What We Wish We Knew in Med School: Financials & Student Loans

In today's episode, I am sitting down to talk about the one part of the medical journey that can feel overwhelming... finances & student loans! 

We dive into what happens after graduation, navigating repayment options, understanding income-driven repayment plans, programs like PSLF, loan assistance resources, and the reality of managing debt during residency.

We’ll talk about the things we wish we understood sooner, how to approach your loans with a plan, and why financial conversations are such an important part of the medicine journey.

Whether you’re a medical student, resident, spouse, or someone trying to understand the financial side of higher education, this episode is for you.

I’m so glad you’re here 🫶🏻

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Transcript

SPEAKER_00 0:01

Hey guys, welcome back to the Life of a Doctor's Wife. Today we're diving into a topic that isn't always glamorous, but it's something that impacts almost every medical student, resident, and their family. Finances and student loans. When you're in med school, it's easy to focus on getting through exams, rotations, interviews, and match day. Maybe you want to grow your family in medical school or you're single with no income, and maybe not much family support. Then graduation comes, residency begins, and suddenly those six-figure student loan balances become very real. Now, before we jump in, I want to give a quick disclaimer. Although I do have my MBA, I am not a licensed financial advisor. And this episode is for educational purposes only. Everyone's financial situation is different, so please do your own research and consider speaking with a financial professional. With that being said, let's talk about some of the basics we've learned while navigating this journey ourselves. The reality is many physicians graduate with hundreds of thousands of dollars in student loans. And if you're married or having children during training, you're often making major life decisions while carrying that financial burden. I remember thinking that once residency started, everything would feel easier financially. But the reality is that residency salaries are often modest compared to the amount of debt physicians actually do carry. Now residency's here and we're finally earning an income, but we're also trying to balance a rent or a mortgage, childcare, transportation, insurance, and honestly, all of those everyday life expenses. So I'm going to dive into it all with you because there's many things that I wish I knew before I landed here in repayment. So let's break down the different kinds of loans to just kind of have a better understanding of what we're talking about. So there's something called direct subsidized loans versus direct unsubsidized loans. So direct subsidized loans are federal loans where the government pays the interest during certain periods. So the interest does not accrue while you are enrolled in school, at least halftime in school and during eligible grace deferment periods. Having the direct subsidized loan, your lower total cost over time would be less than an unsubsidized loan. But I think it's important to keep in mind that many graduate and professional students, including medical students, generally cannot receive new direct subsidized loans. If you have a direct subsidized loan, most likely you have that loan from your undergrad. I still think it's very important to understand the difference between the two. So the most common for med students is going to be that direct unsubsidized loan. Federal loans where you are responsible for the interest from the day the loan is dispersed. So some key points to keep in mind with the direct unsubsidized loan is that it is available to medical students, no requirement to show financial need. Your interest accrues while you are in medical school. The interest can capitalize, which means being added to the principal balance in certain situations. So each semester, a direct unsubsidized loan would be taken out in your name. And every month that is accruing at a certain percentage. So most likely a lot of you, your first year of medical school, your percentage for your direct unsubsidized loan at this time is going to be lower than what your fourth year percentage was, just the way that our market was going at the time. So let's say one is at 4%, that's accruing 4% every month. But what this means is that it's not capitalizing or being added to your principal balance until graduation means that that interest is growing, but the interest isn't adding to your total amount. So for example, you borrow $10,000 for your first year. If the interest rate, let's say, is 10% for round numbers, that would be $1,000 accrued every single month. Then that thousand dollars is then added to your principal balance at the end of graduation. So for 12 months, it's now accrued $12,000 of interest on top of that $10,000. So that's $22,000. Most med students will have a combination of direct unsubsidized loans, which their annual amount is commonly $20,500 per year for graduate or professional students. Again, that can change every year. There are new laws coming in place for loans and how much people can take out in their lifetime. So definitely keep that in mind because that is definitely going to play a role in the future medical students as you come through. So just make sure that you're staying up on the rules and the laws to better understand how much money you can borrow, not including private loans. So that direct unsubsidized loan that we just talked about, and then as well as grad plus loans. So we're gonna go ahead and talk a little bit more about plus loans and how those can affect you. So grad plus loans covers additional cost of attendance, that tuition, living expenses, et cetera, that I talked about. So that could be board exams, your rent, anything like that. Or also unsubsidized, which