Medical Student Loans: The Complete Guide

Posted by in Loans | Updated on May 26, 2023
At a Glance: If you need financial assistance for medical school, you can choose between private loans and federal loans. Federal loans offer perks like Public Servant Loan Forgiveness and income-driven repayment plans, making them a recommended starting point. Private loans may have lower interest rates for those with good credit and fewer accompanying fees. Federal loans require a FAFSA application, while private loans can be obtained from banks, credit unions, or online lenders. It’s important to consider the differences and eligibility requirements when choosing between federal and private loans. Additionally, avoiding common mistakes such as forbearance, selecting the wrong repayment plan, neglecting tax implications, and not verifying employment can help in managing medical student loans effectively.

Loans for medical school can be a complex issue. Debt on medical school loans grow quickly and many physicians end up owing well over six figures on student debt because of this. What’s more, if you’re an international student studying in the U.S on an F-1 visa, making sense of all the financing options is quite a difficult task. Below we make this process easier by setting out some options to consider and things you should avoid when financing your dream of becoming a doctor.

Borrowing Medical School Loans

If you want to study medicine but don’t have the finances, there are two types of loans you can get. They are private loans and federal loans.

Many people recommend federal loans as a starting point before opting to go for private loans. The reason is that federal loans have a few perks additional perks like Public Servant Loan Forgiveness (PSLF) and repayment plans that are based on your income (known as income-driven repayment plans).

On the other hand, private loans might be a better option if you have good credit as you might be able to get lower interest rates. Private loans usually also do not have as many fees accompanying them as federal loans.

Federal vs. Private Medical School Loans

To get a federal loan, you have to apply by submitting a FAFSA (Free Application for Federal Student Aid). Federal loans are funded by the government and offer alternative repayment options that private lenders might not offer you. Congress set the interest rates applicable to these federal loans so you might end up paying a higher interest rate than with a private loan. The good news is you don’t need to prove financial need to qualify for federal loans.

You can apply for a private student loan (or any other personal loan) with a bank, credit union or online lender. The interest rate applicable to your private loan will depend on your credit score, the loan term you choose and also whether you choose a fixed or variable interest rate.

There are two types of federal loans that can be used for medical school:

  1. Federal district unsubsidized loans. These loans have lower interest rates and fees than the PLUS option below. Loan amounts are $20,500 a year, and up to a total of $138,500. This option does not require a credit check.
  2. Federal PLUS loans. PLUS loans should preferably only be considered once your federal unsubsidized loan has been maxed out and you have tried obtaining a lower interest rate with a personal loan. Interest rates for the PLUS loan are 7% and the loan fee is 4.26%. A credit check will be done before you can qualify for a federal PLUS loan. You don’t have to have a good credit score to get a federal PLUS loan, but you won’t qualify if you have an adverse credit history.

If you are considering applying for a federal loan, take a look at this FAFSA Guide to guide you through the process.

Top 10 Mistakes to Avoid with Medical Student Loans

As medical school loans have become an extremely complex financial issue, many young physicians make costly errors in their application and repayment process. Below we list some of the common errors to help you avoid them!

1. Forbearance

This is when you apply to temporarily stop making federal student loan payments or you temporarily reduce the amount you pay each month. This is often done during residency and fellowship years. Finances can be tight so it is easy to argue that you will catch up when you start making big bucks. What you have to keep in mind is that there is a huge cost in making this decision, which should preferably be avoided if you are able to make the required payments.

If you choose to go for PSLF, forbearance can easily cost you a few thousand dollars per month. If you choose forbearance you will also forfeit RePAYE’s interest subsidy (i.e. the income-based repayment program). This cost easily adds to a few hundred and even a few thousand dollars per month.

2. Wrong Repayment Plan

There are many repayment options to pay off your federal student loan. There is PAYE, RePAYE, IBR and ICR (to name just a few).

Many young graduated medical students don’t give proper consideration to all their options and miss out on the most beneficial choice. For example, many young physicians with high student loan balances and low income, who are not eligible for PSLF, opt for PAYE and don’t give due consideration to RePAYE’s interest subsidy. This interest subsidiary is extremely beneficial in most situations but missed by many graduates.

If, on the other hand, you are eligible for PSLF, interest becomes irrelevant. So, it is important to focus on which payment option gives you the lowest possible payment while still remaining eligible.

3. Failure to Consider Tax Implications

Another aspect most students are not aware of is that tax affects your student loan and your student loan affects your tax.

Your tax decisions can affect your student loan and the qualifying payment you are required to repay under PSLF. This is done by lowering your Adjusted Gross Income (“AGI”) (by considering aspects like pre-tax retirement plans) which means your income-driven payments under PSLF will be lower.

Something that surprises most students is also the fact that forgiven loan amounts attract tax in certain situations.

