Financial Considerations in Your Fourth Year

Sheila M. Bigelow, DO


September 26, 2012


I can't wait to get my first paycheck as a resident. How will my financial situation change when I start residency?

Response from Sheila M. Bigelow, DO
Resident Physician, Pediatrics, UH Rainbow Babies and Children's Hospital, Cleveland, Ohio

One of the best parts of starting residency is that you are finally getting paid for the hours you spend in the hospital. No more filling out loan paperwork or signing promissory notes; you now have a job with a real paycheck. The first deposit into your checking account is pretty exciting, since it is probably the first source of income you have had in the past 4 years -- or at least income that you don't need to pay interest on.

That new income brings new responsibilities as well, including taxes, paying off student loans, and long-term financial planning for such things as retirement.

Here are some financial factors you should start thinking about in your fourth year of medical school.

Residency Remuneration

When applying for residency positions, it can be overwhelming to compare program attributes, such as reputation, size of the program, and research opportunities. It can therefore be easy to overlook a program's salary.

In the United States, residents are paid through the federal government, either via the Centers for Medicaid & Medicare Services (CMS) or Children's Hospital Graduate Medical Education Program (CHGME). Thus, salaries are usually fairly similar among programs, with some regional differences.

However, when comparing residency salaries, it is important to keep in mind the cost of living of the region. For example, in one city you may struggle to make ends meet while renting a studio apartment, whereas in another city, you may be able to purchase a home. When visiting and interviewing at programs, ask the residents how affordable they find the area to be.

Asking about benefits, such as health insurance and retirement options, is another way to get a feel for what your financial life would be as a resident in the program. Some programs also provide other nice perks that can really add up, such as call money, book money, free parking, or money for conferences.

Repaying Your Loans

At the end of your fourth year of medical school, if you have taken out federal loans, you will have to attend an exit interview at your medical school. These come in various forms at different schools, but however it occurs, it can be very overwhelming. At this meeting, they will tell you the total amount of federal debt you have, which makes a lot of people feel unwell. During your exit interview, you will also go over the many type of repayment plans, consolidations, forbearances, and deferments you can choose from.

One thing that I wish I would have known in my fourth year of medical school is to make sure to file federal taxes. These will become very important if you decide to apply for various repayment plans, specifically income-based repayment.

Consider Professional Help

If you're not really interested in finances, find them difficult to understand, or just would rather do other things than fill out more loan paperwork, you might want to consider signing up for a loan advisor service. There are several of these, and your financial aid department or residency medical education department may be able to recommend a specific one for you. Many loan advisors will also provide you other financial advice and do your annual state and federal taxes for an annual flat fee.

Overall, finances are definitely much better as a resident than as a medical student but they are still not ideal. Figuring out loan nuances, benefit packages, and other financial details can be daunting. It's important to recognize your own weaknesses and either seek out the necessary information to make a well-informed decision or find professionals who can help you with the nitty-gritty details. At least now you will be signing the back of paychecks instead of loan promissory notes!