MEDICAL SCHOOL LOANS

Many students prefer federal student loans before turning to private debt. Federal loans offer unique benefits and protections — such as income-driven repayment (IDR) plans and loan forgiveness programs — that private lenders don't provide.

Federal student loans also have fixed, standardized interest rates that are the same for every borrower who qualifies. In the 2022-23 academic year, the federal rates were:

• Direct Unsubsidized Loans: 6.54% for graduate and professional students
• Grad PLUS loans: 7.54%

Standard repayment for each of these types of loans is 10 years.

For comparison, 10-year private student loans had an average fixed rate of 9.05% in April 2023. With these numbers, you can expect to pay the following for each loan type:

However, well-qualified borrowers may be eligible for private loans with a lower interest rate, so some students may consider private lending before maxing out their federal student loans. A student loan interest calculator can help you compare costs.

Learn More: Current Private Student Loan Interest Rates

If you’re ready to apply for a federal medical school loan, you must fill out the Free Application for Federal Student Aid (FAFSA). Your school uses this information to determine your eligibility for federal financial aid, including loans.

To complete the FAFSA, head to the Federal Student Aid website and log in. You’ll need to provide personal and financial information, including past federal tax data and documentation about bank accounts, investment portfolios, and other assets.

The newest FAFSA is released annually on Oct. 1 (though the 2024-25 FAFSA may be delayed until December). Submit it as soon as possible when it becomes available, since some aid is awarded on a first-come, first-serve basis.

There are two types of federal student loans that medical students may qualify for: Direct Unsubsidized Loans or Grad PLUS loans.

Both types are available to graduate and professional students, regardless of financial need, and only the Grad PLUS loan requires a credit check. Your credit score isn’t a factor, but you can’t have an adverse credit history. This might include delinquencies, defaults, foreclosures, or wage garnishment in the past five years.

Here are the borrowing limits and interest rates for these federal loans, as of the 2022-23 academic year:

Your school might offer other types of funding, such as a Health Resources and Services Administration loan. There are several different types available, which are offered to borrowers studying to be a primary care doctor, nurse, or other health professional. Contact your financial aid office to see what’s available.

Learn More: How to Pay for Medical School

Typically, you don’t have to make loan payments while you’re still in school. Federal loans — and most private lenders — offer in-school deferment to borrowers who meet certain minimum requirements, such as enrolling at least half-time.

This means you likely won’t need to make any payments on your med school debt until at least six months after you graduate, which is the typical student loan grace period. Depending on your loan, you may even be able to defer payments until after you complete your residency.

However, interest will typically begin accruing as soon as you receive the loan. If your budget can handle it, making interest-only payments while you're in school can help reduce your overall costs.

The Association of American Medical Colleges determined that 73% of 2021 graduates left medical school with student loans. The average amount these new doctors owe is $203,062.

Whether or not you borrow to cover medical school — and how much you’ll have to repay — depends on your school choice, the amount of financial aid you receive, how much you've saved for college, and other factors.

Learn More: Average Student Loan Debt for Medical School

If you’re considering federal loans for medical school, here are a few potential benefits to keep in mind:

• Fixed interest rates: All federal student loans come with fixed interest rates, meaning your payments will stay the same throughout the life of your loan.
• Federal protections: As a federal loan borrower, you’ll have access to federal benefits like IDR plans and more flexible deferment and forbearance options.
• Potential loan forgiveness: There are several federal student loan forgiveness programs available to health care professionals. For example, if you work for a nonprofit or government employer and make 120 qualifying payments, you might be eligible for Public Service Loan Forgiveness (PSLF).

There are also some possible drawbacks to keep in mind before taking out a federal loan, such as:

• Student loan limits: Medical school students can borrow only up to $20,500 annually in Direct Unsubsidized Loans, which have a lower interest rate. However, you could borrow up to your school’s cost of attendance with Grad PLUS or private loans.
• Higher interest rates: If you have excellent credit and a stable income, you might qualify for a lower interest rate on a private loan, compared to federal options.
• Fees: All federal loans come with origination fees — borrowers will pay 4.228% for Grad PLUS Loans and 1.057% for Direct Unsubsidized Loans. Most private lenders, on the other hand, don’t charge these fees.
• Can only get a lower interest rate through refinancing: The only way to potentially reduce your federal interest rate is through refinancing with a private loan. But if you refinance federal loans, you’ll lose access to the unique benefits they carry.

Learn More: Hidden Costs of Federal Direct Unsubsidized Student Loans

There are several factors that contribute to the total lifetime cost of a loan. Consider each of the following factors to determine the best loan for your needs:

• Interest rate: Make sure you know if a listed rate is fixed, which means it will stay the same for the life of the loan, or variable, which can fluctuate based on larger economic conditions.
• Repayment terms: This is how long you have to repay your loan. The standard federal repayment term is 10 years, but private loans may have shorter repayment periods. In addition, you may find a lower interest rate with a shorter repayment term — but that means you'll have a larger monthly payment compared to a loan with a longer repayment term.
• Loan amounts: How much you can borrow varies by lender, so check if it can cover your borrowing needs.
• Discounts: Lenders often provide a rate discount (usually 0.25 percentage points) if you sign up for automatic payments. There may be additional rewards available, including graduation bonuses or loyalty discounts if you sign up for more than one product from the lender.
• Fees: You may see various fees attached to loans. These may include:
  • Origination fee: A percentage of the principal amount, usually deducted from your balance when the lender sends your money.
  • Late fee: A penalty for paying your monthly payment past the due date.
  • Returned payment fee: This is incurred if you have insufficient funds in your account and your loan payment can’t be processed.

