A post showed up not long ago on the WCI subreddit:
“I will be taking loans out to attend an osteopathic medical school and, with living and housing expenses, will take out about $500,000. Given the effects of the One Big Beautiful Bill Act (OBBBA), roughly $300,000 of this will be private loans. Now, according to my math, if I were to do a three-year IM residency and a three-year fellowship, I’m looking at about $1 million-$1.1 million in total loan balance, with roughly $800,000-$900,000 private.
I have four questions:
- Is that not an absurd number?
- If I don’t match into cardiology or another high paying specialty, will I just be essentially ruined financially?
- Will I be able to afford a nice house?
- Would you attend this school or try to go to PA/anesthesiologist assistant school? (not concerned about admissions)
My whole family keeps telling me to relax and I’ll be fine but they aren’t the best decision makers in this regard either. With no forgiveness options on $800,000 of that loan, I can’t help but worry.”
My biggest problem with this post was not that the pre-med was worrying about this stuff (some concern seems appropriate), but that I didn't think the numbers were accurate. And running numbers doesn't do much good if the numbers aren't reasonably accurate.
Is $1 Million+ in Student Loans Absurd?
Yes, $1.1 million in student loans is an absurd amount today. But maybe not in a few years. As humans, we tend to ignore inflation. That's a bad idea when making longer-term calculations.
I was so worried about student loans when I was applying to medical school back in the 1990s that I signed away four years of my life to pay for school when I probably could have graduated with only $75,000 in student loans. The average emergency physician's income the year I left residency was about $225,000. I would have only had to live like a resident for like 4-5 months to pay off my entire medical school loan balance. Instead, I spent four years saluting, putting on gas masks, doing six patients per hour of sick call on Monday mornings, and deploying all over the world. It had its pluses and minuses, but paying for medical school with time instead of money was in no way, shape, or form a smart financial decision in my case. I once ran the numbers, and figured I came out $180,000 behind by doing that.
My point is that this future doctor is likely going to be earning more than they think by the time they come out of fellowship in 11 years. Maybe twice as much. A million bucks in student loans is a lot when you make $300,000. It's not so much when you make $600,000.
More information here:
Considering Refinancing Student Loans Now? What You Need to Know After OBBBA
Will I Be Ruined Financially?
If you don't match into a specialty, yes, you will be ruined financially. This increasingly common physician financial outcome is a legitimate catastrophe with few ways out, especially since the OBBBA passed and medical students have a significant portion of private loans that can't be discharged via 10-year PSLF tax-free forgiveness or 25- or 30-year taxable IDR forgiveness. But you don't necessarily have to match into a particularly high-paying specialty for this to work out for you. I suspect the pre-med is catastrophizing with the numbers and ratios. Not only are they likely to earn more than doctors are currently earning due to inflation, but they are not likely to owe as much as they think. Let's run the numbers ourselves to see.
Midwestern University has two DO schools, in Chicago and in Arizona, that are generally considered expensive. The cost of attendance (COA) at the Chicago school is about $116,000. If you borrow the entire cost of attendance (i.e., no savings, no work, no help from parents at all), the total borrowed is $116,000 x 4 = $464,000, plus interest. How much interest? That depends on the type of loan and interest rates at the time it is taken out. As I write this, federal student loans for medical students are 7.94%, although that's likely to be a little lower next year. OBBBA, though, only allows people to borrow $50,000 per year for medical school using federal loans. The rest has to be borrowed privately. Those rates are typically higher. It's hard to say how much higher since no one has really borrowed private loans for so long, but 1%-2% higher seems likely. It seems fair to run these numbers at 7.5% federal and 9% private.
While you don't have to take out the entire $116,000 at the beginning of the year, it's certainly easier to run the calculations that way. Let's do a $50,000 federal loan and a $66,000 private loan for every year of school and see what the total is at the end of the four years.
