Loans for Medical School and Their Characteristics

Stafford Loans for Medical School

Stafford loans for medical school are the base loan of everyone who receives financial aid. Because of their low interest rate they are the first to be taken out. There are two kinds of Stafford loans: subsidized and unsubsidized.

Subsidized Stafford loans have the lowest interest rate (at time of writing it is 3.4%) and the interest is only applied to the loan AFTER graduation. In other words, the interest will only begin to accrue when you enter residency. You may only take a maximum of $8500 of stafford subsidized loans out every year.

Unsubsidized loans have a slightly higher interest rate usually (6.8% at time of writing), though at times the subsidized and unsubsidized loans have the same rate (2007-2008 was and 2012-2013 will be 6.8% for subsidized as well). Unsubsidized loans DO accrue interest while you are still in school, so the 6.8% will begin to add up from day one. The yearly limit for subsidized loans is $32,000 a year.

Every effort should be made to minimize debt to the point that you don't need to take out more loans than these two. The interest rate and costs are very low, and only taking $40,000 a year out in loans will make your life so much easier than many of those students who are taking out $70,000+ every year. For more information read my article on why the cost of medical school is becomming a problem.

Two more things you should be aware of when it comes to Stafford loans. First, there are fees in the loans of about 1%...meaning that you will receive 1% less than what you expect to receive when the loan is given to you. Remember to take this into account when you do your budgetting. Second, there is a aggregate, or lifetime, limit to Stafford loans for medical school students that adds up to $224,000. This means that you need to be aware of what you borrowed in undergraduate school and plan accordingly.

Grad PLUS Loans for Medical School

If you have maxed out your yearly numbers for the Stafford Loans you may be eligible for the Grad PLUS loan. These loans are not credit dependant except for one factor. If you have any outstanding unpaid debt, or have been extremely late in paying off the debt or credit cards, then you may not be eligible for the Grad PLUS. It is an easy fix though, just call the debtor to whom you owe the debt, catch up with it, then apply for a fix on your credit reports. This will take a few months to process though, so do it early.

Once you've been accepted to take Grad PLUS, the interest rate will be a fixed 8.5% (at least it always has been, I'll try and keep you informed of any changes). Their fee's are 4% (same as Stafford calculate 4% less then what you applied for) which is 4x more than Stafford loans. And their limit is set by the school as the "cost of attendance" meaning all of you loans together cannot exceed the COA the school has published.

The nice thing about Grad PLUS is that it is a much better option than private loans (and much worse than Stafford by the way) being that they are usually significantly cheaper than the private institutions in both fee's and interest rates. They also can be consolidated into one big loan at the end of medical school. On the page I linked I talk about the advantages and disadvantages of consolidation so I won't go into it here. But Grad PLUS can be consolidated and private loans cannot be. Also, Grad PLUS loans can be deffered in a hardship deferral whereas the private loans cannot be. And lastly, Grad PLUS loans are eligible for income based repayment which I mention on the general medical school loan page here, and private loans are not eligible.

Private Loans for Medical School

JUST DON'T DO IT. Just don't, they are not worth it ever. I have never met a single student who couldn't live off of the two loans above. If you are having trouble you probably are spending too much money. If you run into a big issue with unexpected costs, such as a medical bill or death you have to pay for or something to that effect, don't take out loans here, see if you can get financing from a bank, or make a payment plan with the organization you owe. But do your best to never be in that situation by covering yourself with insurance and planning and budgetting. Murphy's law of "things that can go wrong will go wrong" will come to pass in medical school, I promise. Plan for Murphy, save some of your money, NEVER go into private loan debt for medical school. Just don't do it!!! That's as clear as I can be.

That is about it, short of borrowing money from a family member (which I don't recommend either), those are the options for loans for medical school. Use your borrowing wisely, keep it low, become weathly like doctors are supposed to be. You will thank yourself down the road for paying attention now.

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