Monday, July 26, 2010

Medical Student Line of Credit

One of the major pitfalls of going into medical school is debt. Currently, some of my friends like to imply that I should be taking them out for dinner because I am going to be so "rich" when I become a doctor. Ignoring the fact that most people have enormous misconceptions about how much money the average physician actually earns, I always have to point out that I am not a doctor; in fact, I'm a student...which is as far from being "rich" as possible.

Enrollment into medical school has a ridiculous price tag. Now, our tuition isn't as much as most MBA and dentistry programs, but we also have 2-5 years of poorly compensated residency (read: slave labour) after we finish our four years of school. Keep in mind that very few medical students hold down jobs while they are in school because, school is busy.

So how do med students afford medical school? Some have wealthy parents who are willing to help out, others worked and saved in their pre-med years, and most end up taking out a line of credit.

Now, normally, if I went into a bank and asked them for a $150-200K line of credit without having any income or collateral...mass hysteria would ensue. However, many banks have professional student lines of credit. These are lines of credit that are intended for student doctors, lawyers, dentists, etc. Of course, these banks aren't extending a line of credit, at prime I should add, to professional students as an act of kindness...I'm not sure banks are truly capable of acts of kindness. The strategy behind these lines of credit are that professional students will soon become professionals and once they are professionals with money, they will probably take their business (when looking to buy houses, offices, etc.) to a bank that they already know and trust, i.e. the bank that supported them when they were students.

Unfortunately, my interaction with many of the banks in my city has left me fairly disappointed. Credit unions tend not to offer a professional student line of credit, which I suppose is understandable given that they are much smaller than most banks. Some banks offer professional student lines of credit, but with terms that are nowhere near their competitors. In my experience, a good professional student line of credit is at prime and does not need to be repaid until residency is complete. Make sure to read the fine print because some banks offer lines of credit that need to be repaid after two years of residency...which is fine if you are in a family practice residency, but you can get a better deal elsewhere if you are specializing in anything else.