Health Professions: Loans for Medical and Nursing School

    The demand for doctors and nurses in the United States is extremely high, but so is the cost of education for both professions.

    More than 76% of the 2016 medical school graduates have student loan debt that averages $189,000, according to the Association of American Medical Colleges. Nearly half of those with debt (47%) owed more than $200,000 in student loans and 13% owed more than $300,000.

    That total does not include any student loan debt accumulated during undergraduate studies. If you add in the average student loan debt of $37,172 for undergraduate courses, that means the average doctor enters the medical profession owing more than $220,000 on student loans.

    Nurses have a much smaller debt, mostly because they don’t need graduate school to get the necessary degrees for their profession More than 70% of nursing school students graduate with student loan debt that averages just over $37,000.

     HRSA Offers Options for Health Professionals

    Even though health professionals generally are considered well compensated, both doctors and nurses need assistance to pay off the loans. Almost half (44%) of the 2016 medical school graduates expect to enter loan forgiveness programs to help pay off their debt.

    Much of that help comes from programs run by the Health Resources and Services Administration (HRSA), a division of the U.S. Department of Health and Human Services.

    The HRSA offers limited scholarship and grant opportunities, but has several programs that feature low-interest loans and some loan forgiveness programs for doctors and nurses, especially those willing to live and work in underserved rural and urban communities.

    Funding for the programs is provided by the federal government to individual schools, which means that your school will determine your eligibility. Contact your financial aid office to find out if your school participates in any of these programs.

    There are five scholarship/loan programs offered by the HRSA that include:
    • Health Professions Student Loans
    • Scholarships for Disadvantaged Student
    • Loans for Disadvantaged Students
    • Nursing Student Loans
    • Nurse Faculty Loan Program

    If you are eligible for one of these programs, you can receive a loan up to the cost of attendance. This includes tuition and reasonable costs such as living expenses and textbooks, as determined by your school.

    Loans through these programs do not accrue interest while borrowers are in school and for the following 12-month grace period.  After this, borrowers have 10 years to complete their repayment plans. Loan payment is usually deferred while borrowers complete their residency training.

    The final program, the Nursing Student Loan program, works quite differently. A loan under this program comes with different requirements and repayment terms.

    Applicants to any of the programs must demonstrate financial need. After students complete school and their grace periods expire, loans have an interest rate of 5%.

    Scholarships for Disadvantaged Students

    The goal of the Scholarships for Disadvantaged Students (SDS) is to increase the number of practicing professionals in the health professions and nursing workforce by providing awards to students from disadvantaged backgrounds who have financial need and are members of racial and ethnic minority groups.

    Eligible disciplines for this scholarship include: Nursing; health profession; allied health; public health; behavior and mental health; and physician’s assistant.

    The scholarship maximum, as of 2016, is $30,000 per student, per year. Approximately 25% of the awards are designated for graduate programs in behavioral and mental health science. Geographic regions are taken into consideration when making the scholarship awards. There is a limit of three awards to a single institution.

    Students must be enrolled full-time and the award must cover at least half the cost of the annual tuition.

    Loans for Disadvantaged Students

    The Loans for Disadvantaged Students program provides loans to students who are studying certain areas of medicine and who come from disadvantaged backgrounds.

    A disadvantaged background is any that inhibited a student’s ability to learn and subsequently to enroll in medical studies. It can also mean a financially disadvantaged background; students whose families do not reach a certain annual income are eligible for this loan.

    To be eligible for this type of loan, a student must be pursuing a degree in one of the following areas of medicine:
    • Allopathic medicine
    • Dentistry
    • Optometry
    • Osteopathic medicine
    • Pharmacy
    • Podiatric medicine
    • Veterinary medicine

    Health Professions Student Loans

    The Health Professions Student Loan program provides loans to students who are studying one of the following areas of medicine:
    • Dentistry
    • Optometry
    • Pharmacy
    • Podiatric medicine
    • Veterinary medicine

    Primary Care Loans

    The Primary Care Loans program provides loans to students studying one of the following areas of medicine:
    • Allopathic medicine
    • Osteopathic medicine

    First- and second-year students are eligible for the standard loan amount, which is capped at the cost of attendance and includes tuition and living expenses. Third- and fourth-year students may be eligible for higher loan amounts.

    If you receive this type of loan, you are required to complete a residency training program within four years of graduation. Including the time spent in residency training, you are required to practice primary care for 10 years or until your loan is fully repaid, whichever comes first.

