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Loans and Scholarships


A combination of different loan types and potentially scholarships makes up your total "financial aid package", which will match you total cost of attendance. There are different types of loans. Most people take out loans through the US Federal Government Loan program and supplement these with institutional aid as well as alternative private loans if total cost of attendance exceeds the amount provided through the Federal program.

Quite a few students choose to participate in a military scholarship or the National Health Service Corps scholarship, which both pay for all costs in the student budget (and sometimes a little more). This allows students to complete medical school debt-free but graduates have to "pay back" the particular service by committing to work in the program (for less pay) for several years (usually 4 years).

Federal loans

You have to fill out the FAFSA (application for federal aid) for the government to loan you money for school. These are actually government guaranteed loans and individual lenders (not the government) extend the loans to you. You can choose your lenders, but most of the time the medical school you attend can make a good recommendation to prevent you from paying too much in fees. It usually pays to follow their advice on this. There are subsidized and unsubsidized loans that make up the total loan package.

Subsidized & unsubsidized loans (Stafford Loans)

Both of these types of loans are Federal Loans.

For subsidized loans, the US government pays the interest for you while you are in medical school and during other deferral periods, so these loans are the "best deal" you can get. However, only a portion of our loan packages is comprised of these types of loans (and you cannot get more).

The other portion of the loan package is made up of unsubsidized loans on which interest (and interest on interest - compounding interest) accumulates from day 1 when the loan amount is paid out to you. A good portion of your loan money is of this type (you really have no choice in this).

Both of these loans are deferred (you don't have to make payments while in medical school) until after graduation and the interest rate is capped - it can never exceed some 8.25% or so during the life of the loan. Note that you can make interest-only payments on the unsubsidized loans while in medical school to prevent accumulation of interest - but you don't have to - and most people don't. These loans also qualify for further deferral during residency, so that no payments need to be made during residency training, either.

Pretty much everyone qualifies for these loans (although there are income and asset limits which can reduce eligibility) and everyone is treated equally for qualifying. Note that these are part of the package of financing your "cost of attendance" and not extra money beyond that.

Also, the yearly limit for these loans is $8,500 in subsidized and $30,000 in unsubsidized aid. So, if your student budget exceeds $38,500 per year, these extra costs have to be covered by other sources of financial aid. In addition to the yearly limits of $38,500, there is also a lifetime limit of $189,125 which cannot be exceeded as a grand total for your student career.

Institutional loans and scholarships

These usually have the best terms, but are in very short supply. Interest is either very low or not charged at all. Federal Perkins loans fall in this category as well because the medical school can give these out at its own digression. The school gives these preferentially to students with greatest financial need.

Often these institutional loans and scholarships are based on financial need or academic merit or something like that. Some medical schools have small scholarships available that also fit in this institutional aid category. Of course, with scholarships, there is no payback, because they are not loans.

The amounts awarded in this category are usually small in comparison to the whole cost of attendance, ranging from $1000 to $5000 or so per year, but they have the best conditions with low interest, etc. So, this is a great source, but only makes a small contribution to your overall aid package. Note that these are part of the package of financing your "cost of attendance" and not extra money beyond that.

Note that there are many dubious "scholarship finding" enterprises which will charge you money to search for scholarships or file for federal aid and other such things. Most of these are scams designed to take your money, without delivering anything of value to you. All financial aid info and help is available for free through the government, the financial aid office and banks. So, don't buy into a scam!

Alternative (Private) Loans

A note up-front: These loans are dependent on your credit rating. If you have poor or no previous credit history, you may need a co-signer to qualify for these loans. The problem is that the student budget at most medical schools exceeds the Stafford loans available per year ($38,500 per year), so many medical students have to depend on this loan type to cover their budget (and many medical schools require a credit report be sent to them before any offers are finalized).

These are available through the financial aid office as well. The financial aid office applies this money to the tuition and fees owed before giving you a change check. Banks extend these loans and charge the going variable interest rate starting on day 1 when the loan amount is paid to you.

Interest rates fluctuate just like a variable car or home loan and there is no interest cap. These loans are only used to fill gaps if the other (subsidized and unsubsidized Federal) loans and scholarship money did not cover the entire "cost of attendance" as this is the type of loan that typically caries the worst conditions.

If you are lucky enough that your in-state tuition falls below the money available each year in subsidized and unsubsidized loans, you may not need these loans at all. In most cases, the federal and institutional aid alone may not be enough to cover your cost of attendance and alternative loans are the (only) way to get additional money to cover these expenses.

Part-time and full-time scholarships offered by medical schools.