means that the interest is accruing immediately as well. So just keep that in mind that those grad plus loans are accruing their interest exactly how those direct unsubsidized loans were accruing interest. Federal plus loans are government-backed education loans for parents of dependent undergraduates or for graduate professional students. So keep in mind you could have a parent plus loan in your undergraduate years and have now be eligible for a graduate student loan. They do require a credit check, but no minimum score. So offering borrowing up to the full cost of attendance minus your other aid. So for interest rates for loans first distributed on or after July 1st of 2025 and before July 1st of 2026. So most of the students that decided to pull a grad plus loan for this past academic year, the fixed interest rate was 8.94%. These loans will gain interest, but will not compound until they go into repayment. So again, same process as the unsubsidized loans. They're gaining interest every month, but they are not compounding on that principal balance until they go into repayment. Now, this is a great option for someone who does not have the finances to pay the tuition and needs some extra cash in their pocket for the miscellaneous expenses we discussed earlier, like living expenses, books, board exam fees, etc. Now, something you should think of if you have the finances to pay the tuition cost yourself. If you have an account with potential of making more than what the interest of the loan percentage is, it may make sense for you to invest your money into a separate account, take that loan, and then pay back the loan later. So you're making money on that investment. Again, most likely no one's gonna be making more than 8.94% on an account right now because the interest rates are so high. Um, but it's not unheard of. If you do happen to have something like that available to you or could possibly pay that, then that may be an option for you. So if rates were to fall, if the market was to fall, that is definitely something that you should keep in mind and to better understand how to manage your money. Now, another thing that I did want to talk about was Medicaid, SNAP, and WIC in medical school. But the medical school in which Dave went to school was very family forward. Many students are married, getting married, and have kids going into med school, or even have kids in med school like us. With that said, many are on Medicaid, government assistance throughout their academic journey. For those that might not be aware, Medicaid is a government health insurance program for people who meet certain income and eligibility requirements. Being a medical student does not automatically disqualify you. Eligibility is usually based on things like income, household size, the state rules. So remember, it will vary by state, age, pregnancy, parent status, and other factors, again, all dependent on that state. Being eligible for Medicaid, they do not look at your savings accounts and any other outstanding amount of money that you do have. So keep that in mind. Just because let's say you have $50,000 stocked away into an account, that doesn't automatically make you ineligible for Medicaid. Like I said before, it's gonna be that income, household size, and then additional state rules. So how Medicaid can apply during medical school, it's really gonna be low-income medical students who may qualify. Many med students have little or no income during school, so especially if they are not working. However, eligibility depends heavily on the state and the person's circumstances. Loans usually aren't treated like income, the same way wages are. So student loans generally are not considered taxable income, but Medicaid rules can be complicated and vary by state. Married medical students may have different eligibility. So if you're married, your household income may be considered differently than a spouse's income can affect your eligibility depending on the state and program. So again, if Dave and I were married and we didn't have a child, I wasn't pregnant, and I was working, our eligibility would be very different than me staying home and having a child or currently being pregnant. That would also affect him and his status to be eligible for Medicaid. Now, Medicaid versus school insurance. So some medical schools do require students to have health insurance and offer a student plan. A student may compare the cost of the school health plan, Medicaid coverage, provider networks, prescription coverage, specialty care access, and even doing private insurance. Many of our friends also did opt to do private insurance while they were in medical school. I also believe that if your school offers are planned, that may be something that you should really look into, and the cost of that. For medical students, SNAP and WIC can sometimes be options, but eligibility depends on your household situation, income, state rules, and specific program requirements. So being in medical school alone does not automatically make you eligible or ineligible. Now, SNAP. SNAP is the supplemental nutrition assistance program. SNAP helps pay for groceries through an EBT card. So think of it as almost like a little debit card that they load money onto every month for you. So for med students, many medical students have low taxable income, which can make SNAP seem possible. But however, students enrolled in higher education often have extra eligibility rules. So graduate and professional students, including medical students, usually must meet a student exemption, such as working a required number of hours, having certain family responsibilities, participating in approved programs or other qualifying circumstances. Things that can affect your eligibility can be your household size, your spouse's income if you're married, your children or dependents, your work status, and then again those state rules. I think it's important to note that