Association of

American Medical Colleges

Education Debt Manager
A common-sense approach for borrowing wisely
www.aamc.org/FIRST
ii
A Note From FIRST iv
Education Debt 1
Loan Basics for Entering Medical Students 3
Getting Organized 3
Medloans

Organizer and Calculator 3

Tracking Your Loans 4
Lenders 5
Servicers 5
Federal Student Aid (FSA) Ombudsman 6
Master Promissory Note (MPN) 6
Delinquency and Default 7
Less than Full-Time, LOA, and Withdrawing 8
Know the Type of Loans Borrowed 8
Important Loan Details 8
Understand the Total Cost 9
Interest 10
Capitalization 11
Strategic Borrowing 13
Options to Consider 13
Alternatives to Borrowing 13
Borrow in the Right Order 14
Borrow Only What You Need 15
Create a Budget 17
Loan Timeline 19
During Residency 19
Grace 19
Before Repayment Begins 19
Loan Repayment Timeline 20
Using Up Your Grace 21
Postponing Payments 22
Deferment 22
Deferment Eligibility Chart 22
Post-Enrollment DefermentDirect PLUS Loans 23
Forbearance 23
Mandatory Forbearance for Medical Interns & Residents 23
Loan Repayment 25
When Do You Start Paying and How Much? 25
Rights During Repayment 25
Table of Contents
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The Repayment Plans 26
Standard 26
Extended 26
Graduated 27
Income-Contingent 27
Income-Based 28
Pay As You Earn 29
Repayment Plans Chart 30
Monthly Payment Amounts 31
AAMC Monthly Payment Estimator Stafford Loans 32
AAMC Monthly Payment Estimator PLUS Loans 33
During Residency 34
Making Payments 34
Postponing Payments 35
Credit 37
Your Credit Score: What It Is and Why It Matters 37
How Your Credit Score is Determined 37
Factors of Your Score 38
The Benets of Good Credit 39
Did You Know? 39
Budgeting 41
Benets of Budgeting 41
Creating a Budget 41
The Basics of Budgeting 42
Finding Alternatives 43
Budget Worksheet 44
Financial Literacy 45
Identity Theft 45
Stay Safe Online 45
Stay Safe Ofine 46
Be Social. Be Responsible. 46
Credit Cards 46
Signs You Could be Heading for Trouble 47
Fixing the Problem 47
Other Considerations 48
Private Loans 48
Loan Consolidation 48
Student Loan InterestA Tax Deduction 49
Lifetime LearningA Tax Credit 49
Public Service Loan Forgiveness (PSLF) 50
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A Note from FIRST for Medical Education
First and foremost, we want to congratulate you on making the decision to
become a doctor. You have worked hard to get where you are today, but
the next years will also be challenging both academically and financially.
Facing student loans may seem daunting, confusing, and even downright
frustrating. Despite this, it is vital to your financial future that you avoid the
temptation to ignore your loans and instead choose to face your debt armed
with the knowledge to make educated borrowing decisions.
This resource, the Education Debt Manager for Entering Medical Students, is
designed to help students, residents, financial aid staff, and others navigate
the complexities of medical student debt. The information contained herein
will not only show you how to borrow and repay wisely, but also will help
you develop your debt management skills.
Benjamin Franklin said it best when he said, An investment in knowledge
always pays the best interest. Be encouraged; you are about to make a
major investment in yourself, your future, and the future of health care. Rest
assured, this investment will reap great rewards.
The best advice I received when I was contemplating a career in medicine was to
concentrate my initial efforts on getting into medical school and leave the issue of how to
pay for it for another day. They assured me that there would be enough money available in
the form of scholarships, grants, and low interest loans to pay for my medical education.
What they did not educate me about was debt management, the principle of compound
interest, and that it could take me the bulk of my professional career to pay off my
student loans.
It has been more than twenty years since I heard those words of wisdom, and I would
continue to provide students with similar advice over the years; however, I would qualify
my comment with the fact that the trend line for medical student indebtedness has
become increasingly steep with each academic year.
Students must arrive at the door of the house of medicine with an enhanced awareness of
how they will navigate the rising tide of medical education debt that they will encounter
prior to their graduation.
Gary LeRoy, M.D.
Associate Dean,
Wright State University
www.aamc.org/FIRST
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Education Debt
Paying for a medical education is challenging. In fact, the majority of medical school
graduates complete their education with the assistance of student loan financing. In the
graduating class of 2012, nearly 86 percent of medical students reported leaving medical
school with student loans. Across the country, the median level of debt for the class of
2012 was $170,000 (based on public and private MD granting medical schools, including
undergraduate debt).
The AAMC (Association of American Medical Colleges) collects this type of data each year
and we share it with you as a point of reference. Prior to leaving medical school, you will
also be asked to share your feedback regarding your medical school experience via a survey
called the Graduate Questionnaire.
Medical Student Education:
Debt, Costs, and Loan Repayment Fact Card
October 2012
Indebted Graduates, Class of 2012*
Public Private All
Mean $155,978 (4%) $183,066 (4%) $166,750 (3%)
Median $160,000 (3%) $190,000 (6%) $170,000 (5%)
Education Debt of: Public Private All
$100,000 or more 78% 80% 79%
$150,000 or more 59% 67% 62%
$200,000 or more 29% 48% 36%
$250,000 or more 10% 27% 17%
$300,000 or more 4% 11% 6%
Graduates with Education Debt 88% 84% 86%
Graduates planning to enter loan forgiveness/repayment
program:
30%
Cost of Medical School, M1 In-State, 2012-13
Public Private
Median Tuition & Fees $32,414 (5%) $50,309 (4%)
Median Cost of Attendance $53,685 (5%) $72,344 (4%)
Median 4-Yr. COA for Class of 2013 $207,868 (6%) $278,455 (1%)
Source: AAMC TSF Survey preliminary data from 76 public schools and 53 private schools.
Resident/Fellow Stipends 2012
Median Stipend
Approximate Monthly Income-Based
Repayment Amount
1st Post-MD Year $49,651 $411
2nd Post-MD Year $51,428 $433
3rd Post-MD Year $53,454 $459
4th Post-MD Year $55,750 $487
Source: Analysis of current IBR federal regulations and preliminary data from AAMC Survey of
Resident/Fellow Stipends and Benets.
aamc.org/FIRST
Other Debt Pct. of Graduates Median
Premedical Education Debt 36% $20,000
Non-education Debt 25% $9,000
* Source: FIRST analysis of AAMC 2012 GQ data. Education debt gures include premedical
education debt. Non-education debt includes car, credit card, residency relocation loans, etc.
Current Interest Rates
Graduate/Professional Direct Loan Interest Rates:
Direct Stafford: 6.8% xed Direct PLUS: 7.9% xed
For interest rates on loans disbursed prior to 7/1/2006, see aamc.org/FIRST
Contact Information
Julie Fresne, jfresne@aamc.org Matthew Shick, mshick@aamc.org
Jay Youngclaus, jy@aamc.org
aamc.org/FIRST
Sample Repayment $170,000 in Federal Direct Loans
Description
Repayment
Years
Monthly
Payment
Interest
Cost
Total
Repayment
IBR for full
repayment with
$160,000 starting
salary after
residency
Residency: 3
Post-Res.: 12
$410 to $490
$2,000 to $2,200
$151,000 $321,000
Forbearance
during residency,
then Extended
repayment
Residency: 3
Post-Res.: 25
$0
$1,600
$306,000 $476,000
Forbearance
during residency,
then Standard
repayment
Residency: 7
Post-Res.: 10
$0
$3,200
$219,000 $389,000
Forbearance
during residency,
then Extended
repayment with
2 yr NHSC ($60K)
Residency: 3
Post-Res.: 14
$0
$1,600
$91,000 $261,000
Public Service
Loan Forgiveness
with $120,000
starting salary
after residency
Residency: 3
Post-Res.: 7
$410 to $490
$1,400 to $1,700
$100,000
$144,000
then
$169,000
forgiven
Notes: IBR is Income-Based Repayment. NHSC is National Health Service Corps Loan Repayment
Program. All gures are approximate and rounded for clarity. Full assumptions for each scenario
available on request. Salaries in 2011 dollars.
The AAMC is the leading source of education debt management information for
medical students. See www.aamc.org/FIRST for more resources including the
Medloans Organizer and Calculator for detailed repayment scenarios.
www.aamc.org/FIRST
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Loan Basics for Entering Medical Students
Getting Organized
The rst step in managing your education debt is getting organized. In the coming years, if
you track and keep all of your student loan documents in a single place, not only will you
nd that you are a more educated borrower (because you understand the current state of
your debt portfolio), but youll also nd that you are better prepared to manage this debt
after medical school.
Medloans

