Episode 40: Love Thy Parents: Financial Aid (Part 2/4)
Your parents have questions. We have answers. Love Thy Parents is a series dedicated to all the fathers and mothers out there. Applying to medical school can be confusing for applicants themselves; how do you think parents must feel?
In Part 2, we tackle financial aid: what’s out there, how to get it, and how to make sense of it all.
In future parts, we’ll cover common myths and what to expect when a son or daughter starts medical school.
If you have questions for us, please send them to firstname.lastname@example.org. Or, call (773) 336-2POD and leave us a message.
Episode 40 Transcript
Ben Ferguson: Hello, everybody. Welcome to the Pritzker Podcast again. This is Episode 40, and this actually is part two of our four-part series “Love Thy Parents” in which we’re trying to answer some questions for parents specifically about confusion that they may have about the application process, about the financial aid process, and about just having a kid in medical school in the first place. So we’re joined again by Sylvia Robertson. Hey, Sylvia.
Sylvia Robertson: Hi, Ben. Thank you for doing this for the parents and applicants out there.
BF: Sure. Hopefully, it’s helpful. And Sylvia, could just remind people what your title is at Pritzker?
SR: I’m the Assistant Dean for Admissions and Financial Aid.
BF: Okay. And then, we’re happy to be joined by as well by a new face, or a new voice on the podcast I should say, and that’s Darrell Nabers. Hey, Darrell.
Darrell Nabers: Hi, Ben. How are you?
BF: All right, and can you tell people what your title is at Pritzker as well?
DN: I am the Associate Director for Admissions and Financial Aid Systems and Analysis.
BF: Great. Well, welcome again to the podcast.
DN: Thank you.
BF: In this Part 2, we’ll be talking about specifically about financial aid issues. So Sylvia, I’ll just pitch the first question to you, and that is if you could just give people a very brief overview of what types of financial aid are out there just for parents who have absolutely no idea what financial aid is in the first place.
SR: Well, that’s a great place to start, I think. It’s important for families to know the resources that will be available to help finance medical education. And of course, one of the resources is personal resources–the family resources that are available and applicants’ own resources. And then, there are federal loan programs for applicants who are US citizens or permanent residents. Individual schools have their own loan programs. Individual schools have their own scholarship programs, and those scholarship programs are generally based on need-based analysis as well as on merit analysis. And then there are outside scholarships and low interest loans that can be used to help fund education. And, there are service commitment programs that some applicants choose. They should choose those very carefully because the payback penalties are severe if you do not follow through with the commitment; the military scholarships, for example, are an option for applicants who see that as a good match with their goals.
BF: So it definitely sounds like there is a lot of different sources that people can use to try to finance medical school. Is it often the case that people are paying for medical school entirely out of pocket or do most people end up borrowing some money?
SR: That is very seldom the case. Most applicants and their families do borrow from the federal loan program to help finance their education, and that’s really where the bulk of the financial resources come from. It’s not so much like applying for financial aid in college where, if the parental contribution is unable to be met by the family, then the applicant may find themselves unable to meet the cost of attendance at that school. For med school, the individual applicant most often is able to borrow to cover that expected parental contribution that is still calculated.
BF:Sure. I guess another basic question that a lot of people have is if the medical student is the one who’s going to medical school, what do parents have to do with this in the first place if they’re not contributing anything, if they’re not paying out of their pocket entirely for medical school?
SR: That’s a wonderful question, Ben. Different schools approach it in different ways, but every school I know of does ask the family to provide their income information, their asset information in filling out the FAFSA for their son or daughter who’s going to become a med school student. Some schools require that for all four years of the applicant’s med school experience. We, for example, just require it in the first year when we make our scholarship decisions and then make a commitment for that scholarship throughout the applicant’s–the student’s–all four years. The reason that the parental information is required by medical schools is because they have a limited amount of scholarship dollars and they need to determine a way to distribute those dollars to the students who need it the most. This is all in regards to need-based aid. Parental information is not required if you’re talking about merit-based aid. But for need-based aid, most schools do require so they can learn how to most effectively distribute the limited amount of scholarship dollars they have. There are a small number of schools who have determined that they do have enough flexibility in their need-based scholarship dollars that when a student turns a certain age, the parental information is no longer required. For us, that age is 30. So that would be a good question to ask of some med schools. It’s also important to know that med schools understand there are times when family information is not available for many reasons and most schools have ways to document that and to waive the parental requirement. It’s not done very often, but in extreme cases, that can be requested.
