Preparing for Your Year Ahead 

Use this checklist as you prepare to continue your medical education.

• Apply for financial aid each year (be aware of all necessary applications and deadlines).
• Review your school’s financial aid offer for the upcoming year.
• Learn about the terms and interest rates associated with any newly offered aid. 
• Create a budget and spending plan based on the upcoming year’s cost of attendance (COA), activities and related expenses.
• Access your credit report and monitor for identity theft.
• Learn about costs associated with each year of medical school (M2, M3 and M4).
• Set up a meeting with financial aid staff to discuss any questions you have, review your budget, and make a financial plan for the year ahead.
• Review additional FIRST resources and learn about programs and opportunities that may be available as you continue your education.

Resources

• FIRST Videos 
• Managing Your Finances During Medical School
• FIRST Fact Sheets

COA Changes May Lead to Borrowing and Budgeting Changes

On a yearly basis, if you need financial aid, you will want to apply by the school’s deadline and review your school’s financial aid offer in comparison to your school’s COA.

You will want to use your aid offer as a guide for determining how much you may need to borrow and to create a budget based on the year’s upcoming expenses. Keep in mind the length of each academic year, as well as the expenses that you may incur, will change each year, so you will want to be prepared to manage your finances appropriately.

Be sure to discuss the upcoming years’ costs with the financial aid staff at your school and review your school’s financial aid website for additional details. Preparing for upcoming expenses that occur throughout medical school will be helpful academically and financially.

In addition to talking to your financial aid staff, you will also want to be sure to take advantage of the resources and knowledge that your classmates and other offices and services within the institution can offer. Here are some examples:

• Learn about supportive student groups.

• Investigate what offices at your institution can help you with your needs (including academic and financial support services, such as financial aid and student affairs).

• Familiarize yourself with resources across campus (mental health and wellness services).

• Join student council meetings. 

Each year of medical school is going to differ, and how you manage your finances will differ too. Different costs arise at different times throughout your medical education, and you will want to be aware of these anticipated expenses so that you can plan and budget accordingly and minimize borrowing when possible.   

Considerations for the Year(s) Ahead
 

Second Year (M2)

• Study materials for United States Medical Licensing Exams (USMLE)* may be an additional expense this year.
• Dedicated study time for USMLE exams can affect your budget. Since you may not be attending class each day, you may find that you are consuming food at home more frequently. Be sure and budget accordingly.
• Clinical rotations may begin and less free time may cause you to forget your budgeting tactics. Remember your budgeting plan; prepare lunch at home and take it with you so that you aren’t tempted to spend money each day or unnecessarily.
• If you plan to take Step 1 of the USLME at the end of this year, you will want to plan for the cost of the exam.

Third Year (M3)

• Longer terms and semesters may make indirect costs such as groceries and living expenses more costly. Take time to focus on these expenses to make sure you are budgeting appropriately.
• Core rotations will likely take up much of your time as an M3. Being able to cook at home, make your own coffee, and shop for groceries may be more difficult due to lack of time. Be sure to prioritize these aspects of your calendar and budget to stay on track.
• If you plan to take Step 2 of the USMLE this year or as an M4, you will want to be sure to budget for the expense.

 Fourth Year (M4)

• Residency application costs primarily consist of the Electronic Residency Application Service^® (ERAS^®) fees and National Resident Matching Program® (NRMP®) fees, which are separate from interviewing expenses.
• Prepare for the cost of interviewing for residency; these costs should be anticipated as you prepare your budget for the M4 year.
• Think long-term. You will need to be prepared for post-graduation expenses too, such as funds for relocating to your new residency location.

*USMLE General “…Although Step 1 and Step 2 can be taken in any order, most students will take Step 1 at the end of their second year and Step 2 in their fourth year; Step 3 is usually taken during the first or second year of postgraduate training.”  

Tools to Help You

Your budgeting needs may change yearly, so you may want to adjust your budget and/or the budgeting tools you use. Register for your free AAMC Financial Wellness account, to use the monthly budget and track spending tools, along with all the other exercises, calculators and learning modules.

Budgeting Tool

Enter your financial aid refund as income and plan your monthly spending based on the categories listed.

Track Spending Tool

Compare actual spent vs. budgeted amount to stay within your monthly budget.

