Federal direct unsubsidized student loans are a strong option for medical students because they don’t require a credit check or a co-signer. They also can be forgiven through the Public Service Loan Forgiveness program or via income-driven repayment plans.
If you need more money for school than what unsubsidized loans provide, you might turn to graduate PLUS loans, which require a credit check. But there are specific negative marks the government is looking for. You’ll be considered to have “adverse credit history” if you have one or more of the following on your credit report:
•Debts totaling more than $2,085 that are at least 90 or more days past due or that were in collections or charged off in the past two years
•Within the past five years, a:
• Default determination
• Tax lien
• Wage garnishment
• Charge-off of a federal student aid debt
But if you learn you have an adverse credit history after you apply, you can explain the circumstances that led to it, and the government could determine that you’re eligible for a PLUS loan after receiving loan counseling. Another option is to get an endorser, similar to a co-signer, that can help you qualify.
Some borrowers might qualify for a lower rate on a private medical student loan than on a PLUS loan. But when comparing interest rates among private lenders, know that only the borrowers with the highest credit scores, least outstanding debt and strongest incomes will get the lowest rates. That could mean using a co-signer. All private loan rates listed on this page also include a standard 0.25% interest rate discount for using automatic payments.
Since medical students often stand to earn significant incomes after graduation, you may be able to pay off a private loan quickly to avoid substantial interest accrual. But only do so if you don’t plan to qualify for loan forgiveness through federal programs, or you take out a minimal amount of private loans.
It’s best to identify the interest rate and terms you’d receive on a private loan, then compare the overall cost and features with those of a PLUS loan. A student loan calculator can help you determine how much you’ll pay over time.
We collected data from 11 student loan entities that offer medical school loans in at least 25 U.S. states and scored them across 12 data points in the categories of interest rates, fees, loan terms, hardship options, application process and eligibility. We chose the best to display based on those earning three stars or higher.
The following is the weighting assigned to each category:
Hardship options: 20%
Interest rates: 20%
Application process: 20%
Loan terms: 15%
Specific characteristics taken into consideration within each category included availability of residency deferment programs, hardship repayment options beyond traditional forbearance, origination fees, length of post-school grace period and other factors.
Lenders who offered maximum interest rates below 12% scored the highest, as did those who offered more than the standard six-month grace period, who offered interest rate discounts beyond the standard 0.25% for automatic payments, who charged no origination fees and who offered a co-signer release option.
In some cases, lenders were awarded partial points, and a maximum of 3% of the final score was left to editorial discretion based on the quality of consumer-friendly features offered.