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

Most medical students will take out loans when attending medical school. There is a joke between me and my friend that as medical students, we are poorer than a bum off the street. In reality, we are. If we combine the loan with our lack of valuable possessions (assets), we will find that we have less than nothing — we owe money.

Average Loan for Medical School Graduates

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.

Loan Basics – Interest Rate

When we obtain a loan, we would have to pay back more than we have 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 $100 loan 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. If you’re not careful, you can seriously get burned.

medical school loan - where did the money go?

Because of a large medical school loan, Mr. Onionhead and Seal have no money. Medical school is a HUGE financial commitment.

Obviously, with a higher interest rate, we would have to pay back more. With the same amount of $100 borrowed, at 6.8% interest, we would have to pay back $719.68 after 30 years. And do 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%).

Loan Basics – 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 could be reading a similar article about you in the future.

Therefore, I hope I showed you the importance of understanding the financial aspects of medicine, especially that of debt.

We have just touched upon the tip of the iceberg. Read further for details on the different types of school loans.

Types of Loans

There are many different types of medical school loans. Each of them are different in terms of their interest rate and terms of payment. The list below are organized from cheapest interest rate (listed first) to most expensive interest rate (listed last). I would recommend you research the different types of medical school loans so you can empower yourself and pick the best ones for you.

  • 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.

More About Medical School Loans

Medical School Tuition and Fees: Why You Really Need to Pay Attention
The bulk of the school loan will consist 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. Find out how much medical school tuition is here.

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

How to Pay Off Medical 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 Consolidation for Medical Students
After graduating from 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.

Medical School Loan Forgiveness Programs, Repayments, and Scholarships
In some instances, the government is willing to pay for your education. In return, they will want your service for an extended period of time. Explore the different programs available and see if any of them is suitable for you.

Everything You Have to Know About Paying Back Your Student Loans as a Doctor (Even If You Owe $1 Billion)
This is the ultimate guide on paying back as little of your loan as possible … and get away with it legally. THIS IS A MUST-READ!

Default on Medical School Loans: HELP!!!
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.


  1. Good website, but you probably should have made a big distinction between absolute and relative loan cost. I.E, thanks to inflation averaging about 3% a year, that crazy high number that we will pay after residency isn’t as bad as it seems. A lot, yes, but better than it appears.

    • Good point about inflation.

      But I must disagree. The inflation you are referring to is based on the CPI. But the increase in salary for most people does not match inflation. Basically, things are getting more expensive while their salaries barely budge. These days, doctors are making even less per hour, compared to several years ago. Who knows what physician salaries may look like in the future.

      And only a few years ago, the interest rate for the loans was around 3%. Now it’s more than 6%. There is a trend for the government to raise rates.

      Between the high interest rates and the high tuition (which will only get higher), I doubt it really looks better than it appears.

  2. Minh Pham says:

    May I get all the loans about at the time I go to AUC toward MD’s degree, if I am not American Citizen, but I got Permanent Green Card at California , USA for more than 1 yr.
    My original citizenship is Swedish

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