Accepted to Med School, Now What?
Congratulations! Your hard work through your undergrad years has paid off – that GPA and MCAT score and your summers spent doing research and shadowing have prepared you for the next four years, studying to become a doctor. As the glow fades from your monumental achievement, reality set in as you must figure out how to finance this expedition. (If you found this post by accident and you don’t require loans for medical school, go have a mai-tai and then come back for other info).
Let’s jump into the different ways one can pay for school. You’ll likely have information from the medical school you plan on attending to secure funding to pay for tuition and living expenses. You can skim through this section if you took loans out for undergrad. Keep in mind, the type of loan you accept will alter the different repayment options you can choose down the road. This decision, though seemingly minor, can have a large impact on a doctor’s financial situation for potentially decades.
Once you accept an offer, get your checkbook out – typically there’s a deposit required to hold your spot, and the school will provide resources to you for financial assistance depending on your situation. In my anecdotal experience, it seems that these Financial Aid offices can be anywhere from mildly helpful to possibly committing willful malfeasance. Your mileage may vary. Nevertheless, there are a TON of resources to talk you through the different options.
Since this blog is focused largely on surgeons with a residency of at least five years (my surgeon is in the greater than five year category), plus an additional one or two (or possibly three) year fellowship, I’ll focus on the decisions you need to make that will allow you to qualify for PSLF. I should note, also, that there are some longer residency + fellowship combos with medicine specialties that make this information helpful (cardiology, for one).
What’s PSLF? I’m Glad you Asked!
PSLF is an acronym for Public Service Loan Forgiveness, and the Consumer Financial Protection Bureau has a great summary of the program:
The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your federal Direct Loans after you make 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying public service employer.
–consumerfinance.gov
So, what does that mean? Let’s break it down:
- Federal Direct Loans
- This means that the US Department of Education (and Betsy DeVos) is your lender. Basically you’re securing your loan directly from the Department of Education.
- Qualifying Monthly Payments, 120 of them
- Meeting the required payment each month as specified by your payment plan is all you need to do here. If you are attempting to qualify for PSLF, you should choose FedLoan as your servicer – they’re the only loan servicing operation that will manage PSLF.
- Qualifying Repayment Plan
- This is where some real value can come into play with the PSLF program. Federal loans can qualify for a number of different repayment plans, I’ll dig into this with lots more detail in a post dedicated to PSLF, but know for now that it can dramatically decrease your monthly payments to as little as $0.00.
- Working Full-time
- At least 40 hours a week. If you’re a general surgery resident, this will be less than half your week (unofficially; of course your week is officially 80 hours).
- Qualifying Public Service Employer
- In nearly all cases, as a resident you’ll be employed by a non-profit – 501(c)(3) – organization affiliated with your teaching hospital and have nothing to worry about here. (I’ve heard reports that Kaiser in CA does have their physicians, including residents, employed by a for-profit entity; I’ll do some more research on this).
So there it is! Work ten years for a non-profit while meeting the payment required each month and the remainder of your loan will be forgiven (principal and interest TAX FREE!) by good Ol’ Uncle Sam.
Too much of a good thing?
I have heard that there is brewing interest in Congress to institute caps on forgiveness, but for now there aren’t any. At the time of this post, it’s still safe to go for PSLF as a med student. If there are changes, most speculate that existing borrowers won’t be affected – depends how the US Treasury is looking.
Loan Decision Time
I digressed a bit with the PSLF intro, but let’s get back to paying for med school – it’ll all fit together, I promise. Once you get over the sticker shock, put together a rough budget of your expenses you think you’ll have each year, broken down by semester – there are lots of guides online for this, so I’ll just create an example here:
| By Semester: | Cost: |
| Tuition | $25,000 |
| Miscellaneous and spurious fees | $4,000 |
| Living costs: Housing ($1000/month), Food ($400/month) | $8,400 |
| Total (per semester): | $37,400 |
Depending how frugal (or not) you are, you’ll be spending at least $70,000 per year between tuition and living expenses.
Getting that Cheddar, Public or Private?
Two main options are private and public loans. In order to qualify for PSLF, you must use a public loan. After submitting a FAFSA form, you’ll likely be approved for two federal loans, Direct Unsubsidized and Direct PLUS. The former are capped at $40,500 per year, though Direct Unsubsidized Loans don’t have any strict requirements, like credit checks, and come with a pretty reasonable fixed interest rate.
You might be wondering what’s the difference between Unsubsidized and Subsidized Loans – I sure did when I first saw it. It has to do with how the interest on your loan is handled. For Subsidized Loans, the kindly U.S. Department of Education will pay the interest accrued while you’re in medical school. They do come with more restrictions than unsubsidized loans and are based on financial need. You’re responsible for the interest accrued on unsubsidized loans while you’re in school – if you choose not to pay interest while you’re in school, it will capitalize (your interest accrued gets added to the principal) on your loan.
If you find yourself needing more than $40,500 per year in loans, and you very well might, Direct PLUS loans are your next stop. These do come with more requirements, like a credit check, and may have more restrictions for borrowers with an adverse credit history.
SurgeonJourney’s Suggestion
From my perspective, I didn’t fully understand how PSLF worked until my spouse’s last year of medical school. By that time, we had maxed out the Direct Unsubsidized option every year and covered the rest of tuition with private loans. Were we to do it again, I would likely try to take out all public loan options for the purpose of PSLF.
We were fortunate that while my spouse was in school, I was working a full time job at a software startup, which certainly eased concerns for living expenses. I know that not everyone will have this situation, so it’s important to know your loan options and also focus on managing your expenses wisely. There are some great budgeting tools out there I’ll cover in later posts.
Let me know your thoughts and questions in the comments!
-SurgeonJourney