Live Like a Medical Student 

Expenses can be minimized by utilizing some of the following considerations for saving money and keeping your budget on track while attending medical school:

• Share expenses with a roommate. Some schools automatically expect students to share expenses with a roommate and build that into the cost of attendance (COA).
• Consider using coupons to save money on groceries or dining expenses.
• Utilize public transportation or carpool with friends.
• Buy generic brands rather than name brands products; also look for sale items.
• Buy non-perishable items in bulk; consider sharing expenses with friends to save even more.
• Cut down on frequent dining out - pack your meals and prepare beverages at home.
• Check your spending on a weekly and even daily basis; use a free app, worksheet, or budgeting tool.
• Compare your actual spending with your budgeted amount each month (AAMC Financial Wellness program has a track spending tool).
• As you find ways to reduce spending, pay down other debt.
• Meet with the financial aid staff at your school if you are having financial trouble.
• Access your credit report and monitor it on a regular basis to maintain good credit.
• Be aware of identity theft, know how to avoid it, and take action if you should become a victim.

Resources

• Roommates and Finances
• Unforeseen Financial Emergencies
• Tips During Medical School 
• Credit Scores and Identity Theft Precautions (Video)
• Monitoring, Maintaining and Improving Your Credit Score (Video)

Borrowing Needs May Change

While many medical school students borrow loans to finance their education, some students do not have to borrow each year of medical school.  Depending on your individual situation, the need for borrowing can change throughout medical school.

Just like yearly expenses change, your borrowing needs will likely change too. Your school and the financial aid staff have worked carefully to create a cost of attendance (COA) that, in most cases, limits excessive borrowing.

Your school’s published COA is likely the best and most accurate estimate of current costs. Your school’s COA can help you determine how much you will need to borrow for each year of medical school.

On a yearly basis, examine the COA to determine: 

• What expenses you will need to cover.
• How much you may need to borrow.
• How you will spend what you borrow.

Look at all available aid options. Some schools may offer institutional loans. This means the school is the lender of the loan. These loans are not federal student loans; however, they may come with borrower benefits such as lower interest rates, subsidies, and/or possible postponement of payment or flexibility with repayment. Questions about institutional loans should be directed to your school’s financial aid staff.

Eligible schools may award Health Resources and Services Administration (HRSA) loans, which include Loans for Disadvantaged Students (LDS) and Primary Care Loans (PCL) for 3rd and 4th year medical students. Check with the financial aid staff at your school to see if these loans may be an option. If eligible, these loans will not be displayed in your Federal Student Aid (FSA) account.

If you are concerned about borrowing federal loans because of thinking about loan repayment, know that there are loan forgiveness programs and loan repayment assistance programs available from federal, state and, sometimes, county levels. Research and learn about these programs while you are in medical school. Be aware of what your options are regarding assistance programs as they can lighten the financial obligation of repaying what you may have borrowed. 

Accepting Financial Aid

Just because you apply for financial aid, it does not mean you need to accept the full amount that you are eligible to borrow. You can choose to accept only the amount you need and decline the rest.  If your financial situation changes, and you need money that you previously declined, work with your financial aid staff to obtain those previously declined funds. If you borrow this way throughout medical school, you will protect yourself from overborrowing. When you avoid borrowing more than you need, you will reduce unnecessary:

• Origination fees (a fee charged to obtain the loan).
• Interest costs (interest starts to accrue once the loan is disbursed).

If you find that you borrowed too much, you can return the excess funds. You have a 120-day window to return money by working with your financial aid staff to send the money back to your loan servicer. Returning the excess funds will reduce the amount you owe as well as eliminate any origination fees or interest that may have accrued on the money disbursed.

Steps for First-Time Borrowers

If you begin to borrow after your first year of medical school, you will still need to do the following:

• Complete Federal Student Aid (FSA) Student Loan Entrance Counseling.
• Sign your Master Promissory Note (MPN).

To find the details for any federal loans that you borrow, use the following resources:

• Your Federal Student Aid (FSA) account.
• Your federal loan servicer’s website.

If you borrow the following loans, they will not be displayed in your FSA account:

• Loans for Disadvantaged Students (LDS)
• Primary Care Loans (PCL)
• Institutional Loans
• Private Loans

To obtain information about the loans listed above, check your promissory note and/or any information you received when agreeing to accept the loan. If you need additional information, contact the lender of the loan or the servicer of the loan account. 

