There are a fortunate few who graduate medical school without incurring any debt. They manage to do this through a combination of financial aid, academic or merit-based scholarship, military service, dual degree or specialty programs, or even parental assistance. However they do it, avoiding debt puts these grads in a great position financially. They can simply start earning a salary and don’t have to worry about setting money aside each month for med school student loan repayments.
Unfortunately, this isn’t the norm. Graduating from medical school debt free is becoming increasingly rare, as more schools raise tuition rates and loan options become more limited. As a result, these days the typical medical school graduate is deeply in debt.
To help the vast majority of students out there who need to take out loans to pay for medical school, we’re going to cover some important things you’ll want to consider when it comes to financing your education. First, we’ll cover what new borrowers need to know about how much debt they should incur and what loan options are available to them. In the second half of the post, we’ll have some information for people on their repayment options.
Please note, this is not financial advice nor should it be used as a substitute for professional financial services. The objective of this piece is to simply let you know about some options for graduate level student loans so you can make informed decisions. To learn more about any recent student loan changes, please visit the AAMC website.
Let’s begin by taking a look at some basic stats and how much debt the average medical student is in. That will put the rest of our discussion into the right context.
How much is the average med school loan?
According to AAMC data, the annual cost of attending medical school varies drastically, from $30,000 to over $90,000 per year. The total median cost of medical school for the class of 2025 is $286,454 for those attending public schools and $390,848 for those attending private schools.
The large variance in costs is only in part due to tuition. There are other significant but often forgotten costs such as fees, educational supplies, cost of living, and varying amounts of scholarship and/or financial aid offered to students.
Physicians, in theory, have relatively stable jobs with higher than average incomes, but most young physicians graduate with a mountain of student debt, averaging more than $250,000 in medical school debt alone!
How much money should I borrow?
For most of us, student loans are necessary for tuition and living expenses. Due to the interest on the loans, it’s usually a good idea to accept only what’s needed, and not much more. Despite this, I’ve heard stories about many financial aid offices offering and even encouraging larger loans. Be wary of anyone who says taking out more than you need is a good idea.
The most economical path is to take out what’s necessary to cover living and tuition costs, with a little extra for a rainy day. Avoid inflating your lifestyle just because there is more money available to borrow. Remember, you’ll have to pay the money back with interest!
Let’s take a look now at the different types of loans, so you can see what options are available and make a choice that mitigates your financial burden.
What’s the difference between federal vs. private loans?
When it comes to borrowing you have two basic options: taking out a loan from the federal government, or borrowing from a privately held bank.
Let’s take a look at each, so you have a better sense of what these loans entail.
Federal Loans (Direct Unsubsidized and Direct PLUS)
Pros
- You’ll have flexible repayment options.
- Student loans are disbursed at a fixed rate, meaning the interest rate for the loan will not change.
- Payments are not required while in school.
- Potential advantages include forgiveness, forbearance, and zero interest.
- Loans can be discharged if the borrower passes away.
Cons
- You’ll have to fill out a FAFSA form to determine eligibility for federal student loans.
- Not all borrowers qualify for subsidized student loans.
- There’s a limit to how much you can borrow.
- Defaulting on loans will ruin your credit, leading to a potential loss of income. The government can also garnish your salary.
- Most federal student loans also have loan fees when disbursed, decreasing the loan reward amount. You’ll still be responsible for paying back the entire amount borrowed including the fees.
- Borrowing caps will drastically reduce in July 2026 down to $50,000.
Private Loans
Pros
- Borrowers can generally borrow more to cover the full cost of their education.
- Sources of loans include banks, credit unions, and other financial institutions, and borrowing may have an easier application process than applying for federal loans.
- Interest rates are based on your credit scores, and you or your cosigner may be rewarded for excellent credit with lower rates.
- Statute of Limitations: Unlike federal government loans, if you default on your student loans, after 3-10 years (it varies from state to state), lenders may be unable to force you to pay back the loans. Your credit will be affected, however.
