repay your loans. We will discuss both here. 

Following are the traditional ways for Student Loan Repayment:

Standard Repayment

Standard Repayment is one of the traditional ways of student loan debt repayment. The repayment term for this is 10 yrs which can be extended if consolidated. It has a fixed monthly payment with possibly the lowest interest-cost plan. If no other plan is chosen, Standard repayment plan becomes your repayment plan by default.

Extended Repayment

 If you have borrowed a loan of more than $30,000 then you are eligible for Extended Repayment. The repayment period is 25 years which can be stretched for more years without consolidating. Extended Repayment may be considered costlier than standard repayment because of extended period and the interest paid over time.

Graduated Repayment

In graduated repayment, you initially make payments in smaller amounts which gradually increases after every two years. The term for graduated repayment is usually 10 years which can be extended if consolidated. However, it may result in higher cost compared to standard repayment.

Find more about student loan repayment plans here

Following are the Income Driven Repayment Options to pay off your medical student loan debts:

Income Contingent Repayment

Under ICR, the monthly payments are dependent on the borrower’s monthly income and the poverty line for the borrower’s family size. The monthly payment amount changes every year based on the borrower’s income and family size in the past year. The repayment period is extended upto 25 years under ICR. The payment amount is basically 20% of your discretionary income or fixed payments based on 12 years loan term.

Income Based Repayment

Under IBR, your monthly payments for student loan debts are based on your income and family size. The repayment term can be extended from 10 years to 20 years. IBR sets payments at 10% -15% of your discretionary income depending on the time of your loan disbursement. Discretionary income is the difference between your adjusted gross income and 150% of the annual poverty line for a family size like yours and in your state. Borrowers who cannot qualify for PAYE can apply for Income Based Repayment plan.

Pay As You Earn

PAYE has the strictest requirements under the Income Driven Repayment Program. PAYE needs you to pay 10% of your discretionary income for 20 years after which the rest of the loan is applicable for forgiveness. PAYE is applicable only on federal direct loans and is best suited for borrowers who are married, have grad debt and have low income jobs. In order to be eligible for PAYE, you must be a new borrower on or after 1st October, 2007 or have a direct loan disbursement on or after 1st October, 2011.

Revised Pay As You Earn Payment

You can opt for REPAYE if you do not qualify for the rest of the IDR plans. It is a great repayment option for borrowers who are single, have no graduation debt and have higher income chances in the future. The period of repayment under REPAYE is 20-25 years and needs you to pay 10% of your discretionary income towards the repayment plan.

Know more about Income Driven Repayment Plans here

Key Points to Remember about Student Loan Debt Repayment

  • About 30-60 days before your first repayment date, your loan servicer (s) will send you a notice notifying you about the due amount to be paid, the date of payment, information about the interest date and your total outstanding balance.

  • Choose a repayment plan that suits you and your financial condition the best

  • The longer you take to repay your loans, know that the more interest will be incurred over time.

  • You can always change your student loan repayment plan as per the changes in your income level with the help of  your loan servicer(s)

  •  Make sure your loan servicer has your updated contact information because you will not want to miss out on your monthly payments

In the end, it is you who will have to decide which student loan and loan repayment plan suits you the best. Be sure to do your due research before choosing a student loan and repayment plan. Hope this article helps you sort out the options you have for your medical school. We wish you all the best!

Find Related articles here:

Refinancing Medical School Loans

Easy ways to pay off your Medical School Loan Debt