student loans generally are not treated the same as earned income, but SNAP has specific rules around financial aid and student status. So again, go look at your government or state page to better understand the rules in your given state. I think it's also important to note that I know a lot of students also keep their home residency from wherever they live and go to school in another state. Remember that that will then make you ineligible for Medicaid in the state of which you're currently in school. Now, WIC. WIC is women, infants, and children, and this provides healthy foods, nutrition support, breastfeeding support, formula for babies, and nutrition education. Medical students and their families may qualify if they're pregnant recently postpartum. Now that time limit does vary by state, breastfeeding and a parent or guardian of an infant or child under the age of five. WIC is often more accessible than SNAP for families because pregnancy and children are central to eligibility. For a med school family, a medical student household may look like $0 to very low income during school. The spouse can work. You just have to be under the minimum monthly allowance for your household. So I believe online, if you do look, it will list out how much the maximum amount of money you can make per month for the given number of people in your household. So again, whether it was just Dave and I, a household of two people, the monthly income would be less, three, it's a slightly more, and so on. Additionally, living on loans, paying rent, childcare, and food as you're waiting years for your attending income. Programs like Snap and WIC can sometimes help bridge that gap. I think it's so important to remember that you can be a future doctor but still qualify for assistance during training. Because med school is years of delayed income and not instant financial security. I want to take a quick break and share something that has genuinely helped us stay on top of our finances, and that's using Monarch for budgeting. If you're anything like us, especially in this season of life, balancing school, work, family, loans, and everything in between, money can feel like one more thing to keep track of. And honestly, it used to stress me out. But Monarch has made it so much easier. It gives you a full picture of your finances in one place, your spending, your saving, your goals, and what I love most is that it's designed for families. You can link your account, credit cards, and even investment accounts. You can share it with your partner, stay on the same page, and actually feel in control together. It's not about restricting your life, it's about understanding it and making smarter decisions without feeling overwhelmed. If you want to try it out, you can get 50% off your first year with my link in the show notes. I highly recommend it if you're trying to simplify your finances and just feel a little more organized in your day-to-day life. Now let's get back to the episode. Okay, I want to dive deeper into loans and better understanding the grace period that people talk about. So after graduation, federal student loans typically enter a grace period before repayment officially begins. For many graduates, this is about six months. That can feel like a relief because you're transitioning into residency, moving, and adjusting to an entirely new chapter. But it's important not to ignore your loans during this time. You should use those months to understand how much you owe, which loans are federal versus private, your interest rates, and what repayment options are available. The more informed you are before payments begin, the less overwhelmed it feels later. Now, what is an income-driven repayment plan? One of my biggest things we learned is that not everyone has to make standard loan repayments. Many physicians in training choose an income-driven repayment, also known as IDR plan. These plans calculate your monthly payment based on your income rather than the total loan balance. Because residents earn significantly less than attending physicians, your monthly payments can be much more manageable. For some families, this can make a huge difference in their monthly budget. Instead of being crushed by a payment that was designed for a fully practicing physician salary, payments are adjusted based on what you're actually earning right now. So, what's the RAP program? You may hear people talk about RAP, which stands for Resident Assistance Program at certain institutions or loan servicers. Through programs can vary depending on where you train and what loans you do have. Some residency programs offer financial wellness resources, loan repayment assistance, or counseling services to help residents navigate repayment strategies. It's worth checking with your residency program, financial aid office, or loan servicer to see if there are any assistance programs available to you. I do want to take a minute and mention that LUCOM did do a very good job with this with their financial aid office. Prior to graduation week, the fourth-year medical students had to attend a session with the financial aid office, and they walked them through all of this to better educate them upon graduation. And one of the financial aid employees at his medical school even sat down and opened up his schedule to allow students to schedule a one-on-one session with him to really break down their exact situation, what loans you do have, how much you do have, and talk about what specialty you're going into and different options that you may have for repayment and what is best for you. And honestly, I really did appreciate his time and the fact that he really wanted the best for everyone upon graduation. So I think it's also important that many residents don't realize there may be resources specifically designed to help physicians in training. So income-driven student loan repayment plans got a major overhaul with the new tax act on July 4th, 