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The Department of Education administers several loan programs for which medical students may be eligible. The majority of these programs are authorized under Title IV of the Higher Education Act (HEA). The Health Resources and Services Administration (HRSA) also has student loans for health professions students, including the Primary Care Loan (PCL) that is authorized under Title VII of the Public Health Service Act.
The Health Care and Education Reconciliation Act of 2010 (P.L. 111-152 ) eliminated the Federal Family Education Loan (FFEL) program and originates all Stafford loans under the Direct Loan program beginning July 1, 2010. The Budget Control Act of 2011 (BCA, P.L. 112-25) eliminated subsidized Stafford loan for graduate/professional students, which will increase repayment for medical students between $10,000 and $20,000 over the life of their loans.
All current Department of Education student loan interest rates are available on its website, www.studentaid.gov.
Direct Stafford Loans: The Department of Education offers unsubsidized Stafford loans for medical students that have better interest rates and loan terms than many private loans. Stafford loans for graduate/professional students have an annually-fixed interest rate based on the 10-year Treasury note -- 1.55 percentage points higher than undergraduate loans. For loans first disbursed on or after July 1, 2015, and before July 1, 2016, the interest rate is 5.84 percent. Students are not required to make payments while in school, but interest accrues on unsubsidized loans during that period. Unsubsidized Stafford loans for medical students are limited to $40,500 annually.
April 14, 2008, the Department of Education (ED) issued a Dear Colleague letter (GEN-08-04) that raises the combined aggregate Stafford loan limit for certain health professions students (including medical students) from $189,125 to $224,000. The increase comes in response to a September 4, 2007, AAMC-coordinated sign-on letter from almost 60 health professions organizations to then Secretary of Education Margaret Spellings. The Secretary first announced the Department's decision in a February 2008 letter to AAMC President and CEO Darrel G. Kirch, M.D.
GradPLUS Loans: Medical students may also take out GradPLUS loans, which are unsubsidized loans and have an annually-fixed interest rate based on the 10-year Treasury note -- 2.55 percentage points higher than undergraduate loans. For GradPLUS loans first disbursed on or after July 1, 2015, and before July 1, 2016, the interest rate is 6.84. GradPLUS loans are limited to the total Cost of Attendance as determined by the institution.
Perkins Loan Program: A Perkins Loan is a low interest, fixed 5 percent loan for medical students with "exceptional" financial need. The Department of Education provides a programmed amount of funding to the participating institution. In turn, the school determines which students have the greatest need. The school combines federal funds with some of its own funds for loans to qualifying students. Perkins Loans do not have origination fees and carry a longer grace period (9 months) then other federal loans. Financial need is determined by a standard formula using information from the Free Application for Federal Student Aid (FAFSA) and the student's expected family contribution (EFC).
HRSA Primary Care Loan: Medical students interested in primary care are eligible for the HRSA PCL program. The PCL offers a 5 percent interest rate to students who agree to train and practice in primary care until the loans are paid off (capped at 10 years). Students who fail to complete the service requirement will revert to a 7 percent interest rate.
Matthew Shick, J.D.
Senior Legislative Analyst, Government Relations
Telephone: 202- 828-0525