Federal student loans for medical school students. The federal government offers medical students direct unsubsidized and Direct PLUS loans. Direct loans – also known as Stafford loans – are available to students enrolled at least part time.
“It’s easy to get approved for what you want,” Miller says. “Most doctors are able to take out the debt they need. The limits are quite high.”
An unsubsidized loan accrues interest the day it is disbursed until it is paid in full. You can wait until after graduation to repay loans or make interest payments while you’re in school to reduce the amount due later.
A Direct PLUS loan is available to help students pay for education expenses not covered by other financial aid. A medical student might seek a PLUS loan after reaching the annual borrowing limit for direct unsubsidized loans.
Private student loans for medical school students. Borrowers may choose private medical school loans to fill funding gaps or if they are ineligible for federal student loans or qualify for lower interest rates on private loans compared with federal loans. Before selecting a private loan, make sure you understand the conditions attached to it.
Some private student loans have variable interest rates that may start low and then adjust higher. “You’re taking on a certain amount of risk because usually to get that uber-low rate, it’s a variable rate rather than a fixed rate,” Fresne says.
Interest rates for private student loans are based on the borrower’s creditworthiness, and the borrower may need a co-signer to qualify for the best possible rate. The government, on the other hand, sets federal loan rates.
Terms can be less flexible for private student loans compared with federal loans. Borrowers may find limited repayment, deferment, forbearance, grace period and loan forgiveness options, notes the Association of American Medical Colleges.
“With a private loan, you have an amortization schedule; you have a promissory note,” Miller says. “You won’t be able to renegotiate the terms unless you refinance, and you can’t refinance unless your debt-to-income or your income potential is great.”
Pros of Federal Student Loans:
- Fixed interest rates. All federal student loans come with fixed rates, which means your payments will stay the same for the duration of your loan.
- Federal benefits. Some of the benefits of federal loans include access to income-driven repayment plans, loan forgiveness programs, and deferment and forbearance options.
- No credit checks or co-signers for most loans. A credit check is required for Direct PLUS loans, however, and you may not qualify if you have an adverse credit history.
- Death or disability cancellations. A total and permanent disability could relieve the borrower from having to repay federal loans, and all federal loans are discharged if the borrower dies.
Cons of Federal Student Loans:
- Loan limits. Medical school students can only borrow up to $20,500 in direct unsubsidized loans each year.
- Higher interest rates than private loans. With excellent credit, borrowers may qualify for lower rates on private student loans than on federal student loans.
- Upfront fees. Fees can be high on loans for graduate and professional students.
Pros of Private Student Loans:
- No application deadlines. You can apply for private student loans at any time, unlike federal student loans.
- Larger loan amounts than federal loans. You might be able to borrow up to your school’s cost of attendance, depending on the lender.
- Lower interest rates. If you have excellent credit, you may qualify for a lower interest rate on a private student loan than on a federal student loan.
- No upfront fees. Private lenders typically don’t charge upfront fees.
Cons of Private Student Loans:
- No federal loan benefits. Private student loans don’t come with federal loan benefits, such as student loan forgiveness programs, death or disability loan cancellations, and income-driven repayment plans.
- Few poor or no-credit loans. You will typically need at least good credit to qualify for a private student loan. If you have no credit history or a low credit score, you could end up with a more expensive loan than what the federal government offers.
- Interest rates may be variable. If rates rise, your monthly payment will as well. Hybrid rates have the same risk.
- Loans could require a co-signer. You might need a co-signer even if you have good credit.
Either a federal or private student loan can work to finance medical school, but borrowers should consider these differences:
Medical school loan qualifications. Federal direct unsubsidized loans are available to students enrolled at least part time, regardless of income and credit history.
Private student loans base eligibility and rates on the borrower’s credit history. Applying with a co-signer could help you obtain better loan terms if you have fair or poor credit. The most creditworthy borrowers tend to receive the lowest interest rates.
The government recalculates interest rates on federal loans each academic year, which begins July 1. A borrower’s creditworthiness does not affect the loan rate.
You can choose whether to pay interest on your direct loan while you are a student. Normally, interest will accrue and be added to the principal amount of your loan.
Private student loan interest rates. If interest rates are variable, they may adjust higher over time. In some cases, a cap may be placed on the rate so that it does not climb too high.
Citizens offers medical school loans at fixed APRs from 4.93% to 9.22% and variable APRs from 2.89% to 8.27%, plus medical residency loans at fixed APRs from 6.97% to 10.08% and variable APRs from 4.96% to 8.06%. Medical residency refinancing loans are also available with fixed APRs between 4.49% and 9.26% and variable APRs between 2.99% and 8.76%.
Limits on student loans for medical school. Federal student loans have annual and aggregate limits on how much you can borrow, while private loans generally can’t exceed a school’s cost of attendance.
The annual borrowing limit for direct unsubsidized loans is $20,500, and the aggregate limit – including all federal loans received for undergraduate studies – is $138,500. Your school will determine the amount you can borrow each academic year based on your cost of attendance and other financial aid you receive.
Loan limits vary with private lenders.
Medical school loan fees. For a federal loan, you will pay a fee that is a percentage of the total loan amount, deducted proportionately from each disbursement. This means you will receive less than what you borrowed, but you will still be responsible for repaying the full amount.
Fees for private student loans may vary by lender. Unlike with federal student loans, many private loans do not charge an origination fee.
Medical school loan repayment. If you fall below part-time enrollment, exit a program or graduate, you will get a six-month grace period before you have to begin repaying your federal student loans. Your loan servicer will provide more details, including your first payment due date.