BF: When we talk about loans from the government, can you guys talk just kind of in broad terms about what types of loans are out there and where the money is really coming from?
DN: Well, I could attempt to field that question. Currently, we are in the Direct Loan Program. The federal government obviously provides the resources for federal funds. In the past, we were in a program where banks were partners in this process. Since last year–July first of last year–or, sorry, this year–the federal government has now given schools the ability to process loans on behalf of the federal government. That’s considered the Direct Loan Program. So with that program, we have Stafford loans, which are subsidized and unsubsidized; GraduatePLUS Loan for graduate students (the distinction being that graduate students are able to look at the PLUS Loan, which is, in undergrad, a parent loan; as a graduate student, you have the ability through the GradPLUS program independently of your parents, so there is a distinction there of how it might be different as a graduate student to assume some loans through the federal government); and of course there are Perkins loans which are not part of the Direct Loan Program but they are also federal loans.
BF: Okay. When you say subsidized and unsubsidized, what exactly does that mean?
DN: Well, the subsidized interest is paid by the government while you’re in school. So, you have a certain amount of subsidized Stafford available to you if you demonstrate need. So, for students that have demonstrated need, through the analysis tool, they are offered a portion of their Stafford loan as subsidized–or interest paid while they’re in school. The remaining portion of their Stafford would be unsubsidized. In other words, the interest would accumulate while they are in school.
BF: So suffice it to say, it’s advantageous for people to get as many dollars in a subsidized fashion as possible and then get the rest as unsubsidized because they won’t be accruing interest during the time that they are in school.
DN: Correct. There is a cap on the subsidized portion for students–$8,500 per borrower-based year–but you could maximize that. That’s what we try to instruct students to do and when we package it, we attempt to maximize their subsidized portion before we would package anything that would be unsubsidized.
SR: So students can borrow up to $40,500 a year in Stafford loan money.
BF: Okay. And then the rest would have to come out of pocket and some other aid source.
SR: From scholarship, hopefully, or GradPLUS loans, or parental income.
BF: Sure. Often times, I think it’s the case it’s the parental units that are paying for the actual application to medical school, too. How much can parents typically, if they’re contributing to that, expect to spend on the application itself?
SR: Thanks, Ben. Again, a great question, It is an expensive process and to the extent that the family can help, this is an important place to help. We’re seeing more and more students arriving in med school with problems with their credit scores, often because they’ve charged the entire med school application cost. And so if families can help, this is a great place to help. The average cost on individual college campuses ranges from about $2,500 to $4,000.
SR: That includes the application fees and the interview expenses. Obviously, if they are applying to only a regional set of schools, then the interview cost will be less. But the average number of applications is 12 to 15.
BF: Wow. And I should mention that we talked about this in a little bit in the first part of the series, but I think it’s worth revisiting. And that–when you talk about the interview costs, that’s not fees and stuff, necessarily. That’s just flying cross-country sometimes to get to these schools.
SR: Well, the figure that I suggested does include taking the MCAT and the AMCAS application.
BF: Sure. Sure.
DN: As far as applying directly for financial aid, however, the federal application is free. It’s actually called the Free Application for Federal Student Aid, or FAFSA. And then, of course, we have our own institutional application. There’s no charge or cost to student to complete either one of those. So we’re able to understand the student’s need analysis assumption or quantify that and are able at that point to package the student with available federal funds, and then of course our institutional funds based on the completion of those two pieces.
SR: I’m glad you mentioned the free part, Darrell, because there are some companies that have grown up which offer to help families fill out the FAFSA and then they charge a fee for that, and we would encourage you to avoid that. The FAFSA has been made much simpler. There is now skip logic available so that it’s not as long as it used to be. So really do look for the free look for the free application for federal student aid.