- Year 1, Federal $50,000 grows to =FV(7.5%,4,0,-50000) = $67,000
- Year 1, Private $66,000 grows to =FV(9%,4,0,-66000) = $93,000
- Year 2, Federal $50,000 grows to =FV(7.5%,3,0,-50000) = $62,000
- Year 2, Private $66,000 grows to =FV(9%,3,0,-66000) = $85,000
- Year 3, Federal $50,000 grows to =FV(7.5%,2,0,-50000) = $58,000
- Year 3, Private $66,000 grows to =FV(9%,2,0,-66000) = $78,000
- Year 4, Federal $50,000 grows to =FV(7.5%,1,0,-50000) = $54,000
- Year 4, Private $66,000 grows to =FV(9%,1,0,-66000) = $72,000
- Total Federal = $240,000
- Total Private = $329,000
- Total Federal + Private = $569,000
That's certainly not $1.1 million, at least not yet. But there's still residency and apparently fellowship in the plans. Let's assume three years for each. What happens to federal loans in residency and fellowship under OBBBA? At a minimum, they'll go down by $50 per month despite making relatively tiny payments that don't even cover the interest rate. So, we'll assume that after six years of post-graduate training, the federal loans are sitting at $236,000, about the same as upon graduation.
What happens to private loans in residency? Well, they should be refinanced early and often. Payments can usually be set at $100 a month during training (which we'll ignore in our calculation). Bottom line: they're going to grow, but probably not at 9%. Let's assume they can be refinanced to 6%. After six years of $329,000 growing at 6%, the private loans grow to =FV(6%,6,0,-329000) $467,000.
Upon completing training, this doctor will owe $236,000 in federal loans and $467,000 in private loans for a total of $703,000. Now, $703,000 is an awful lot of money. But it's not $1.1 million. Not even close. And the federal loans are potentially eligible for PSLF in just four more years. In reality, this doc likely only owes about $500,000, assuming their willingness to stay on as faculty or work at the VA for a little while. And the doc is likely making something between $500,000-$1 million.
That ratio sure doesn't look like a financial catastrophe to me. It looks like about two years of living like a resident.
Other Options to Pay for School
If the prospect of owing $700,000 is just too overwhelming, other options exist. One can join the military via the Health Professions Scholarship Program or other options, like I did. One can make a commitment to an MD/PhD program, the National Health Service Corps, the Indian Health Service, and others. Time or money, your choice.
Will I Be Able to Buy a Nice House?
This is a far more sensible question than the others. People these days, even highly paid doctors, are right to worry about the housing crisis in this country. Many of today's attendings could not afford to buy their current houses at their current income. We have no idea where our children will live, but it won't be in our neighborhoods unless half the down payment comes from us.
If I had to navigate the housing crisis as a young person today, I'd much rather do it with a physician income than the average American one. Yes, you'll have the ability to buy a nice house. But it might not be as nice as your dreams, and you might not buy it as early as you hope.
Should I Go to APC School?
Being an APC of some type (PA, NP, CRNA, AA, CNM, etc.) may be a fine career. However, it isn't a solution for someone who wants to be a doctor but is worried about the financial cost. Your career choice is too important to make with finances as the primary consideration. This is your life we're talking about. What do you want to do with it?
Most of us in medicine couldn't be talked out of it. We're highly motivated Type A folks who want to be the captain of the ship. I love the PAs I work with, but they're fine not being the captain of the ship. I'm not. I would have been miserable as a PA, especially if I had chosen that because I was worried about that $75,000 (seems so silly in retrospect, right?) student loan burden.
More information here:
How to Go to Medical School for (Almost) Free
Cheapest Medical Schools in the US
Medical School Still Makes Financial Sense
Yes, going to medical school is still a good investment, even if you must pay for it all with debt. Four things must happen:
- You match into a specialty you want.
- You get a halfway decent job and work full-time in it, at least for a while.
- You don't get burned out before at least mid-career.
- You learn to manage money well.
Those are the real risks here, and the first three have been increasing in the last few years. But for most WCIers who really do want a career in medicine, this still works out fine—even if you pay for the whole thing with debt, so long as you also learn to manage money. Just like I've been telling doctors for years: don't abandon your dreams out of fear of student loans that you can pay off in three years by living like a resident.
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What do you think? Does medical school still make financial sense after OBBBA? Why or why not?