2025. This includes the introduction of the repayment assistance plan, which will become available by July 1, 2026. Here's what it means for borrowers who are on income-driven plans, including how it could affect monthly payments. So, what is repayment assistance plan? The repayment assistance plan or RAP is a new income-driven repayment IDR plan for federal student loans. Like other IDR plans, it allows borrowers to repay their student loans with monthly payments that are determined by a borrower's income and number of dependents. RAP will replace some existing IDR plans like the Saving on a Valuable Education Save Plan, Income Contingent Repayment ICR plan, and the Pay As You Earn Payee Plan. How does the repayment assistance plan work? The repayment assistance plan is going to charge most student loan borrowers monthly payments as a percentage of their income. Like another IDR plan or the save plan, unpaid interest will be canceled each month if the borrower continues making their payments. That way the balance doesn't grow. So here's what that would look like. If you owe $200 a month in student loan interest but qualify for the minimum wrap payment of $10 a month, your $10 payment would go towards the interest and the remaining $190 would be waived instead of adding to your principal balance. This ensures your debt does not compound over time as it would with other loans if you don't cover your monthly interest payment. Now beyond That if your monthly payment won't reduce your loan's principal value by at least $50, the Department of Education will contribute to ensure that it does. This will guarantee you'll reduce the debt over time, even if you're only paying the minimum. Under RAP, it takes a maximum of 30 years for borrowers to pay off their debt. This is more than the 20-year max timeframe to pay off student loans taken out by undergrad via Save or the 25-year max for graduate school loans. How are repayment assistant plan payments calculated? RAP calculates monthly student loan payments based on a borrower's adjusted gross income, also known as AGI, or the total amount you earned in a tax year minus certain adjustments like contributions to a tax-deferred retirement plan or a health savings plan, also known as HSA, outside of your payroll. This could also be student loan interest and health insurance premiums if you are self-employed. Now, this can get interesting. Let's say your spouse makes more money, so a six-figure job, and it's just the two of you. I would personally look into filing your taxes for the previous year, so the January of your fourth year of residency, to be married filing separately and see how that would affect you both. Because this would allow for your partner's AGI adjusted gross income to be lower, allowing them to make smaller monthly payments and to qualify for RAP. Now, RAP, when they look at this, they're looking at the adjusted gross income of the prior year. So keep in mind that that year, your fourth year of medical school, how you file your taxes is going to affect your adjusted gross income for RAP. You should consult a financial advisor to understand the effects that that may have for you, but that is an option that you can do if your spouse is not working full-time medical school and then starting residency, making a very low income. Rap payments also consider the number of dependents a borrower has. For example, let's say your AGI is $101,000. Your annual wrap payment would equal 10% of your AGI or about $842 per month if you have no dependents. Your monthly payment would be reduced by $50 for each dependent you claim on your tax return. So using the previous example, if you have two kids, you'd pay $742 per month instead of the $842. But regardless of your AGI or your dependence, RAP has a mandatory minimum payment of $10 per month. The medical student who had $0 for their adjusted gross income or less than $10,000, your minimum annual payment or percent for your AGI must pay $120. Now, let's say you fall in that $10,000 to $20,000, that's gonna be a 1%. So that's why I'm saying look at the benefits or the disadvantages and weigh your situation for what makes more sense for you. Now, who is eligible for the repayment assistance program? So those with direct loans will be eligible for RAP once it's implemented. With the exception of those with parent plus loans, some borrowers may be able to consolidate their loans to a direct loan and become eligible for the RAP. So let's talk about the repayment assistance plan versus the standard repayment plan. So student loan borrowers who take out a loan after July 1st, 2026 will only be eligible for either the standard repayment plan or RAP. The standard repayment plan offers fixed monthly payments over a set time period, regardless of your income, similar to a mortgage or an auto loan. The amount you borrowed determines your repayment term on the standard repayment plan. So any amount borrowed less than $25,000, you will then have automatically 10 years for repayment. $25,000 or less than $50,000, 15 years, $50,000 to less than $100,000, 20 years, and $100,000 or more is 25 years. So let's talk about the benefits of repayment assistance plans. So compared to the student repayment plan, RAP does offer some advantages. Your monthly payments will be driven by your income. So this aims to make payments more affordable for your personal financial situation. No debt compounding. So if your payment amount is less than the interest owed, the difference is waived, not added back to the value of the loan. That means if you're on time with your payments, your loan won't increase in value. Discounts for dependents. So RAP accounts for your financial responsibilities as a parent or guardian, giving you a $50 monthly discount per dependent you claim on your tax return. Disadvantages of the repayment assistance plan. Here are the potential drawbacks of RAP. It could take longer to repay your loans. RAP could