DN: Absolutely, especially because it’s something you have to provide updates on every year, so if you’re getting into a pattern of paying someone else or a third party to complete it for you, then that could obviously add up. But it is a free application, and as I said, our internal application again is updated each year but is also free.
BF: In terms of the timeline of applying for financial aid, if we’re taking a hypothetical student, say, applying, in the summer, to medical school, perhaps, of their senior year of college–before their senior year of college, I should say–when is all this application stuff happening for financial aid specifically?
SR: Well, they should be looking for outside scholarships and low-interest loans while they’re first beginning their med school application. We would encourage families to talk to their employers to see if they have any scholarship dollars that are available for employed children…that kind of thing. But the FAFSA becomes available at the beginning of January each year, and the sooner that families get that completed, the better. And that will require information from your taxes for that year and so we would strongly encourage families to complete their taxes as soon as the information is available, and then complete the FAFSA.
BF: Okay. And in terms of hearing back from schools, that can pretty much come at any time in terms of the aid that they are awarded? Or when they can they expect to hear that?
SR: We award some merit aid at the time of acceptance. Of course, other merit aid is awarded as we move through the year. But we are able to begin accepting students on October 15th. That’s in accordance with the AAMC traffic rules that govern med school acceptances. And so, some merit offers were made then. Need-based decisions cannot be made until after the FAFSA information is completed and submitted, and so those will come later in the year, usually beginning in March and April. Obviously, there’s more money available in March and April than there is in August. So it’s really to the student’s advantage for families to complete that information early in the year.
BF: Okay. I think, in both of your long careers, you must have interacted with a lot of pre-med students and also a lot of parents of pre-med students. Do you have any sense of what some of the myths are concerning financial aid that parents constantly have or areas of confusion that come up a lot?
SR: It saddens me when I hear families say that their son or daughter wanted to go to med school but they couldn’t afford it. I would really encourage them to be in touch with med school financial aid officers to find ways to make that happen. I think that it’s most often the case, in the great the majority of cases, that applicants will not find money as a limiting factor for them in applying to med school. Then, there’s the myth that the state schools are less expensive than the private schools. That is not so much the case anymore, even in terms of the tuition dollars and cost, but certainly it is the case that many private schools have more scholarship dollars, larger endowments than many of the state schools. So it would be important to look at all the options and to keep in mind that the goal is to find the best fit for the applicant. This is a big investment and you want to be sure that the student is able to achieve their goals at the end of the investment.
DN: I think that’s a great point, Sylvia. To consider this an investment is something that’s very difficult for parents and students to do. We like to talk about this investment and the unrealized asset, which is their student. And if you’re investing your money in any investment tool, then you’re obviously looking at a rate of return. What better rate to return than to invest in your child’s education, for them to realize their hopes and dreams of becoming a physician, and obviously the benefit of an income once they’ve begun their practice? Again, there’s always the myth of loans, in any form, being bad. We really try to counsel students to understand that loan debt from education is not bad debt to have. When you consider the 6.8% fixed rate on a Stafford loan, when you compare that to anything out there that you could possibly invest in, to get a return of that amount in this particular economy, it’s difficult to do. So, I think that looking at it in terms of investment in your child’s future is something that will maybe enlighten the family and maybe change the perspective a little bit…not concern themselves with the borrowing process. Obviously, you want to ensure that you don’t overborrow. You want to try to live within your means, and we do counsel students to do that as well. But as shepherds of this process, we are responsible for constructing a budget that is reasonable, that is not excessive. And so, excessive borrowing is just not really part of the process. Again, deconstructing the myth that student loan debt is bad is, again, a challenge that we try to do. But again, the idea of looking at this as an investment is one, I think, that is a positive way of taking on the debt, taking on the challenge of paying it down in a variety of different ways which are afforded to medical students and just being positive about this experience and the outcome.
BF: Okay. Let’s see, I think that’s all kind of the major questions that I wanted to cover. Do you guys have any final advice for parents or additional stuff that you think they should know?