Organizer and Calculator

When putting your essential documents in order, you may rely on a folder system, a filing
cabinet, a scanning-and-saving process, or even a shoebox. The specific method you use is
not as important as the actual process of opening, readingyes, readingand saving your
student loan paperwork.
To assist you in staying organized through medical school and residency, the AAMC has
created an online resource for you to safely and securely organize and save your loan
portfolio information as well as calculate various repayment options for after graduation.
This tool will help you stay organized and help you understand the impact of your borrowing
(total repayment cost) before you accept a loan.
The earlier you begin utilizing the Medloans

Organizer and Calculator, the more prepared

you will be to make wise borrowing and repayment decisions.
Organize and keep track of your student loan information
Develop repayment strategies using the calculator
Use the only calculator designed specically for medical students
the Medloans

Calculator
is pretty darned useful.
Job well done!
Frank Bauer, 2012 Graduate,
URochester SOM
Use your AAMC username and password
to log in to the Medloans

Organizer and Calculator

www.aamc.org/FIRST
For help with your username and password, contact Denine Hales at: dhales@aamc.org.
www.aamc.org/FIRST
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Tracking Your Loans
Where are your loans coming fromwho is your lender? Where will your payments gowho
services your loans? The next step in managing your education debt is knowing who you are
borrowing from and who you will be repaying. If you keep good records, you will know the
answers to these questions. Dont despair, though, if you lose track of your loan information.
There are two resources you can rely on to help you nd the details of your debt.
The nancial aid ofce (pre-med and medical) can help you identify the lender and
servicer of your loans.
The National Student Loan Data System (NSLDS) is the U.S. Department of
Educations central database for federal student aid. Visit: www.nslds.ed.gov.
NSLDS is a repository of all of your federal loans and lists the current lender, servicer, and
the outstanding principal balance (OPB) of the loan. The information displayed on NSLDS
is not real-time data, and due to processing times and only periodic updates, your current
loan situation may be different than what is reected. For the most up-to-date information,
contact the loan servicer.
Nonfederal loans (including private, alternative, and institutional loans) are not listed on the
NSLDS Web site. For this information, consult the nancial aid ofce or review your credit
report (www.annualcreditreport.com) to determine the lender of those loans.
www.nslds.ed.gov
To log in, provide the following information:
Social Security Number
Date of birth
First two letters of your last name
FAFSA PIN
If you dont know your PIN, request it by going to:
www.pin.ed.gov
Additional information on record keeping is available on the FIRST Web site at: www.aamc.org/rst/factsheets.
www.aamc.org/FIRST
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Lenders
During medical school, you will borrow your federally guaranteed student loans from Direct
Loans (DL), also known as the William D. Ford Federal Direct Loan Program (www.dl.ed.gov).
The DL program lends money to borrowers directly from the U.S. Department of Education.
The loans you may receive from DL include Direct Stafford Loans, Direct PLUS Loans, and
Direct Consolidation Loans.
Other common loans received during medical school include Perkins Loans, Primary Care
Loans (PCL), and Loans for Disadvantaged Students (LDS). These are federal loan programs,
but the loans are issued to you by your school on behalf of the federal government.
Loan Type Lender
Direct Stafford & Direct PLUS Direct Loans (Dept. of Education)
Institutional Your School
Perkins, PCL, and LDS Your School
Private Bank or Other Lending Institution
Direct Consolidation Direct Loans (Dept. of Education)
Once you know who your lenders are, the next step is to nd out who services your loans.
The loan servicer is very important because until your loans are fully repaid, the servicer is the
point-of-contact for everything concerning these loans.
Servicers
After a lender disburses the loan, a servicer will be the entity that oversees the
administration of the loan during repaymentlike the manager of the paperwork. Be aware
that the lender may act as the servicer of their loan or they may contract with a third-party
to do the servicing on their behalf. In any case, the servicer will be your point-of-contact for
most activities that occur during repayment such as making payments, updating contact
information, processing forms for deferment and forbearance, and providing tax forms
with information on deducting student loan interest. The servicer(s) of your loan(s) may
change. In order to stay informed about these types of changes, be sure to open and read all
communications that you receive regarding your student loans.
For successful loan repayment, its crucial that you know the servicer(s) of your
loan(s). The NSLDS Web site lists the lender and servicer for each of your federal loans.
www.aamc.org/FIRST
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Federal Student Aid (FSA) Ombudsman
If you experience a loan dispute that cannot be resolved after repeated attempts, the
Federal Student Aid (FSA) Ombudsman may be able to help. The FSA Ombudsman conducts
impartial fact-nding research about your complaint to reach a resolution. Note that the
Ombudsman can recommend solutions, but does not have the authority to reverse decisions
or dictate specic actions. They can be reached at: http://studentaid.ed.gov/repay-loans/
disputes/prepare or 1-877-557-2575.
Master Promissory Note (MPN)
The Master Promissory Note (MPN) is a legally binding contract between you and your lender.
One MPN can cover all Stafford Loans, while a separate MPN can cover all PLUS Loans. Simply
stated, an MPN is your documented promise to repay the debt under the specied terms. It is
important to carefully read and understand the MPN before signing it. If you already signed an
MPN, a copy can be obtained from your lender or servicer.
The obligation to repay your student loan debt is a serious responsibility that cannot be
excused, even if:
your course of study is not completed (or not completed in the regular amount of time)
you do not receive the education program or service that you purchased
you are unable to obtain employment
you are dissatised with your education experience
The benets of an MPN include a reduction of paperwork and a simplication of the
borrowing process because an MPN can have a multi-loan feature. This allows a single
promissory note to cover multiple loans disbursed by the same lender over a 10-year period
(while at the same school). Therefore, you may only be required to sign one or two MPNs
while attending medical school.
Rights
Prepay any federal loan without penalty
Request a copy of your MPN
Change repayment plans
Receive grace and subsidies on
certain loans
Use deferment or forbearance to
postpone payments
Receive documentation of loan
obligations, rights and responsibilities,
and when the loan is fully repaid
Responsibilities

Use loan funds only for authorized
expenses
Make loan payments on time
Make payments despite receipt of bill
Notify the servicer(s) of changes to your
contact or personal information
Notify the servicer(s) of changes in your
enrollment status

Resources for Borrowers
Borrowers who experience problems or disputes with their federal student loans have several
resources available to assist them, including:
The U.S. Department of Educations Federal Student Aid Ombudsman
1-877-557-2575
http://studentaid.ed.gov/repay-loans/disputes/prepare
The Student Loan Borrower Assistance Project, run by the National Consumer Law Center
www.studentloanborrowerassistance.org
The Consumer Financial Protection Bureau
1-855-411-2372
www.consumernance.gov
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For a complete list of a borrowers rights and responsibilities, review the Borrowers Rights
and Responsibilities Statement within the MPN. Questions about this list or the terms and
conditions of your student loans can be directed to the lender, servicer, or your medical
schools nancial aid ofce.
Delinquency and Default
Medical school borrowers have a very low default rate. This means that borrowers like you
repay their loans, repay them on time, and many even pay them off earlier than required.
The key to duplicating this positive repayment behavior with your debt portfolio is to stay
organized and know when your payments are due.
When it comes time to repay your student loans, if something does slip through the cracks,
you should know that the loan will be considered delinquent on the rst day that the
payment is late. After being late for 270 days, the loan is considered to be in default.
There are negative consequences for both of these situations (see list). Each will hurt you well
into the future, especially if you need credit for a house, a car, a practice, or other consumer
loans.
The record of a late or defaulted student loan remains on a credit report for seven years.
If you are experiencing nancial difculties, do not
wait until its too latecall your servicer to see what
arrangements can be made.
Maintaining good credit also requires that you stay
current on all other payments (e.g., credit cards, utilities,
etc.). A resource to consider tapping into during
medical school, and beyond, is automatic withdrawal
or scheduling payments (online) to be automatically
deducted from your checking or savings account and
sent to those that you owe prior to the due date. By
scheduling payments, you eliminate the chance that
fatigue and/or forgetfulness will cause a payment to be
late.
Less than Full-Time, LOA, and
Withdrawing
If your course load or enrollment status drops below
half-time, you take a leave of absence (LOA), or you
withdraw altogether, it is critical that you remember to
contact the nancial aid ofce immediately. They will:
1) guide you through the required exit counseling
for your loans
2) update you on which loans require immediate repayment and which loans have a
grace period
If you drop below half-time status, loan repayment begins. So, stay in touch with the
nancial aid ofce to best understand your situation.
Consequences of
Delinquency
reported to credit bureaus
negatively affects credit
Default
entire balance due immediately
additional charges, fees, and
collection costs
negatively affects credit
garnished wages and tax returns
withheld Social Security and
disability benets
legal fees and court costs are your
responsibility
ineligible for additional student aid
other federal debt collection methods
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Know the Type of Loans Borrowed
Important Loan Details
The terms subsidized and unsubsidized probably sound familiar, but do you know what
a subsidy actually is? It is nancial assistance that covers the interest that accrues on a loan.
The result of a subsidy is that interest does not accrue on the loan while the subsidy is active,
or in other words, the loan is essentially interest free for the borrower at certain points in
time. Once you are in active repayment, interest will accrue on both your subsidized and
unsubsidized loans.
A subsidy is only active and working for you while you are in school and during qualifying
periods of grace and deferment. Alternatively, unsubsidized loans always accrue interest and
payment of that interest is solely your responsibility.
Subsidized Stafford Loans are not available to graduate and professional students (including
medical students). Therefore, the majority of your medical debt will be unsubsidized.
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*If consolidated, Perkins and LDS Loans lose their favorable grace and deferment rights and also become
unsubsidized balances.
**In a Consolidation Loan, subsidized balances remain subsidized and unsubsidized balances remain unsubsidized
with the exception of Perkins and LDS Loans.
Understand the Total Cost
You have heard the saying that nothing in life is free, and your student loans certainly
are no exception. However, understanding exactly how your loans cost you money will help
you make smart borrowing and repayment decisions. If borrowed and paid strategically, its
possible to save yourself time and money.
There are two primary factors that will
contribute to the cost of your loans:
1) Interest
2) Capitalization
Subsidized Stafford
Perkins*
Loans for Disadvantaged Students
(LDS)*
Primary Care Loans (PCL)
Institutional Loans (some)
Consolidation **
Unsubsidized Stafford
Direct/Grad PLUS
Private/Alternative
Institutional Loans (some)
Consolidation **
Consider making payments toward the interest accruing
on your UNSUBSIDIZED loans while youre in school, in
grace, in deferment, or in forbearance. This will reduce
interest capitalization and overall interest costs.
Subsidized
These loans receive an interest subsidy
in which the government or your medical
school pays the accruing interest on your
behalf while youre enrolled in school and
during authorized periods of grace and
deferment.
Unsubsidized
These loans accrue interest from the date
of disbursement. If the interest is unpaid, it
will be added back to the principal balance
(original amount borrowed) at specic
points via a process called capitalization.
You are responsible for this interest.
Manage
your debt;
dont let it
manage you!
www.aamc.org/FIRST
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Interest is what the lender charges you to use their money. Understanding the way
interest accrues is necessary for borrowing wisely. The most important fact to know about
student loan interest is that if the loan is unsubsidized, interest accrues on the outstanding
principal balance of the loanbeginning on the date of disbursement. For this reason,
borrow all available subsidized loans before accepting unsubsidized monies. Also remember
that you always have the right to pay the accruing interest on your unsubsidized debteven
if no payments are required.
Different loans carry different interest rates. The chart below will help you understand what
the interest rates are for your loans.

