Medical School Loan - Financial Information, Aid, and Consolidation for Students

The sad situation for us medical students is that we will owe more than 6 times the average salary in the US (6 x $40,000 = $240,000) by the time we graduate if we borrow the total amount for all 4 years. That is a lot of money! According to the Association of American Medical Colleges (AAMC), the median medical school loan for 2010 was $160,000. Some lucky kid has parents to help with the bill. Even so, $160,000 is still a large sum of money. I personally feel that tuition is way too expensive, but that is a topic for another day.

Since we're dealing with big money here, it would be beneficial to know some basics about loans.

Interest Rate

When we obtain a loan, we would have to pay back more than we borrowed. The difference is the interest. For example, if we borrow $100 and the interest rate is 5% per year, we would have to pay back $105 by next year. The extra $5 is 5% of the $100.

Sometimes, it is not possible to pay back the loan within a year. Remember, we are poor medical students. So the year after that, assuming the same 5% interest, we do not pay back $110 but $110.25. The $110.25 is the 5% of $100 for the first year and 5% of $105 for the second year. In a sense, for the second year, we are paying interest on the prior interest. This is called compounding interest.

So with enough time, if none of the money is paid back, the money owed would be much, much more than the original $100. So if we decided to pay back the original amount we borrowed after 30 years, we would have to pay back $432.19. That is more than 4 times the original amount! We're dealing with fire here.

Obviously, with a higher interest, the more we would have to pay. With the same amount of $100 borrowed, at 6.8% interest, we would have to pay back $719.68. And you want to know what the bad news is? The interest rate for student loans is more likely going to be 6.8% rather than 5%. The interest rate for a medical school loan is higher than a loan for a house (6.8% compared to 4%).

Stuck with You for Life

Generally, if we declare bankruptcy, whatever debt and loans we have will go away. However, medical school loans are a different story. It very unlikely that you can get rid of a medical school loan through bankruptcy. And don't think that doctors are immune from financial hardships. This doctor borrowed $250,000 for medical school and ended up with a total debt of $555,000. If you are not careful with your finances, we can be reading about a similar article about you in the future.

Therefore, I hope I showed you the importance of having an understanding of the financial aspects of medicine, especially that of medical school loan.

We have just touched upon the tip of the iceberg. Read further for details regarding medical school loans.

Medical School Tuition - The bulk of the school loan will consists of the tuition. The difference in tuition between a public school and a private school will vary by a significant amount. In addition, there are additional expenses besides tuition which will add up.

Medical School Financial Aid - Applying for financial aid is a time-consuming process. In this section, I will walk you through what I did when applying. I will also show you the types of loans offered, mainly government loans. This is a very important section to be familiar with.

Primary Care Loan - If you qualify for this, you will have one of the lowest-cost loans offered by the government. Find out what the qualifications are. This section will include information about the interest, terms of payment, and more.

Perkins Loan - This is possibly the best loan a medical student can have. Find out why. This section will include information about the interest, terms of payment, and more.

Subsidized Stafford Loan - This is the second-best loan a medical student can have. Find out why. This section will include information about the interest, terms of payment, and more. However, this loan may be something of the past. For The school year beginning 2012, there will be no more subsidized Stafford loans .

Unsubsidized Stafford Loan - This will make up the bulk of the loan for an average medical school student. This section will include information about the interest, terms of payment, and more.

Graduate Plus (Grad Plus) Loan - This is the worst loan among the government loans. Find out why. This section will include information about the interest, terms of payment, and more.

Medical School Private Loan - Sometimes, there just isn't enough money to cover all your expenses. You maxed out on the government loans. You need another source of money. Learn about the private loan available to you to meet your financial needs and what it will cost you.

Medical Student Loan Consolidation - After graduating medical school, you will have the option of consolidating your school loans. This section will discuss the pros and cons of consolidation and the steps to take if you decide to pursue it.

Pay Off School Loans - Should you pay off the loan faster or slower? What do you do if you want to pay off the balance? This section will help you arrive at the necessary steps to shrink that debt.

Loan Forgiveness Programs - In some instances, the government is willing to pay for your education. In return, they want your service for an extended period of time. Explore the different programs available and maybe one of them is suitable for you.

Default on School Loans - If you are about to default on your school loans, look here. As I mentioned earlier, it is very, very difficult to get rid of your student loans through bankruptcy. Let's examine the options you have and avoid unnecessary headaches.

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