Tuition for medical school can cost tens of thousands of dollars per year, plus additional expenses for housing, food, transportation, books, tests, and applications to attend. Medical school students have many expenses throughout their four years of school.
For many college students, borrowing money is unavoidable.
While debt in medical school is unavoidable, what is important to understand is how to manage the debt and what it will mean after graduation. Because while in school, students are so focused on getting through school, getting through residency, and getting all of the licenses required to practice, that planning for finances is an afterthought.
That can be costly.
By developing a funding strategy to cover current expenses and maintain flexibility, medical students can avoid financial missteps.
Start With the Full Cost of Attendance
Step 1: Determine what the total cost of attendance will be for a student attending medical school.
In addition to tuition, there are costs such as room, board, transportation, health insurance, books, medical school supplies, licensing exams, and more for application to interviews. These costs may seem small, but can add up to a significant amount over a long period of time, such as 4 years of medical school.
Schools publish an estimated cost of attendance for their students. This is the average cost that medical students in the past have incurred for tuition, living expenses, etc. However, students can spend way more, depending on where they live. For example, a student attending medical school in Los Angeles could incur many more expenses than a student attending medical school in a small town.
Creating a personal budget helps expose the difference.
This budget can highlight places where you can cut back on your spending in order to not have to borrow as much for school, and therefore reduce the amount of interest that has to be paid on the money that you do have to borrow.
It is also important to note that while there are ways to decrease the amount of debt that one incurs for medical school, there are still going to be many costs that need to be paid. The purpose of this article is not to try to put strict limits on all spending by future doctors, but rather to encourage them to become aware of their total spending for medical school.
Use Scholarships and Grants Before Borrowing More
These can sometimes even only cover part of the tuition for medical school, but do help to pay for part of it.
Look beyond large national scholarships that receive many applicants. Smaller awards offered through medical associations, local organizations, hospitals, alumni groups, foundations, and specialty-focused programs can have fewer applicants.
While some scholarships are awarded based on academic performance, others will look at a student’s community service, geographic location, leadership, research, or even a student’s commitment to practicing in underserved areas of the world.
Some grants are awarded by individual medical schools to their students. It is wise to check with your medical school to see if there are any grants available.
Never assume that all scholarships are for first-year students. There are many, many awards for 2nd year, 3rd year and 4th year medical students too. In fact, in some instances, there are more for upperclassmen.
Taking just a little time to fill out an application for even the smallest award can mean the difference of having to borrow money to pay for school, or not.
Be Careful About Borrowing the Maximum Available
Most student loans have maximum amounts that can be borrowed by the student during his or her studies, for example a maximum of $20,000 per academic year. This does not mean that you necessarily have to borrow the maximum amount of money each semester.
There is a big difference between loan limits for school and actual spending needs for the academic term. Even though you are approved for the maximum amount for each semester of school, you do not need to borrow the whole amount. As with other expenses throughout school, costs may vary from term to term - and borrowing the maximum amount for each academic term can add to the balance quickly - and interest begins to accrue while you are in school.
Rather than borrowing the maximum amount each semester, it is recommended that students estimate the amount that will be needed for each term of medical school and then borrow that amount. If costs are to rise, students can reevaluate their situation at that time.
Another consideration is whether a student will be borrowing a federal loan or a private loan. A key feature of many federal loans is that they will allow a student to put their loan payments into income-driven repayment plans while they are working to pay down the loan. Private loans do not typically have these payment plans available, so it is an important consideration.
Understanding the differences between these types of loans prior to borrowing can prevent many headaches down the road.
Think About Loans in Terms of Future Income
The idea that future doctors will earn a great deal of money can make them want to borrow a lot of money to pay for their medical education.
But medical careers do not follow one financial path.
Income can vary based on a number of factors, including the type of practice that a physician is planning on, where they plan on practicing, the length of their residency, whether or not they will complete a fellowship, and whether or not they will work in a hospital or in a private practice. The income of a future surgeon will likely be very different from that of a future primary care physician.
New doctors will have a few years of earning resident salaries before they can start earning higher salaries as practicing doctors. During this time, they will begin repayment of their education debt.
Therefore, students should consider the value of medical school loans in relation to their early-career income, rather than their future salary many years after graduation from medical school.
Students don’t need to project out exactly what they will earn in the future, but they should not believe that a high income a few years after graduation will mean that they can afford to pay back their school loans.
Planning around a conservative income estimate can provide a more realistic view of how much you can afford to repay each month.
Keep Living Costs Under Control Without Making School Miserable
This is different from trying to live off virtually nothing, and can actually affect how much students need to borrow.
Reducing your living costs during med school can be difficult, especially when you are working long hours studying, doing clinicals, taking tests, and have very little time to do anything else.
Still, housing and transportation choices can have a major effect on total borrowing.
To cut back on your housing costs, consider living with roommates, moving to a house that is a short distance from the campus, using public transportation, and preparing most of your meals at home.
Students should focus on large recurring expenses first.
Saving $500 per month on housing, for example, has a much greater impact than spending hours worrying about the cost of coffee. When we are planning our finances for medical school, we should focus on the larger recurring expenses, and try to find ways to save money on those.
Protecting the Future Starts Before Graduation
Borrowing to pay for medical school is inevitable for most students, but the amount of debt that they take on is within their control. That is, unless they borrow without a plan.
Knowing how much you need to pay for your education and all related expenses in advance, searching for and applying for grants and scholarships, managing the cost of the major aspects of your life, comparing the terms and conditions of different loan offers, and knowing how and when to repay the money you borrowed are all important for being able to succeed after you finish medical school.
None of these steps requires perfect financial knowledge. It does require starting, though. You can do it!