Interest Rates
Direct Stafford Loans*
(disbursed on or after 7/1/06)
6.8%
Direct PLUS Loans* 7.9%
Perkins Loans / PCL / LDS* 5.0%
Private Loans** Varies by loan Check the Promissory Note
Institutional Loans Varies by loan Check the Promissory Note
Direct Consolidation Loans Fixed rate based on weighted average interest
rate of underlying loans rounded up to the
nearest one-eighth of a percent (capped at 8.25%)
* These loans have a xed interest rate.
** Private (or alternative loans) may carry a rate higher than federal student loans.

Debt Management Strategies
Here are some debt management strategies to help you pay your loans off faster:
Organize your debt by arranging it from highest to lowest interest rate.
The highest rate debt should be your rst priority.
Pay as much as possible toward your highest rate debt. Attempt to reduce the
required payment on your lower rate debt to free up more monies to go to the higher
costing debt.
Pay with purposeit can save you money. Dont forget to include your credit card
and private loan debt in your strategythey sometimes can be the most expensive debt.
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Capitalization occurs when any accrued and unpaid interest is added to the principal of
the loan. Capitalization causes your principal balance to grow and the effect of this is that
the interest that capitalizes will then begin to accrue interest. The servicer of the loan can tell
you when the loan is scheduled to capitalize, and since this can be a costly process, some
tips to reduce the cost of capitalization are included below.
Debt Management Strategies
Contact the servicer(s) to determine their capitalization policy. This will let you
know when your loans are scheduled to capitalize.
Pay accruing interest prior to capitalization. This may mean making partial or full
interest-only payments while you are in school or during residency. Remember, its
always an option to make voluntary payments, even when no payment is required.
Submit timely requests. After medical school, if you are late ling your forbearance,
deferment, or repayment plan forms with the servicer, capitalization may occur earlier
than expected.
How to Make a Voluntary Payment
1) Send it separately from any required payment.
2) Send directions telling the servicer how to apply the voluntary
payment (i.e. Apply to interest on my Direct PLUS Loan, Loan
#, etc.).
3) Follow-up and make sure your payment was applied accurately.
NOTE All fees and interest must be paid before payments can
be directed towards the principal of the loan.
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Strategic Borrowing
Options to Consider
For the majority of medical school students, borrowing student loans is a necessary component
of completing a medical education. Despite this, it is important to know that there is a right
way and a wrong way to get into debt. Understanding how to strategically borrow will enable
you to borrow less, reduce your interest costs, and repay your student loans earlier.
Consideration #1: Alternatives to Borrowing
Borrowing wisely may mean not borrowing at all. There are other sources of monies that can
reduce or eliminate the need to borrow. These alternatives include scholarships from outside
sources such as faith afliations, civic organizations, state of residency, etc. There are service-
based scholarships such as military and public health service programs (e.g., National Health
Service Corps and National Institutes of Health). There also may be scholarships from your
institutioncheck with the nancial aid ofce for more details on scholarships available from
the school.
Dont forget your family supportboth nancial and emotional. Whether it is your parents,
grandparents, or a working spouse, your family may be able to provide an alternative to
borrowing. If they are unable to contribute large up-front gifts toward your education costs,
family members sometimes are able to help you pay the accruing interest on your student
loans while you are in school. This type of assistance can help to decrease the cost of your
student debt and reduce your repayment costs.
Additionally, be familiar with loan forgiveness and repayment options following graduation
and residency. The AAMCs Web site (www.aamc.org/stloan) lists nearly 80 options for debt
forgiveness. Remember your medical schools financial aid office is your primary point-of-
contact for all nancial aid matters; visit them to discuss other alternatives to borrowing.
The Impact of NHSC Loan Repayment*
Primary care providers may receive substantial nancial benets by participating in the
National Health Service Corps Loan Repayment (NHSC LR) program. For example, the
minimum two-year commitment can result in a $60,000** award. If the borrower
applies the entire award immediately to their outstanding balance, they would
experience dramatic savings.
Medical school debt: $170,000
NHSC LR applied post-residency: $60,000
Total repayment cost: $261,000
Total savings of NHSC LR: $215,000
The impact of the NHSC LR program would be greater for higher debt levels.
*Assumes a three-year residency program, use of forbearance during residency, and an
Extended Repayment plan (25 years).
**The award amount is based on the HPSA score of the site where the recipient works.
For more information see: http://nhsc.hrsa.gov/loanrepayment.
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Consideration #2: Borrow in the Right Order
Borrowing wisely means borrowing the least expensive debt first and only moving onto a
more expensive student loan after your less costly options have been exhausted.
In the image above, the bottom tier translates into accepting all free money (grants and
scholarships) prior to borrowing Perkins, PCL, and LDS Loans (if eligible). After those options
are exhausted, consider borrowing Stafford Loans, then PLUS Loans, and then lastly, private
loans or credit cards. If you choose a private loan, understand your options for repayment,
deferment, and death or disability forgiveness.
Your nancial aid ofce and institution have worked carefully to create a cost of attendance
budget that in most cases limits excessive borrowing. Your award package is intended to
enable you to avoid drastic nancing options, such as private loans or credit cards. Contact
your nancial aid ofce to discuss your situation if you nd yourself in the red zone.
Additionally, if an unexpected emergency occurs, your nancial aid ofce may be able to assist
you in obtaining nancing options other than private loans or credit cards.
When you borrow certain loans, it may affect your eligibility for future aid. You are
limited in the total amount of nancial aid that you receive each year, including all loans and
scholarships. You are prohibited from receiving more aid than your cost of attendance. This
fact could mean forfeiting free or lower rate monies if you have already accepted a higher
rate loanso borrow in the right order.
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Additional information is available on the FIRST Web site at: www.aamc.org/rst/factsheets.
www.aamc.org/FIRST
15
Consideration #3: Borrow Only What you Need
A common misconception that new medical school students have is that they are required to
accept and borrow all of the loans that are made available to them; however, this is not the
case. We encourage you to know how much money you will need for each semester/quarter
and borrow accordingly.
When you avoid borrowing beyond what you need, you protect yourself from:
1) origination costs for the unneeded money
2) interest costs that would accrue on the balance of needless funds
3) effects of capitalization on the extra money
4) the possibility that this extra money may actually go towards things that
you want and not the things you need
Live like a medical student
while you are a medical student and
you will reap the rewards
during repayment.
Borrow smart; maximize your least expensive debt rst. A $40,000 Direct
PLUS Loan can cost an additional $4,900 compared to a Direct Stafford Loan.
A $40,000 private loan at 12% can cost an additional $25,500 compared to
a Direct Stafford Loan. Carefully consider all your loan options and save
money by borrowing wisely.
Debt Management Tip
(Note: The interest rate on private loans can vary due to market rates and
a borrowers creditworthiness. Rates could be lower or higher than the rate
used in this example. This example is based on a six-month grace period and
a 10-year repayment term for each loan type.)
www.aamc.org/FIRST
16
www.aamc.org/FIRST
17
Consideration #4: Create a Budget
Consider accepting less than what is offered to you in your nancial aid award package.
By having a budget, you will know what you need and you can safely accept just the
necessary amount. By following this procedure, you can save money.
COMMON MISTAKE: Hoping to be nancially prepared for the coming semester/
quarter, new medical school students tend to think they should borrow everything
that is made available to them.
CORRECT ACTION: Borrow only what you need and decline what you do not
need. If additional money is required in the future, the nancial aid ofce can help
you obtain those previously declined monies.
CHALLENGE
Make a decision to borrow $5,000 less each year* than what is offered to you in your
award package. If you choose to do this, you will avoid borrowing a total of $20,000
during medical school which will result in reducing your:
Monthly Payment by $400(+) per month
Total Loan Cost by $39,000(+)
Have a planbudgetand stick to it. Borrow only what you need to
borrow because it will save you time and money during repayment.
*Example is based on Stafford Loans at 6.8% with a three-year residency and three years of forbearance prior to
beginning a Standard Repayment plan (10 years).
Additional information on budgeting is available on page 41 of this booklet and on the FIRST Web site at:
www.aamc.org/first/factsheets.
www.aamc.org/FIRST
19
Loan Timeline
During Residency
Lets face ityour years after medical school (residency) will not be your most extravagant or
lavish times. Not only will it be a good idea to continue living within a realistic budget, but it
