Debt: The Other Four Letter ?D? Word - Student Doctor Network

By Andrew and Christy Crisologo

Many medical students have pushed student loans into the closet of their minds while they are in school. This monster in the closet, unfortunately, is not imaginary like the one you may have feared as a child. Doctors often graduate with debt not only from medical school, but with loans from undergraduate education and other graduate schooling as well. Even though medical students can borrow upwards of $40,000 per year, it can be easy to let loans become nothing more than an afterthought. Debt upon graduation should not scare or dissuade prospective students from pursuing medical school, but since the ability to pay for school out of pocket is becoming increasingly rare, students present and future should be informed on the financial responsibility that comes with medical education.

So how much debt is included in this responsibility? According to the American Medical Association (AMA), graduates of public allopathic medical schools accrue an average of $162,000 in loans, while graduates of private medical schools accrue a staggering $205,674. The American Association of Colleges and Osteopathic Medicine (AACOM) reports that the average graduate of public and private osteopathic medical schools is even higher ($184,545 and $210,679 respectively). These numbers do not include debt incurred from education prior to enrollment in medical school.

There are currently two main types of federal loans available to medical students: Unsubsidized Stafford Loans and GradPLUS Loans. Stafford Loans are awarded based on financial need shown when a student files the Free Application for Federal Student Aid (FAFSA). Medical students can borrow up to $40,500 in Stafford Loans per year at an annual interest rate of 6.8%. GradPLUS loans are similar to private bank loans, but the U.S. Department of Education is the lender. Students with no adverse credit history may borrow up to the cost of school attendance (which is determined by the school and includes cost of living expenses in addition to tuition), minus any other financial aid received, at an interest rate of 7.9%.

These annual percentage rates, which seem small, can quickly add thousands of dollars in interest to a loan balance. Let?s say you attend a public allopathic medical school, and you graduate with the average $162,000 in debt. All your loans build interest at the Stafford Loan?s rate of 6.8%. According to the loan calculator at finaid.org, paying off your loans in ten years will require a monthly payment of $1,864. You will end up paying a total of $223,716.23 over that ten year period. The interest, $61,716, is nearly forty percent of the amount originally borrowed. If you contribute finaid.org?s suggested ten percent of your gross income toward debt reduction, you would need to make an annual salary of nearly $224,000 to pay off your loans in ten years. Paying it off on a lower salary is certainly possible, but will require careful budgeting.

US medical students have not always accrued this amount of debt. And in fact, the average amount of debt is increasing. The Association of American Medical Colleges (AAMC) reviewed the debt of medical school graduates from 1978 to 2011 and found a disturbing trend. Adjusting for inflation (in 2011 dollars), the mean education debt has tripled since 1978. Additionally, the four-year cost of attendance increased at twice the rate of inflation from 1998 to 2011.

However, a close look at debt patterns shows a break in the upward trend. Adjusted for inflation, the average debt load has not increased since 2009; in fact, it dropped an average of $2,700 per graduate between 2009 and 2011. What caused this slowdown in the debt rocket? While the exact cause has not yet been fully identified, the AAMC and the American Academy of Family Physicians (AAFP) point to a change in interest rates rather than any significant change in the amount of money borrowed. The Stafford Loan interest rate switched from a variable interest rate to a fixed rate of 6.8% in 2006. Debt could be dropping three years later because graduating medical students at that point had a majority of their loans at this new fixed rate of interest. Unfortunately, this downward trend is not expected to continue, since Subsidized Stafford Loans, which do not begin accruing interest until the borrower graduates or stops attending school, ceased to exist for graduate students as of July 1, 2012. When a student with no subsidized loans graduates, he or she will have accrued over $6,000 more in interest than those who received subsidized loans each year they borrowed.

The increasing debt rate could also affect a newly-minted physician?s specialty of choice, potentially leading to a decrease in primary care doctors. It would be much easier to pay off debt as a plastic surgeon making $350,000 per year than a primary care physician making $180,000 per year. An article published by the Society of Teachers of Family Medicine did not find a clear correlation overall between a medical student?s debt burden and their career plans. However, the article noted that students from middle income families were less likely to plan for a career in primary care as their debt level increased.

Today?s aspiring medical students face many financial uncertainties. The unknown affects of the Patient Protection and Affordable Care Act (PPACA, more commonly known as Obamacare) and the absence of Subsidized Stafford Loans are two variables that previous students did not encounter. Still, most students and graduates find education debt to be an acceptable investment in their future. The reality of debt does not need to be a deterrent to those seeking a medical career, but students should be aware that the long and arduous road of medicine is not just made of long sleepless nights of study, but many years of financial discipline as well.

References
Kantrowitz, Mark. ?Finaid Loan Calculator.? www.finaid.org. FinAid Page, LLC, n.d. Web. 7 Feb. 2013.

Krupa, Carolyne. ?Medical Students Still Burdened by High Debt Loads.? www.ama-assn.org. American Medical Association, 27 Aug. 2012. Web. 7 Feb. 2013.

Phillips, Julie P., MD, MPH, David P. Weismantel, MD, MS, Katherine J. Gold, MD, MS, and Thomas L. Schwenk, MD. ?Medical Student Debt and Primary Care Specialty Intentions.? Family Medicine 42.9 (2010): 616-22. www.stfm.org. Society of Teachers of Family Medicine, Oct. 2010. Web. 7 Feb. 2013.

Youngclaus, James, and Julie Fresne. ?Trends in Cost and Debt at U.S. Medical Schools Using a New Measure of Medical School Cost of Attendance.? Association of American Medical Colleges 12.2 (2012): n. pag. July 2012. Web. 7 Feb. 2013.

Source: http://studentdoctor.net/2013/03/debt-the-other-four-letter-d-word/

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