Medical student financial FAQ: Insight on loan forgiveness, repayment

Medical school is the first step in a career in medicine. It’s also a key stage in a journey toward determining one’s financial picture for the next decade-plus.

How much you will pay in medical school tuition and how you will repay the medical student loans required can create a complicated financial dynamic for medical students. Expert insight from the AMA on frequently asked questions related to finances will help you plan and understand how to navigate your medical student financial decisions in a way that sets you up to thrive down the road.

According to the Education Data Initiative, the average total cost of medical school in 2024 is $235,827. Total costs vary by institution type and location, ranging from $161,972 (in-state, public school) to $264,704 (out-of-state, private school).

A survey of 2023 graduating medical students conducted by the Association of American Medical Colleges (AAMC) found that about 60% of respondents had some sort of non-student loan funding to aid their education. Those funding sources included scholarships, grants and stipends. Those non-loan funding sources most commonly amounted to $25,000 or less, though about 30% of student respondents reported funding figures that were higher than that number.

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The average medical school-related debt load for students in 2023 was $202,453, according to the Education Data Initiative. About 70% of medical students, per AAMC data, graduated medical school with some student debt in 2023. About 50% of medical students graduated with loan debt that was more than $150,000.

Dive deeper:

• How much can you save by staying in-state for medical school?
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For medical school graduates, there are several potential paths to student loan forgiveness, as well as programs that can make your monthly payments more manageable during your early career years.

Two of the most popular programs are Income-Driven Repayment (IDR) and Public Service Loan Forgiveness (PSLF). When you’re enrolled in an IDR plan, your reduced monthly payment for federal loans will be based on your income and family size, particularly helpful when you’re earning a lower salary as a resident or fellow. And IDR plans will still put you on the path toward student loan forgiveness after 20–25 years of eligible payments.

PSLF is often the go-to program for physicians throughout the US who work in public health. Through this program, physicians working at eligible nonprofit or government organizations can have the remaining federal student loan debt forgiven after 10 years of repayment (120 qualifying payments) and you’ll also be able to enroll in an IDR plan. One recent change to the IDR landscape was the addition of the SAVE Plan, which offers the potential for even lower monthly payments and changes the way interest accrues. 

Dive deeper:

• 5 key student-loan terms that medical students should know.
• Repaying student loans with SAVE: What resident physicians should know.
• What to do when federal student-loan forgiveness goes wrong.
• AMA member exclusive: Medical student loan repayment options and forgiveness consultation.

Standard loan repayment plans are typically amortized over 10 years. So, six months after your medical school graduation—when student loan repayment is scheduled to begin—what you owe will be roughly 1% of your total balance per month. That’s not tenable for most residents.

If you understand what you owe, you can plan ahead. Options such as Income-Driven Repayment can lessen your monthly payments, making them more manageable.

“Medical professionals face a unique set of challenges, so it's crucial to tailor your student loan repayment approach accordingly,” said Alyssa Schaefer, general manager and chief experience officer at Laurel Road, a financial services company that specializes in working with physicians. “Deciding how to manage your medical school debt will be one of the most important financial decisions you’ll make in your career, so you’ll need to find the right tools and strategy to help manage your debt effectively.”  

Dive deeper:

• 3 mistakes to avoid on medical student-loan repayment.
• AMA member exclusive: Medical student loan repayment options and forgiveness consultation.

While there are several ways to tackle your budget, it doesn’t need to be cumbersome—as long as it helps you stay organized and on track. One popular method is the 50/30/20 rule.

With this method, you’ll want to allocate 50% of your income toward your “needs” or essentials such as housing, transportation, groceries, and the minimum payment on your loans. Then, 30% can go towards your “wants” or discretionary items such as restaurants, entertainment and travel. Lastly, 20% should be set aside to meet financial goals such as savings, investments, or making additional payments towards other debts. 

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Dive deeper:

• Budgeting 101: Money management tips for medical students.

The average annual salary for a first-year resident physician is a little below $63,000, according to the AAMC. But that does not mean that you will have about $5,000 each month to spend as you see fit. According to certified financial planner Chad Chubb, the likelihood is that your net monthly income, after taxes and employer deductions, will be about $1,000 less—or about $4,000.

Dive deeper:

• You made it—will your wallet? How to budget in physician residency.

After graduation, many medical students will consider consolidating or refinancing their student loans. Deciding whether one of these paths is right for your financial situation comes down to a variety of factors.

You will want to consider: Your loan types; whether you have federal or private student loans; your existing interest rates and potential rates if you consolidate or refinance; the impact your credit score could have on new rates; and your other financial goals. According to a recent Laurel Road study, about 74% of doctors will consider their student loan consolidation options during their career.

“I highly recommend taking the time to research all your options—refinancing, repayment, forgiveness – so you can create a detailed plan as early in your career as possible,” said Schaefer. “When you take a proactive approach and talk to a student loan specialist, you’ll have the facts you need to make a well-informed decision about how to manage your medical school debt. The federal student loan repayment and forgiveness landscape is increasingly complex, but you don’t have to navigate it alone.”

You can also schedule a free student loan consultation with a Laurel Road specialist to review your student loan options.

Dive deeper:

• Refinancing medical student loans.
• AMA member exclusive: Medical student loan repayment options and forgiveness consultation.