also will be the time to begin managing the repayment of your student loans.
Be encouraged. You have a number of options that, if needed, will allow you to complete
your residency making little or no student loan payments. These options include postponing
payments through grace, deferment, forbearance, or making reduced payments through one
of the repayment plans.
Grace
After you leave school, your loans will either enter a grace period or require immediate
payment. The grace period is a time when payments arent required. Grace periods occur
automatically so you dont have to apply for them. While in your grace period, certain loans
will remain subsidized while others will continue to accrue interest. Unsubsidized loans
continue to accrue interest during the grace periodjust as they always have done. The
availability and length of a grace period depends on the loan type. The chart on the next page
shows some common grace periods, but notice that PLUS and Consolidation Loans do not
offer a grace period. If necessary, there are other options to postpone payments on these loans;
contact your servicer(s) for assistance.
Before Repayment Begins
For many loans, the initial capitalization of accrued interest will occur at the end of the in-school
deferment period (when you separate from school) OR at the end of the grace period. The Loan
Repayment Timeline on page 20 visually depicts when this generally occurs for each loan.
The actual repayment start date for loans differs depending on:
loan type
grace period
when the loan was disbursed
possibly the lender of the loan
Its important to know what is in your loan portfolio and when repayment begins so that a
repayment strategy can be determined in a timely manner.
www.aamc.org/FIRST
20
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www.aamc.org/FIRST
21
Using Up Your Grace
Many loans enter an automatic grace period after separating from school; however, you
should check with your servicer(s) about your grace period eligibility for each loan because
there are numerous ways a grace period may have already been exhausted (including
during any breaks in your education lasting longer than six months). Some loans may offer
additional grace periods for certain circumstances, but its best to check with your servicer(s).
Additional information on postponing payments and PLUS Loans is available on the FIRST Web site at:
www.aamc.org/first/factsheets.
Enter repayment when fully disbursed
Interest begins accruing at disbursement
Interest accrues continuously
Maximum interest rate is 7.9%
An automatic in-school deferment will postpone payments
Direct PLUS
Loans
www.aamc.org/FIRST
22
Postponing Payments
Deferment
While you are enrolled at least half-time, payments will not be required on any of your federal
student loans. Payments are postponed while you are a student because either an in-school
status or an in-school deferment is applied to your loans. After graduating or separating from
medical school, there are several other ways to continue to postpone payments. Keep in mind
that at any point in time if you cannot make a required payment, contact your servicer(s)
immediately to help you identify postponement options.
Deferment is a period of time when a borrower, who meets certain criteria, can delay making
payments. During a deferment, the government will pay the interest that accrues on the
subsidized loans; however, you are still responsible for the accruing interest on the unsubsidized
loans. Deferment does not occur automatically; you must apply AND qualify in order to receive
a deferment. If you have more than one servicer, youll need to apply with each servicer
individually. Although deferments are appealing, it is important to know that most medical
residents will not initially qualify for a deferment during the traditional residency period.
Currently, the deferment types that most likely will be used by a medical resident are
Graduate Fellowship Deferment and Military Deferment, but for more extreme nancial
situations an Economic Hardship Deferment may be available. To discuss eligibility for these
and other deferment types, contact the servicer(s) of the loans.
New Borrower
1
2
7/1/93
New
Borrower
1
New
Borrower
7/1/93
New Borrower
1
7/1/93
New Borrower
1
7/1/93
Deferment Eligibility Chart*
Type Max Time
Stafford
and SLS Loans
PLUS Loans Consolidation Loans Perkins
Loans
F
Post-Enrollment
ull-Time Student None
Half-Time Student N
6 Months
one
Graduate Fellowship None
Rehabilitation Training None
Unemployment 3 Years
Economic Hardship 3 Years
Military Service
3
4
None
Military Post-Active 13 Months
5
7/1/08
Duty Student
1
New Borrower: A borrower who received an FFEL loan with a rst disbursement on or after July 1, 1993. The borrower has no outstanding principal or interest balance on a FFEL loan
as of July 1, 1993, or on the date the borrower obtains a loan on or after July 1, 1993. This includes a borrower who obtains a Federal Consolidation loan on or after July 1, 1993, if
the borrower has no other outstanding FFEL loan when the Federal Consolidation loan was made.
2
For PLUS loans disbursed on or after July 1, 2008. PLUS loan borrowers with loans disbursed prior to 7/1/08 may request a post-enrollment deferment from the loan servicer.
3
A deferment may be granted to a borrower who is serving on active duty during a war or other military operation or national emergency (including qualifying National Guard duty)
The service period must include or begin on/after 10/1/07.
4
A deferment may be granted to a borrower called to active National or State duty who is a member of the National Guard or Reserves (including retired members) and who was
enrolled at least half time at an eligible school at the time of, or within 6 months prior to, being activated. The service period must include or begin on/after 10/1/07.
5
Max time for this deferment applies each time the borrower qualies for the deferment.
* This chart is to be used only as a guide. Contact your servicer(s) to determine eligibility.
www.aamc.org/FIRST
23
Post-Enrollment Deferment Direct PLUS Loans
Ofcially, Direct PLUS Loans enter repayment immediately after they are fully disbursed.
However, servicers will automatically apply an in-school deferment on your Direct PLUS Loans to
postpone payments while you are enrolled in school.
After you leave school, although no grace period is available, a six month post-enrollment
deferment will automatically be applied to the loan (if it was disbursed after July 1, 2008). This
deferment postpones payments for six months, but since Direct PLUS Loans are unsubsidized
loans, interest does accrue during this time. If you prefer to start repayment immediatelyto
avoid the additional accrual of interestcontact the servicer to decline this deferment.
Forbearance
Forbearance is the period of time when a borrower may either:
make a reduced payment
postpone payments
During forbearance, interest accrues on ALL loans including
subsidized loanspotentially making this a more costly way to
postpone payments. You may voluntarily pay interest during
forbearance; however, the interest that is not paid will be
capitalizedtypically at the end of the forbearance period.
According to regulation, capitalization is allowed to occur as
often as each quarter, so check with your servicer for their
capitalization policy.
All forbearance periods must be formally requested from the loan
servicer, who, in most cases, will determine the type and length of the forbearance. For medical
interns and residents, there are a number of available forbearance types, but the most often
used is a mandatory forbearance (described below).
To learn about forbearance options, contact your servicer(s).
Mandatory Forbearance for Medical Interns & Residents
Medical interns and residents are eligible for a mandatory forbearance on federal student loans.
Although you must rst request and provide documentation of your eligibility, the servicer must
grant the forbearance on your federal loans. This mandatory forbearance is only approved in
annual increments; therefore, you must reapply each year to keep the forbearance active for the
entire duration of your residency.
Mandatory forbearance is a viable option to avoid making payments on federal loans during
residency. Forbearance provisions may differ on some loans, such as the Federal Perkins Loans,
which require you to pay at least some interest while in forbearance. Be sure to nd out from your
servicer(s) what the provisions are on your loans. During forbearance, interest accrues on your
entire loan balance, but you can always make voluntary payments without losing the forbearance.
The Cost to Postpone
For a 2012 graduate with
$170,000 in Stafford Loans,
the capitalization of interest
accrued on this unsubsidized
loan, during school and grace,
will increase the principal
balance to $195,000. During
residency, more than $1,100
in interest will accrue on this
outstanding balanceeach
month.
www.aamc.org/FIRST
25
Loan Repayment
When Do You Start Paying and How Much?
As a student enrolled in medical school (at least half-time), payments are not required on
your federal student loans. Additionally, if you borrow and manage your money wisely
during medical school, you will nd the task of repaying the loans much easier and more
affordable. By making smart nancial decisions early and consistently, you can signicantly
reduce the cost of your debt.
Your Stafford, Perkins, and other loans with a grace period will enter repayment at the
end of the grace period. In the case of Direct PLUS Loans, payment is required after the
post-enrollment deferment ends. For loans without a grace period, you will be required to
begin repaying them when you graduate, withdraw, or drop below half-time status. See the
Repayment Timeline on page 20 for more details.
Approximately one to two months before your rst payment is due, youll receive a notice
regarding the exact due date. Around that same time, youll also be asked to select a
repayment plan. The plan that you opt for will determine the amount of your required
monthly payment and, consequently, the amount of
interest you pay over the life of the loan. Additional
information on repayment plans is available on the
following pages.

