It is no secret that medical school is getting very expensive. Over the past 20 years, the cost of medical school has greatly outpaced the rate of inflation, and medical school debt is rapidly rising.
The average medical student now graduates with over $192,000 in student loans, but with the cost of attendance for the most expensive private medical schools approaching $100,000, there are some physicians who are finishing residency with $300,000 or even $400,000 in student loans.
The rate of increase in medical school tuition, with its increasing student loan burden as a consequence, has not significantly deterred college students from applying to medical school in record numbers. In 2017, 51,680 students applied for 21,338 spots.
While physicians have to take out massive amounts of student loan debt, because they enjoy the highest average salaries of any profession, student loans can typically be quickly paid off with only a few years of diligent saving.
However, are we reaching a point where it may no longer be financially prudent to attend medical school? For example, should a prospective primary care physician or pediatrician who might face up to half a million dollars in student loans consider against attending medical school?
Student loan forgiveness
With government student loan forgiveness programs, there’s currently a natural ceiling on the effective maximum student loan burden physicians can face. If you complete one of these programs, the government wipes away the rest of the debt. So even if you had $2,000,000 in student loan debt, if you can complete a loan forgiveness program, the amount of student loans you actually had to pay back with interest is much less than what you took out.
Public Service Loan Forgiveness
For now, the best student loan forgiveness program for physicians is the public service loan forgiveness (PSLF) option.
The government will forgive your student loan balance after 10 years of qualifying loan payments. Since qualifying loan payments can begin at the start of residency, most physicians only have to work at a non-profit hospital for 5–7 years before being eligible for loan forgiveness.
In many cases, physicians do not have to take a significant pay cut to work at a non-profit hospital and remain eligible for the program.
However, as more and more physicians complete training and have hundreds of thousands of dollars of student loans forgiven, there may be a public backlash against the PSLF program for doctors. The PSLF “loophole” could be closed in the future. One possible revision to the program would be to cap the amount of student loan forgiveness available to PSLF applicants.
Other Student Loan Forgiveness Programs
Other forms of loan forgiveness program, such as income-based repayment (IBR), pay-as-you-earn (PAYE), or revised pay-as-you-earn (REPAYE), do not appear to be imminently at-risk for being modified by Congress. But these programs require you to make student loan payments for 20 or 25 years. This unfortunately makes student loan repayments akin to a second mortgage for many physicians, who wouldn’t receive loan forgiveness until they are in their 50s.
Other Professions Are Already At This Tipping Point
While medicine still certainly is a financially smart decision because of its future income potential, the typical or extreme debt/income ratios is increasing in other professions beyond sustainable levels.
Dental School
Dental school is typically even more expensive than medical school because of the increased laboratory and equipment cost associated with dentistry. The average dental student has a whopping $287,331 in student loan debt at graduation, and it is not uncommon to see some dentists with over $500,000 in student loans, and in at least one extreme case, over $1,000,000 in student loans.
Unfortunately for dentists, the income potential for most dentists are even lower than physicians, and there is no shortage of general dentists in high cost-of-living, large metropolitan areas. Therefore, some dentists could be faced with debt/income ratios of 4:1 or even 5:1.
Patterns of dental school admissions could be a foreshadowing of what may happen to medical school admissions because of the increasing cost to attend medical school. These days, most dental students greatly prefer their in-state programs over even elite, Ivy League programs.
While dental students do not have to do a residency to practice as a general dentist in most states, given the high debt/income ratio for practicing dentists in saturated job markets, the fact is most general dentists in large metro areas will have to do a financial fellowship and live like a student for 5 to 7 years after graduation just to pay off their student loans.
Law School
The typical law student has around $100,000 in student loan debt. Law school is only three years and is generally less expensive than medical or dental school, but the availability of high-paying law jobs is limited. Unlike in medicine, there is no guarantee of at least a six-figure salary in law. There are many practicing attorneys who make resident-level salaries for their entire careers.
This was assuming you could even get a law job after finishing law school. There was such a massive surplus of law students compared to law jobs, particularly following the Great Recession, that many law schools had more than half of their graduates not directly using their law degree after graduation. This eventually led to a sharp decrease in law school applications and some law schools had to close because not enough of their graduates were getting law jobs.
