Path to Medicine

Medical School Finances

There is no doubt that going to medical school is very expensive…….that is why I created this section on medical school finances, to help you figure out how to handle it all!

In this section I want to cover…

  • Cost of attendance
  • Loans and scholarships
  • Payback options

According to US News, the average cost of medical school tuition and fees for the 2014-2015 school year is a whopping $51,044! This means that you will be about $200,000 in debt just from the tuition and fees at most

institutions.

Now, there are many schools that have tuition in the $30,000 range and even cheaper. If you live in Texas you have a good chance of getting into schools there, and getting into a Texas medical school means that you will have the opportunity to attend some of the cheapest medical schools in the nation.

Before I dive into the meat of medical school loans and finances, I want to give a positive message…

The fact of the matter is that medial school is expensive, but you will be able to pay it off. With even the lowest paid full time physicians earning an income of right around $200,000 a year, paying back your medical school loans will be feasible. That $200,000 a year income is more like $150,000 by the time you have taxes and pre-tax retirement contributions taken out. This leaves you with roughly $12,000 a month after taxes. If you calculate out your monthly payments when your all done, then you will see that you can expect to pay about $2,500 a month on a 20 year loan, or $4,000 a month on a 10 year loan.

I would highly advise the ten year loan over the 20 year one….it will help you save a lot of money on interest….. this means that after you pay your loan payment each month you should still have $8,000 a month or $96,000 a year….

This is where most physicians go wrong…. they think they have a lot more money then they actually do…. $8,000 a month is good money! You need to keep in mind though the lost time for retirement contributions, buying a house, and other monthly expenses. After some much necessary budget planning I have come up with $6,000 a month…. this is the number that I personally need to live on after my medical education in order to give my family the life we desire and to catch up on retirement contributions…. This means that I should have about $2,000 of disposable income… that will GO TOWARDS MY LOANS!

Remember too that after loans are paid for in ten years, you will have that extra $4,000 a month! You are use to living without it, so now you can put it right into retirement or savings and help secure your financial future even faster!

So what is the point in all of this….? I am proving a point that if you can control spending and be responsible with your money then it is very lucrative financially to become a physician. It will pay off, you will be able to pay back your loans and live a decent life. The biggest factor in all of this is HOW YOU MANAGE MONEY AFTER SCHOOL!

 

Cost of Attendance

Many students think that they can take out whatever they want in student loans. Well I am here to tell you that you can’t…

The amount that you can take out is dependent on what the financial aide office at your school of choice calculates you will need to survive each year. This is called the cost of attendance.

The medical schools financial aide office uses fairly strict federal guidelines to come up with this number. The school will add in costs such as tuition, fees, books, commuting costs (gas, oil, etc), and general living costs for a single medical school student. The cost of attendance DOES NOT factor in if you are married or single,  live alone, or have kids, everyone is budgeted the same amount of money.

The interesting fact is that all of your financial aid together will only cover the cost of attendance. Government loans, scholarship money, and any other loans can only be used to cover up to the cost of attendance. Financial aide is not available for above and beyond the cost of attendance.

Now, after you have received financial aide for the total cost of attendance a check will be given or direct deposited to you with the “change”. The change is the amount that is left over after all tuition and fees have been subtracted out. For example if cost of attendance is $80,000 and your tuition and fees are $50,000 then you would be given a check worth $30,000 to cover living expenses. The $30,000 check is the “change” check.

This check is generally given out once a semester… it becomes your responsibility to ensure that it is budgeted and used correctly to last you the entire semester.

Everyone’s situation is different, but generally speaking from what I have researched and observed you will have around $30,000 a year to live on and pay bills. That money includes paying for the necessary health and dental insurance, so it really becomes more like $23,000 after that is paid for. That may sound like enough, but if you aren’t responsible and don’t budget your money then it can run out quickly.

 

Loans and Scholarships

There are many different kinds of loans that one can get for medical school. The ones that you will most likely use are the government backed loans….before you can secure these loans you must fill out a FAFSA.

Direct Unsubsidized Stafford Loan: These loans allow medical students to take out $42,722 per academic year. The total amount that you are allowed to have of this kind of loan is $224,000, this included undergraduate and graduate loans. These loans have a rate of 5.84%, and interest will accrue throughout the lifetime of the loan. Payments have to begin six months after graduation, unless deferred. (which I don’t recommend). These loans also have a 1.073% origination fee that is added to the total balance of the loan at the time of each loan disbursement. Payment generally begins six months after graduation or withdrawal.

Direct Grad Plus Loans: This loan is used to cover all expenses up to the calculated cost of attendance. The interest rate on these loans are a little bit higher then the Stafford loans. These interest rates generally run at 6.84% and have an origination fee of 4.292% at the time of each disbursement. The loans will continue to gain interest for the life of the loan. Payment generally begins six months after graduation or withdrawal.