Rights During Repayment
Take comfort in the fact that if your nancial
situation changes, you have the ability and the right
to request any of the following:
deferment or forbearance to postpone
payments
a change in the selected repayment plan (and
thereby, a change in the required monthly
payment amount)
shorten the repayment schedule
prepay loans without penalty
Contact your servicer(s) as your circumstance
requires.

Get a Jump on Your Loan Payments
It may be a relief to know that you dont
have to make payments during school,
but you can still consider making some
type of paymentespecially towards
your most expensive (i.e., high interest
rate) debt.
Sending in an interest-only payment each
month while in school or residency, even
if it is only a small amount, can be a very
smart thing to do. Every dollar you pay
now helps to reduce the overall cost of
your debt. The fact is, the quicker you
pay off your debt, the less it will cost you.
NOTE You can make payments towards
student loans at any time, without penalty.
Your in-school, grace, deferment, or
forbearance status will remain uninterrupted
when a voluntary payment is made.
Debt Management Fact
The faster you reduce the principal of your loans, the less
your debt will cost you.
www.aamc.org/FIRST
Based on an original principal balance of
$170,000 (which includes subsidized
and unsubsidized loans).
Standard/Level
Extended
Graduated
Income-Contingent/Sensitive
Income-Based Repayment (IBR)
Pay As You Earn
$2,100/mo
$1,300/mo
$1,000/mo
$630/mo
$400/mo
$270/mo
The Repayment Plans
There are various payment plans to choose from during the repayment of federal student
loans.* Understanding the repayment options allows you to choose the best plan for your
nancial situation. The purpose of the different repayment plans is to provide exibility in
your nances. These options were designed to make your payments more manageable and,
in most cases, you can change your selected plan when your nancial situation changes.
Whether your debt is large or small, the repayment plan you select will impact the total cost
of the loans. A hasty decision could turn out to be a costly choice, so when the time comes,
select wisely.
* Currently, six repayment options exist for the Direct Loan program and ve for the FFEL program.
Standard Repayment
When you choose this plan, your monthly
payment amount generally will be an equal
amount throughout the term of the loan, which
is typically 10 years. In comparison to the other
options, the Standard plan requires higher
monthly payments, but results in lower interest
costs. Standard Repayment allows borrowers to
pay education debt in an aggressive and cost-
efcient manner.
If you fail to notify your servicer of a repayment
plan choice, the Standard Repayment plan is the
default plan for loan repayment.
Best option for borrowers whose primary goal is minimizing the total interest
cost of their student loan debt.
Extended Repayment
The Extended Repayment plan allows you to stretch your current repayment term up to
25 years, which lowers the required monthly payment. The qualications for Extended
Repayment include:
an outstanding balance of principal and interest totaling more than $30,000
all loans must have been issued on or after October 7, 1998
Before opting to extend your repayment term, consider the degree to which this option will
increase the total interest cost of your debt.
Best option for borrowers seeking to lower their monthly payment (without
consolidating).
26
www.aamc.org/FIRST
27
Graduated Repayment
The Graduated Repayment plan allows you to begin making smaller monthly payments during the
rst two years of repayment, then signicantly higher monthly payments for the remaining eight
years of a 10-year repayment term. Often, the initial payment amount in this plan is equal to the
amount of interest that accrues monthly, making it potentially an interest-only payment plan.
Despite the fact that the Graduated plan offers monthly payments that start lower than the
Standard payment amount, this plan can lead to higher interest costs because the principal of
the loan is not paid off as quickly. Additionally, in the third year of this plan, the payment may
increase dramatically. For this reason, this is not a plan that medical residents tend to select.
Best option for borrowers seeking temporary relief from high loan payments but
expecting an increase in their income shortly after repayment begins.
Income-Contingent Repayment (ICR)*
The Income-Contingent Repayment (ICR) plan is similar to Income-Based Repayment (IBR) and Pay
As You Earn, which will be discussed in the upcoming pages. However, unlike the other income-
driven plans, the ICR plan does not require a partial nancial hardship (PFH) in order to qualify.
As with the other income-driven plans, annual income documentation is needed to determine
the monthly payment. This payment will be adjusted annually based on changes to the
borrowers household income. Generally this plan has a higher required payment when
compared to the other income-driven plans, so if this plan doesnt meet your needs, IBR or Pay
As You Earn may offer additional exibility with lower payments.
The maximum repayment term for ICR is 25 years. After that period of time, any unpaid balance
is forgiven (but will be taxable).
For sample monthly payments, see the Interest Cost Comparison Charts on pages 34-35.
Best option for borrowers who want a lower initial payment that will increase as their
income increases; also good for those seeking loan forgiveness.
* Income-Contingent plans are available only for loans owned by Direct Loans. FFELP-owned loans have a similar plan referred
to as Income-Sensitive Repayment. Speak to your FFELP servicer(s) for more details.
www.aamc.org/FIRST
28
Income-Based Repayment (IBR)
The Income-Based Repayment (IBR) plan caps the monthly payment at 15 percent of
discretionary income and is an option for those experiencing a partial nancial hardship
(PFH). The loan servicer(s) will determine if a PFH exists, but most medical residents exhibit
this hardship and are able to enter IBR without a problem.
Under IBR, the monthly payment will be adjusted annually according to changes in the
household income and family size. This plan offers a partial interest subsidy that is only
available for the rst three years in the plan. During this time, the amount of interest that
accrues on the subsidized loans, but exceeds the IBR payment amount, will be paid for by
the federal government. Capitalization of the remaining interest will not occur until after
the PFH ceases to exist, or you elect to leave IBR. Since many residents will show a PFH
throughout residency, capitalization could be postponed until residency is over. There is no
limit to the amount of interest that can capitalize while in IBR.
This plan qualies as an eligible plan for Public Service Loan Forgiveness (PSLF) in which
the forgiven amount is not taxable. Alternatively, if you pay under IBR for 25 years, any
remaining balance that exists after this time will be forgiven (but is taxable); however, most
physicians are likely to have fully repaid their loans before reaching this point.
Best option for borrowers with lower salaries experiencing a nancial hardship,
and/or for those seeking some type of loan forgiveness.
Example of a PGY-1 Resident
in IBR
E
in Pay As You Earn
Monthly Adjusted Gross
Income
1
$4,138 Monthly Adjusted Gross
Income
1
$4,138
(minus) 150% of Poverty
Line
2
$1,396 (minus) 150% of Poverty
Line
2
$1,396
Discretionary income = $2,742 Discretionary income = $2,742
(multiplied by)
3
.15% (multiplied by)
3
.10%
Monthly IBR Payment $411 Monthly Pay As You Earn
Payment
$274
1) Based on the 2012 rst post-M.D. year median stipend of $49,651.
2) Based on the 2012 federal poverty guideline for a family size of one (as determined by the US Department of Health
and Human Services in the 48 contiguous states $11,170).
3) Based on 2012 federal regulations.
www.aamc.org/FIRST
29
Pay As You Earn*
Pay As You Earn is similar to IBR in that it is only available for those experiencing a partial
nancial hardship. Since many medical residents exhibit a PFH throughout residency, it can
be easy for a resident to enter and remain in Pay As You Earn. An interest subsidy is available
for the rst three years in this plan and covers the interest accruing on the subsidized loans
that is greater than the Pay As You Earn payment amount.
Unlike the IBR plan, the Pay As Your Earn plan restricts the monthly payment to 10 percent
of discretionary incomemaking the Pay As You Earn payment lower than the IBR payment.
Furthermore, the amount of unpaid interest that will ultimately capitalize under Pay As You
Earn is limited to 10 percent of the principal amount borrowed when entering into this plan.
After the maximum amount has capitalized, interest will continue to accrue, but it will not
be capitalized.
For a medical resident, there are several reasons to choose Pay As You Earn over
any other option:
1. partial interest subsidy
2. limit to the amount capitalized and a potential postponement of capitalization
3. capped payment amount
4. several possible forgiveness programs
5. possibly the lowest required payment during residency
The Pay As You Earn payment amount will adjust annually based on the household income
and the family size; however, no matter how much the income increases, the Pay As You
Earn payment is capped at a predetermined amount. This maximum amount cannot exceed
what the 10-year Standard Repayment amount would have been (based on the debt
amount when initially entering Pay As You Earn). The maximum payment is reached when
the PFH ceases to exist.
The repayment term for Pay As You Earn is up to 20 years. After that period of time, any
unpaid balance is forgiven. This plan also qualies as an eligible payment plan for Public
Service Loan Forgiveness (PSLF).
Best option for qualied borrowers with a lower income that are experiencing a
nancial hardship, and/or for those seeking some type of loan forgiveness.
* Only Direct Loans are eligible. For the borrower to qualify, they must be a new borrower on or after October 1, 2007,
and they must have received a Direct Loan disbursement on or after October 1, 2011.
www.aamc.org/FIRST
30
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www.aamc.org/FIRST
31
Monthly Payment Amounts
Estimates of monthly payment amounts are provided in the following charts on pages
32-33. The rst chart depicts payment amounts for Direct Stafford Loans, and the second
chart shows payment amounts for Direct PLUS Loans. These breakouts show the original
principal balance (rst column), the balance after the initial capitalization (second
column) and the estimated required monthly payment for each of the repayment plans
(all remaining columns).
To see your estimated monthly payment amount, nd the row with the debt level that
most closely correlates to your loan balance. If you have both Direct Stafford and Direct
PLUS Loans, you will need to add the two correlating payment amounts togetherwith
the exception of ICR, IBR, and Pay As You Earn amounts during residencyto get the total
payment amount.
For repayment estimates based on your borrowing, use the AAMC Medloans

