Another Way to Pay for PA School

2022 Update: As one of our more popular posts, many students have thanked me for such a detailed review of student loan options. As a poor college student, I always felt overwhelmed with the decisions I had to make and so, I hope this helps you understand the differences between traditional loans and ISAs.

-C

This is a sponsored blog post by Stride Funding. If you use the link to apply for funding, a commission will be paid to EmpoweredPAs, LLC. All reviews and opinions expressed in this post are based on my personal review and discussions. Please reach out to me if there are any questions!

Covering the Cost of PA School

How much does it cost to go to Physician Assistant (PA) school? Will federal student loans cover the cost? How will I pay for textbooks? What if I can’t find a job after graduation from PA school or my loan payments are too high? What if I get sick after I graduate and can’t work to make my payments? If you are considering becoming a PA, THESE are the questions you might be asking yourself. I know, because I was there.

My Experience with Graduate Loans

I clearly remember the moment I knew I was accepted into PA school.. the very first thing I was worried about was how I would pay for it! The cost of PA school seemed overwhelming. I’d still had some undergraduate loans to pay off, and since I could not work during PA school, I knew I was going to be facing more student loans, which seemed so daunting, so final. What IF I couldn’t make my payments? What if I took out all those loans and didn’t end up graduating? I’ll admit I might have been a little dramatic, but the fear was very, very real.

So, when Stride Funding reached out to me to collaborate on their Income Share Agreements (ISAs), my interest was definitely piqued. What could they offer a PA student that wasn’t already out there? What was an ISA and would I have considered it when I was a PA Student? I, being the skeptical Pediatric Emergency Medicine PA that I am, had a lot of questions (hint: I still do), but I am thankful to report that I actually really like their model, and think there is a certain group of PAs that this product could be very good for.

When I spoke with their team – Ryan, in marketing and Aidan, the data scientist – they seemed genuinely interested in focusing on helping PAs fund their education. I was pleased to hear that not only did they know about our profession, but they understood that it was an amazing investment, both for the student and as a funding company. Ryan mentioned that his girlfriend is currently a PA student, which I’m sure has certainly given him a better understanding of the profession. Though, in full transparency, I must admit some cognitive bias, as this also scored him a few brownie points in my book.

Keep This in Mind

Keep in mind a few things though: I’m not an accountant, nor a financial advisor. I’m not a loan officer either, so take what I say (and really, what anyone says) as my opinion only, this is not meant to be financial advice. Remember, read the fine print and always, ALWAYS verify the information before signing anything.

I’m not here to tell you what to do. I do think it’s important to know all of your options and weigh them carefully, ESPECIALLY when it comes to such a long term commitment. I encourage you to read more about ISAs, crunch your own numbers and take matters into your own hands. Become an “Empowered” Pre-PA student and make an educated decision on what is best for you. Hopefully, I can show that there is another option out there.

So, What is an Income Share Agreement (ISA)?

An ISA is basically an agreement with a funding company that you will be given money for school, and after graduation, you’ll be paying it back within a designated amount of time. Sounds like a loan, right? Well, here’s the difference:

• Stride’s ISAs are typically only 5 years versus traditional loans that are 10+ years.
• Your monthly payments will vary each year because they will be a percentage of your monthly income, not a fixed payment like a loan
• Because of this agreement, there technically is no “interest” accruing
• ISAs with Stride Funding are set up so that if you make LESS than their income threshold of $40,000 per year, your payments are deferred until your annual income rises above that threshold. This is key.

How Much DOES PA School Cost?

Believe it or not, the cost of tuition for PA schools is incredibly variable. To keep it simple, I’ll speak in terms of annual tuition. Most programs are at least 24 months, so a general rule of thumb is that you can multiply the tuition cost by 2 and get a baseline cost. For longer programs, you may need to multiply by 2.5 or even 3 years to get the total tuition cost. I’ve also not included cost-of-living here: textbooks, travel and living expenses.

I’ve seen the annual cost of PA school tuition rates as low as $28,000 in Kansas and as high as $102,000 in California. This means that at a minimum, the total costs of tuition for those PA programs ranges from $55,000 to over $200,000… and that is before you have purchased textbooks, paid rent or had a meal. Sadly, these numbers just keep going up as the years pass.

There are several factors to consider when looking at the cost.. are you going to be an in-state “resident” when you apply or out of state “non-resident”? The latter usually being more expensive, at least for the first year. Also, will you be at a public or private school?

According to the American Academy of PAs (AAPA) document “Financing Your Education” the costs of PA schools are increasing, and though Federal Loans cover some of the costs, there is still often a deficit. This means that there is a very good chance Pre-PA students could have trouble paying for their education, depending on their situation. I always advocate that you should take out the least amount of loans possible, and pay them off as soon as possible.