Perkins Loan Program: The Perkins loan is a low 5% fixed rate loan. This loan is reserved for students with “exceptional” financial need. The loan amounts are given to schools and they are to decide which students meet the exceptional need requirement. These loans have a longer period before repayment begins, they typically require repayment to begin around nine months after graduation or withdrawal.

HRSA Primary Care Loan: These loans are designed for students interested in primary care. They are a low 5% rate loan, the interest doesn’t accrue until the second year of residency. There are a lot of stipulations with this loan, they require you to pay on them for no less than 10 years, but no more than 25 years. Basically you have to have some principle on the loan for up to ten years, this helps secure you in a primary care practice setting.

Private Loans: There are many private loans out there, they typically carry a higher interest rate and also do not qualify for repayment and consolidation options that the other loans do. I would advise that you try to utilize the loans listed above for all, if not the majority of your loans.

 

As far as scholarships go, you can get medical school paid for in an abundant of different ways. Now, before we begin I will tell you that there is no such thing as free money… so get that out of your head right now. When you get a scholarship that pays for medical school there will be stipulations. Most of the time your repayment for the money is to give your time in some capacity. These are all great options, but make sure it is what you want, because I assure you that you can pay back your medical school loans the traditional way. It will be hard, but you can, so make sure that when you take a scholarship there is more that you like then just the money.

The first ones I will discuss are the Armed Service Health Professions Scholarship Program. These are known as the HPSP and they are offered through all the major divisions of our armed forces. You can chose to enter the Army, Navy, or Air Force HPSP. They all provide basically the same benefits, but some might be easier than others to gain admission into.

HPSP highlights:

  • Pay full tuition, fees, books, and any other expenses directly related to medical school.
  • Pay a stipend for living expenses: Right now (2016) it is around $2,000 a month.
  • Year for year payback. If you get a four year scholarship, you owe four years of service.
  • You are expected to serve four 45 day active duty tours while in medical school. (Officer commission, and rotations…  not basic training.)
  • Apply for residency through the military match, may get deferment for civilian residency, but not likely.
  • Residency pay is slightly higher than civilian pay, you are payed what an officer in your respective branch is paid.
  • Post residency pay is less than a civilian doctor.
  • After your four years are up they typically have you on reserve status for another four years. This means that you can be called back at any time. You have become an asset to the military, so they will give you promotions and other offers to try and retain you. It is up to you after your commitment is up whether you stay or not. The military offers fantastic benefits for practicing physicians, but it may not be for everyone.

Many recruiters all people will say that the military allows you to choose whatever specialty you want to… just like the civilian world. These students have to participate in the military match process though, and the military has been known for deciding what specialty you will pursue based on your needs. There are very few residencies in the military match as compared to the civilian, this is where this stigma comes into play most. If the military needs a certain specialty then it is rumor that you will be swayed to pursue that residency.  However, if both your wants and the military’s needs are the same then you will most likely end up in that specialty.. pending enough residencies are open.

Sometimes you can serve as a general medical officer or a flight surgeon instead of matching. If you do this then you will have a greater chance of matching into the residency specialty that you want when that time comes. I believe that military match goes off of a point system, the more points you have the higher priority you have in the process. Service time happens to be one way in which you can earn points, so if you do a tour as a general medical officer (GMO) then you gain service time and in essence more points.

What is a GMO? A general medical officer is essentially a primary care physician in the military that is not specialty trained and board certified. You generally do some training and then are assigned to a specific area to practice primary care for the military. The downfall to this is that you may not feel ready to practice medicine because you haven’t been through a residency yet, but if military medicine is what you want to do for a long career, or just aren’t competitive enough to match into your chosen specialty then a stint or two as a GMO of flight surgeon (GMO in the Air Force) may benefit you.

With that, I want to end my discussion of the HPSP by leaving you with a few tips….

Read your contract and make sure you understand every detail! Make sure you especially look at the fine print, the military is notorious for forgetting some of the small print information. As with any document, know what you sign before you sign it.

Be sure that military life is for you… you will be deployed… you will be forced to move… that is time away from family and friends… be sure you like military life. It has is benefits as well, so you have to decide.

Don’t do it for the money… if you do the math, even for primary care specialties you will be able to make almost just as much money in the same period of time… sure you won’t have to worry about loans with the military route, but you may also give up some of your better interests for that of the military’s. If money is the only factor… don’t do it!!! You can easily pay off your loans by being smart with your money.

Have an open mind, and do it because you love the military and you enjoy helping those who serve this country and you wont regret it.

Uniformed Health Services University (UHSU)

This program is very similar to the benefits of the HPSP, but also has some differences. This is basically medical school in uniform, you apply directly to UHSU through AMCAS just like all the other schools. If accepted, you are then commissioned as an officer in one of the three military branches and then you begin medical school as an officer.