Organizer
and Calculator at: www.aamc.org/FIRST. For exact repayment amounts, contact your loan
servicer(s).
www.aamc.org/FIRST
32
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5

f
o
r

1
6
.
0

y
r
s
.
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34
During Residency
After medical school, there are two common options that residents choose between to
manage their educational loans: making payments or postponing payments. To better
understand the financial impact of these options, compare the results in the following charts.
Making Payments
For residents who choose to pay, possibly the most feasible repayment plan is Pay As You Earn.
Interest Cost Comparison: Payment During Residency
Monthly
Payment
During
Residency
Repayment
Plan
Repayment
Years after
Residency
Estimated Monthly
Payment after
Residency
Interest
Cost
Total
Repayment
$280 to
$360
Pay As You Earn
during Residency
then Standard
6 $3,900 $125,000 $295,000
$420 to
$540
IBR during
Residency then
Standard
6 $3,800 $124,000 $294,000
$280 to
$360
Pay As You Earn
during Residency
then Extended
21 $1,700 $276,000 $446,000
$420 to
$540
IBR during Residency
then Extended
21 $1,700 $271,000 $441,000
$280 to
$360
Pay As You Earn
during and after
Residency
15.3 $1,600 to $2,200 $194,000 $364,000
$420 to
$540
IBR during and after
Residency
12.2 $2,200 $180,000 $350,000
Assumptions: Graduating 2013 medical student borrows $170,000 in principal during medical school with subsidized Stafford
Loans during the rst three years only. After graduating, s/he immediately begins six-month grace period, then chooses IBR or Pay
As You Earn during a four-year residency. Post-residency starting salary is $180K (in 2011 dollars). Unpaid interest from residency
will capitalize when the borrower no longer shows a PFH. Total repayment includes payments made during four-year residency.
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35
Postponing Payments
Residents who choose to reduce or postpone payments most often do so by utilizing a
Mandatory Medical Residency Forbearance.
Interest Cost Comparison: Forbearance During Residency
Monthly
Payment
During
Residency
Repayment Plan after
Residency
Repayment
Years after
Residency
Estimated Monthly
Payment after Residency
Interest
Cost
Total
Repayment
$0 Standard 10 $2,800 $165,000 $335,000
$0 Extended 25 $1,700 $335,000 $505,000
$0 Graduated 10 $1,400 for 2-years then
$3,300 for 8-years
$178,000 $348,000
$0 Income-
Contingent
Repayment (ICR)
7.5 $3,200 to $3,700
over 7.5-years
$142,000 $312,000
$0 Income-Sensitive
Repayment (ISR)
10 $1,400 for 1-year then
$3,000 for 9-years
$172,000 $342,000
$0 Income-Based
Repayment (IBR)
11.3 $2,400 to $2,800 over
11.3-years
$182,000 $352,000
$0 Pay As You Earn 19.2 $1,600 to $2,600 over
19.2-years
$289,000 $459,000
Assumptions: Graduating 2013 medical student borrows $170,000 in principal during medical school with subsidized
Stafford Loans during the rst three years only. After graduating, s/he immediately begins six-month grace period,
and then chooses forbearance during a four-year residency. Post-residency starting salary is $180K (in 2011
dollars) and repayment balance is approximately $243,000, which includes $48,000 in unpaid interest that
capitalized at the end of residency.
These charts reflect a valuable debt management principle that is important to be aware of
throughout the repayment of your student loans:
The lower the monthly payment, the higher the total interest cost.
To see numbers that are more reflective of your loan portfolio, use the Medloans

Organizer
and Calculator at www.aamc.org/FIRST (login details available on page 3). For exact payment
amounts, contact your servicer(s).
www.aamc.org/FIRST
37
Credit
Your Credit Score: What it is and Why it Matters
A credit score is an indicator of the creditworthiness of an individual. In other words, it is
a numerical value that represents the probability of a borrower to repay their debt. This
score is an important number because it will directly impact your approval rate (for loans,
insurance, housing, utilities, and more) as well as your interest rate for products and services.
In most situations, the better your credit score, the less it will cost you to borrow.
During medical school, there are three items on which to focus to improve your credit score
1) Pay your bills on time
2) Pay down your debt
3) Dont close accounts or open new ones
After watching and protecting your credit, its very likely that you could leave school with a
better credit score than when you started.
How Your Credit Score is Determined
A credit score is the result of a numerical calculation that takes into account the entries on
your credit report. The best known and most commonly used credit score is a FICO

score,
with scores ranging from a low of 300 to a high of 850. Knowing your exact FICO score is
not as important as understanding what determines this number.
A credit score, or FICO score, is based on ve factors (as determined by Fair Isaac Corporation)
that give no consideration to employment status, income, or profession. Be aware of these
factors because even though youll be an M.D. earning a higher salary, a good credit score is
not guaranteed.

Nothing in Life is Free, Right?
If youre curious to know your FICO score, its likely you will either pay a fee or
agree to a nancial obligation (like signing up for a subscription) before youre
able to see that score. Time is better spent reviewing your credit report.
www.annualcreditreport.com
(Where it really is free!)
www.aamc.org/FIRST
38
35% Payment history
15% Length of history
10% New credit
10% Types of credit
30% Amount owed
Factors of Your Score
Payment History (35%)
This is the largest portion of your score.
Delinquent payments can have a major
impact on scoring, but consistent on-time
payments will raise a credit score.
TIP: As a medical student, be proactive about
paying on time. Set up automatic withdrawal
or schedule online bill pay services with your
bank so that a recurring monthly payment
(like a credit card) is never late.

Amount Owed (30%)

The total amount of your credit line that you are currently utilizing will impact your credit
score. The goal is to use less than 30 percent of your line of credit (add up the maximum
credit line on all of your credit cards and compare the total amount owed towards these
cards to determine your utilization rate).
TIP: During medical school, make a focused effort to pay down your credit card debt or at
the minimum, avoid creating/increasing the balance on these cards.
Length of History (15%)

The longer the history, the higher the score, and for this reason, be careful when closing
accounts (like credit cards) as you may lose some of your credit history in the process.
TIP: To avoid having your oldest accounts closed, some companies may require periodic
use of the card.

New Credit (10%)

A high number of inquiries (more than three within 12 months) can be negative. Limit the
number of times you allow a company to pull your credit for new lines of credit and loans.
TIP: During medical school, there is usually no reason to open new credit cards. When
checking out and paying at your favorite store, if they ask you if you would like to apply
for one of their cards, just say NO.
Types of Credit (10%)
Possessing a variety of credit is optimal. Note, there is a difference between secured versus
unsecured debt and how it weighs into your nal credit score.
TIP: Too much unsecured debt is never a good thing, so be conscious of the number of
credit cards in your wallet. For more information, visit: www.myco.com.
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39
The Benets of Good Credit
Good credit means you are more likely to get loan approval. Beyond that, there are
additional benets to be enjoyed:
better loan offers (rates, terms, and conditions)
lower interest rates on credit cards
faster credit approvals
increased leasing and rental options
reduced security deposits
reduced premiums on auto, home, and renters insurance
Being proactive about your credit is the way to begin making smart nancial decisions that
will give you a solid nancial foundation for years to come.
Did you Know?
You likely have three credit reports. A separate credit report is maintained by each of the
three major credit reporting agenciesEquifax, Experian, and TransUnion. These three
reports accomplish the same purpose but the information on each report may vary. To best
protect yourself from mistakes and identity theft, its important to review each of your credit
reports annually.

