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 profes-
sional 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 choos-
ing to do so, will shun such lower remunerative
specialties as family medicine, pedi-
atrics, or general internal medicine.
Particularly severe pressure would be felt under
these conditions by qualified minority students
who do not have access to special finan-
cial 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 ser-
vices. 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 agen-
cies in getting them to withhold licenses to
practice to such individuals until their
loans are paid up.
SUCCESSFULLY MANAGING EDUCATIONAL
INDEBTEDNESS
Most medical students take out loans to pay for
the cost of their education. Borrow-
ing means that they benefit by having access to
someone else's money now because
they agree to pay it back with interest later.
This reimbursement is a legal obligation
that they assume. Those defaulting on repayment
can face serious financial and legal
consequences, which can impact negatively on
borrowers, both personally and pro-
fessionally.
The majority of students are able to repay
their loans. The two major ways to suc-
ceed in handling debt repayment is to
participate in a loan repayment program (usually
sponsored by the federal government), and or
practice prudent debt management. The
latter is outlined in the five advisory tips
discussed on the next page.
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