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Money and Finances

Overview

You may have already heard this quote, but here it is anyway:

Live like a doctor now, live like a student later.
Live like a student now, live like a doctor later.


So, you don't want to overspend while in medical school. Try to stay on a limited budget while in school.
Obviously, the less money you borrow while in medical school, the less you have to pay in interest and the less your payments are going to be when you are done.
Generally speaking, don't max out your student loans just because you can.
Use the loans if you have to, but not to buy toys.

Interest never sleeps. It accumulates 24 hours per day, 365 days a year. Interest always works against you.

Medical school is very expensive, with many students accumulating between $100,000 and $250,000 in debt by graduation. Although a few students or their parents may have the financial resources to pay for medical school, most students do not. Rather, they rely heavily on loans (and occasionally scholarships) to fund their medical education. Note that all types of financial aid, loans, scholarships, etc. are handled through the financial aid office of the medical school you attend.

First, it is important to know that you can usually qualify for financial aid fairly easily to pay for medical school. Your parent's finances are not considered, which is usually good. This ensures that you can get financial aid even if your parents are doing fairly well financially (but not well enough to pay you $50,000 per year to cover your medical school expenses).

Most of the aid comes in the form of student loans which are deferred (you do not make payments) while you are in medical school. These loans can also easily be deferred until the end of residency training once you graduate from medical school.

The financial aid office at the medical school has a lot of say about the financial package you receive while attending medical school. To understand how the finances work, we need to review what is meant by the "student budget" or "cost of attendance".

Cost of Attendance or Student Budget

Cost of attendance is NOT the amount of money you think you need or the amount you actually need to attend medical school. It is the amount of money the financial aid office at the medical school thinks (or rather calculates, estimates and averages) you need to survive and make it through med school each year.

Cost of attendance it a dollar amount that the medical school's financial aid office comes up with, based on federal guidelines which are rather strict. It includes all costs such as tuition, fees, books, commuting expenses, and living expenses that the "average normal" (single) student would have to pay during one school year. As already mentioned, the medical school has to follow government guidelines to set up the budget and does not have much ability to change the budget (or so they claim at least).

This magical dollar amount called "cost of attendance" is the same for each student, regardless if he/she is married, or has children, lives alone, or with room-mates. The medical school only considers the expenses of the student by himself/herself. Family members such as spouse and children are not considered and do not increase the amount of money allotted to the student for living expenses.

The cost of attendance is usually broken down into the "student budget", which shows each item (tuition, books, rent, utilities, commute, clothing allowance, etc.) separately. Financial aid, in the form of loans and scholarships, will only cover the cost of attendance. Financial aid is not available for any higher amount than the cost of attendance (or "total student budget"). Government loans, scholarship money, and alternative loans can be used to cover the cost of attendance.

Your "change check"

For example, if your financial aid office says that your total cost of attendance is $50,000 per year, including all living expenses, tuition, etc. and you happen to qualify, because you are so good looking or whatever, for some fancy scholarship worth $80,000 per year, your financial aid office will limit your financial aid package to $50,000 since that is your cost of attendance. The other $30,000 is not available to you at all. You would receive a check of whatever money is left of the $50,000 (not the $80,000) after subtracting tuition, fees, etc. for the year for you to live on.

As illustrated by the example, taking the total amount specified by the cost of attendance and subtracting out the tuition, fees, books, supplies, and mandatory insurance, leaves you with the amount that will be paid out to you each year to cover living expenses. The school usually mails a "change check" to you every semester. It is your responsibility to budget that money to last the entire semester to pay your bills.

The summer break is not included in the budget, either. So, you only receive money for 9 of the 12 months of the year - since that is the only time you are in school (for the first 2 years). During years three and four, your budget is calculated using all 12 months since you don't get summers off anymore.

That means that the financial aid office only considers you to be a student for 9 of the 12 months of a year (during the first 2 years) and only budgets enough financial aid for the 9 months during which you are actually a student. If you don't have a job over the summer, you will have to stretch the limited change check to also pay your bills over the summer.

Note that, generally speaking, the annual change check is just under $11,000 (or $5,500 per semester) at most medical schools. That's not a lot to live on, especially if you have kids or other unique circumstances. It comes to about $900 per month if budgeted over 12 months.
You can look at the student budget information for most schools in the Medical School Statistics section.

More cost of attendance info

In most cases, the schools calculate your budget with the assumption that you will have room-mates to share rent expenses, so that the budgeted rent expense in your student budget is very low, not enough to really afford your own place.

Again, to make this point very clear: even if you hypothetically qualified for say $200,000 in loans, scholarships, etc. per year, the school will only allow you to fund (from all these sources combined) the total budget amount specified. NO MORE!

Having said that, there are a few exceptions that allow you to increase you cost of attendance. Childcare expenses fall in this category. If you have childcare expenses because you are attending school, you can add this expense to your student budget and get a larger change check to cover these expenses. But this does not give you more money to live on each month. Also, this is a loan, after all that you will have to pay back.

If you need to purchase a computer or laptop for school, this also counts as an allowable expense to increase the budget. You purchase the computer or laptop and then turn in the receipt to get reimbursed. Reimbursement only works if you still have some unused financial aid available to cover the additional student budget expense. Most of the time, this is not an issue since you can typically qualify for more private loans if you need them.

You have to provide documentation in the form of bills, receipts, and signed statements from other people involved (daycare providers) to get reimbursed for childcare expenses. A receipt is sufficient for reimbursement of a computer purchase.

You can also qualify for some "one-time" money if something unexpected happens, say, your car is stolen, you have to have a brain transplant or some other major one-time expense comes up that would "sink your boat". These circumstances can be considered for additional aid. However, this is limited and only approved on a case-by-case basis. Note that you have to be able to qualify for this money in loans or scholarships first. If you are at a very expensive school and have maxed out your loan amounts, there may be no additional money available for this or you have to access private loans.

You cannot increase you "change check" by qualifying for extra aid or alternative loans. The different loan programs and scholarships only determine where that money comes from, not how much in total you get. All government loan programs have caps (max amounts you can borrow) and some medical schools are more expensive than what you can borrow through government loans.

That is what alternative loans (available through the financial aid office also) are for - to bridge the gap if your cost of attendance exceeds the amount the government is willing to loan to you each year.

Be sure to read the details about the different loan types and scholarships available for pros and cons about each.


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