Fortunately, the future of the PA profession looks incredibly bright, with an average annual salary for all PAs now around $104,000 according to the AAPA Salary Report and an average starting salary of ~$88,000. New graduates may have a lower income in the initial years after graduation, but as time passes, a PA’s annual salary can exponentially increase well into the six-figure range.

Pre-PA Life is HARD

Ok, I say that partially in jest, but honestly, Pre-PAs have a lot to consider. They have a bachelor’s degree to complete, shadowing and patient contact hours to obtain. When applying to CASPA and looking to choose the schools they want to apply to, there are so many variables to consider, but one of them includes the COST of PA school. You have to know, will you be an in-state or out-of-state student? You will pay more for out-of-state tuition, but (usually) only for the first year, so you’ll need to borrow more that year.

Also, once accepted, new PA Students need to figure out HOW to apply for graduate student loans. There is usually someone on campus who can help, but why not take matters into your own hands and compare your options? The two main loans are federal or private.

Taking Out Federal Loans

Honestly, getting federal loans for undergraduate was relatively easy, and it was the same in PA school. I walked into the office, signed and initialed and I was done. I’d get money in my checking account at the beginning of each semester, and I really didn’t put a lot of thought into it if I’m honest. The reality was that I wasn’t getting just “one” loan. I’d actually signed up for two different loans. I learned the different types, “subsidized”and “unsubsidized”, and some of my classmates also got a PLUS loan or a Perkins Loan. So… I found there were actually FOUR Federal loan options, and I’d ended up with two of them.

Do Students Usually Take Out Private Loans?

According to the 2017 SallieMae Report “How America Pays for College“, for undergraduate degrees, “72% of student loan borrowers use only federal loans, 5% use only private loans, and 22% use both.” They also report that students often don’t know what their loan payments will be after graduation, citing “When asked to estimate their monthly payments based on current loan amount, student responses had low correlation to projected payments.”

So basically, students are borrowing money and don’t actually know how to project what their payments will be. Great.

What I Believed Versus Reality

When I was young and naive, I thought I was smart. I took out loans for undergraduate thinking.. “Ok, so I took out $10k for my loans, that’s what I’ll be paying back, with just a “little bit” interest!” Wrong.

Someone wise once said that student loans were made to be confusing, and all conspiracies aside, I’m starting to believe it. While they have the basics of a simple interest loan, it’s important to understand a few things:

• You will be paying quite a bit more money than you borrow due to a combination of “hidden fees” and interest
• Interest accrues even when you are not making payments while in school or during the 3 or 6 months “grace period” after you graduate.
• Interest accrual also depends if your federal loan is subsidized or not. (This article helps explain it much better than I can)

The bottom line is that there are many things to consider when trying to figure out what you will owe after graduating from a PA Program. A basic calculation can be made with this calculator here.

The thing you need to know, you MUST know, is that borrowing money costs money and that you are betting on your graduation and ability to work over the next several years in order to pay it off. Federal loans are rigid and unforgiving, ISAs give you some flexibility during that time.

Paying Off Loans

When looking at paying off your loans, you’ll need to consider what is more important to you. Is it your monthly payments, how much you pay off in total (i.e. the cumulative cost of PA school), or how long it takes you to pay it off?

Traditional loans mean interest. As you can see from the below diagrams, most traditional loans will have you paying a large chunk of the interest (the green line) upfront BEFORE you pay down your principal (the blue line) which means it takes years before you’ve made a dent in your remaining principal balance. Your payment will be the same during your entire repayment period, regardless of how much you make or if you are able to work.

Example Borrowing $25,000

Let’s look at some numbers.

Most PA Students have heard of Grad Plus loans. A $25k loan has a real cost of $29,880 when you include the Loan Fee and interest that accrues while you are in PA school.  Then, when you graduate, you have a fixed payment of $348.16 for the next 10 years even if you are out of work, on leave, etc.  While they may even have some flexibility for life events, the interest keeps accruing so the principal amount can even go higher! While the example below does not account for the continued interest accrual, it is a rough example of what your first 10 years of payments after PA school might look like (although it’s likely to be higher if you defer based on unemployment or further education).

Pros: 

• Fixed monthly payments might be lower (though not always)

Cons: 

• Lifetime total amount repaid is higher
• Interest continues to accrue
• Payments may be higher than you can afford if your salary drops
• Rigid monthly payments also mean if you stop working, or reduce your income (part time, sick leave, maternity leave) payments do not change and you are still responsible for making them

Now let’s look at an ISA

To keep it as simple as possible, here’s an example with a starting salary around $100k, with no raises. Again, the 2018 national salary average for a PA is around $104,000 but new graduates don’t usually start there with an average starting salary of ~$88,000 so this is an upside case (stress-testing the ISA) and demonstrates lower total payments than a traditional Grad PLUS loan. 

