Availability of student loans for medical students and residents

Many private student loans are available to medical students given their earning potential, and equally importantly, the fact that few students leave medical school before getting their MD.

Borrowing limits vary by lender, but most offer up to "full-expense less aid," and "full-expense" can sometimes be defined rather liberally. Individual lenders, such as Citibank and Sallie Mae, set the interest rates – but rates often track within a couple of points of the prime rate, and depend on the duration and terms of the loan.

In addition, there are unsubsidized Stafford Loans (Federal Student Loans) available to medical students. Online tools such as the Medloans Organizer and Calculator on the AAMC website can help medical students manage their student debt.

Debt from Medical School Loans

Medical school loan debt, especially high-interest rate debt, is a growing problem. According to a recent study by the Association of American Medical Colleges (1), the cost of attending a private medical school has grown at 1.8 times the rate of inflation, and the cost of public medical schools has grown more than twice the rate of inflation, over the last 13 years. Another report by the AAMC (2) shows that medical school trainees from both public and private schools graduate with an average debt burden of $166,750.

Compound this with slow physician salary growth, and young physicians are faced with increasing difficulty in paying their college student loans and medical student loans.

All medical schools recognize this problem; the Liaison Committee on Medical Education asks every medical school how they intend to reduce medical student debt during their regular re-accreditation process. This pressures schools to reduce costs or find creative ways to help students finance their debt.

Trends for student loans

According to a report by the Institute for College Access and Success (3), approximately two-thirds of college graduates in 2011 took out student loans, with an average of $26,600 per borrower. Until recently, student loan interest rates ran between 6-8 percent. Recently, however, rates have fallen very low. As of fall 2003, Stafford loan interest rates were in 3-4 percent range (4).

Like any debt, student loans can influence your credit and your future decisions. Students who borrowed a substantial amount for college (more than $5,000) are less likely to pursue higher education.

There are two ways to reduce the debt burden:

1) Reduce your monthly payment. Since debt burden is measured by comparing your loan payment to your income, reducing your payment helps your credit evaluation. One of the simplest ways of doing this is through student loan consolidation.
2) Reduce or eliminate the principal balance. Specific types of loans can sometimes be forgiven by service or other higher education - look into the specific student loan program you have.

References

(1) Trends in Cost and Debt at U.S. Medical Schools Using a New Measure of Medical School Cost of Attendance. AAMC, 2012.
(2) Medical Student Education: Debts, Costs, and Loan Repayment Fact Card. AAMC, 2012.
(3) State by State Data. Institute for College Access and Success, 2012.