Medical Student Loans: Counting the cost of med school

Let’s talk about something that’s on all our minds: the cost of medical school. It’s no secret that becoming a physician comes with a hefty price tag, and student loans often play a big role in making those dreams a reality. In this guide, we’ll break down everything you need to know about medical student loans so you can make informed choices about your future.

The Cost of Medical Education

It pays to think about the pounds and pence or dollars and cents of medical school. From tuition and fees to living expenses, the numbers can add up fast. Current statistics paint a daunting picture of the cost of attending medical school, with figures escalating annually. Beyond the direct expenses, factors such as inflation, technological advancements, and increased administrative costs contribute to the mounting financial burden faced by medical students across the globe.

In the UK, the tuition fees for medical students vary for local and international students. UK students typically pay up to £9,250 per year in tuition fees for medical universities. However, international students may pay much higher tuition fees, ranging from as low as £10,000 to as high as £38,000 per year, depending on the medical school. Additionally, living costs for both local and international students can vary, ranging from £1,000 to £2,000 per month, depending on the city and type of accommodation. It’s important to note that these figures are approximate and can vary depending on the specific university and location.

In the US, the cost of medical school can also vary depending on whether the student attends a public or private institution and whether they are an in-state or out-of-state student. According to a report by US News, the average cost of attending a public medical school for in-state students is around $40,462 per year for tuition and fees, while out-of-state students may pay significantly more. Private medical schools tend to have higher tuition costs, with average tuition and fees ranging from $60,000 to $70,000 per year. It’s important to note that these figures are approximate and can vary depending on the specific medical school.

It’s worth mentioning that these figures are subject to change and it’s always recommended to check with the specific universities or institutions for the most up-to-date information on tuition fees and other associated costs.

The Types of Loans Available

When it comes to financing your medical education, understanding the different types of loans available is crucial. There are several types of medical student loans available, including government backed student loans and private student loans. This differs in the UK and the USA. Let’s explore each type in more detail:

Federal Student Loans (USA)

• Direct Unsubsidized Loans: These loans are available to both undergraduate and graduate students. They accrue interest while you’re in school, and repayment typically begins after you graduate. They are not based on financial need, and the interest starts accruing from the time the loan is disbursed. The interest rates for Direct Unsubsidized Loans are fixed and set by the government.
• Direct PLUS Loans: These loans are available to graduate or professional students and parents of dependent undergraduate students. They require a credit check and may have higher interest rates than Direct Unsubsidized Loans. PLUS Loans also have an origination fee.

Federal Student Loans often have lower interest rates compared to private loans, flexible repayment options (such as income-driven repayment plans), potential eligibility for loan forgiveness programs, and deferment or forbearance options.

However there are limited borrowing limits, origination fees for PLUS Loans, and eligibility criteria based on citizenship or residency status.

Loans Available in the UK

In the UK, students have access to various loans and financial assistance programs, including:

• Tuition Fee Loans: Available to cover the cost of tuition fees. These loans cover the cost of tuition fees and are available to UK and EU students studying in the UK. The amount borrowed is paid directly to the university, and repayment begins once the student’s income reaches a certain threshold.
• Maintenance Loans: Help cover living costs while studying. The amount borrowed depends on factors such as household income and where the student is studying. Similar to tuition fee loans, repayment begins once the student’s income reaches a certain threshold.
• NHS Bursary: Available for eligible medical students who commit to working in the NHS after graduation. It’s important to note that the NHS bursary is typically designed to supplement other forms of student finance, such as government loans for living costs (Maintenance Loans) or grants. The NHS bursary often covers the full or partial cost of tuition fees charged by your university or college for your medical or healthcare-related degree program, plus some other living costs. The specific amount you can receive from the NHS bursary is determined based on your individual circumstances and financial need. To get an accurate estimate of the financial support you may be eligible for, it’s recommended to check the latest guidance provided by the NHS Student Bursaries service or the relevant student finance authority in your region (such as Student Finance England, Student Finance Wales, etc.). They can provide detailed information on eligibility criteria and how to apply for financial support.