Reality Check: Scrutinize Your Credit Report

It is a good idea to review your credit report at least once a year. In fact,
there is a Web site and toll-free number through which you can request a copy of
your free report from each of the three major credit bureaus.
To order your free annual credit report, visit
www.annualcreditreport.com
or call 877-322-8228.
You are entitled to a free report from each credit bureau once a year
take advantage of this!

Reality Check: Scrutinize Your Credit Report
Additional information is available on the FIRST Web site at: www.aamc.org/first/factsheets.
www.aamc.org/FIRST
41
Budgeting
Having a spending plan is the cornerstone of a solid nancial foundation. All other efforts
for borrowing wisely will be undermined if you dont have a plan of action for managing
your money during medical school. Living on a budget is possible, and by doing so, your
efforts will be met with a more immediate realization of nancial goals.
Benets of Budgeting
Lets face it. Money probably will be tight during medical school; thats why having a realistic
spending plan is essential for you to most efciently accomplish the following:
Track and control your spending
Identify leaks in your cash ow
Avoid credit card debt
Reduce the total cost of your medical education
Creating a Budget
The most difcult part of developing a spending plan is taking the time to sit down to
actually create it. This task may seem overwhelming at rst, but it can be accomplished by
using templates, guides, and other budgeting tools and Web sites. To get you started, the
AAMC offers several tools to help you create a budget.
Resource Format Name
Financial Literacy 101 Online module Budgeting for Medical School Students
Budget Calculator Online module Budgeting for Medical School Students
Financial Aid Fact Sheet PDF Budgeting Worksheet*
*available on page 44
These resources can be found online at: www.aamc.org/FIRST. The PDF templates are free to
download. Each of these resources allows you to document your spending plan (in writing),
save your planned expenditures, and revisit the data at a later date to compare your actual
spending behavior to your initial plans. Once you compare your written budget to your
actual spending, make the necessary adjustments to either your behavior or your budget,
and repeat this process continually throughout medical school.

Your Total Income
- Your Total Expenses
= Your Discretionary Income

The Steps of a Spending Plan
1) Put it in writing
2) Review it periodically
3) Make necessary adjustments
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42
The Basics of Budgeting
Income. The rst step in creating a budget is to document all of your incoming funds. If
you are married, calculate your spouses income as well. If you consistently receive gifts from
family members, add this into your income. Any incoming funds, such as your refund check
from nancial aid, should be included in your income calculations.
Expenses. Secondly, identify all of your monthly expenses or monies that are outgoing.
There are two types of expenses, with the most obvious being the routine, xed amounts
like rent, car payments, insurance, loans, etc. Then, dig a little deeper for those more
sporadic, variable expenses that uctuatelike
eating out, gas, cell phone, groceries, and utilities.
Total your monthly expenses, then subtract that
amount from your income. What youre left with is
your discretionary income.
Discretionary Income.Once all income and
expenses have been honestly accounted for and
properly subtracted, the remaining number is
your bottom line (discretionary income). If youre
being completely honest in your planning, you may nd that your discretionary income is a
negative number. If so, go back and adjust accordingly until you break even.
On the other hand, if you happen to have a positive bottom line (meaning extra money left
over) consider two things: Have you accurately documented all of your expenses? Could you
possibly borrow less next semester or cut down on other expenses? Typically, during medical
school there wont be a lot of discretionary income, so when there is, handle it wisely.
Expenses
FIXED VARIABLE
Rent Groceries
Car payment Entertainment
Insurance Clothing
Student loan payment Dining out
Credit cards (debt)
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43
Finding Alternatives
Having a budget doesnt mean eliminating all of the joy from your life; rather, it means keep-
ing many of those good things and nding alternatives when necessary. Once your cash
ow is visible in black and white, it will be easier to consciously reduce your cost of living. By
periodically reviewing your budget for any imbalances, youll realize that it may only require
small adjustments to make a big difference.
Common alternatives for medical students living on a budget include:
buying groceries instead of eating out
brewing your own coffee instead of stopping at a gourmet coffee shop
choosing generic instead of name brand
opting for free TV instead of Netix, or Netix instead of the movies, or the occasional
matinee instead of Cable TV
getting a roommate or two
TIP: Choose to live like a student
when you are a student, so you dont
have to live like a student later.
THE MINIMUM PAYMENT TRAP

$5,000 financed at 18%
Paying the minimum monthly payment, results in:
Nearly 23 years to fully repay
A total cost of nearly $12,000
WHAT COULD POSSIBLY BE WORTH PAYING
MORE THAN TWICE ITS ORIGINAL VALUE?
Budget Worksheet
INCOME:
List all sources of income
Salary (after deductions) ______
Spouse salary (after deductions) ______
Investment income ______
Financial aid
(in excess of tuition & fees) ______
Gifts ______
Income tax refunds ______
Other (child support/alimony) ______
Veterans benets ______
Total Income ______
FIXED EXPENSES:
These are monthly or yearly expenses that are
usually unavoidable and typically unchanging in
their amounts. There is no clear-cut distinction
between fixed and variable expenses; it is up to
the individual. You may or may not have all of
these expenses.
Yearly/Monthly
Tuition & fees ______/______
Books & supplies ______/______
Regular savings ______/______
Rent/mortgage ______/______
Utilities* ______/______
Telephone (base rate) ______/______
Taxes (federal, state) ______/______
Vehicle payments ______/______
Other transportation ______/______
Credit card payments ______/______
Personal loans ______/______
Educational loans ______/______
Life insurance ______/______
Health insurance ______/______
Home/renter insurance ______/______
Auto insurance ______/______
Auto registration/taxes ______/______
Professional fees/dues ______/______
Child care ______/______
Other (i.e., alimony) ______/______
Total Fixed Expenses ______/______
VARIABLE OR FLEXIBLE:
After determining your xed expenses, list
variable expenses. When trying to gure out
variable expenses, you will be most successful,
if you write down all of your expenditures for
two weeks. Be as realistic as possible. You will
be surprised to see where your money goes and
how it adds up.
Monthly
Food/household supplies ______
Dining out ______
Clothes ______
Laundry/dry cleaning ______
Gas, oil, auto maintenance ______
Parking ______
Medical/dental/eye care ______
Hobbies/recreation ______
Entertainment ______
Travel/vacation ______
Pets, supplies, food ______
Sports ______
CDs & books ______
Heath & beauty aids ______
Haircuts ______
Postage ______
Subscriptions ______
Cable TV ______
Cell phone ______
Gifts ______
Charity/contributions ______
Other ______
Total Variable Expenses ______
Total Fixed Expenses + ______
Total Monthly Expenses = ______
Total Income ______
Total Expenses ______
Total Discretionary Income = ______
www.aamc.org/FIRST
* gas, electric, water, sewer, garbage
Association of American Medical Colleges 2013
www.aamc.org/FIRST
45
Financial Literacy
Identity Theft
Identity theft is the fastest growing white collar crime in America.
Sources: Javelin Strategy and Research, 2012; Spendonlife.com
Stay Safe Online
Check your credit report (www.annualcreditreport.com)
Install and update rewalls, antivirus, and antispyware
Use and recognize secure Web sites
Avoid accessing personal accounts or sharing personal information (credit cards)
on public computers
on unsecured WIFI connections
Watch out for emails and attachments from imitators (banks, government, etc.)
Use safe passwords
do not use the word password
integrate numbers into your password
at least 8 characters long
LinkedIn, Google+,
Twitter, and Facebook
users are more likely
to be victims
Friendly fraud
(when the perpetrator
knows the victim) is rising
for 25 - 34 year olds
Smart Phone users are
1/3 more likely to
become a victim
Studies show that anyone earning over $70,000
experiences an increased chance of having their
identities stolen. Thus, physicians are
2 s
more likely to be victims of identity theft.
11 million victims
in 2011 (a 12.6%
increase from 2010)
55% of people
reveal their birthdate
on a social
networking site
The average amount of
time to resolve
identity theft:
21 hours
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46
Stay Safe Offline
Check your credit report at least annually
Keep personal documents, at home and work, safe and out of sight
Avoid sharing your SSN
Ask for alternative identier unrelated to your SSN
Carry only necessary documents and cards with you
Shred all documents with sensitive information
Request electronic statements
Use online bill pay
Opt out of pre-approved credit cards (www.optoutprescreen.com)
Enter your debit card PIN discreetly
Be aware of your surroundings at all times
Be Social. Be Responsible.
Do not reveal personal information:
birthdate
phone number
high school name
siblings
pet names
Use caution with social networking apps
some access your private information
Credit Cards
Credit cards arent bad; there are many positive financial aspects of
a credit card. These include, among other things, the ability to use
someone elses money for free for thirty days (depending on the terms
of the card). Credit cards also can be used to improve your credit score,
as a tool to track your spending, and as a source of rewards for the
purchases that you make. They also may be helpful in emergencies, as
long as the balance is repaid quickly. Despite the advantages of credit
cards, we are more familiar with the negative side of credit cards.
What we hear about repeatedly is Americas bad relationship with
debt, which most often comes in the form of credit card debt. Credit
cards that are not used responsibly will have a negative impact on your
financial well-being.
On average, the current college student leaves their undergraduate
program with an estimated $4,138 in credit card debt (as last reported
by Sallie Mae, 2009). This amount grows for each additional year of
education the student obtains. $9,000 is the median amount among
the 25 percent of 2012 medical graduates that report having non-
education debt. Non-education debt includes car loans, credit cards, and
residency and relocation loans. To prevent this statistic from being a reflection of your situation
at graduation, youll want to be a savvy user of credit cards throughout medical school.

