Tuesday, February 01, 2005

Medical Student Debt: Part 1 (The Problem)

I decided to compile a series on medical student debt. It’s a topic I feel strongly about since it affects my life and the choices I make and will make in the future. It will also, by the way, affect your life as well. I hope you will find it interesting.

Data compiled over the last twenty years concerning medical education and the debt burden of medical students reveal a troubling trend. For one, the average student debt is rising faster than the consumer price index (CPI) and parallels the rise in medical student tuition which is rising considerably faster than the CPI.

Why should you be concerned? We will get to that shortly. I believe, however, that a first necessary step is acknowledging the problem.

Data has shown that private medical school tuition has grown 435% since 1960. A closer temporal comparison shows a rise of 65% since 1980. Public institutions haven’t done much better. The average tuition for public medical schools has grown 387% since 1960 and currently is rising even faster than private tuition and will soon catch up.

Take a closer look. Average tuition and fees at public medical schools during the 2003–2004 academic year amounted to $16,153. For private schools the figure was $32,588. Add $20,000 to $25,000 for living expenses, books, and equipment and that brings the estimated cost of four years of attendance to about $140,000 for public institutions and $225,000 for private medical schools.

Compare this, in the 1984–1985 academic year, average tuition and fees were $3,877 at public medical schools and $12,973 at private schools. The average debt carried by 1984 graduates was $22,000 for public school and $26,500 for private school. By 2004, the debt had increased to $105,000 for public school and $140,000 for private school. Only 20 percent of medical students graduate with no debt.

Although tuition makes up the greatest part of student debt, additional expenses are also partly to blame for the increase in total debt incurred. More students, for example, are now entering medical school with debt already incurred from undergraduate Universities, whose increasing tuition rates are also alarming. The interest accrued on loans over time can significantly add to the total financial burden. In addition, there is an increase in “nontraditional” students, like parents with children to support. More students now live in apartments, marry during medical school, need to buy cars to travel to outpatient healthcare facilities and also need to buy computers and other expensive electronic study aids. These additional costs have increased the price of medical education dramatically.

For those who’d like the numbers I believe that these are the most staggering:

63 % of medical students graduate with debt of at least one hundred thousand dollars.

According to the Association of American Medical Colleges, the average debt by graduates of the class of 2004 is a staggering $115,218.00, truly an additional mortgage hanging over their heads.

What does this all mean?

A 2003 graduate with $100,000 in debt who begins repayment after a three-year residency will generally pay $15,000 per year for 10 years. Consolidating the debt and extending repayment over a period of 25 years will result in payments of $12,000 per year for a quarter-century.

In 2003, the consolidated interest rate for Stafford loans was only 2.82 percent. When interest rates reach the maximum allowable rate of 8.25 percent, as they have been known to do, or when students need to borrow additional money from private sources, repayments will surely exceed these estimates.

In the next piece of the series I will explain how this increase in medical student debt has affected the choices of future physicians and how it will affect your future.