stretch how long it takes you to pay off your loans, which means that you may have more years of making student loan payments. Parent plus loans are not eligible, although they are considered direct loans. Parent plus loans are not eligible for RAP. If you borrow for a child's education, you may be left without an IDR plan to pay back that debt. Parent plus loans taken out after July 1, 2026 will only be eligible for the standard repayment plan. Now I do want to go over some common questions that may come up about repayment assistant plans, also known as RAP. When will repayment assistant plans be available? So the current law states that RAP should be available on July 1, 2026. So that's coming up here in the next few weeks from the time that this podcast will be put out. Which student loans are eligible for the repayment assistance plan? Only those with direct student loans, meaning loans borrowed directly from the federal government, are eligible for RAP. Parent plus loans are not eligible. Although they are considered direct loans, ParentPlus loans have not been eligible for most income-driven repayment plans like RAP. A special kind of IDR called the Income Contingent Repayment Plan was previously available for those who consolidated their Parent Plus loans. Parent Plus loans taken out after July 1, 2026 will only be eligible for the standard repayment plan. What is the minimum monthly payment with the repayment assistance plan? The minimum monthly payment is $10, regardless of your adjusted gross income or deductions for eligible dependents. Your past income-driven repayment plans had minimum payments as low as $0. So this $10 minimum payment may be a change for some borrowers. After how many years with the repayment assistance plan are my loans forgiven? Under RAP, it takes 30 years of payments for loans to be forgiven, regardless of whether those loans are for undergraduate or graduate education. Under previous IDR plans, undergraduate loans were forgiven after 20 years of payments, and graduate loans were forgiven after 25 years. Public service loan forgiveness, which is available to certain federal, state, local, tribal, and nonprofit workers with student loans, remains in place under RAP. Eligible loan holders can have their debts forgiven after 120 payments or 10 years of consistent payments. Key dates for the repayment assistance plan. So here are some key dates to keep in mind around this new RAP. Like I stated before, RAP will be available for direct student loan borrowers on July 1st, 2026. Loans taken out after July 1, 2026 are not eligible for some current IDR plans, such as Save, ICR, and PayE plan. Student loan borrowers who take out a loan after July 1, 2026 will only be eligible for either the standard repayment plan or RAP. Now, lastly, I do want to talk about the public service loan forgiveness, also known as PSLF. One of the most talked-about programs among physicians is public service loan forgiveness, often called PSLF. The basic idea is that if you work for a qualifying nonprofit or government employer and make qualifying payments under an eligible repayment plan, you may become eligible for a loan forgiveness after meeting the program requirements. Many residency programs are affiliated with nonprofit hospitals, which is why residents often start tracking PSLF eligibility early in training. It's important to note that this is not a quick fix and the rules can change, so it's important to stay updated and keep accurate records. But for some physicians, PSLF becomes a major part of their long-term financial strategy. I do want to mention the emotional side of debt. I think one thing that people don't talk about enough is the emotional weight of student loans. It's not just numbers on a screen, it's seeing a balance that's larger than the cost of many homes. It's wondering how long it'll take to pay off. It's asking yourself if you'll ever feel financially caught up. And honestly, those feelings are completely normal. There were moments when we looked at the numbers and thought, how are we ever going to tackle this? But then we reminded ourselves that medical training is a long-term investment. The goal isn't to pay off everything overnight. The goal is to have a plan. So what we've learned so far, if I could share a few takeaways for anyone entering residency, these are what it would be. First, learn about your loans early. Don't wait until the first payment notice arrives. Second, understand all of your repayment options. The standard repayment plan is not your only choice. Third, don't compare your journey to someone else's. Every physician's financial path looks different. Some aggressively pay down debt, some pursue forgiveness programs, and some focus on building an emergency fund first. There isn't one perfect strategy for anyone. And finally, remember that your financial situation today is not your financial situation forever. Residency is temporary, training is temporary, the sacrifice you're making right now are part of a much larger journey. So if you're starting medical school, residency, fellowship, or supporting someone who is, I hope this episode helped make the world of student loans feel a little less intimidating. You don't have to know everything today, you don't need the perfect financial plan right away. Start by learning, asking questions, and taking one step at a time. Because just like medical training itself, financial freedom isn't built in a day. It's built through consistent decisions over time. And as always, I'd love to hear from you, your experiences, your stories, or even things you wish you knew. So feel free to reach out or message me if you'd like to be on the podcast. You can find me on social media at LifeofADR Wife. Thank you so much for being here and spending this time with me. I don't take that lightly. Until next time, take a breath, pour yourself a nice coffee, and be kind to yourself. I'll see you in the next one.