Explore New Options to Repay Medical School Loans

Current medical students can have their loans repaid in exchange for working in underserved areas.

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Not so long ago, many medical school graduates entered residency burdened with large amounts of student loan debt. And just when you thought that was the worst of it, many residency-related student loan deferments for federal loan repayments were phased out in the early 1990s, leaving many residents with relatively large monthly loan payments while still in training.

The federal government has embarked upon programs aimed at attracting medical residents to work in HPSAs (Health Professional Shortage Areas) for three years after graduation, at which time they would receive tuition and stipend reimbursements for each year of HPSA service. The government recently expanded the program, after it announced that almost 20 percent of Americans live in underserved areas, ranging from isolated rural areas to areas many would be surprised are considered underserved, including the Venice Beach and West Hollywood/Hollywood areas of Los Angeles.

[Learn how to go to medical school for free.]

Students can apply for healthcare loan repayment programs through the National Health Service Corps (NHSC), which asks medical residents for a flexible commitment of working for at least two or three years in an underserved area of the United States in a primary care specialty. The government would then repay up to $120,000 in debt. From 2008 to 2011, the program has nearly tripled its enrollment from 3,600 physicians to more than 10,000. Additional loan repayment support is available if physicians choose to work longer.

U.S. Secretary of Health and Human Services Kathleen Sebelius recently announced a newer initiative toward student loan repayment. This new loan repayment program, to which Sebelius committed $9.1 million, is targeted at recruiting current medical students, particularly those in their fourth year, who are dedicated to specifically designated specialties.

[Check out rankings of medical school primary care specialties.]

The announcement of this additional option makes the following federal scholarship and loan repayment avenues available:

NHSC Scholarship: In this program, students entering medical school—or those who haven't yet completed their fourth year of medical school—receive tuition scholarships and monthly stipends. The students sign a commitment to spend one year working in an underserved area for each year of support received. There is a limit of four years of funding per student.

This program can sound tempting—after all, what is four years if your entire medical school tuition is paid in advance? But if you happen to change your mind after graduation and you don't enter or finish residency, the penalty can be steep. You must repay the government tuition costs plus penalties and interest within a specified period of time. In rare cases, the government has disciplined doctors who did not repay these costs in time.

Students to Service Program: With the recently announced funding, this program allows fourth-year medical students who have solidified their career choice down to a primary care specialty (internal medicine, family medicine, pediatrics, geriatrics, obstetrics and gynecology, and general psychiatry) the opportunity for loan repayments.

[Find out which public medical schools award the most financial aid.]

• Commitment after residency: If you complete a residency in one of the primary care specialties above, you can work in a HPSA for as long or as little time as you desire. Each year you spend working 32 or more hours per week seeing patients, a certain percentage of your loans will be repaid.

A half-time work option is also available. After three full (or six half-time) years, these physicians have the option to continue on for more substantial support. Physicians who terminate the program without NHSC approval face substantial financial penalties (usually more than $100,000).

Keep in mind that these programs, as they're federally administered, do not tax funds given to these physicians for the purpose of loan repayment. Programs outside the NHSC that offer these benefits may report the repayment to the IRS, which then taxes the physician.

For those premeds who find current medical school tuition figures daunting, these programs offer a great way to become debt-free in a shorter amount of time than for most graduates. Premeds can still get a fairly competitive salary at the same time. Just be sure to read all the fine print, especially if you are committing early.

Ibrahim Busnaina, M.D. is a graduate of the University of Pennsylvania School of Medicine and coauthor of "Examkrackers' How to Get Into Medical School." He has been consulting with prospective medical school applicants, with a special focus on minority and other nontraditional candidates, since 2006.