After you’ve filled out the FAFSA and applied for grants and scholarships, you might use private student loans to cover additional costs.

Submit an application as soon as you know your expenses will exceed your federal aid package, since the timing for disbursement varies. Applying as early as possible also gives you ample time to compare lenders. Here’s what the process looks like:

1. Application: The application is typically quick — you’ll provide information about yourself, your school, and your income (including proof of your earnings). If you’re using a cosigner, they’ll need to submit their data as well.
2. Approval: The lender will check your credit and review your ability to repay. This will determine if you qualify for the loan and what rate the lender will charge you.
3. Certification: Private lenders will certify your enrollment status and cost of attendance with your school. This must be completed before the lender will disburse your funds and can take a few weeks, depending on your school.
4. Disbursement: Generally, money is disbursed at the beginning of the semester, and the lender sends the loan directly to your school. If there’s any cash left after your tuition and fees are covered, you can receive the remaining balance to use for books, supplies, and living expenses.

Learn More: When You Should Apply for a Student Loan

There are a number of benefits to taking out private student loans for medical school including:

• No application deadline: You can apply for private loans at any time, making them more flexible than federal debt.
• Higher loan amounts: Depending on the lender, you might be able to borrow up to your school’s cost of attendance, which isn't possible with some federal loans.
• Lower interest rates for qualified borrowers: If you have excellent credit and a good income (or a cosigner with those things), you might qualify for a lower interest rate on a private loan.

If you’re considering taking out private loans to pay for medical school, be aware of the following drawbacks:

• Fewer options for poor or no credit: If you don’t have good-to-excellent credit, you may struggle to find an affordable private loan. And if you have poor credit or no credit history, you may not qualify at all.
• No federal benefits: Federal benefits and protections for borrowers, such as longer deferment and paths to loan forgiveness, aren’t available from private lenders.
• Lack of repayment options: Private loans generally don’t provide the same repayment options as federal loans. For example, you likely won’t be able to sign up for an income-driven or a graduated repayment plan.

Specific criteria varies by lender, but most require:

• Good credit: Though most federal loans don’t require any credit at all, private lenders prefer borrowers with at least average credit. You’ll likely need a credit score in the mid- to high-600s, although some lenders cater to borrowers with lower scores. However, low-credit loans generally come with higher rates and less favorable terms.
• Verifiable income: Private lenders typically require borrowers to show proof of income — some lenders even have a minimum income requirement.
• Low debt-to-income ratio: Your debt-to-income ratio (DTI) compares your monthly debt payments to your monthly income. Borrowers generally need a DTI below 50% to qualify for a private loan, although a DTI below 36% is ideal.

The credit score required to get a student loan without a cosigner depends on the type of loan you're applying for.

• Direct Unsubsidized Loans: No credit check is required.
• Grad PLUS loans: There’s no minimum credit score requirement, but you’ll need to show you don’t have “adverse credit.” This can include default, foreclosure, bankruptcy, or garnishment in the past five years.
• Private student loans: Most private lenders require borrowers to have good-to-excellent credit, which usually means a credit score in the mid- to high-600s. Some lenders accept borrowers with lower credit scores, but these tend to have higher interest rates.

Learn More: Best Student Loans for Applying Without a Cosigner

It depends on the kind of loan. Here are the limits you can generally expect:

• Direct Unsubsidized Loans: Up to $20,500 per year, with a lifetime limit of $138,500 (including any federal loans you used for your undergraduate degree).
• Grad PLUS loans: Up to the full cost of attendance, minus any financial aid.
• Private student loans: Varies by lender, but many offer up to the full cost of attendance. Lifetime limits may apply, but they’re typically quite high for med school students.

Congress sets the federal student loan rate each year, and different loan types have different rates. For the 2022-23 academic year, federal loan rates are:

• Direct Unsubsidized Loans: 6.54% (for graduate and professional students)
• Grad PLUS loans: 7.54%

Private loan rates are determined by each lender and based on a number of factors, including the borrower’s credit profile and larger economic conditions. To lock in the best rate, consider these strategies:

• Improve your credit. Your credit is one of the largest factors that determines your rates. In general, the higher your credit score, the better the rates you’ll get. If you have poor or no credit, improve your score before applying.
• Apply with a cosigner. A creditworthy cosigner can improve your chances of approval. Even if you don’t need a cosigner to qualify, having one could get you a lower interest rate than you’d get on your own.
• Compare lenders. Shop around and compare your options to find a cost-effective loan that suits your needs.

Medical school is expensive, and graduates leave school with an average of $203,062 in debt. The exact amount of time it will take you to be debt-free depends on how much you borrowed, your interest rates, the types of loans you have, and your income after graduation.

Federal student loans offer repayment plans ranging from 10 to 30 years. If you have private student loans, terms typically range from five to 20 years. However, you can always pay off your loans ahead of schedule, if you can afford it.

There are several medical school loan forgiveness programs available to health care professionals, such as:

• Public Service Loan Forgiveness: If you work for a government or nonprofit organization and make 120 qualifying payments, you could have your remaining debt forgiven.
• National Health Service Corps (NHSC) Loan Repayment Program: Agree to work for at least two years at an approved site, and you could have up to $50,000 of your loans repaid.
• National Institutes of Health (NIH) Repayment Programs: There are eight loan repayment programs for doctors and scientists who perform biomedical or biobehavioral research. In return, you could receive up to $50,000 per year in loan repayment.
• State-based physician loan forgiveness: Many states also provide their own loan repayment programs to attract and retain doctors. Both private and federal loans may qualify.