DN: Well, you did ask about–you had some questions there about, “Will I go broke? Why is medical school so expensive?”
DN: Again, going back to this idea of an investment, institutions are not really fluctuating costs a great deal. I think that medical school–there’s the inflationary rate that does perpetuate regular tuition and fees on a yearly basis in many institutions. But, for example, in our institution, many of our major costs have to do with the cost of living, the cost of a student not having a regular steady income, but having to provide for themselves, food, shelter, clothing, et cetera. So we’ve taken great pains to make sure that we are not trying to inflate or over-inflate that. But we also want to be cognizant of the fact that students do have to live and that there is a range of comfort with living expenses that students have. So we offer a generous budget, but in no way do we tell students that every situation determines the same outcome with respect to the budget. We encourage students frequently to reduce borrowing if they don’t need it. We ask students to really think about their own personal finance situation, really examine their own needs in terms of shelter, food, transportation. And really, once you get at that exercise and it becomes routine to you, then you start to understand that the budget itself is something that is a flexible instrument. Obviously, you want to be able to pay your tuition and fees, and again we account for those. But the other costs that are assumed allowances in our budget, we expect students to make reasonable decisions about whether or not those costs pertain to them and of course reduce their borrowing if they don’t.
SR: Ben, I want to encourage parents and their applicant to sit down together and visit the AAMC website. Once you’re there, it’s www.aamc.org, search for the word “FIRST”. It stands for Financial Information, Resources, Services, and Tools. It is a website that’s in a class by itself in terms of financial resources for med school students and applicants, and you would find wonderful calculators there to think about in the future, what the payback cost will be for the debt they’re taking on, wonderful information about budgeting and credit scores. So I think it would be great for the families to review that together as the applicant is preparing financially for med school.
BF: Sure. I think it’s worth mentioning here that you’ve mentioned that tool on the podcast before. And we’ve actually had some thorough discussions on financial aid processes, and applications and stuff on the podcast before. We’d actually done Episode 10, which is called Financial Aid where we went through the entire process, and then Episode 27, which was called Financial Aid Redux, in which I spoke with you, Sylvia, about just some additional issues with financial aid. So I think in this episode, we’ve attempted to answer some questions for parents, but if you want to hear kind of the whole detailed process of that, please be sure to go back and check out those other episodes as well. What else? Did we miss anything, guys?
SR: You know, I didn’t say anything about the death benefit on the Stafford. I always think that’s a bit difficult to approach, but it might give some parents some relief.
BF: What is that?
SR: It means that if the unthinkable were to happen and a medical student died during the med school years or while they were repaying their Stafford loans, one of the benefits of that program is that those loans are then forgiven. The family is not responsible for that federal loan debt.
BF: Okay. It’s a bittersweet gesture, I guess, but it’s nice at the same time.
DN: It’s also significant because there are private loans out there that many parents may consider for the cost of the education. But again, as Sylvia alluded to, that benefit is something that is a part of the federal student aid program. So that is one of the true benefits of having loans in that program. Again, those rates are fixed. Many private loans instruments are variable-rate, so you could walk in to a loan at 3% but walk out of the loan at 20%. So again, there are benefits to the federal loan program.
BF: Sure. Okay. I think we’ll close up there, then, if that’s all right with you, guys.
SR: So thanks, Sylvia and Darrell, for coming on the show. This has been really helpful, for me at least, and hopefully it’s helpful for parents of students who are applying in medical school. I would encourage any students who are listening to this, who do have parents who are planning to help out with the process, to indeed send this to your parents and give them the information so that they can educate themselves about this entire process. So, in the next part of this “Love Thy Parents” series, we’ll be talking about common myths that parents have about medical school in general. And then I think in the fourth part, we’ll talk about what’s it’s like to have a son or daughter in medical school and what type of changes you can expect, both in their lifestyle and your lifestyle and your lifestyle as well. So stay tuned for those upcoming episodes. And until then, take care.
SR: Thanks, Ben.
DN: Thank you, Ben.