Some medical schools offer full- or part-time scholarships based on MCAT and GPA and other merits. As an example, Mayo Medical School offers a part-time scholarship to ALL students accepted there.
For the 2005 year, Des Moines University considered all medical students for part-time or full-time scholarships if they had an MCAT greater than 30 and a GPA greater than 3.5.

These are just two examples. Check with individual medical schools to see what they offer.

Military Scholarships

Any military programs are only available to US citizens.

The Health Professions Scholarship Program, or HPSP for short, is available through the military. You choose to enter the Army, Navy or Air Force. All of the branches have to offer pretty much the exact same incentives and benefits, with minor difference, so the program is almost exactly the same no matter which branch you choose.

Military scholarships pay for your tuition, fees, books, and anything else that is directly related to medical school. They also pay you a monthly stipend while in medical school. The stipend can be around $1400 or so per month (in 2005).

In return for getting your 4-year medical education paid for, the military expects 4 years of active duty medical service after residency and 4 more years of reserve duty. It's a year-for-year payback. If you only use the HPSP program for 3 years, you only owe 3 years of military service. The minimum payback is 3 years, regardless of how many years you use the program.

Also, if your medical school allows it, you are expected to serve four 45-day Active Duty Tours during medical school. These are similar to shadowing and medical school rotations, which allow you to get involved in military medicine.

So, this is what typically happens for the HPSP program:
1.You graduate from undergrad with a 4-year degree.
2.You apply for the HPSP scholarship program through your military branch of choice (Army, Navy, Air Force).
3.They review you application and approve your application.
4.You attend the medical school of your choice that you selected just like you would without the military scholarship. During your medical school experience, you are not in uniform, but are a student like everyone else. You receive a monthly stipend and all school expenses paid for. You spend the first summer at a military hospital for shadowing or at Officer Indoctrination Training (learning how to be an officer).
You have to go through officer indoctrination training for 45 days - they try to get this done the summer before medical school (and that is an advantage since you gain some additional officer benefits and pay from that).
5.When you graduate from medical school, you apply for residency through the military match (different from the civilian residency match). In some cases, you can go through the civilian match and complete a civilian residency but for the most part you are expected (with little choice) to enter a military residency. From day 1 of residency, you are an officer and paid as such with vacation, benefits, etc. Pay (officer's pay) is slightly better than resident pay in civilian residencies. Military Residencies are completed in and around military hospitals - prominently where big bases are - Bethesda, Maryland being the largest, for example.
6.After residency, you pay back your 4 years of service obligation. Pay is considerably less than for civilian doctors, but still fairly decent.
7.After 4 years of active duty service in the military, you can leave the military (or stay by choice) and work as a civilian physician like any other private physician. You are still considered "reserve" for 4 years and can be called back up for active duty whenever needed. You need to check what implications that may have - to see if this route is a good one for you.

Supposedly, medical students and residents are not deployed while in training, but fully trained physicians may be deployed during the pay-back period. However, I have also heard that some (really very few) residents were deployed to some of the more recent "wars" after completing their first year of residency training.

The recruiters say that most medical students can pretty much choose their specialties just like in the civilian world, with most of the competitive specialties being the same as in the civilian world, but students have to go through the military match to get into their residencies.

However, the military has been known to over-rule people's career choices on occasion and make them choose specialties the military needs at the time. So, if your residency choice matches their need, and they have enough openings for that particular specialty training at the time, you can pursue that training.

If they don't have openings in your specialty of interested that particular year (you couldn't match or the specialty is not offered at all that year), or they need more specialists in a particular field, you may end up having to choose a different specialty instead. Not all specialties are offered every year, especially the less common ones.

So, in other words, depending on the military branch's need at the time, they may make you choose a specialty you did not want to enter. You may have to pursue specialty training in which you are not interested to start out your medical career. Then, after some time, you can apply to your choice residency again to retrain. This is especially possible if you plan to stay in the military for a little while. If you train as a general medical officer or flight surgeon and serve in that capacity, your chances for choosing and getting into the specialty of your choice increase significantly.

Be sure to ready more about some of the residency implications of military scholarships in the residency thoughts section.

During your service payback time, you are typically stationed at a base hospital within the United States. However, you may also be sent abroad for up to 3 months at a time, up to 4 times during your commitment - without your spouse or children (if you have them). Getting stationed overseas more permanently is unusual unless requested. Generally speaking, you don't have much say about where you are stationed, although you can make requests, which may or may not be considered, based on the needs of the military.

Note that the military can decide to force you to stay in the military if needed, as in the case of war or crisis. That means that the military can essentially force individuals (not just physicians) to stay in the military beyond their contract time, so you would be unable to leave the military, even if you have fulfilled your payback.

