The Ultimate Guide to Financing Your Medical School Education
This piece was originally drafted by MD Financial Management and featured on md.ca.
Every year, nearly 3,000 students enter Canada’s 17 medical schools. Many of them — perhaps including you — have dreamed for years of bettering the world through their practice of medicine.
Yet your dreams of practising medicine probably didn’t include the high cost of getting there. The median debt for medical school graduates is $100,000, with 40% of students reporting debt of $120,000 or more, according to the Association of Faculties of Medicine of Canada.
Add this to undergraduate education debt — $26,000 for the average Canadian university graduate — and you are looking at a hefty sum you’ll likely have to start paying back once you’re not longer considered a student.
Source: The Association of Faculties of Medicine of Canada
Funding for medical school can come from a variety of sources — from scholarships to grants and loans — and figuring out which options are right for you is the key to how well you manage the money you receive.
The strategies offered in this guide will walk you through the most common forms of med school funding, step by step:
- Apply for scholarships and bursaries to avoid borrowing more than you have to.
- Maximize government grants to minimize debt.
- Get government loans to cover the remaining costs.
- Establish good credit to ensure financial security.
- Secure a line of credit for any additional funding.
- Budget wisely to avoid unnecessary debt.
- Develop good financial habits as a medical student, to prepare you for residency.
- After you graduate, apply for loan forgiveness and relief programs.
- Build a financial plan that works for you.
Apply for scholarships and bursaries
Scholarships and bursaries are the first things to look at because you don’t have to pay them back. Scholarships are earned through academic or other merit, whereas bursaries are distributed based on financial need or return of service arrangements.
The Canadian Medical Foundation provides scholarships and bursaries for medical students as part of its partnership with provincial and territorial medical associations (PTMAs) and various universities throughout Canada. For example, the Alberta Medical Association is a PTMA that provides bursaries for students in Alberta. These bursaries tend to have application deadlines in the late fall or winter, so make sure you look for these and get your applications in early.
However, most scholarships and bursaries won’t cover the entire cost of med school. You’ll likely have to find additional funding streams, such as government grants, government loans or other types of loans.
Let’s start by looking at government grants.
Maximize government grants
Grants are an excellent option for education funding because you do not need to pay back what you receive. Canada Student Grants provide financial assistance for post-secondary students and are distributed to qualified students based on financial need.
Seek out grants from the federal and provincial/territorial governments. The amount you may receive depends not only on financial need but also on the province where you attend med school, and it’s difficult to determine how much you might receive until you apply.
Some grants are specially designed for certain students, such as those with financial dependants, students with disabilities, and First Nations and Inuit students. But most grant money is allocated based on student financial need and is available to all Canadians.
Even if you do receive grants (and even if that’s in addition to scholarships and/or bursaries), you will likely still have to borrow to finance the rest of your med school costs. This next step is the most stressful part of financing: taking on debt.
Get government loans
The prospect of borrowing large amounts of money can be daunting, and you may feel overwhelmed throughout the process. We believe that good advice can help you to flourish and not flounder.
Before you apply for any financial aid, consult an advisor. Ideally, this person should specialize in financing medical school studies. From the application process through med school and your residency journey, an expert in the financial services industry can help you to get the most out of your funding options and to manage and pay off your debt when you’re ready to.
MD Advisors* have the experience and expertise to guide students in their financial decisions through medical school and beyond. They can help you start your journey on the right foot.
Note that your financial circumstances may affect how much you receive from governments. For example, having assets in a tax-free savings account (TFSA) may reduce the amount you can get. If you have a spouse or common-law partner, his or her assets may also affect how much you can receive.
Establish good credit
Regardless of your later profession or specialization, your credit score will have a significant impact on your adult life. Demonstrating that you’re a reliable borrower will help to maintain and even boost your credit score. And that will affect your ability to borrow going forward (and the interest rates you’ll receive), say, when you want to finance your first home.
Credit scores range from 300 to 900. The higher your score, the better. Obviously, paying your bills on time (including loan repayments) will increase your credit score, while failing to pay on time (or at all) will lower your score.
Whether you like it or not, credit reporting agencies (TransUnion and Equifax in Canada) are keeping track of your credit history and assessing your viability as a borrower. Your history is updated every time you apply for a loan or line of credit, so the information you provide on the application is used to update the score. One item that will keep your score high is the length of time you’ve had debt or a credit card (longer is better).
Check your own credit report and core. TransUnion and Equifax will send you a free copy of your credit report by mail — but it won’t include your credit score. For a fee, these two credit bureaus will give you your credit report and credit score online.
A credit score of 700 and above should qualify you for the best interest rates, while a score below 650 may limit your ability to open new lines of credit. There is no “hit” to your credit when you check your own credit report, so don’t hesitate to request this baseline information.
Secure a line of credit
After applying for scholarships, bursaries, government grants and government student loans, you’ll probably find that you’re still short on funding for med school. If so, you’ll likely want to apply for a student line of credit.
The major benefits of a student line of credit are flexibility and lower interest. This option is different from a traditional loan because you can use money as you need it, and you pay interest only on the funds you withdraw. This is an important benefit of a line of credit that can save you money compared with taking out a traditional loan. A student line of credit also provides more flexible repayment options, generally requiring lower monthly payments than traditional government loans require.
The snag with all this flexibility is that rates can change. The interest rate for a student line of credit is usually based on the prime rate. For example, your interest rate might be “prime rate minus 0.15%,” which would give you a 3.80% interest rate when prime is 3.95%. As the prime rate changes, the interest rate you pay will change, so it’s important to keep a close eye on interest rates overall — and to have a sense of where those rates might be headed.
