It’s no secret that medical school is expensive. According to Association of American Faculties of Medicine, the average medical school debt of students who graduated in 2019 was $ 201,490.
If you are planning to study medicine or are already in the thick of it, it’s important to understand what to expect from the financing process and what your options are for repayment and debt reduction.
What is the average debt of medical schools?
The average student loan debt of physicians and other medical school graduates is $ 201,490, an increase of 3% from the previous year. That’s a far cry from the $ 28,950 average student loan debt for all students graduating in the same year, according to the Institute of College Access and Success.
Here are some more details about the average debt after medical school:
- Seventy-three percent of graduates have medical school debt.
- Almost one in five medical graduates has student loan debt of more than $ 300,000.
- The median debt for pre-med studies is $ 25,000.
- Forty-four percent of medical school graduates plan to participate in a student loan cancellation or repayment program.
- Medical school graduates also have other debts, including a median of $ 5,000 on credit cards and a median of $ 10,000 in home and relocation loans.
In comparison, the average student loan balance for graduates with professional doctorates for the 2015-2016 school year (the latest data available) was $ 186,600, according to the National Center for Education Statistics. Graduates with research doctorates and masters graduates with $ 108,400 and $ 66,000 in debt, respectively.
What are the average interest rates on medical school loans?
If you have federal student loans, including undergraduate and graduate loans, the interest rates are updated annually. Private student loans, on the other hand, generally offer a range of interest rates, which depend on the creditworthiness of the borrower.
Here is a history of federal student loan interest rates over the past few years:
|School year||Direct loans for undergraduates||Direct loans for graduate students and professionals||Direct PLUS loans for parents, graduate students and professionals|
Since November 2020, private student loan interest rates vary from just under 2% to around 14%, depending on the lender and your creditworthiness.
It is important to understand that most student loans accumulate interest while you are in school, even if you choose not to make payments, and if you choose to continue this deferral during residency, the interest will accrue. Once you’re ready to make payments, the lender will capitalize the interest, add it to your principal balance, and increase your monthly payment.
How long does it take to pay off medical school loans?
The standard repayment term for federal student loans is 10 years. If you’re struggling to keep up with your monthly payments, you can extend your repayment schedule up to 30 years with alternative repayment plans:
|Repayment plan||Repayment period|
|Consolidation loan||Up to 30 years|
|Pay as you earn||20 years|
|Remuneration as you earn||Up to 25 years|
|Income Based||Up to 25 years|
|Income-Quota||Up to 25 years|
Private student loan companies set their own repayment terms, but most loans to private medical schools will allow the choice of terms of five to 20 years. Of course, you can always refinance your loans on new terms, thereby extending the repayment period. How long it takes you to pay off your medical student loan debt ultimately depends on your salary and other expenses.
How can I reduce the debt of my medical school?
You may find it difficult to work even part-time while studying medicine, so you may need to rely on scholarships and grants to reduce your reliance on debt to complete your college education.
However, once you finish your studies, you will have several options to reduce your student loan balance, or at least the amount of interest you pay on the debt.
Student loan exemption programs
The federal government offers student loan forgiveness borrowers who work for a government agency or qualifying non-profit organization. To qualify for the public service loan forgiveness program, you will need to work full time for an eligible employer while making 120 eligible monthly payments.
Once you have fulfilled all the conditions, your remaining debt will be canceled without any tax consequences.
You can also get a discount by signing up for an income-based repayment plan and sticking to the repayment term. After 25 years of payments, your remaining debt will be canceled, although the paid-up balance is considered taxable income.
Student loan repayment assistance programs
Federal agencies and state governments offer a variety of student loan repayment assistance programs. These programs are not technically forgiveness programs because the benefit does not come from the lender, which is the US Department of Education.
However, depending on the program, you could get tens of thousands of dollars in repayment assistance. The Association of American Medical Colleges maintains a list of state and federal programs you may be able to take advantage of it.
One thing to keep in mind is that these programs generally only provide assistance to borrowers with federal loans. If you have private student loans, they may not be eligible.
Student loan refinancing
Refinancing a student loan involves replacing one or more existing loans with a new one through a private lender. Depending on your income and credit history, you may be eligible for student loan refinance rate lower than what you are currently paying, which can save you money and lower your monthly payment.
You will also have the option of shortening or extending your loan repayment term – lenders typically offer terms ranging from five to 25 years.
Note, however, that if you have federal loans, refinancing may not be the best option if you are working toward a rebate, a repayment assistance program, or an income-based repayment plan.
Whatever you do, it’s important to be proactive in paying off your medical school debt. Research your options, especially forgiveness and repayment assistance programs, and choose the one that best suits your needs and financial goals.