The loans in the UK are mainly government-backed loans with lower interest rates, repayment based on income, no upfront fees, and potential loan forgiveness after a certain period.

However borrowing limits may not cover all expenses, repayment obligations tied to income thresholds, and eligibility criteria is based on residency status.

Private Student Loans (global)

Private student loans are offered by banks, credit unions, and other financial institutions. They may have variable interest rates and repayment terms based on the lender’s policies. Private loans may require a credit check or a cosigner, and interest rates can vary widely depending on your credit history. They are not backed by the government and often require a good credit history. The interest rates for private student loans can be fixed or variable, depending on the lender.

Private Student Loans can fill the gap when federal or NHS loans are not enough, may offer competitive interest rates for borrowers with good credit, and can be used for various education-related expenses.

However generally they have higher interest rates compared to federal loans, may require a cosigner, have fewer repayment options, and fewer borrower protections compared to federal loans.

Consider financial advice

Before choosing a loan, carefully consider the interest rates, repayment terms, and eligibility criteria to ensure that it aligns with your financial situation and long-term goals. Consulting with a financial aid advisor can also provide valuable insights into your borrowing options and help you make informed decisions.

How Interest Builds On Your Loan Amount

Understanding how interest builds up (accrues) and capitalizes (gets added to the total balance) on student loans during medical school is crucial for managing your debt and minimizing long-term financial burden. Here’s a detailed exploration of interest accrual and capitalization, along with strategies for mitigating their impact:

Interest Accrual

Interest is like a fee you pay for borrowing the money. Interest accrual is the process of this extra fee adding up over time. So, by the time you graduate, the amount you owe might be more than what you initially borrowed because of the interest that has accrued over time.

During medical school, most federal student loans accrue interest, including Direct Unsubsidized Loans. This means that interest starts accumulating from the moment the loan funds are disbursed.

Accrued interest increases the total amount owed on the loan, leading to larger repayment amounts over time.

Forbearance and deferment options are available to temporarily postpone loan payments, but interest continues to accrue during these periods.

Understanding interest accrual is important because it helps you realize that the longer you take to pay back your loans, the more you’ll end up owing due to the accumulating interest. That’s why it’s a good idea to start making payments as soon as you can, even if it’s just covering the interest, to keep the total amount you owe from growing too much.

Capitalization

When you have a student loan, interest is like those extra fees that get added on top of what you owe. But with capitalization, those extra fees don’t just sit on the side; they get added to the total amount you owe, making your loan even bigger.

Capitalization occurs when accrued interest is added to the principal balance of the loan, effectively increasing the total amount owed.

So, let’s say you have a $1,000 loan, and every month, interest is accumulating on it. With capitalization, if you haven’t been paying off the interest as it accrues, the unpaid interest gets added to your original loan amount. Now, instead of owing $1,000, you might owe $1,050 or more because of the interest that’s been added to your loan.

Capitalization typically happens during specific events, such as the end of a grace period, the end of deferment or forbearance, or when switching repayment plans.

When interest capitalizes, borrowers end up paying interest on interest, leading to higher overall loan costs.

Understanding capitalization is crucial because it helps you see how your loan balance can grow over time, even if you’re making regular payments. So, it’s essential to be aware of when capitalization might happen and to try to keep your loan balance from getting bigger by paying off as much interest as you can along the way.