Resources

• Find the Details of Your Federal Loans
• Federal Direct Loans

Not all Loans are the Same

Throughout medical school, you may be offered several types of loans and each loan offer will likely come with different interest rates and terms, and the interest rates and terms can change yearly. Be sure to understand what loans you are borrowing, the interest rate and the terms associated with each loan, and learn about what your repayment options will be so that you can be prepared after graduation.

Direct Unsubsidized Loan – Borrowers must complete the Free Application for Federal Student Aid (FAFSA) to obtain this federal loan.  The financial aid office at the school will use the data from the FAFSA to determine eligibility for the loan, and if the loan will be funded through the Department of Education. Interest rates change each academic year; however, once the loan is disbursed, the interest rate is fixed for the life of the loan. Interest accrues on this loan while in medical school and until the loan is paid in full.

Direct PLUS Loan – This loan is also a federal loan and eligibility is determined by the financial aid staff based on FAFSA data and a credit check. This loan is also funded through the Department of Education. Just like Direct Unsubsidized Loans, interest rates are set each academic year and once the loan is disbursed, the rate is fixed for the life of the loan. Interest will accrue on this loan from the time it is disbursed until paid in full.

Private Loans – These loans are obtained through an application process with a financial institution (bank, credit union, lending organization, etc.). Interest rates, fees, and terms of the loan are set by the lender and can vary from lender to lender as well as from borrower to borrower. These loans are not funded through the Department of Education and therefore do not offer the same loan repayment and forgiveness options as federal loans.

Institutional Loans – These loans may be offered to you if your school offers institutional loans.  The loan terms vary based on the borrower and institution.  If offered an institutional loan, talk with financial aid staff to discuss the interest rates, loan terms, and borrower benefits for the loan.

Changes in Enrollment Status 

If you take a leave of absence (LOA), withdraw from your program, or if your enrollment status drops below half-time, then your federal loans will enter their grace period. This is a 6-month period when a borrower is not required to make payments on their student loans (though unsubsidized loans will continue to accrue interest).

If you return to full-time status after six months or more, the federal loans disbursed prior to the LOA will not be eligible for an additional grace period (e.g., upon graduation from medical school).

If you decide to change your enrollment status, you need to contact the financial aid staff immediately. They will:

1. Notify you of any student aid that must be returned due to your change in enrollment.
2. Guide you through the required exit counseling requirements for your loans.
3. Help you understand which loans will require immediate action and which will have a grace period.

If you experienced a status change while you were enrolled but aren’t sure if this resulted in using your grace period, contact the financial aid staff at your school or reach out to your loan servicer(s) to see if your existing loans have a grace period and when repayment will be required.

Reviewing Repayment Scenarios

The MedLoans^™ Organizer and Calculator (MLOC) was specifically created for medical students and residents. The MLOC tool can help borrowers understand total estimated borrowing costs, review different repayment strategies, and examine total interest costs for various repayment plans.

In the Entering Medical School section, we showed you what a monthly payment may look like if you borrowed during your first year of medical school. In this section, we will show you what monthly payments may look like if you begin to borrow later in medical school. You will have many repayment options; however, the Standard Repayment plan numbers shown below are used to demonstrate that monthly payment amounts will change based upon the total amount borrowed.

Some students may not need to borrow loans each year of medical school, and if you can limit your borrowing, that’s always advisable, whenever possible. If you begin borrowing after your first year of medical school, you will want to use the MLOC tool to keep track of your loans and to review what your repayment options may look like after graduation from medical school.

If you borrow $50,000 for your first year of medical school, it may be safe to assume that you may continue to borrow each year of medical school. In the chart below, we show what possible monthly payments may look like if you start borrowing $50,000 per year at specific points in time throughout medical school. The information below is based on a resident who chooses to postpone payments during their 3-year residency program and then begins to make payments in the Standard repayment plan post-residency. When reviewing the chart below, please keep in mind, most physicians will generate a post-residency, net monthly salary of $11,000/month or more.

Year Started to Borrow	Total Borrowed	Standard Repayment
M4	$50,000	$600/month for 10 years
M3	$100,000	$1,300/month for 10 years
M2	$150,000	$1,900/month for 10 years
M1	$200,000	$2,600/month for 10 years