    Some accepted specialties in primary care include the following:
    • Adolescent medicine
    • Clinical preventive medicine
    • Geriatrics
    • Public health
    • Sports medicine

    Nursing Student Loans

    The Nursing Student Loan program varies from the other health student loans in that it is offered to undergraduate and graduate nursing students enrolled full-time, or at least half-time.

    These loans are capped at $3,300 annually and $5,200 for each of the last two years of school. In total, students cannot borrow more than $17,000 through this program.

    The grace period for these loans is nine months, shorter than with the rest of the health student loans. But consistent with the other loans, this type of loan has a fixed interest rate of 5% after the grace period ends.

    Borrowers from this program must sign a Master Promissory Note agreeing to pay back the loan and interest.  NSL borrowers may obtain deferments for up to 10 years if they are pursuing advanced training. These loans can be consolidated under the Federal Loan Consolidation Program.

    Contact your school’s financial aid office to find out more about the availability and eligibility requirements of health student loans and other ways to fund your education.

    Nurse Faculty Loan Program

    This HRSA program offers loans to registered nurses completing graduate programs to become qualified teaching nurses. It also offers a loan forgiveness program of up to 85% of the loan amount to graduates who serve as full-time nursing faculty in an accredited school of nursing for four consecutive years.

    This is not a need-based program. Students can be enrolled full or part-time and receive loan support for up to five years. The maximum loan amount is $35,000 during the academic year.

    They are expected to gain full-time faculty employment within 12 months of graduation and maintain employment for four years to be eligible for loan forgiveness participation.

    Loan Forgiveness for Doctors and Nurses

    If you are one of the medical or nursing school graduates drowning in student loan debt, there are lifelines available, especially if you don’t mind living in rural communities.

    The Health Resources and Services Administration has loan forgiveness programs for doctors and nurses who serve in designated areas of the country that have shortages of primary medical, dental and mental health providers.

    For example, the National Health Service Corps loan repayment program offers up to $50,000 repayment of student loans for a two-year commitment in underserved areas. If you extend your stay beyond two years, additional loan forgiveness is available, based on where you are serve. Higher need areas offer the greatest loan repayments.

    Likewise, the Nurse Corps loan repayment program pays 60% of your unpaid nursing school debt for a two-year commitment and 25% more if you stay three years.

    Participants in the Students to Service Loan Repayment Program can earn up to $120,000 in the last year at medical school by committing to serve three years at an approved health professional shortage area.

    There are 36 states that offer loan repayment programs for doctors that range from $80,000 (Wyoming) to $250,000 (Vermont), to $525,000 (Massachusetts) to $1 million (California and Illinois) for serving in Health Professional Shortage Areas. States like Florida, California, Texas, Arizona, New Mexico, Illinois, Missouri and Georgia have the largest number of under-served areas.

    Doctors and nurses who work at nonprofit, 501 (c)(3) hospitals and clinics could qualify for Public Service Loan Forgiveness if they work there for 10 years and making 120 on-time payments.  This could change if the Trump administration follows through on promises to change the terms of the Public Service Loan Forgiveness Program.

    American Indian and Alaska Natives can receive up to $40,000 to repay medical student loans from the Indian Health Services Loan Repayment program.

    Military Has Generous Loan Forgiveness for Doctors and Nurses

    All three major branches of the military service offer loan repayment programs for doctors, some of which will pay the entire cost of medical education.

    The Army Active Duty Health Professions Loan Repayment Program offers doctors on active duty $40,000 per year to repay student loans for up to three years. The Health Professions Special Pay gives $25,000 a year for up to three years to active duty physicians and Reserve members. The Financial Assistance Program awards grants of up to $45,000 to army members enrolled in an accredited residency.

    The Air Force offers 2-year scholarships to pharmacists, optometrists, clinical psychologists and public health officers as well as 3-year scholarships for nurse corps and 4-year scholarships for medical and dental corps.  The Navy also awards $45,000 grants for each year of residency in return for one year of service.

    The Navy offers qualified practicing physicians sign up bonuses between $220,000 and $400,000, based on specialty and experience. The Navy Financial Assistance Program offers up to $45,000 a year for up to four years to medical residents.  Navy doctors, residents and med school students can receive $40,000 applied directly to student loans through its Health Professions Loan Repayment Program. The Navy’s Health Professions Scholarship Program offers up to 100% tuition coverage during medical school, plus a $20,000 sign-on bonus.

    Bill Fay

    Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at Debt.org is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at bfay@debt.org.

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