How to Minimise Interest Accrual

• Make Interest Payments: Consider making interest payments while in school or during residency to prevent interest from capitalizing. Even small payments can help reduce the total amount owed over time.
• Choose Income-Driven Repayment Plans: Income-driven repayment plans offer lower monthly payments based on income, which can help alleviate financial strain during residency. While these plans may result in more interest accruing over time, they provide flexibility until higher earning potentials are realized.
• Budget Wisely: Create a budget and stick to it. Minimize unnecessary expenses to free up funds for making interest payments or paying down loan principal.
• Understand Capitalization Triggers: Be aware of events that trigger capitalization, such as the end of a grace period or changes in repayment plans. Understanding these triggers can help borrowers plan strategically to minimize the impact of capitalization on their loans.
• Get expert help: Consider consulting with a financial advisor or loan servicer to explore options for managing interest accrual and capitalization effectively. You may be able to refinance or consolidate student loans to lower interest rates and more favourable terms, but it is recommended you speak to an expert about this,

Loan Repayment Options

Upon graduating from medical school, students often find themselves facing significant student loan debt. Navigating the various repayment options is essential for establishing a manageable plan for paying off these loans. Here’s a closer look at the different repayment options available to medical students:

1. Standard Repayment Plan:
   • Under the standard repayment plan, borrowers make fixed monthly payments over a set period, usually 10 years.
   • While this plan typically results in higher monthly payments, it allows borrowers to pay off their loans faster and potentially save on interest over the long term.
2. Income-Driven Repayment Plans (IDR):
   • Income-driven repayment plans offer flexibility based on the borrower’s income and family size.
   • Plans such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR) cap monthly payments at a percentage of the borrower’s discretionary income.
   • These plans extend the repayment term beyond the standard 10 years, resulting in lower monthly payments but potentially higher overall interest costs.
3. Loan Forgiveness Programs:
   • Loan forgiveness programs exist in the USA, more on these later. There is also other financial support available in the UK.
4. Refinancing and Consolidation:
   • Refinancing involves obtaining a new loan with a private lender to pay off existing student loans. This can result in a lower interest rate and more favorable terms but may entail sacrificing benefits offered by federal loans, such as income-driven repayment options and loan forgiveness programs.
   • Consolidation allows borrowers to combine multiple federal student loans into a single loan with a fixed interest rate, simplifying repayment. However, it may not lower the interest rate or reduce overall repayment costs.

It’s essential for medical graduates to carefully evaluate each repayment option based on their individual financial circumstances, career goals, and long-term financial objectives. Seeking guidance from financial advisors and loan servicers can help borrowers make informed decisions and develop a repayment strategy that aligns with their needs.

The Impact of a Loan on your Career Choice

Student loan debt can be a significant factor in determining which career paths medical professionals choose to pursue. The burden of repaying loans may lead individuals to prioritize higher-paying specialties over others, as a means of managing debt and achieving financial stability more quickly.

Additionally, the availability of loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF) and National Health Service Corps (NHSC) Loan Repayment Program, can also influence career decisions. These programs offer opportunities for medical professionals to have a portion of their student loans forgiven in exchange for working in underserved areas or in public service roles. More info about these is covered later on.

It’s essential for medical students and graduates to carefully weigh the financial implications of their career choices against their personal and professional goals. While loan forgiveness programs may offer relief from student loan debt, they often come with specific eligibility criteria and service commitments that may impact career flexibility and mobility.

Loan Forgiveness Programs and Further Financial Aid

Navigating student loan repayment can be challenging, but there are programs and resources available to help ease the burden for medical students and graduates. It’s essential to research eligibility requirements, application processes, and program details to take full advantage of available opportunities for financial assistance.

USA Loan Repayment Options

The Public Service Loan Forgiveness (PSLF)

PSLF is a federal program designed to forgive the remaining balance on Direct Loans after borrowers have made 120 qualifying monthly payments while working full-time for a qualifying employer. Borrowers must submit the PSLF application form to certify employment and payments made under a qualifying repayment plan.

To qualify for PSLF, borrowers must work full-time for a qualifying employer, which typically includes government organizations at any level (federal, state, local), non-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code, and other non-profit organizations that provide qualifying public services.

Qualifying payments are those made under a qualifying repayment plan while working full-time for a qualifying employer. These repayment plans include the Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR) plans.