Tax is not an aspect that can be ignored when making student loan decisions.

4. Failing to Verify Employment

Physicians are encouraged to be proactive and verify their employment annually. This prevents unnoticed errors from slipping in that can cost you hundreds of thousands of dollars under PSLF.

According to a US Government Accountability Office Student Loan Research Report, less than 4% of physicians who are eligible for PSLF proactively position themselves for PSLF approval. The cause is people having a choice to either verify now or verify later.

Physicians are only required to verify employment once they want to apply for PSLF, which is after 120 loan payments have been made (i.e. 10 years). Often physicians work for 10 years without verifying, wanting to verify 10 years at once. Although this late verification won’t affect your eligibility to apply for PSLF, it can be a problem if an error slipped in in the last 10 years that was not corrected regarding any aspect that influences your eligibility.

5. Paying too much Interest

Most student loans’ interest rates vary a great deal. If you are eligible for PSLF, interest rates is something to take very seriously when considering your loan options. The higher your interest rate, the more the cost of your loan and the more you lose.

Experts suggest that, if your interest rate is higher than 5%, you should seriously consider refinancing your loan. If you fail to do this, you might end up paying losing thousands of dollars in just interest payments. Remember that this is only applicable if you or your spouse dare not eligible for PSLF.

6. Poor Refinancing Decisions

Refinancing your medical student loan will only be a good idea if you or your spouse are not eligible for PSLF. To be eligible for PSLF, you must hold a qualified federal loan. If you choose to refinance your loan and miss your opportunity to utilize PSLF, you end up losing many thousands of dollars.

If you are not eligible for PSLF and choose to refinance, make sure you do proper homework. Some lenders offer refinancing options that won’t be in your best interest.

7. Bad Consolidation Decisions

Whether it is consolidating loans that should not be touched or not consolidating when you should have, Consolidation mistakes are quite common. Consolidating your student loan may mean you sidestep your loan grace period and effectively quicken your PSLF eligibility. Make sure you get the right advice regarding your option to consolidate or not.

8. Not Considering Spousal Student Loans

Many physicians who are not eligible for PSLF, make the obvious choice of refinancing their loans without considering the impact this can have on their spouse’s PSLF eligibility. It might be a good idea to only refinance after your spouse’s loans are forgiven – provided the interest rate offered is still favorable of course.

9. Not Fighting Servicer Errors

Student loans are complex and errors made by loan servicers can easily creep in. Don’t assume that loan servicers will also have your back. Make sure to keep your own records up to date and track your progress. Compare your records with that of the loan servicer and query any mistakes there might be. Another tip is to document all the interaction you have with and paperwork submitted to loan servicers. This will help if you have to prove the mistake was theirs.

10. Taking Bad Advice

There are many fraudulent student loan advisors out there that capitalize on the complex student loan system. Many student loan advisors also get compensated by loan financiers to refer students to them. This is a major conflict of interest and should be avoided at all cost. You can sniff this out by determining if the advisor is “fee-only”, which means income is based 100% on fees. Also, take care to not just take advice from any accountant or financial advisor. The student loan environment is very complex and many well-meaning people can give the wrong advice.

Top 3 Medical Student Loans

If private student loans are the right option for you, it is important to do your homework so you can make the right decision. We compare some of the best private student loan providers below to help you make the right choice.

1. Stilt

Stilt is a unique lender that provides personal loans to US immigrants and international students. If you are a foreign student wanting to study at a medical school in the U.S Stilt is a great financing option. As a nonresident, loan-seeking student, you may not qualify for everything that permanent residents or citizens in the U.S do. You don’t have to let that stop your dreams as Stilt will be there to help.

2. Sallie Mae

Sallie Mae provides graduate and undergraduate student loans to students, as well as parents. Sallie Mae also specifically offer medical school loans to students wishing to attend medical school. All the details of their medical school loan can be found here.

3. LendKey

LendKey is an end-to-end digital lending partner to hundreds of banks and credit unions. They have transformed the $3.6 trillion consumer lending market by enabling the nation’s 13,000+ community financial institutions to enter and succeed in online lending.

Lender Amount Interest Rates Repayment Period Cosigner
Stilt $1000 – $25000 7.99%–15.99% 2 years No
Sallie Mae 100% coverage

of school-certified expenses—with no max for all years of medical school

Variable interest rate 4.00% – 8.74% APR

Fixed interest rate 6.24% – 8.86% APR

20 years Yes
LendKey $5,000 to $300,000 Fixed: 5.36% +

Variable: 4.51% +

5, 7, 10, 15, or 20 years Yes

Read More


There are many options available to finance your medical school dream. Make sure you make the right choice and avoid the common mistakes many physicians make by working through this article more than once. There is no need to burden your bright future with medical school debt worries.