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 to 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 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.
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.
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.
“Wall Street Physician,” a former Wall Street derivatives trader , is a physician who blogs at his self-titled site, the Wall Street Physician.
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