How to Finance a Medical School Education — and Live to Tell About It

Congratulations! After years of hard work in college, you’ve finally been accepted to medical school — and now you’re faced with the next major hurdle to becoming a physician, namely finding a way to pay for it all.

Medical school can be an extremely costly educational pathway; tuition and fees for private schools can range from $31,000 to $58,000 annually, while public, in-state costs typically fall between $16,000 and $47,000 annually. According to a 2014 AAMC report, the average educational debt was $190,053 for graduates of private medical school and $167,763 for those who attended a public institution. And while these figures may seem grim, you can mitigate the burden from the outset by following these four tips.

1. Apply for Financial Aid

The first step students need to take is to fill out the Free Application for Federal Student Aid (FAFSA). This form is available annually beginning on January 1, and you should compete it as early as possible in order to maximize your chances of receiving the best financial award at each institution where you are accepted. Medical schools rely on the FAFSA to determine the types and amounts of aid you may be eligible for and will use this information in combination with other demographic or achievement considerations to create their financial aid packages.

Note that while federal financial aid programs take into account information from both you and your spouse (if you have one) to determine your eligibility for government loans, medical schools will also consider your parents’ financial circumstances, alongside your own, in order to tailor offers of school-based aid.

There are limited online resources to research medical school scholarships and grants, but the American Medical Association (AMA) and Association of American Medical Colleges (AAMC) provide good information about the overall financial aid process, as well as a number of links to available scholarships. Additionally, you should contact your local medical association’s chapter and each school’s financial aid office to ask if they can recommend targeted scholarships or grants that you can apply for, such as those offered by the Latino Medical Student Association.

2. Understand the Offers

When your financial award letters arrive, each package will contain a number of different components. For example, the university may offer a scholarship outright — that is, without any service requirements like committing to practice medicine in-state for a length of time. Or you may be offered loans both through the medical school and the federal government.

While navigating financial aid offers may seem confusing at first, remember that you’ve aced the MCAT — you can do this! So, let’s go through the different types of financial support you might receive:

Federal loans

You may be awarded loans from different federal programs, each of which will have its own borrowing terms. One great advantage of these forms of government support is that they have fixed interest rates (meaning that they do not fluctuate over time). There are several examples of these loans, including:

  • Stafford loans, whose 2015 interest rate is approximately 6 percent annually
  • Perkins loans, which are awarded to students with financial need and carry a 5 percent interest rate in 2015
  • GradPlus loans, which have an annual interest rate of 7 percent in 2015

School-based lending

Loans can also be awarded directly from the university and may have a fixed or variable interest rate. In addition, medical schools sometimes offer loans related to specific career interests, such as for graduates who agree to practice as primary care or rural medicine physicians. Some students find these requirements too restrictive, but if they match your career goals, this support can be an excellent addition to your package.

Private loans

Federal loans are great options, but one drawback is that they have caps on the amount you can borrow each term, meaning that other sources of funding are usually necessary to cover the cost of attending medical school. While private student loans may seem appealing because of their low initial interest rate and higher borrowing caps, you need to understand that the interest rate on private lending can jump after graduation — at a period when you’ll only be earning a resident’s salary. These loans are also not eligible for the types of service repayment programs (addressed below) that are available for federal loans, which can cause them to be a more significant burden once you finish medical school.

Follow this link to find more guidance and ask questions about student loans.

Need- and Merit-based Scholarships

Medical schools, like colleges, award a limited amount of scholarship aid, which can be offered to meet a candidate’s financial need or in order to attract a student whose achievements or demographic characteristics match those the university is trying to fulfill. If an applicant matches the profile of students the institution is seeking, or if her MCAT scores or GPA are above the average at a particular medical school, she may be able to leverage these characteristics to secure larger scholarships or grants. Such factors may also enable a student to shift the components of an aid package in the direction of scholarships and away from loans.

Some schools also offer “service scholarships” to students who commit to working in a field or with a population that aligns with the medical school’s philosophical mission. For example, there are grants made to students who promise to work in underserved communities for a specified period of time following graduation. As with service loans, some students do not want to have their career pathways constrained by such a commitment. That said, if you are interested in pursuing your medical practice in these areas, such awards are particularly valuable since they do not have the repayment requirements of loans.

Military Scholarships

Some students also consider applying for a Health Professions Scholarship through the armed forces. These awards will cover your tuition and fees as well as provide you with a stipend in exchange for a four-year commitment of service to a branch of the military. Interested students should check the websites of each branch to learn more about these opportunities.

3. Loan Repayment Considerations

Each type of loan has benefits and drawbacks, and one of the most important considerations is how they are expected to be repaid after graduation. Federal student loans, including Perkins, Stafford, and GradPlus loans, have the advantage of being eligible for several different repayment options. To learn about the range of options, check out AAMC’s Financial Aid page, which offers webinars, online repayment calculators, and other resources to help students manage their education-related financial obligations.

Lowering the burden of borrowing

One of the most popular repayment choices currently available is called Income-Based Repayment, which allows borrowers to make smaller monthly payments on their loans while they are still in their residency. When this option is coupled with the Public Service Loan Forgiveness Program (PSLF), granting forgiveness of loans after making regular payments for 10 years while working at a nonprofit institution (remember that many hospitals qualify!), you can significantly reduce the total amount of student loan debt that you end up paying back. One caution, however, is that programs like the PSLF are subject to regular renewal by the federal government and may be eliminated in the future.

There are also a number of service programs designed to help students either pay for medical school or help them pay back loans once they complete their education. In addition to the PSLF discussed above, the National Health Service Corps Loan Repayment Program has a structured loan forgiveness plan that relieves borrowers from repaying their federal loans if they agree to work in underserved areas for a specific period of time.

Read a more in-depth dive into student loan forgiveness programs.

4. Putting it all Together

We’re nearly there! At this point, you’ve probably looked at each package and have a rough idea of how much you’ll need to borrow annually, as well as what each loan’s repayment terms are. You may have even considered service repayment options. The next step is to consider your career goals, the characteristics of the schools you love, and their costs: Which institution will give you the most “bang for your buck”? For example, if you’re committed to pursuing clinical research in your career, does your in-state med school where you were offered a strong financial package provide similar opportunities as the private, oh-so-expensive university down the road?

Often, when you look at the situation practically, the right fit for you will be clear. Don’t minimize the gaps between packages — a $20,000 difference in annual support can quickly become a $110,000 burden by the time you graduate. Picture your life 10 years from now: If starting a family and buying a house are important to you, you may want to attend a university that is ranked slightly lower but is much more affordable.

My strongest advice, as someone who went through this process not so long ago, is not to blindly attend a school without carefully weighing the costs and benefits for your future life. The ability to make career decisions without having to worry about paying back a mountain of debt can’t be ignored. You can get an excellent education at medical schools whose total cost won’t weigh you down for years to come — and being a doctor with a rewarding career is the goal, not struggling to dig out from the cost of getting there.

Follow this link to read fellow Noodle Expert Dr. Patrick Beeman's piece on putting medical school rankings in perspective.