Here’s a story that illustrates why financial planning and maintaining financial health before and during medical school is important.
I have a friend who is amazingly brilliant. This guy also has a photographic memory and when we would study, it seemed that all he had to do was turn the pages of the book, notes, or PowerPoints to get the information stuck in his head. After our undergraduate studies, my boy was accepted to St. George’s University School of Medicine in Grenada, West Indies. He excelled in his first year and he finished his MD1 semester with a 4.0 and MD2 with something like a 3.7ish. His second year was just as amazing, and he scored a 245 on his Step 1. He was considering a career as a cardiologist and it didn’t seem that there was anything that could derail him. Except for that all-important credit score.
While my friend was in Grenada, he lived beyond his means, so he maxed his Sub/Unsub loans. He qualified for the Grad Plus loan in his second year, but he didn’t give any thought to the need to have a new credit check run when he got to year three. He purchased a lot of luxury items on his credit cards while he was in Grenada, didn’t pay a few bills and his credit score took a significant hit.
Just before he was to start his third-year rotations, he received word from the US DoE that he did not meet the credit score criteria for the Grad Plus loan. The remedy was for him to provide letters from his creditors showing that he either had paid his past due balances or he had made other arrangements to pay. He’d amassed some 25 or 30K in debt from the time before he started medical school but since he had paid minimal payments on that debt, nothing went into collections. When he got to medical school, the combination of his outstanding debt and his living beyond his means meant that he could not pay his bills so most of his creditors reported him to collection agencies, so his FICO score took a major hit. SGU gave him two weeks to figure out how to come up with the money for third year; he couldn’t do that, so he ultimately dropped out of school. My friend is home now trying to pick up the pieces to his medical career. I don’t know if he’ll be able to go back to SGU since almost six years have lapsed but his credit is better now, but he never had to be in this situation.
While this is an extreme situation, it helped to provide the impetus for me to repair my credit and get into good financial health BEFORE starting medical school.
The first thing that I had to do was take a look at my credit reports. You don’t know what you don’t know. In my youth, I had not been the most responsible with my credit, so I was honestly afraid to see what was present on my FICO reports. Additionally, during my senior year of undergrad, I had applied to a master’s program at the University of Nevada-Las Vegas. One of the admission staff stole a hard drive that had the names, addresses, social security numbers, and photo IDs of several thousand applicants, including mine, and she sold them on the Dark Web. I didn’t know this until 2012 or ’13 when I got a call from the Las Vegas Metro PD but luckily, they gave me a police report regarding the ID theft that I’d suffered, and this came in handy as I worked to repair my credit. Finally, in 2012, I had a surgery to repair a ruptured Achilles tendon; the surgeon was in network, but the outpatient surgery center and the anesthesiologist were out of network (I didn’t know this at the time). Plus, I had a high deductible health plan; this meant that a lot of the procedures cost weren’t going to be covered until I met the deductible. Altogether, these facts meant that I was likely to have a LOT of debt.
Taking a deep breath one night in 2016, I pulled all three of my FICO reports and discovered that I had about $78K in debt. My heart sank. How was I going to pay for all of this? I spent that night reading EVERYTHING that I could find about old debt, how to negotiate lower payments, how to dispute items on your credit report, and the statute of limitations on old debt for Arizona. I discovered that I had rights and using this empowering knowledge, I set out to dispute everything on my reports that I was not responsible for. This amounted to about 17K in debt and using the police report that I had from LVMPD and another that I obtained from the Chandler Policed Department, I was able to have that removed in fairly short order.
Next, I picked up three jobs. I taught at two community colleges, full-time, and at Arizona State University part time. I trimmed my living expenses to the bare bone’s minimum and every extra dollar that I made, I put towards paying those debts that were mine and had not aged out (those debts that had aged out, I disputed and had removed from my credit report). By 2018, my debt was down to $10,500 and by mid-2018, I had that paid off.
The next step was to have all of the paid debt reports removed from my credit report. Even though the debt was paid, these reports still showed as late pays/charge offs so they were still drag on my credit score. I went through another round of disputes and I was able to remove all but two items. I’ve tried to work with the two collection agencies to have these items removed but I have had no luck; I recently hired Lexington Law to assist and it’s been the best $89/month that I have spent. They have helped to tend to a couple of other issues on my FICO reports that I had overlooked, and they are currently working to have those last two items removed from my credit report.
The other two things that I did was 1) I have not had a late payment or missed payment since 2016; your payment history is the single biggest factor in your FICO score; 2) I opened two credit cards, one with a $3500 limit and the other with a $2500 limit and I have a loan of $10,000. I never exceed 10% - 20% of my credit limit and I have paid on my loan consistently for the last 24 months. It will be paid off in July; 3) I have lived within my means religiously. All of these things combined have helped my FICO scores across all three credit bureaus to reach the 680-690 range. Once those last two negative items drop off my report, I should see a boost to 700+.
A lot of my friends tell me that I am overly anal about my financial health, saving, and monitoring my credit but it is so VITALLY important. Let’s say, just for example, you want to apply for a military Health Professions Scholarship. Guess what? They run a credit check to see if 1) You are a potential security risk and 2) To see if you have a history of honoring your commitments. If you apply for a National Health Service Corps Scholarship or Loan Repayment, the government runs a credit check to see if you pay your bills on time (i.e., honor your commitments). I even know of one medical school, Kansas City University of Medicine and Biosciences, that runs a credit check as part of the admissions process, or at least they did. Back in 2011 or ’12, I thought about applying to their SMP program and I saw on their financial aid website that as part of the admissions process, they ran credit checks on every accepted student. I don’t know if this is still the case, but as you can see, your financial health is VITALLY important to being able to secure the financing that you will need. For medical school. The Grad Plus loan, private loans, and many of the federal and state-level scholarships and loan repayment programs require good credit. When you start the application process, you may need to apply for a credit card to pay for your MCAT, the primary and secondary applications, and the cost of interviewing. To give you an idea of what my application costs were this cycle, here is what I have spent so far:
MCAT $320
MCAT reschedule $95
AACOMAS application, 32 programs $196 for the first program, $46 for each subsequent program = $1,622
AMCAS application, 4 programs $170 for the first program, $41 for each subsequent program = $293
Ross University School of Medicine application $100
AACOMAS transcript entry fee $145
Transcripts ~ $95
12 secondary applications. Ranged from $50 - $100. ~ $750
1st seat deposit for Rocky Vista University College of Osteopathic Medicine $250 (I will be withdrawing my application here)
Seat deposit for A.T. Still University – School of Osteopathic Medicine, Arizona $1,000 (I will be attending SOMA in the fall 2021 so I’ll pay the seat deposit on Monday, Dec. 14th. I will have to pay another $1,000 sometime in January)
Suit - $500
Total: ~ $4,170 (And this does not include the seat deposit that I will be paying on the 14th or the final $1,000 that I will have to pay to SOMA)
Keep in mind that all of my interviews were virtual. If I had to attend traditional face-to-face interviews, the three interviews that I had would have added another $1200-$2000 between air fare, hotel stays, food, and rental cars).
I was fortunate that I didn’t have to dip I into my credit card until it was time to pay my first seat deposit. Part of the reason why is that I budgeted $2,000 up front to start this process and I had a job that paid me enough to pay for much of this out-of-pocket. Many applicants don’t have these luxuries however so financial planning becomes key. Don’t let your medical school dreams go unrealized because of poor financial planning!
In my next post, I will discuss some of the resources that you might consider to help minimize the amount of student loans that you have to take for medical school.
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