Besides the HPSP program and the Uniformed Health Services University (discussed next) there are additional programs available through the military after completion of medical school or residency. Some of these include loan repayment options, but all carry a military service commitment as a physician.

Three final thoughts on the military scholarships:

READ YOUR CONTRACT - including all fine print.
Don't just trust the recruiter - they often "forget" to mention some of the finer points, or may not think they are important. Payback commitments for active and reserve duty vary somewhat. Be sure you know what you're getting into and that you know what you will be signing!

Also, be sure that you enjoy being in the military. Financially, it is true that you are not piling up depbt while in medical school, but that does not necessarily mean that you will be better off in the long run. Comparing students who used the military programs with those who used loans, there is no significant difference after 5 to 10 years in practice when factoring in physician pay in the military and in private practive. In fact, for most non-primary care specialties it is not advantageous to use the military option (due to higher compensation in private practive) looking at it from a financial perspective only.

Once you have signed up for this program, it is almost impossible to withdraw from it. There are also very heavy penalties financially - often requiring payback of 300% of the amounts paid by the service for your education.

Uniformed Health Services University (UHSU)

Similar to HPSP, but yet different. You apply to the Uniformed Health Services University (UHSU) directly through AMCAS as you would to any other medical school. If you are accepted, you are immediately commissioned as an officer (when you begin medical school) in one of the three military branches with the corresponding officer pay (throughout medical school) and rank advancements beginning immediately.

School is free. On this path, you can only enter military residencies (practically no civilian paths are possible unless a particular specialty training is not offered through the military at all) and you owe a total of 7 years of service payback after residency.

Medical students at this medical school are in uniform during med school, and are part of the active duty military, although they pretty much concentrate on nothing else but medicine while in training. They do not deploy medical students while in training. Some physicians stay in the military until retirement, other just fulfill their minimum payback time.

National Health Service Corps (NHSC)

As with the military scholarships, the NHSC scholarship pays for all school-related expenses and a monthly stipend while you are in medical school. To be considered, you must commit to practicing in a primary care specialty (family medicine, pediatrics, OBGYN, internal medicine - no subspecialty) when you begin medical school.

When done with medical school, you complete your primary care residency. After that, you have to fulfill your 4-year service requirement. This is done by practicing medicine for 4 years in an "underprivileged area" with a shortage of physicians in your specialty.

So, you are asked to open a practice or find employment in one of those areas. In many cases, that's where physicians remain for the rest of their careers once settled. Since all of those specialties are in short supply almost anywhere, you can find opportunities in nearly any city and town in the USA that is considered "underserved".

You can check the current listings to get an idea and do some digging. You'll be surprised that most likely your own backyard is considered "underserved" or at least some areas close to home. Most often, underserved areas are in more rural areas or within inner cities.

As with the military programs, once you have signed up for this program, it is almost impossible to withdraw from it. There are also very heavy penalties financially - often requiring payback of 300% of the amounts paid by the service for your education.

The other "Alternative Loan"

You can always qualify for loans on your own, outside of the boundaries and rules of the financial aid office.

However, you will generally need to show an income (or spouse's or co-borrower's income) and have a good credit history. Also, the terms are usually not as good and you accumulate interest at a higher rate. It's more like a personal loan. There are some of these "Alternative Loans" (not to be confused with the Alternative Private Loans available through the financial aid office mentioned previously)

Most financial aid offices will not be able to give you much information on these loans since they usually only work within the framework of the cost of attendance, never outside of this "box".

These alternative loan programs mentioned in this section do not require school certification. This is the key. If any loan requires school certification, it is administered through the financial aid office and the rules of the cost of attendance apply. The loan would, thus, be part of the financial aid package, not to exceed cost of attendance.

Bank One along with Chase J.P. Morgan Bank offers a loan program that does not require school certification (I'm sure there are more banks which offer this type of loan if you look around). It is an alternative loan program for "Graduate/Professional Education" that is targeted at the medical school and other professional school student.

Another nice feature of this particular loan offered by Bank One is that the loan repayment is deferred during medical school and can be deferred up to 8 years max (so, including residency). Most other alternative loan programs do not have deferment options, but go into repayment the day you sign the loan - just like a car loan, house loan or other personal loan.

Here is the link to their website for the loan application and information.
Choose the "Graduate/Professional Education" loan. This loan type requires good credit, an income and/or a cosigner and is not needed by most medical students. Most medical students should be fine with the amount of money available through the financial aid office. So, stick with that.

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