Students who use federal loans can access income-driven payment plans that set monthly payments based on what you earn and your family size. This can be an attractive option for graduates who may not make a lot of money right away or who choose less lucrative career paths, such as teaching.
The terms of private student loans for medical school vary by lender. Sallie Mae, for example, charges interest upon disbursement and throughout the life of the loan, including any grace period. PNC also notes that it offers a deferment option, but loan interest will continue to accrue.
Interest rates are higher on Sallie Mae’s fixed and deferred repayment options than on the interest repayment option, as unpaid interest is added to your loan’s principal at the end of the grace period. Variable interest rates may increase over the life of the loan, the lender points out.
Paying down medical school loans may intimidate prospective students, but it could be more manageable than it seems.
Of course, your salary is likely to rise sharply as your medical career advances to help you pay off the rest of your debt.
Medical school students can view the large debts they take on as investments in the future, Fresne says.
“Strong job security and excellent income potential are reasons that it’s a good investment,” she says. “And that security and income potential should enable any medical school graduate practicing in any specialty to both repay their education debt and provide for a comfortable lifestyle and safer retirement.”
If you aim to minimize borrowing, these alternatives to medical school loans can help:
Explore scholarships and grants. Contact your school to find out about scholarships for medical students. Ask whether need-based grants and merit-based assistantships are available. Check medical associations and nonprofits for other aid opportunities.
Consider a service program. Government or military service will cover some or all of your medical costs. The Health Professions Scholarship Program, for example, provides a full scholarship to medical school, but recipients must serve as a military physician.
Start your own crowdfunding campaign. Sites such as GoFundMe and Indiegogo can be used to raise funds for college expenses, but they charge fees.
Ask a family member or friend for a loan. You might be able to work out better terms with family members or friends than with a lender.
U.S. News selects the Best Loan Companies by evaluating affordability, borrower eligibility criteria and customer service. Those with the highest overall scores are considered the best lenders.
To calculate each score, we use data about the lender and its loan offerings, giving greater weight to factors that matter most to borrowers. The scoring factors for private student loan providers are customer service ratings, fixed APR, variable APR, loan product availability, minimum and maximum loan terms, minimum and maximum loan amounts, minimum FICO score, and online features.
The weight each scoring factor receives is based on a nationwide survey on what borrowers look for in a lender.
To receive a rating, lenders must offer qualifying loans nationwide and have a good reputation within the industry. Read more about our methodology.
To recap, here are the picks:
Best Medical School Loans of December 2023
Students can use federal and private student loans to finance medical school.
“The vast majority of medical school students borrow through the federal student loan program,” says Julie Fresne, senior director of student financial and career advising services at the Association of American Medical Colleges.
In 2020, about 75% of medical school students had some type of education debt, Fresne says. Most of that debt was in the form of federal loans, with just 1% to 2% of those borrowers using private loans.
Many students choose federal loans because they do not require either a co-signer or collateral and because the terms are generous. “Barring any highly unusual circumstances, they can borrow up to the cost of attendance at their medical school,” Fresne says.
Federal loans also offer flexible repayment options and opportunities for debt forgiveness if students work in the public service sector.
On the other hand, you may get a lower interest rate if you have good credit and opt for a private medical school loan instead of a federal loan. Qualifications, interest rates and terms vary by lender and type of loan.
“Private loans are just like a loan you would owe a bank traditionally,” says Jan Miller, president and student loan consultant for Miller Student Loan Consulting. That means borrowers have “no forgiveness benefits, or not very many,” he adds.
Students tend to favor federal loans, in part because of the flexible repayment plans and the loan forgiveness perks. Most students who use federal loans to pay for medical school can defer payments for six months after they graduate, leave school or drop below half-time enrollment.
Most experts suggest exploring federal student aid first and then considering private student loans if you still need help paying for medical school. Here are the steps to apply for federal student loans:
- Begin by completing the Free Application for Federal Student Aid, or FAFSA, to determine your eligibility for federal loans and grants for medical school. You will list on the FAFSA the schools you are interested in attending, and these schools will receive an Institutional Student Information Record.
- Next, you will receive aid offers with directions. Follow them carefully.
- Complete entrance counseling if you have not previously received a direct unsubsidized or Direct PLUS loan. This process is intended to make sure you understand the terms and conditions of your loan, as well as your rights and obligations.
- Sign a Master Promissory Note, a legal document that specifies the terms and conditions of your federal student loans.
If federal aid and money you don’t have to pay back, such as grants and scholarships, fall short, then private student loans from banks and credit unions can help you bridge the gap. However, your ability to get a private loan will depend on the strength of your credit profile, and you may need a co-signer to qualify.
If you want a private medical school loan, this is what you can expect:
- You will shop for interest rates. Get at least a few quotes from lenders to compare rates before you choose one and apply. This is the best way to get a good deal on a loan.
- You will apply for credit. A creditworthy co-signer, such as a parent or relative, may help you get a loan if you don’t have credit history.
- Your school has to certify the loan amount before disbursal.
- You will receive a final disclosure with loan details.
The amount you need to borrow will depend on whether your school is public or private and whether you qualify for in-state tuition. Students also must have medical malpractice insurance, a contributor to medical school’s high cost.
Indeed, medical school is pricey. The median four-year cost of attendance for the class of 2022 is $263,488 at public schools and $357,868 at private schools, according to the Association of American Medical Colleges.
Although many medical students graduate with debt, most specialties provide comfortable salaries.