With the opening of many new medical schools, but without an accompanying increase in residency spots, it soon may not be a guarantee that a medical student graduating from a U.S. medical school will have a residency spot available to them after graduation. This may make it difficult to assess at the time of medical school matriculation whether you will even have a residency spot after taking on all the student loans.
Conclusion
Do I think medical school is still worth the significant monetary commitment for prospective medical students applying today?
While becoming a physician isn’t the financial slam dunk it used to be, medicine is still an extraordinarily rewarding field financially. It has strong job security, and there are many other reasons why being a physician is awesome. There may be other professions where you might come out financially ahead, but you shouldn’t be going into medicine exclusively for the money anyway. This was as true 20 years ago as it is today.
Because of the government backstop of student loan forgiveness, some physicians often end up effectively paying back only a portion of their student loan burdens. More and more physicians will have to rely on these forgiveness options in the future.
Regardless, physicians will not be able to afford to make the large money mistakes that they could have in the past. More than ever, medical students, resident physicians, and early career physicians need to understand the principles of saving early and adequately, and investing prudently. Medical schools and residency program cannot continue to turn a blind eye to physician personal finance.
What do you think? If you were a medical school applicant today, at what debt level would you decide not to become a physician? $200,000? $500,000? $1,000,000?
[socialpoll id=”2512748″]
A few things,
1) there are state programs, too. For example, in NC you can get basically a tax free scholarship for 14k per year that your promise to work in NC after finishing med school. Up to 4 years = 56k off your student loan bill. Many states offer something similar, particularly for primary care.
2) PSLF forgiveness is a tax free event whole forgiveness through the IDR programs is taxed. Getting hit with a $100,000 tax bill after 20 years feels a lot less like forgiveness to me, but it is an option I suppose.
3) completely depends on the specialty people choose. When your Debt to income ratio goes above 2 (600k debt, 300k income) it becomes really painful. PSLF is the best option there.
I think at this point it is still worth it, but freshly minted attendings must get used to living like a resident for a few years after finishing training.
TPP
Agreed on all points. Didn’t know about NC’s program.
-WSP
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Thoughtful post. I had no idea this was going on until I started reading the WCI blog a few years ago. For comparisons sake I finished med school in 1983 with $29k in total student loan debt. I no longer remember the interest rate. I never worried about it. My feeling is that academic medicine needs to re-examine their costs. This of course is unlikely to happen until some sort of crisis triggers a decline in applications IMHO.
I’m not sure that the medical student education of today is superior to your education 30+ years ago to justify the astronomical increase in costs. Perhaps today’s medical students have more fancy simulation equipment and standardized patients, but medical school is all about getting to the clinical wards and learning under attendings and residents. Perhaps medical schools have to pay (are willing to pay?) more to the hospitals to host medical students for rotations. I’m not sure…
We are living the debt gauntlet now. I have $250k and 3.5 more years for PSLF. Fingers and toes are crossed that the program doesn’t get changed. Wife’s $250k is down to $160k and we could pay it all off tomorrow but would have no money to buy a house. I’m in favor of paying off the loan and resaving but havnt convinced her yet.
Having all these loans is stressful, a constant burden and takes something away from the work we do. If they were hitting 3 or 4 x our income it would be even worse. A scam. Indentured to pay off a degree. Unless something change then I agree with your concern that these high loan burdens, decreasing pay and increasing nonclinical work is going to push people away from medicine. If I really understood all this then I might have perused a different carrier.
I would hope no one is deciding to be a physician because of the money. If they are, they will be disappointed and unhappy. This is a choice you must make because it’s what you really want to do. You will make enough money. You likely will not have enough free time though.
Kpeds, have your wife read my book The Doctors Guide to Eliminating Debt. She may think differently afterwards. One doctor family had the same discussion and after reading my book they had her student loans paid off in a few hours. She wrote about it here: https://bckrygowski.com/2018/04/20/student-loans-a-14-year-argument-resolved-after-reading-eliminating-debt/
Dr. Cory S. Fawcett
Prescription for Financial Success
It is shocking how quickly tuition is rising in both undergraduate and graduate schools.
If something is not done soon, I just can’t imagine that this can continue in future.
Having a $500k+ debt coming right out of medical school will be prohibitive for many, especially as going into residency for an additional 3+ years can make it grow even higher (I would have really suffered since I did deferment and forbearance during my residency (foolishly so)).
It can absolutely continue — see dental school and law school. There are 30,000 applicants each year who don’t get into medical school who would be glad to take on debt to become a doctor, as long as they can be assured a very high probability of a residency position after medical school.