The other downside to student lines of credit is that, unlike for government loans, interest accrues immediately on the amount you borrow. Some student lines of credit allow for capitalized interest (or compound interest), which means that you may sometimes be allowed to skip a payment and have the interest owing added to the principal amount (the original amount you borrowed). This can provide some financial relief, but remember that it’s increasing the debt that you will need to repay later.
Source: Bank of Canada
To compare lines of credit, focus on the features and benefits. Though many lines of credit offered to students have similar terms across providers, they tend to diverge when it comes to the features and benefits offered — like grace periods, conversion and payment options. There are also the intangibles: do you get along with, and trust, your contacts at a particular service provider?
You may want to consider the Scotia Professional® Student Plan, which is available to medical students. It offers a line of credit of up to $300,000 with an interest rate of prime minus 0.25% (3.70% as of June 2019), as well as a chequing account and credit card fee waivers, and other benefits for medical students. You can apply online to pre-qualify for the line of credit in just 7 minutes.
Whichever line of credit you pursue, apply early. The best practice is to complete your application at the same time that you apply for government grants and loans.
One of the most crucial things is to budget effectively. Generally, about half the cost of medical school is directly related to education, while the other half comprises basic living expenses. This piece of the financial puzzle can be challenging, and may seem daunting. Getting help from an MD Advisor can be particularly important here, to avoid unpleasant surprises and unnecessary costs.
The cost of tuition and living can vary significantly. For example, medical students at the University of Saskatchewan pay almost double the tuition that University of Manitoba students do (about $17,000 and $9,000, respectively). Generally, it will cost more to live in a big city than in a small town.
Wherever you end up, accurately assessing the costs of medical school and living is one of the first steps in the budgeting process.
Building a budget starts with an honest assessment. It’s important to realize you cannot just take the amount of your funding and divide it by four to cover all your annual expenses. Years 3 and 4 are more expensive than the first two because they require travelling for CaRMS interviews (for your residency placement), electives, conferences, exams and more.
Using a credit card instead of cash can help you keep track of all the money you spend. The earlier you start keeping track, the more prepared you’ll be when it’s time to budget for your semester expenses.
A credit card is also a responsibility. Be sure to pay off your balance at the end of the month — in full. Though, of course, you should consider the interest rates on your credit cards (they matter), it’s never a good idea to borrow money directly through your credit card that you can’t pay back at the end of the month because that will hurt your credit score.
Remember that you must pay interest on everything you borrow. So the best practice is to borrow only as much as you need.
Consider the sources you’re drawing from. If you earn a grant, scholarship or bursary — or if some of your loans are interest-free, be sure to spend that money before you borrow funds that you’ll have to pay interest on.
Anticipate major looming costs. Large expenses like tuition, books and exams can put a dent in your bank account, but they’re foreseeable and manageable with proper planning. Fees for overdrafts on your bank account are the last thing you want to deal with during medical school, so stay on top of upcoming expenses.
Sadly, even if you budget properly for your first year of med school, you might find yourself feeling suffocated by rising costs throughout your education. Having (and, most importantly, sticking to) a budget will be critical in preparing you for those rising costs.
Develop good financial habits as a medical student
The habits you’ll develop by sticking to a budget will serve you well throughout your life, particularly during your residency.
Throughout residency, you may need more financial support. After you graduate from med school, next up is residency, during which you get to practise medicine under the supervision of senior practitioners. A residency normally takes four or five years, though some practice areas (like family medicine) have shorter residency periods. In some programs, like those that are competency-based rather than time-based, the residency period may not be known in advance.
That’s why it’s critical to have access to a line of credit, whether it’s the same one from your med school years or a new one. (Unlike student loans and grants, a line of credit may still be available to you after you graduate.) This is a great option if you can’t confidently estimate about how much residency will cost (think conferences, exams, Canadian Medical Protective Association dues, training, immunization, police checks, etc.) or how long it will take to complete.
After you graduate, apply for loan forgiveness and relief programs. Depending on where you want to practise, you may qualify for loan forgiveness programs. Provincial programs, especially family medicine programs, provide financial assistance through the governments of several provinces and are often designed to attract physicians to underserved areas. Family physicians and residents working in underserved or rural communities may also qualify for loan forgiveness through the Canada Student Loan forgiveness program.
Certain programs have location-specific financial perks. For example, in Prince Edward Island, you may be able to avoid paying interest on your student loans through the Medical Residency Provincial Loan Repayment Relief program.
If you’re completing your residency in Ontario, and you’re willing to stick around for another five years after your residency, you may be able to avoid paying any of the principal or interest on your med school federal and provincial loans through the Resident Loan Interest Relief Program by entering into a Physician Return of Service (ROS) agreement. You’ll have to make sure you can abide by all the terms of the agreement (location, duration and other terms). Otherwise, you’ll be dropped from the program and will have to pay back your med school loans in full.
Now, build a financial plan that works for you
Deciding how to finance medical school is just the first of many big financial decisions you’ll make on your journey through med school and residency, and into practice. Now that you’ve started the process, you’ll find out quickly why it’s so important for you to understand the strategies available for financing your med school education and residency.
MD is happy to help in this and other ways. If you follow the advice in this guide, you’re likely to ace the subject of medical school funding — we only wish we could make it that easy for you to ace your exams!
MD Financial Management provides financial products and services, the MD Family of Funds and investment counselling services through the MD Group of Companies. For a detailed list of these companies, visit md.ca.
* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.
Banking and credit products and services are offered by The Bank of Nova Scotia “Scotiabank”. Credit and lending products are subject to credit approval by Scotiabank.