Financing Your Medical Education

During the 1990s, there was a marked escalation in tuition and other costs related to medical education. This inflationary spiral may continue for the foreseeable future but at a slower pace. It is taking place unfortunately at a time when financial aid programs are being cut. This situation has caused a rising deficit between what funds are needed by medical students and what financial aid is available to them. To aggravate the situation, legislation reducing federal grants to medical and osteopathy schools was approved. In addition, it has become increasingly difficult to receive bank loans through the Federally Insured Student Loan Program, and private sources of support to medical students are also on the decline. All this strongly suggests that very careful consideration be given to financing one's medical education well before one considers applying for admission. In 1976 a Health Manpower bill was passed that requires almost every recipient of a federally supported medical scholarship to serve at least two years with the National Health Service Corps in areas of need.

It is essential for prospective medical students to be fully aware of the high cost of a medical education and its possible consequences. With proper planning this challenge can be met.

Medical school tuition and fees are the largest expense facing a medical student. The current average cost of tuition represents an increase of more than 400% for private schools and 275% for public schools over the past 25 years. Thus, for a typical private school, the cost of four years of medical school (tuition, fees, and living expenses) can run as high as $150,000 or more.

If the reasonable assumption is made that half of the total expenses are covered by borrowed money, loan repayment, which begins five years after graduation, will exceed $1,000 a month. In addition, interest, which begins at the time of borrowing and is due as “interest only” payments as early as two years after graduation, when added to the principal of the loan, would increase considerably the monthly repayment cost beyond $1,000 per month. Parenthetically, this interest is not tax deductible.

The next question then is, at what income level must one be in order to be able to comfortably repay a debt of approximately $75,000? Such a debt repayment level is estimated as 8% of one's gross income per year. This would require an income of $145,000, while an income of $97,000 would make repayment difficult, and an income of $70,000 would not allow for repayment. These income levels are to take place five years after graduation, namely at the time of completion of postgraduate (residency) training. To achieve the desirable upper income level at the initial stage of one's professional career is quite difficult.

These debt prospects suggest that, as time goes on, premedical students from less affluent backgrounds will find themselves unable to pursue medical careers or, if choosing to do so, will shun such lower remunerative specialties as family medicine, pediatrics, or general internal medicine. Particularly severe pressure would be felt under these conditions by qualified minority students who do not have access to special financial assistance.

In the light of this situation, prospective medical students should do as much research as possible about financing their education, debt service, and available resources. The apparent leveling off of tuition will also be helpful, even though the cost of living will continue to increase. If, as some anticipate, there are massive loan defaults, the impetus for aggressive governmental action to solve the financial aid crisis will be necessary.

An example of the direction that the issue of loan default is taking is the action by the Health Resources and Services Administration (HRSA) against the several thousand individuals who have not repaid federal Health Education Assistance Loans (HEAL). Hoping to pressure them into repayment, they have published their names and last known addresses in the Federal Register, the official government listing of federal actions and regulations. HRSA, in an effort to recover funds, can go further and alert credit bureaus, request that IRS withhold tax refunds, and bar defaulters from being eligible for Medicare or Medicaid reimbursement for their services. They can even arrange for the Department of Justice to litigate and withhold wages and property. They are also seeking to secure the cooperation of state agencies in getting them to withhold licenses to practice to such individuals until their loans are paid up.