If you choose this route then your school will be paid for and you will also have living expenses paid for too. When you choose to go this route then you will be in uniform for everyday of your medical school career. You are part of the active duty military, but it is unlikely that you will be deployed during education… just like the HPSP they let you concentrate on medicine and serve after your done.

With this route you will owe seven years of payback when you are done… because you will also do a military residency… it is highly unlikely that you will match into a civilian residency. This route offers great benefits as well, but once again do it for love of military life and service to your country… and you will be happy.

National Health Service Corps (NHSC)

This scholarship is directed towards students who have a passion to provide primary care to under served populations. Just like the HPSP, this scholarship will pay for all tuition,fees,and medical school expenses as well as giving you a stipend each month. The stipend right now is around $1,200 a month, before taxes are taken out… so expect about $1,000 a month.

In order to be considered for the NHSC you have to commit to providing primary care to a rural or other under served community for the same amount of time that you received the scholarship for. Qualifying specialties include: Family medicine, Internal medicine, Pediatrics, OB/GYN,  and Psychiatry. There are combinations of these specialties that can be completed, and also a small list of fellowships that are allowed.

You can complete you service obligation in a clinic or hospital setting. The setting just has to meet guidelines a specified by the NHSC. They give a score called the HPSA (Health Profession Shortage Area) score, this determines the need for your specific specialty in a given area. You can view this score at the NHSC jobs board site.

This is a very beneficial program to anyone interested in primary care, but it does come with its stipulation…. if you choose to practice anything but primary care then you will end up paying back roughly 300% of what they paid you.. so be sure you want to go into primary care.

The NHSC also provides another option for those who decided late in medical school that primary care was what they wanted to do…. it is the loan repayment program. They offer $50,000 for a two year commitment or they offer through another program $120,000 for a three year full time commitment. Keep in mind that you can extend contracts for more funding as long as their is more funding available.

The NHSC is a fantastic opportunity for those that are interested in practicing primary care. The program often gets a bad name because they will assign you to a specific site if you do not find one yourself. You have the opportunity to find a practice location that meets the needs of your contract, but if you fail to do so then you will be forced to practice wherever it is that they choose for you.  So be on the ball and get yourself a job if you choose this route.

Institutional Scholarships

Check with your respective institutions, most medical schools offer scholarships to their incoming students. Many of these scholarships are based on MCAT and GPA, but there are certainly other factors for many of them as well.

Also, many schools will have lists of scholarships that are privately funded. Check with your schools financial aide office and inquire about the scholarships that are out there. Many of these privately funded scholarships will be in the $1,000 to $5,000 range, but every little bit helps!

 

Loan Repayment Options

There are a few different loan repayment options that the government provides. These programs generally only apply to the stafford, direct plus, and consolidation loans. The point of the varying payback options is to make paying your medical school loans feasible during residency and beyond.

You have two options for repayment once your grace period after graduation is up… you can begin paying or you can defer. If you defer then interest starts to build… and I can assure you that you don’t want an average of 6% building annually on a $350,000 loan…. this would amount to roughly $21,000 being added to your loan balance every year! If you want to pay on your loans directly out of medical school then you can expect to pay a minimum of around $2,000 a month! How can you do that on a resident salary of about $50,000!?? YOU CAN’T!!

That is why the government created Income Based Repayment (IBR), Income Contingent Repayment (ICR), and Pay As You Earn (PAYE).

These programs allow you to pay a fraction of what you would pay normally… this amount goes to the interest balance on the loan… the cool thing is that you are paying down the interest… but the $300 a month you will most likely pay on these plans wont cover the entire interest accrual… well the government will pay the remaining balance of your interest for 3 years of residency!

With these programs you will generally pay less as long as the total you are paying isn’t more than the ten year regular loan amount. So if under the standard ten year repayment plan you are paying $4,000 a month, when you graduate residency and begin actually earning some decent money you will not qualify for the $300 a month payments anymore because they base your payments off of income. So if you get to the point where they are calculating your payments to be $4,000 then you will pay the standard loan repayment payments at that time….

With that in mind… they do offer complete loan forgiveness after 25 years of working in a not for profit organization. Even though I hope you will pay your loans off before 25 years it is a pretty cool option….

These are awesome programs and I plan on using them and I hope you do too!

Another cool option is the Public Service Loan Forgiveness (PSLF).

This program makes it so your loans will be forgiven after you have made 120 total qualifying payments towards your loan. The catch is that you have to be working for a 501c3 organization or some other not for profit entity during the time you are paying on your loans…

The way that you save money is to do IBR during residency and then couple it with PSLF. That means for three of the ten years you are not paying the full amount… then you get out and continue to pay for the next seven years… and the loans are forgiven after that.

All pretty cool options that you need to know about!! Take advantage of all that you can while going through this process!