Funding - Medical School Debt And Repayment

In order to become a doctor, a student must complete 4 years of college and 4 years of medical school (for starters). The graphic above charts the rise in undergraduate and medical school tuition rates. The rise in tuition rates contributes to the rise in debt for those seeking to finance their education with loans. According to the Association of American Medical Colleges, about 81% of medical students incur some educational debt. The average debt for a medical school student in 2000 was $95,000. This was a 58% increase from 1993 when the average medical school student owed $60,000.²²

Of course, tuition isn't the only expense for future doctors. The cost of room and board has also gone up (32.5%²³ from 1992-1993 to 1999-2000). In the 1992-1993 school year, the average cost for undergraduate room and board at a 4-year college or university was $4,006 a year. By the 1999-2000 school year, the average cost rose to $5,308 a year. This expense can be alleviated if students have the luxury of living with their parents during their time in college. But, if living with mom and dad is not an option, and living in a dorm is unappealing, living in an apartment (even with a roommate sharing the expenses) may cost even more.

After medical students graduate, they must complete 3 to 5 years of residency, and, depending on the specialty, another 1 to 5 years of a fellowship. The good news: working on a residency pays a salary. (In 1999, the average annual salary for residents was $35,000.) The bad news: medical school debt rose an average of 6% from 1993 to 1999, but residents' salaries rose only 2% during this time period.²⁴ As a result, many medical school graduates deferred paying back their loans (if they could) until after they finished their residency. Unfortunately, this meant the interest on the loan kept growing, debt kept rising, and deductions for interest paid could not be taken. Since 1986, there has been a 5-year limit on this deduction, and even if graduates went into private practice before the 5-year limit was over, there was a good chance that they would be earning too much to be eligible for the deduction. The 5-year limit on tax deductions for education loans was eliminated as part of the Economic Growth and Tax Relief Reconciliation Act of 2001. The income limitations were also modified. This law took effect starting with the 2002 tax year. Therefore, it remains to be seen if this will truly help graduates pay off their loans.

In the meantime, there are other ways medical school graduates can eliminate their debt. By making a two-year commitment to serve in medically underserved areas as a part of the National Health Service Corps, primary care physicians can eliminate $50,000 in loan debt. The longer the time commitment, the greater the debt that is erased. Established physicians can join the U.S. Navy or Army Reserves. They offer loan repayment of up to $20,000. If neither public service nor the military is appealing, there is always debt consolidation. Educational consolidation loans, offered through the Federal Government, banks, and other lenders, lowers monthly payments by combining the amount owed on all loans into a single loan and charging a lower rate of interest.²⁵

The next panel will discuss another large expense for new and experienced doctors alike: medical liability insurance premiums.

Sources: National Center for Education Statistics. U.S. Department of Education. Digest of Education Statistics, 2001. Association of American Medical Colleges. "Total Enrollment by Gender and Race/Ethnicity, 1992-2001." and "How much does medical school cost and can I afford it?" Retrieved August 12, 2002 from http://www.aamc.org/data/facts/famg82001.htm. "The Inflation Calculator." Retrieved August 13, 2002 from http://www.westegg.com/inflation. Tanya Albert. "Bills Offer Relief from Medical School Debt." Edcuation Update Online, April 2001. Retrieved August 20, 2002 from http://www.educationupdate.com/april01/medbills.html. Doreen Mangan. "Say goodbye to your med school debt." Medical Economics, December 6, 1999. Retrieved August 12, 2002 from http://www.findarticles.com. Dr. Carl Bianco, M.D. "How Becoming a Doctor Works." Retrieved August 20, 2002 from http://www.howstuffworks.com/becoming-a-doctor.htm. "Bill Summary & Status for the 107th Congress" Retrieved August 20, 2002 from http://thomas.loc.gov. "How Medicare Calculates GME Payments, Part I." JAMA, May 26, 1999. Retrieved August 28, 2002 from http://jama.ama-assn.org/issues/v281n20/fpdf/jrf90014.pdf.