I found myself viewing the CNBC Special Report on the Price of Admission: America’s College Debt Crisis on Tuesday evening (12/21). The program was very effective in presenting the crisis of students leaving proprietary schools, colleges and universities with large educational debts, which are not erased by bankruptcy and in some cases does not even go away, if the student dies. Recently, one of our Class of 2000 graduates passed while practicing Anesthesiology in Wisconsin. It is my understanding that he dropped dead in his clinic leaving a family behind ill-prepared to continue the life-style they had set up for themselves and with the hundreds of thousands in his student loans from the years of college, graduate school and then medical school to deal with. Fortunately, for the family estate, the majority of the federal educational debt is cancelled or forgiven due to his death. This is not case with private loans that do not carry this cancellation provision and becomes part of the estate to settle. With the correct financial planning beforehand, that private loan debt can be dealt with effectively by having had it insured.
Every year at the medical school, we have less than 15% of those accepted at IUSM and matriculate with educational loans from their undergraduate experiences. Some of the first year medical students have educational debt from Master’s Programs or Post-Baccalaureate Programs as well as students who have taken an extra year of undergraduate coursework to get pre-requisites out of the way in order to apply to medical school. On average, IUSM students with pre-medical school debts range from $10,000 to over $60,000 or an average of slightly over $20,000.
For 90% of our IUSM medical students who borrow and graduate with educational debt, the average is near $170,000, ranging from one loan of $8,500 to well over $300,000. For each $10,000 that a medical student borrows, there is the relative cost of approximately $4,000 in managing that debt until complete repayment of the loan, within the allowed 10 year repayment period once the loan commences repayment. In general, a typical medical student with $170,000 in medical school average debt, they can expect to repay approximately $304,000 on that debt after four years of residency and 10 years of repayment. It seems daunting, but there is a lot more positives than negatives in a medical student’s future. First and foremost, there is no better investment than to attain a medical doctorate. There is the obvious potential for income of $5 million to over $20 million within a 30 year medical practice career. Of course, it depends on the specialty. An Anesthesiologist can bring home after taxes over $17,000 a month. A Radiologist may earn over $20,000 a month. Unfortunately, a family medicine doctor, a general internal medicine doctor and a pediatrician aren’t so lucky and will earn less than $8,000 a month after taxes. The reality is that physicians do quite well financially.
So, why am I writing a blog on such depressing stuff as educational debt? One answer is to reflect on the bright side of medical school indebtedness. As physicians, you are all compensated extremely well. There is the notion that you will be able to afford the $2,500 – $2,800 monthly payments on a $220,000 debt without too much hardship. Or, if you are starting residency and looking to cash in on the Public Service Loan Forgiveness (PSLF) after paying 10 years on your loans through the Income Based Repayment (IBR) all the while working in a not-for-profit setting (a least 30 hours a week), then there is the prospect of a good amount of your debt forgiven by the federal government. The other plus is that as a physician, you will likely never see a day of unemployment, unless self-imposed. All of these opportunities and more is why your situation is not like what I saw on television over the holiday break.