Pros: 

• Flexible monthly payments mean if your salary drops, so does your payment
• Shorter term for repayment
• Career support such as access to recruiters, resume-services, and mentorship to help improve the success of new PA graduates 

Cons: 

• Monthly payment may be higher than a Grad Plus loan
• As your salary increases, so do your monthly payments (but given Stride has funding from impact-focused groups, some excess returns are reinvested in funding and supporting more PA students)

Let’s Look at Another ISA Example

You receive $25k in Stride ISA funding for PA school and agree to pay back 7.8% of your income for 5 years. After graduation, your salary is $100k per year, but you are such an awesome PA you get a $3k raise a year each year after graduation. Here’s my understanding of how it works:

Still, the total payments end up being similar to Grad PLUS but with increased flexibility and shorter duration. 

What if I Lose My Job or Can’t Work?

Let’s say you had to stop working… you had emergency surgery or had to go part-time to care for a loved one and your annual salary drops below $40k, Stride Funding will put your payments on deferral until your annual salary is above $40k, at which time, payments will resume completing your 5 year agreement. Think of it as a “gap year” for your repayment. The most important part to remember is that no interest is accruing at the time you can’t make payments, which really helps you save on total costs!

Why is Stride Funding Different?

So, now that you understand ISAs, you might consider them to help you pay for PA school, but what makes Stride Funding different? Why did I choose to collaborate with them?

Stride Funding is a mission-driven company that helps students hit their stride with flexible education funding and career support. I learned recently that some of Stride’s funding is from impact organizations such as education-focused non-profits and impact-driven individuals, which allows them to offer lower ISA rates and direct some of their excess returns into funding more students. So, the product is often more affordable than traditional loan options for you and if you end up earning more than expected, you’re helping fund other students, which is really meaningful! 

They also offer cohort-based pricing, so they tailor pricing based on your school, program, geography, etc, so it’s much more personalized than traditional loans that don’t see you as a person, just another cog in the system….

Also, you might have noticed above that Stride Funding also offers career resources to help new graduates transition into their new career. They offer blogs, access to recruiters, resume services, and a tight-knit Stride community with a lot of PAs. This all helps you make the most of your internships / time in school, find the best job, negotiate your salary, and grow in your career. This is an added benefit that is a nice touch, and not usually seen with federal funding. Remember, they want to see you succeed!

When & Why To Choose An ISA (According to Stride)

I asked Stride Funding to tell me why they believe ISAs are great for PA Students, and this is what they had to say:

• Once you’ve exhausted your subsidized student loans, Stride offers a more flexible, affordable, supportive option to Grad Plus / private loans
• Affordable: Given Stride is a mission-driven business, they aim to be similar if not lower cost than traditional private loans (cheaper the better :))
• Faster Payments: Stride’s ISAs are only ~5 years vs traditional loans which are 10+ years… why be stuck paying back loans when you’re trying to build a life…
• Flexible: An ISA has the added benefit of built-in insurance, if you’re ever unable to work, you don’t owe anything during those periods
• Aligned: Stride actually seems like a partner – they only do well if you do well – they’re invested in your success. It’s awesome they focus so much on healthcare professionals like us, it seems like a cool community of nurses, PAs, and other STEM grad students. 
• Supportive: They offer career resources like access to recruiters, resume-services, and mentorship to help PAs find the best jobs, negotiate the best salaries, and feel like there is someone backing PAs who cares

The major benefit of the ISA, from what I can see, is that no matter what your salary, you will still be able to make your ISA payments. If an emergency arises and your salary drops, so do your payments. It’s a nice safety net if I’m honest. The biggest downside is that you may pay more money as your salary increases, though it would be directly proportional. Their terms are also usually around 5 years, which is ideal if you ask me. 20 and 30-year student loan repayment plans are just horrific.

You could, in theory, make larger payments to your federal loan plan, and paying down the principal means you’d pay less interest and pay off the loan sooner, effectively creating the same end result of complete repayment in 5 or 10 years. I haven’t done the math on that one, but honestly, for me, it takes an incredible amount of discipline to remember and actually make those extra payments, so it’s kind of a moot point.

Questions?

Wow, that was a LOT to digest. And.. I might have made it more confusing because now you have more options when considering how to pay for the cost of PA school!

I’m no expert, but these people are! Check out their frequently asked questions about ISAs or send them an email at hello@stridefunding.com.

I hope this article has opened your eyes to some other funding alternatives to cover the cost of PA School. If you enjoyed the article, you might like the 7 Things You Should do Before You Start PA School or any of our Pre-PA articles! If you want more articles like this, consider signing up for our newsletter to get up to date articles in your inbox.

-C