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Keepin’ it real (real talk from real advisors about the real realities of being a med student)

The importance of having a solid financial plan as you make your way through med school and beyond can’t be overstated—but you already know that (you’re reading this article, aren’t you?). If you’re feeling intimidated by the prospect of wrapping your head around the financial realities of the next decade of your life, don’t worry, we’ll give you some peace of mind. We asked some of our advisors about the most common questions they get, the most consistent concerns they address, and the biggest mistakes med students make with their finances.

What kind of questions do you get most often from students?

“Debt, debt, debt—they all want to know about debt. Do other people have this much debt? Have you ever seen debt this high? Do you think I’ll ever pay off my debt? The answers to these questions are always: yes, yes, and yes. It just takes time, discipline, and planning.”

What’s something that med students should be more concerned with than they currently are?

“Not enough students are ‘money aware’—which is, I think, the first step to organizing your finances. Setting up a monthly budget is a good way to start building money awareness. Of course, there are many ways to set up a budget and everyone does it a little differently (our article on the Burrito Exchange Rate will show you just how differently some students approach this). Some want to see the bottom line with everything they need to save, while others find that big-picture view overwhelming. It may help to separate the discretionary expenses or the expenses you can control (like how much you spend at restaurants) from those that you can’t or the fixed expenses (like tuition and application costs), which essentially gives you two budgets: fixed and discretionary."

What’s something else that gets overlooked?

“Credit scores. Especially early on, before they get too deep into debt. By the time they become residents, most people figure out what they have to know and manage their credit scores, but students need to start paying closer attention from the very start—they will feel the impact throughout their careers. Simple things like paying your credit cards on time, and not having too much unnecessary credit open, can help you avoid big problems in the future. Having a bad credit score can impact your ability to get a mortgage, or even to move your line of credit to a different institution.”

What are most students surprised by?

“Debt. Which is ironic, because most of them already know that they’re going to have debt to pay off—still, many of them are shocked by just how much debt they're likely to be dealing with when they’re finished med school. Upwards of 180K—and sometimes more."

What are students most worried about?

“One of the things that comes up a lot, especially in third year, is a fear of not matching through CaRMS. Specifically, what happens to my debt if I don’t match? The answer differs slightly depending on your financing. Government loans will go into repayment, but, if you go into research, or demonstrate that you’re continuing your academic work in some way, you can apply for repayment assistance. As for a student line of credit, it depends on the terms and conditions—some of them have a grace period, some of them don’t.”

What’s the one essential thing most med students don’t think about?

“Disability insurance! Students typically think they won't need it, but I’ve seen firsthand how important it is—two students I know had to take a leave from school for stress and illness-related reasons, and, luckily, they both had insurance, so they were covered. The danger is, if you have to leave for a prolonged period (for whatever reason), you’ll no longer be considered a student and your debt will go into repayment. So, say yes to disability insurance! It can be cost-effective for students, particularly if you go through your provincial medical association, and when you transition into residency or practice, it can be converted without having to take a medical exam.”

What do med students need to know about loans?

“Most students already have their student lines of credit set up by the time I meet them. The most important conversations I have are after a student matches through CaRMS—at that point, they need to know how to get the most out of the various loan forgiveness programs that are out there. For example, if you do 400 hours of family medicine in a qualified rural area, you can apply for the Canada Loan Forgiveness for Family Medicine, which can save you around $8,000. Another important question to address is whether or not to consolidate your debt. If so, you’ll need enough room on your line of credit to do so—keeping in mind that consolidation can make you ineligible for certain relief programs. Yes, it’s complicated! Which is why it’s important to talk to someone who is familiar with all the considerations and implications and can help you build a solid financial plan before you’re faced with these choices. Understanding where you’ve come from and where you want to go can take some of the pressure off these big decisions.”

How do most med students break their budgets?

“This is a tricky one, because it gets into the psychology of being a med student. But, in my experience, med students remain students much longer than other people—while they’re still studying for exams and possibly still living with roommates, many people in their peer group will have graduated and started earning healthy incomes, they would be starting their families, buying homes, travelling the world, etc. It’s hard for med students to see that happening and find themselves living through a much different financial reality. To that end, med students often try to justify having things that they don’t need to compensate. They want cars. They want to start investing in properties. And while those are all healthy impulses, and not impossible, they have to be taken into consideration alongside all of the financial burdens and responsibilities that are unique to them. Sure, you can get a car, but think carefully about whether you buy it on a line of credit, or get a car loan, or lease. Med students also spend a lot on leisure travel—they don’t want to miss out on that ski trip with their friends or they want to travel home for Christmas. And while those things are important – med students don’t have to live like monks – you’ll have to compromise. Perhaps you choose to go on that trip, but decide that a three-star hotel is better for your budget (and your peace of mind) than the five-star hotel."

How do you keep med students from letting their debt get out of control?

“It's a matter of reviewing their discretionary expenses – the expenses they can control – and their situation, to see where they may be able to reduce costs. While everyone shares some common challenges, everyone finds themselves in a unique position, which means there are problems and solutions that will be unique to them. Where you live, for example—in a place like Toronto or Vancouver, with higher costs of living, you won’t have the same flexibility in your budget as someone who lives in a less expensive region. Some students have to travel far and wide for CaRMS interviews or residencies, others stay in generally the same area, so travel costs, which are significant, can vary. Giving them a holistic understanding of their financial realities often helps med students find a balance between being disciplined and still enjoying their lives.”

What the simplest piece of advice you give to med students?

“Have a plan! Even before you think you need a plan. Many students leave it too late and are left trying to catch up for the rest of med school and beyond. The best way to develop a solid financial plan – and, just as importantly, educate yourself about all the options available to you – is to connect with a financial advisor. We’re here to help you make the right decisions, simple as that. And once you’ve developed a good relationship with an advisor, where they come to know you just as well as you know yourself, the decision-making process becomes easier and easier. And sometimes that ease is the most important thing; med school is stressful enough without having to worry that your finances are out of control.”

What’s the most important thing a student can do to get started on the right foot?

“Many medical students don't realize how much debt is going to impact them in the future. Or else they think there’s nothing they can do about it, and simply leave it to their future selves to worry about. But the truth is, there’s a lot you can do to prepare yourself, starting with figuring out (and monitoring) your credit score, and coming up with a simple cash flow budget so you know how much you’re spending and how much you need to save."

What should students be aware of when interest rates rise?

“With interest rates rising, your student line of credit actually costs you more since you’re paying more interest. Most students are capitalizing interest on their line of credit, which means they’re using their lines of credit to pay their monthly interest charge. Simply put, when interest rates rise, they have to “borrow” more to cover those bigger interest charges, and they actually end up with less money to spend. Rates go up and down, and if you’re worried about what that might mean for your finances, talk to your financial advisor.”

What should your next step be?

To get a big picture view of your finances, and develop a smart strategy for managing it all, it’s important to connect with a financial advisor—they’ll give you personalized answers to many of the questions above, and help you figure out how to address them. If you don’t have a financial advisor yet, you can browse our team of MD Advisors and find what they can do for you (and what cool people they are).