$9,000 is the
median amount
among the 25%
of 2012 medical
graduates that
report having
non-education
debt.
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47
Signs You Could be Heading for Trouble
These are tangible signs that either youre headed for troubleor youre already there:
relying on credit cards to pay for the basics like food and utilities
responding continually to offers to transfer balances from one card to another
increasing your credit line or applying for new credit cards
no cushion in your nancial life for even a small or unplanned expenditure
making only minimum monthly payments
ignoring credit card statements
maxing out all of your credit cards
Fixing the Problem
First and foremost: GET HELP. You dont have to face this alone. Its easy to lose control
of your credit and to let it run away from you, but there are ways to take back control.
Depending on your situation, there may be a variety of solutions.
Talk to the nancial aid ofce. Often, they have dealt with similar situations and will
be able to provide guidance.
Go back to the basics and work on a budget; see how you can start paying down your
credit card balances.
Call your credit card company(ies) to work out a repayment plan.
If you do work out a repayment plan with your credit card company, make sure to be
clear on the interest rate.
Negotiate! Often times you can negotiate a better rate, especially if youve been a
good customer.
If your situation is more complicated, seek the advice of a professional credit counselor.
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48
Other Considerations
Private Loans
The cost of your medical education, including all living expenses, should be completely
covered by your nancial aid package (consisting of federal and institutional loans). If
your expenses are not covered, you may need to look at private loans to supplement your
nancial situation.
Private education loans may be less favorable than federal debt due to possibly higher
and more volatile rates, lack of forgiveness programs, limited postponement options, and
reduced control over the actual amount of the required monthly payment.
The discrepancy exists between federal and private student loans because private education
debt is not regulated by the legislation that governs federal loans; therefore, the terms and
conditions of private loans are at the discretion of the lender. In fact, most of the repayment
options discussed in this booklet are applicable only to your federal loans.
Borrowing private loans should be carefully considered. If you find yourself in need
of additional funds during medical school, visit your financial aid office to see what
other options may exist.

Loan Consolidation
Federal loan consolidation allows you to combine one or more existing federal student loans
into a single loan. A consolidation loan pays-off the old loans and gives you a single new
loan with new terms, conditions, and possibly a new interest rate. The advantages and
disadvantages of consolidating depend on what loans you include in the consolidation and
when you consolidate.
Advantages
A single payment to a single servicer
Lower monthly payment
Extended repayment period
Fixed interest rate
No prepayment penalty
Repayment plans can be changed
May make loans eligible for PSLF
May make loans eligible for IBR or
Pay As You Earn repayment plans
Disadvantages
Longer repayment period resulting in
possibly higher interest costs
May lose current borrower benefits
Interest rate is the weighted average
of the loans rounded up to the nearest
one-eighth of a percent
May negatively impact grace, deferment,
or forgiveness options
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49
As a student, consolidation likely will not be an option available to you until after
you separate from school. However, after leaving medical school, the primary reason
to consolidate is to simplify the repayment process during residency. This is especially true
when multiple payments are required. Alternatively, if you prefer to avoid consolidation in
the future, scheduling automatic payments from your bank account can simplify repayment
(and eliminate the need to consolidate).
Currently, the only lender offering federal consolidation loans is Direct Loans. For more
details, visit: www.loanconsolidation.ed.gov.
Student Loan InterestA Tax Deduction
The interest you pay on your student loans may be tax deductible (up to $2,500 annually).
There are certain parameters that must be met.
The maximum allowable deduction ($2,500) diminishes as your income increases. This
means that paying interest while in school and/or residency will not only help reduce
capitalization and interest costs, it also could allow you to take advantage of a deduction
that you may not qualify for in the future. Furthermore, changes to the tax law in 2013
make this deduction available for only the rst 60 months of repaymentproviding another
reason to make interest payments during residency.
For more detailed information, visit: www.irs.gov and review IRS Publication 970, Tax
Benets for Education.

Lifetime LearningA Tax Credit
A $2,000 tax credit, called the Lifetime Learning Credit, is available for eligible students that
have qualifying education expenses. As a credit, this tax benet can only be used to reduce the
amount of taxes owed and will not result in refundable cash if your income tax liability is less
than $2,000. For more details about this tax credit and other possible tax benets available to
students, visit: www.irs.gov and review IRS Publication 970, Tax Benets for Higher Education.

Reality Check:
Consolidation May Mean Paying More at a Higher Rate

It is important to realize that although loan consolidation can give you a lower
monthly payment with a longer repayment term, this may signicantly increase the
total cost of the debt.
When you get right down to it, the longer you take to repay a loan, the more
it will cost. Many of your federal loans may already have xed interest rates meaning
that consolidation could mean paying a higher xed interest rate (due to rounding).
Understand how consolidation works before consolidating
in most cases it is permanent.
Reality Check:
Consolidation May Mean Paying More at a Higher Rate
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50
Public Service Loan Forgiveness (PSLF)
If you decide to work in public service, you may be eligible to have your federal student
loans forgiven after 10 years of full-time work. Use the following steps and checklist to help
adhere to the qualifying components of this forgiveness program:
Five steps to ensure eligibility for Public Service Loan Forgiveness:
Step 1: If necessary, consolidate ineligible loans into a Direct Consolidation Loan
Step 2: Request a qualifying repayment plan for the eligible loans
Step 3: Make 120-qualifying payments while completing the work (as detailed below)
Step 4: Ideally, submit an Employment Certification form annually to FedLoan Servicing to document progress
Step 5: Upon completion of requirements, apply with FedLoan Servicing for Public Service Loan Forgiveness
Checklist for Public Service Loan Forgiveness
QUALIFYING WORK
You must be employed full-time* for 10 years in a public service position.
For the work to be considered public service, your employer will be one of the following:
non-proft tax-exempt 501(c)(3) organization (includes many medical schools and residency programs)
Federal, state, local, or tribal government organization, agency, or entity
Military service
Public service organization - a private organization providing a public service
* Generally full-time work is considered 30 hours per week or the number of hours the employer considers full-time
QUALIFYING PAYMENTS
While simultaneously working in a qualifying public service position, you must make 120 on-time and
scheduled payments* under a qualifying repayment plan. The following plans qualify:
Income-Based Repayment (IBR)
Pay As You Earn
Income-Contingent Repayment (ICR)
Standard Repayment plan or a repayment plan where the monthly amount paid is not less than the
monthly amount required under the 10-year Standard Repayment plan
*Payments do not have to be consecutive, allowing for changes in employers and periods of non-work
ELIGIBLE LOANS:
Only the following loan types are eligible:
Direct Stafford Loans (Subsidized and Unsubsidized)
Direct PLUS and parent PLUS Loans
Direct Consolidation Loans
Other student loans* can be made eligible by including them in a Direct Consolidation Loan**
(including FFEL Stafford, Grad PLUS, Federal Consolidation, Perkins, and certain Health Profession
Loans)
*Defaulted loans, private loans, and any consolidation loan containing a spousal consolidation loan are not eligible
** For more information, visit www.loanconsolidation.ed.gov
This checklist is a general guideline only.
For more information regarding eligibility, visit: studentaid.ed.gov/publicservice.
Final Note
Dont forget about the financial aid office at your institution. They are
available to help you and are keenly aware of issues affecting medical
students. This can be a lot to sort through, so take it one step at a time.
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51
NOTES
The Association of American Medical Colleges has a variety
of Financial Information, Resources, Services, and Tools for
students and residents concerned with debt management.
Take some time to go through the Web site at
www.aamc.org/FIRST.
AAMCs FIRST for Medical Education team wishes you
great dividends on your investment in knowledge and
encourages you to use this resource in accomplishing
your nancial goals.
Congratulations on your entrance into medical school
and good luck.
2013 AAMC. All rights reserved.
rev. 6/2013