Only Direct Loans are eligible for PSLF. Borrowers with loans from the Federal Family Education Loan (FFEL) Program or the Perkins Loan Program may consolidate their loans into a Direct Consolidation Loan to qualify for PSLF.

The National Health Service Corps (NHSC) Loan Repayment Program

The NHSC Loan Repayment Program offers loan repayment assistance to healthcare providers who commit to serving in designated Health Professional Shortage Areas (HPSAs) with a critical shortage of healthcare professionals.

Eligible healthcare providers include physicians (MD or DO), nurse practitioners, physician assistants, dentists, dental hygienists, and others. Applicants must submit an online application through the NHSC portal during the annual application cycle. The application requires documentation of employment and loan information.

Participants must commit to working full-time (at least 40 hours per week) for a minimum of two years in an NHSC-approved site located in a HPSA. Participants may have the option to extend their service commitment for additional loan repayment assistance.

The NHSC Loan Repayment Program provides assistance for qualified educational loans, including government and commercial loans for tuition, reasonable educational expenses, and other reasonable living expenses incurred during the pursuit of a healthcare education.

UK Loan Repayment Options

In the United Kingdom, these programs do not directly mirror the loan forgiveness and repayment programs available in the US. But they do offer various forms of financial support and incentives to healthcare professionals to address workforce needs and encourage service in underserved areas. Here are a few examples:

• Medical Loan Repayment Scheme (MLRS)
• The MLRS is a scheme in England that offers financial assistance to newly qualified doctors who commit to working in eligible specialties and geographical areas facing recruitment challenges. Participants receive loan repayments towards their medical school tuition fees and maintenance loans.
• Widening Access to Specialty Training (WAST) Programme
• The WAST Programme is designed to support medical graduates from underrepresented backgrounds in accessing specialty training in the UK. It provides financial assistance, mentoring, and support with training applications.
• Foundation Year 2 (F2) Trust Grade
• Some NHS Trusts offer Trust Grade positions for junior doctors completing their Foundation Year 1 (F1) training. These positions may include financial incentives or loan repayment schemes to attract doctors to specific specialties or geographical areas.
• Golden Hello Schemes
• Some NHS Trusts and regions offer “Golden Hello” incentives to attract healthcare professionals, including doctors, nurses, and allied health professionals, to work in areas with staffing shortages. These incentives may include one-time payments or loan repayment assistance.

Financial Wellness and Mental Health

Student loan debt can significantly impact the mental health and well-being of medical students and graduates. The weight of student loan debt can lead to heightened levels of stress and anxiety. Concerns about loan repayment, future financial stability, and career choices can contribute to mental health challenges. The pressure to balance educational expenses, loan repayment obligations, and career aspirations can take a toll on mental well-being.

If you are experiencing these, here are some tips for Managing Financial Stress:

1. Budget: Develop a budget to track expenses and prioritize spending. Setting financial goals and creating a plan for managing debt can help alleviate stress and provide a sense of control over finances.
2. Seek Support: Reach out to financial advisors, mentors, or counselling services for guidance and support. Many medical schools offer resources for financial wellness and mental health support.
3. Explore Loan Repayment Options: Investigate loan repayment programs, income-driven repayment plans, and loan forgiveness opportunities to determine the best strategy for managing student loan debt while pursuing career goals.
4. Self-Care: Incorporate self-care activities into your daily routine to promote mental and emotional well-being. Engage in stress-relieving activities such as exercise, mindfulness, and hobbies to help manage financial-related stressors.

Medical Student Loans – a necessary evil

Navigating the journey of medical education and professional development comes with financial challenges, but with knowledge, support, and perseverance, both medical students and graduates can overcome financial obstacles. Remember, you’re not alone in this journey, and there are resources and communities available to support you every step of the way.

Managing student loans can be daunting, but it’s essential for medical students and graduates to be proactive in understanding their options and seeking financial assistance when necessary. By exploring repayment plans, loan forgiveness programs, and additional resources, you will be able to take control of your financial future and work towards achieving your career goals.