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.