Debt Management

Planning

Financial aid is renewable on a yearly basis, provided you are a US citizen or permanent resident, remain in good standing and continue to demonstrate financial need. Application for renewal must be made each year and the amount may vary depending upon your current financial situation. Awards may also be reviewed during the academic year if your financial circumstances change substantially. If a change in your circumstances warrants it, you might qualify for assistance in future years even if you do not qualify this year.

Financing your medical education over the next four years can be very complex. Listed below are items that should be considered thoughtfully:

  1. Discuss your situation with parents and other family members
  2. Make a realistic budget that minimizes the amount of money that needs to be borrowed
  3. Be sure to think beyond the first year

Credit 

Credit is an increasingly important part of medical student financial life. There are instances of students seeking loans and finding that their adverse credit ratings preclude their eligibility. This is particularly true of students who have been working for some years, as in college it is possible to have developed a bad credit rating.

Limiting the amount of credit used is the most important strategy. One credit card is enough and bills should be paid on time. Charging more than can be paid in one month is a bad habit and can lead to problems as the interest accrues. Additional financial aid will not be awarded to pay off debts. Students are responsible for any debts incurred prior to matriculation at the School of Medicine.

If a student cannot obtain a loan because of a negative credit rating, School of Medicine funds will not be awarded to replace that loan. Therefore it is recommended that you obtain a copy of your credit report before matriculation to ensure that all information being reported is correct. Check your credit score in order to obtain free credit reports, resolve any errors and review one of the three available reports quarterly. If you've been denied credit within the past 30 to 60 days, you may obtain a credit report free of charge. 

Tax Benefits

Lifetime Learning Tax Credit

The Lifetime Learning Credit is a tax credit available to individuals who file a tax return and owe taxes. This means the amount of the credit is subtracted directly from a family's actual tax liability, rather than reducing taxable income like a tax deduction does. The lifetime learning credit is not refundable. A family may claim a tax credit of up to $1,000 per tax year for the taxpayer, taxpayer's spouse, or any eligible dependents for an unlimited number of years.

To qualify for the credit, the taxpayer must report the amount of tuition and fees paid, as well as the amount of certain scholarships, grants, and untaxed income used to pay the tuition and fees. Current law specifies that schools must supply this information on form 1098-T to individual taxpayers and to the IRS. The taxpayer may claim the tax credit and figure the amount to claim by completing parts II and III of IRS Form 8863.

The taxpayer: an eligible taxpayer must file a tax return and owe taxes to claim the credit. The taxpayer must also claim the eligible student as a dependent unless the credit is for the taxpayer or the taxpayer's spouse. The taxpayer is eligible for the maximum benefit with an adjusted gross income (AGI) of up to $40,000 for a single taxpayer (or $80,000 for married taxpayers). The credit amount is phased out between $40,000 and $50,000 for single taxpayers (or $80,000 and $100,000 for married taxpayers).

The student: an eligible student may be enrolled at least half time in an eligible program leading to an undergraduate or graduate degree at an eligible school during the calendar year or may be enrolled at any enrollment level in any course of instruction at an eligible school to acquire/improve the student's job skills during the calendar year. The student may claim the credit if the student is not claimed as a dependent by another taxpayer.

Student Loan Interest Deduction

Taxpayers with qualified student loans may deduct the interest they paid for themselves, their spouse or their dependants. You do not have to be in repayment to be eligible for this deduction. Your voluntary payments of interest and required payments are both eligible. This deduction is an adjustment to taxable income, so a taxpayer may claim the deduction even if they do not itemize deductions on Schedule A. The maximum deduction is $2,500 per year.

For more information visit the IRS website.