Medical Residency Loans Explained

Medical residency loans cover various costs associated from transitioning from medical school into a residency program. These costs can include studying for a board exam, taking a board exam, traveling to residency interviews, relocating and even small living costs once a residency program starts. It is important to note many residents find they have less funds available after finishing medical school and transitioning into a salaried position. Loans tend to provide more income than the initial salary of a resident, and money can be tight. Residency loans are designed to help ease this burden.

Covering the Cost of Taking Board Exams

The medical board exam cost $1,200, in 2009. These exams are administered at five regional centers. This means many students have to pay the registration fee and then pay to travel to take the test. In addition, studying for the exam is a full-time job. Medical residency loans can provide a moderate "income" during the time a student is studying. The loans cover the registration fees, and many will also cover the cost to travel to the exam location.

Paying for the Transition into Residency

Transitioning into residency means first locating the appropriate program. Medical students are required to interview at residency programs, and these interviews can involve more travel. Once the proper residency has been located and a student has "matched," most students will have to relocate to begin their medical careers. Even a small relocation can cost a lot of money. This is exacerbated for students who have or are starting families, which is very common for students in the advanced years of medical school. Residency loans can cover the gap between medical school loans and residency salaries.

Expected Rates and Payment Plans

Doctors are notorious for going deep into debt in order to obtain their M.D.'s. Thankfully, they also have excellent job security. This means they tend to pay their loans off at high rates. Even if a doctor is slow to pay off loans, lenders can usually locate the individual's practice in order to garnish wages. Recovering funds from a doctor, then, is much easier than doing the same with a venture capitalist or similar professional. Since lenders are taking on less risk, they will provide better rates and more flexible payment plans for residency loans than other personal loans. They will even extend the loans to individuals already deep in debt from medical school. In the long run, profits off these loans are high for lenders.

Downsides of Residency Loans

Because lenders are so willing to allow doctors to go deep into debt, many doctors have long-term debt problems. It is a misconception doctors are always flush with cash. In fact, many are repaying school debts well into the advanced years of their lives. The total cost of getting a medical education is astronomical. If a person then takes loans in residency, the debt does not get any smaller for many years to come. Starting to pay off this debt is better than going further into debt. Ultimately, individuals who find a way to budget for the expenses associated with residency have more financial freedom in the future.


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