Cons
- Interest rates are more likely to be variable and may increase over time unless you get a fixed rate loan.
- Payments commonly start while you’re still in school.
- Payment plans are less flexible, and borrowers usually won’t benefit from federal zero-interest periods, forbearance, or loan forgiveness programs.
- May require a cosigner. Debt is also not always discharged after the death of the borrower or the cosigner.
Types of Federal Student Loans Available for Med Students in 2025
Direct Unsubsidized Loans
For these loans, schools determine the amount you can borrow based on the cost of attendance and other financial aid you receive. If you’re a dependent student whose parents aren’t eligible for a Direct PLUS Loan (see below), you may be able to receive additional direct unsubsidized loan funds.
Direct PLUS Loans for Graduate or Professional Students
Direct PLUS Loans are federal loans that graduate or professional students (and parents of dependent undergraduate students) can use to help pay for college or career school. PLUS loans can help pay for education expenses not covered by other financial aid. The US Department of Education makes Direct PLUS Loans to eligible parents and graduate or professional students through schools participating in the Direct Loan Program.
Note: A Direct PLUS Loan is commonly referred to as a parent PLUS loan when made to a parent, and as a grad PLUS loan when made to a graduate or professional student.
To receive a grad PLUS loan, you must meet the following requirements:
- You have to be a graduate or professional student enrolled at least half-time at an eligible school in a program leading to a graduate or professional degree or certificate.
- You can’t have a poor credit history (unless you meet certain additional eligibility requirements).
- And you’ll need to meet the general eligibility requirements for federal student aid.
For Direct PLUS Loans first disbursed on or after July 1st, 2025 and before July 1st, 2026, the interest rate is 8.94%. This is a fixed interest rate for the life of the loan. Additionally, there’s a loan fee for all Direct PLUS Loans.
The maximum PLUS loan amount you can borrow is the cost of attendance (determined by the school) minus any other financial assistance you receive.
Note: Grad PLUS plus loans are being eliminated for new students after July 1st, 2026. Those already borrowing under this program will be grandfathered in for the remainder of their medical school program.
Repayment Options for Federal Loans (Updated for 2025)
If you’ve already been through school and find yourself in serious debt after graduation, don’t despair! The following is for those of us walking this earth burdened with mounds of debt and searching for ways to ease the strain. We’re going to guide you through what your repayment options are in 2025, so you can gain the financial freedom you deserve, or at least the peace of mind that comes from knowing what the latest options are.
Please note, this isn’t financial advice nor should it be used as a substitute for professional financial services. The objective of this section is to simply let you know about some repayment options for graduate level student loans so you can make informed decisions. To learn more about repayment plans for federal loans, please visit the Department of Education website.
Repayment plans for federal loans are generally divided into two categories: “traditional” repayment plans and income-driven repayment plans.
Let’s have a look at each.
Traditional Repayment Plans
Standard Repayment
- Assumes a 10- to 30-year repayment term at a fixed payment rate.
- Default plan unless another plan is chosen.
- Requires a fixed monthly payment, but usually has a lower interest rate. .
Extended Repayment
- Assumes a 25-year repayment term. Must owe more than $30,000 to qualify.
- Reduces monthly payments due to longer-term loan repayment.
- Over time, it may cost more due to more interest paid over a longer term.
Graduated Repayment
- Assumes a 10-year repayment term.
- Payments start off smaller and increase after 2 years.
- It may result in higher costs than the Standard Repayment plan, but it accounts for potentially lower income during the first two years of residency.
Income-Based Repayment Plans
An income-driven repayment (IDR) plan bases your monthly student loan payment amount on your income and family size. For some people, payments on an IDR plan can be as low as $0 per month.
IDR options include the following:
- The Income-Based Repayment (IBR) Plan
- The Income-Contingent Repayment (ICR) Plan
- The Pay As You Earn (PAYE) Repayment Plan
- Saving on a Valuable Education (SAVE) Plan
You can learn more about each IDR plan at the Department of Education website.