I wish the medical schools would seriously consider making mandatory some financial courses. I think we would see reduced debt if the students had some concept of finances. The majority of students I taught had no idea. They just knew they were taking on debt and had been sold a bill of goods reassuring them that they would be able to pay their debt off easily once they were in practice. I think a national organization or board of people like WSI and WCI and other financially literate people could set up a reasonable curriculum that the medical schools would be made to follow and test students. I bet there would be multiple volunteers to help from the many readers of these blogs.
I’ve said in the past that if you can get just 1-2 questions on USMLE Step 1, personal finance knowledge among doctors would instantly improve.
-WSP
I think one of the greatest concerns is how uneducated students are financially. The people that are applying to these programs only see the benefits.
They don’t comprehend that the amount debt has changed and the income of these professionals has changed.
Just finishing up my first year of dental school and I have withdrawn$104k in student loans…
Is it worth it? I guess I’ll find out in a couple of years. But if been trying to convince those applying to medical/dental/vet etc. To maybe consider other options.
But the future isn’t looking too bright
-FSD
Have you found that more of your dental student colleagues feel compelled to specialize because of their student loan burden?
-WSP
Money isn’t everything, but going into this much debt, and delaying earning and letting intrest accumulate through training, money really does matter.
The biggest issue is that reimbursements are not keeping up with inflation. In fact from what I can tell physicians haven’t had a raise since the early 80s. So we are actually loosing money. With the time and financial investment I don’t think it will be worth it in 10 years.
While I don’t have hard data to support this, I do believe that physician incomes have risen since the 1980s, albeit not necessarily at the pace of inflation.
I feel like we’re reaching a tipping point. Schools will keep raising tuition as long as there are student loans to cover them. Either the students will break (and we’ll see an even larger physician shortage) or we’ll see a tuition cap and schools will become even more selective on their students.
Ps. I’ll be on of the $500K debtors
That would be concerning if admissions decisions became not need-blind.
I think a large issue with this is also the student loan interest rate. I am a third year student who is wanting to go into family medicine and over the last 3 years my interest rates have gone from 6.3% to 7.6% for Grad PLUS and 5.3 to 6.6% on my unsubsidized loans. I calculated that I have earned $5k in interest alone over the last 2 years alone so it will only snowball from there. Our tuition has also risen from $51k to $55k in the last 2 years since I have started. It is insane how these are growing so much faster than the rate of inflation and yet there have been no improvements or changes to our school to cause such a change. Thankfully my husband and I budget all our expenses off his $28k salary so we do not have to take out living expenses. I know most of my classmates who spend more than that on themselves alone so I would really recommend some financial awareness and money management classes to all students who are considering going to medical school to minimize loans as much as possible. I cannot even imagine where tuition and student loan interest rates will be in 10 years.
Thank you for the post on a relevant topic. As a new surgeon after 6 years of training with a wife and 3 children, without a doubt, my student debt is by far the greatest source of stress hanging over me for the last 10 years. I regret going into medicine purely because of this debt. I see my peers using their most productive years to secure a strong future for their families. Medicine steals these years and holds you captive until the bitter end. I see most young surgeons battling this same dilemma. However, I realize that my place in the world remains one of extreme blessing relative to the vast majority. And, to be a surgeon is one of the highest privileges in society. The intangible value in the work must be the driving force for one to pursue medicine.
Well said,
Considering the value I have for the work. I’m considering applying to medical school, but the debt terrifies me. If my love for the work was bigger than my fear of debt, it would be a sound choice to go ahead and apply to medical school. I’m sure I don’t value medicine nearly as much as others, so I don’t feel it’s my place to consume the position of a surgeon. Someone more willing and driven for the work ought to have the position.
Considering my hunger for the respect that comes with being a doctor. That being said, I’m in my mid-twenties and I have no debt and undergraduate education. I have the opportunity to pursue music and have already paid off my bill for the artist development program I’m starting soon. I work in retail currently. The work in rewarding enough for me, it’s a reason to talk to people, help people, use my mind, and increase my endurance. But, the pay is on the very low end of societal income averages. It’s embarrassing to work in retail, you don’t get nearly as much respect as (the worst) surgeons. So then it comes to the question, I fear debt more than I value the work, but do I hunger for respect more than I fear debt?
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