By July 2026, IBR, PAYE, and SAVE will be replaced by:
- The Standard Plan
This offers fixed payments over a set time. Payments are determined by the loan amount and will span 10-25 years.
- The Repayment Assistance Plan (RAP)
A new IDR-style plan with a $10 minimum monthly payment and 30-year forgiveness.
Loan Forgiveness Programs, Deferment, and Forbearance
As of July 2025, there’s an ongoing review of the recent Executive Order regarding the Public Service Loan Forgiveness (PSLF) Program. There are no changes to PSLF currently, and borrowers do not need to take any action. For program requirements, check out the Department of Education website.
The aforementioned income-based repayment plans all have their own forms of loan forgiveness. Generally, loans are forgiven after 20-25 years of payments. Anything forgiven is liable to be taxed. Within the terms of the repayment plans, these built-in forgiveness plans are often not the most financially advantageous, and loans are likely to be paid off before borrowers can qualify for forgiveness.
Public Service Loan Forgiveness (PSLF) is one of the most discussed and popular forgiveness programs that appeals to most doctors. Forgiven loans are not taxed, and are available after 10 years of qualified payments (120 qualifying payments).
The requirement is that the physician must be directly employed full-time by a non-profit 501(c)3 while making 10 years of payments in an eligible payment program (an income-driven repayment plan). Loans must be in the form of direct loans.
What is deferment?
Deferments are given in 6-month increments by your loan servicer. If you, like most graduate and professional students, have unsubsidized loans, they’ll continue to accrue and capitalize interest during the deferment period.
Subsidized loans will not accrue interest during this time. Eligibility requirements may be quite restrictive, and many residents will not qualify.
What is forbearance?
Forbearance is a 12-month pause on payments. It may be easier to qualify for than a deferment. Resident doctors can qualify for “mandatory” forbearance as medical residency qualifies as an extenuating circumstance that makes them eligible for forbearance. Subsidized and unsubsidized loans will continue to accrue interest and will capitalize once the forbearance period is over.
Resident doctors may choose forbearance during residency because they don’t want to deal with student loan debt while living through a difficult and formative period of their training. They may plan to pay back aggressively when they become attending physicians. Ultimately, this will cost them more money in the long run due to the rapid loan growth in the forbearance period.
Both deferment and forbearance, due to the rapidly accumulating loan, should only be considered in drastic circumstances. Most often, it’s recommended to continue payments via an income-driven repayment plan if possible, and potentially qualify for forgiveness down the road.
Should I refinance my med school loans?
Refinancing a loan essentially means a new loan is created with a private lender, with a new interest rate. The private lender pays off your current loan, and they are now your new loan servicer. Refinancing your loan may be a good option in order to qualify for a lower interest rate and lower monthly payment. If you have private loans, it’s generally a good idea to refinance your loans if you can get a lower interest rate and a better monthly payment.
Refinancing may be a good option for physicians transitioning to a high-paying, private practice position who want to aggressively pay off their loans under more advantageous terms. However, if you have federal loans, and are hoping to qualify for PSLF or another federal loan forgiveness program down the line, you should not refinance your federal loans with a private lender, otherwise, you won’t qualify for the forgiveness program.
In Summary
The world of medical school loans can be overwhelming and confusing. If you need to take out money to finance your medical education, my advice is to take only what you need to cover your expenses, with maybe a bit extra. If you’ve already graduated, it’s important to keep your eye on the ball.
During your residency training, your focus should be primarily on honing your skills as a future physician and mastering your craft. Hopefully, knowledge of these loan basics will empower you to make the best decision and pursue your passion within the field of medicine without being weighed down by financial factors. Please reach out to the financial aid office at your institution for more specific information.
For more (free!) tips to help you through med school, check out these other posts on the blog:
