By Dr. Jim Dahle, WCI Founder
Let's talk numbers today. Important numbers. Let's talk about the average medical school debt. This number is thrown around a lot. Most of the time, the people throwing it around aren't using the right number. So today I'll show you where to get that number from.
Average Indebted MD Graduate Self-Reported Debt
The best place to get this number is from a survey given to MS4s not too long before graduation. This is the AAMC Medical School Graduation Questionnaire. There is lots of interesting information in this survey. Here's what the 2018 version says.
Over 3/5ths of medical students reported getting a scholarship or grant! That figure is way higher than I expected, even if you subtract out all the people who really had a contract, not a scholarship (MD/PhD, HPSP, NHSC). Granted, most of those scholarships weren't very big, about half totaled less than $25K and most of the rest (again excluding the contracted students) totaled less than $100K. Let's look at undergrad debt:
Only about 1/3 of medical students brought debt into med school. I would have been in that 1/3 with that $5K loan I took out as a freshman. The vast majority of those brought in less than $50K. What's the lesson to learn here? Get through undergrad debt free. It's entirely possible. And if you're one of those who start med school with six figures in debt, you're really in a unique situation and need to act like it.
Now let's look at med school and total debt.
All right. Here we go. The meat of the matter. As you can see, about ¾ of med students pay for medical school with loans. The other ¼ generally consists of people from wealthy families or who have signed contracts to pay for medical school. I find it very noteworthy that the number is actually FALLING, from 82.6% to 72.3% in the last five years. This fall has been going on for a long time. It was in the 90% range in the 1980s.
I'm not sure why. I don't think it's due to the three medical schools now offering free tuition (NYU, Columbia, and Kaiser) — as that has only occurred in the last year. I don't think the services offering contracts are taking more students. I don't think the WCI Scholarship is making the difference. I'm skeptical that scholarships overall are going up. Maybe it is because more rich people are going to medical school. Let's see if the data bears that out. Here's how it used to be:
Yup, rich parents send their kids to professional school. Nobody is very surprised there. The combination of nature and nurture is always going to skew this sort of a statistic in this way. The question is whether it is getting worse. From 1987 to 2002, it looks pretty stable. But what is it now? Let's take a look.
No, it doesn't look like more rich people are going to medical school (it's a lot fewer actually), although the median household income of the parents of a medical student is $130K and certainly less than a fifth of medical students come from a family with a below average household income.
So I really have no idea why this is, but that's the data. Fewer medical students are graduating with debt. However, among those who are, the debt is clearly rising. The number for 2018 is $200,000. However, there are four issues with “the number.”
4 Problems with the Average Medical School Debt “Number”
#1 It's Self-Reported
Remember taking this survey? I do. It was handed to you at school. You didn't have your financial paperwork in front of you. You hadn't even graduated yet. Most medical students kind of have their head buried in the sand about their debt. Chances are VERY good that most of the students were just guessing and I submit that most guessed low. So I think the reported number is lower than the truth.
#2 It Lulls Pre-Meds into Complacency
There is a serious delay in these numbers. A pre-med looks at those numbers and say, “Oh, that's not too bad.” But this isn't the number the pre-med is going to be facing 5 or 6 years later when she graduates. That number will be higher. From 2014 to 2018 it went up from $180,000 to $200,000. Remember this isn't the cost of education either. It's the median debt. If you're planning on borrowing the entire cost of your education, it's going to be a number much higher than the median. Lots of these folks had parents who helped or a working spouse or a scholarship of some kind.
#3 The Range of Debt Is Wide
The median only tells part of the story, of course. Half the students owe more than that. The more interesting numbers are seen in the students with truly catastrophic levels of debt. Almost 3% owe over $400K. 13% owe over $300K.
#4 Debt Goes Up in Residency
This was supposed to be a dry canyon for 4-year-old Afton's first technical slot canyon. Thanks to a guided rappel, she did stay dry.
As a general rule, the student loan burden climbs in residency. Few residents make large enough payments to cover the interest, much less pay down principal. Far too many are in deferment or forbearance. Even the smart ones though are in government Income Drive Repayment (IDR) programs making tiny payments.
It is not unreasonable to assume the debt will increase at a rate of as much as 7% during residency. $200K at graduation becomes $245K at the end of a 3-year residency and $321K at the end of a 5-year residency plus two-year fellowship. If you are part of that lucky 3% that graduated with $400K+, that turns into $490-642K+ respectively. That's a big deal no matter what your specialty.
#5 We're Only Looking at US MDs. What About DOs, Dentists, and Carribean Schools?
What About DOs?
All that sounds bad enough, right? But these folks are in the best shape of their doctor peers. Let's take a look at the DOs. They have an exit survey too. Here's the latest.
Instead of only 72% being in debt, 84% of them are in debt (but also interestingly still dropping). And they owe an average of $255K. Did I mention the median debt is worse? Yup, $265K.
Oh, by the way, that's just the medical school debt. They also owe money for undergraduate (48% owe a mean of $49K), Post-Bacs (33% owe $51K), their family (5% owe $119K), and their cars and credit cards (38% owe $25K).
Don't worry though. 70% of them think they're going to get PSLF (and 33% of them think their state is going to forgive their debt.) That should work out well.
Caribbean Schools
Students at Caribbean schools are notorious for two things — low match rates (like 50% of those who graduate and a truly dismal percentage of those who enroll) and high debt levels. According to this article, in 2012 they were racking up about 48% more debt than their US MD counterparts. The DO number is only 36% higher for comparison. I wish I could find a survey to give you exact data, but it's not going to be good. More debt and less chance of having a job that will pay enough to give any hope at all of paying it off.
What About the Dentists?
The ADEA does surveys too.
So, 83% are in debt, and over 40% of those owe more than $300K.
The number for dentists is $285K, 43% higher than US MDs. Interestingly, it went DOWN this year for the first time since 2009 and it was the largest drop ever, by percentage and dollar amount. That's interesting and hopefully the start of a trend.
The bottom line is that the “number” is as follows:
- US MD: $200K
- US DO: $255 +/- ANOTHER $50-100K
- Caribbean MD: ~$296K
- US Dentist: $285K
However, each of those is likely underestimated, will grow during training, and are only the median of a very wide range.
To be fair, doctor salaries are going up (despite the pessimists' claims to the contrary. The 2018 Medscape Salary Survey reports this:
That's almost a 50% increase in just 7 years. That almost exactly parallels the growth of DO debt levels over that same time period ($203K to $285K). So maybe it's not time to hit the panic button yet.
My recommendation remains the same for taking on student loan debt or professional school. Consider your debt to attending income ratio.
- If your ratio < 1X, I think that's a good investment. If you will just dedicate 1/3 of your gross income to paying off student loans for just three years, you should be able to wipe them out easily.
- If your ratio <2X, I think that's still doable. If you can dedicate 50% of your gross income to paying off student loans, you can still get rid of them within 5 years of graduation.
- If your ratio is in the 3-4X, this is not a good investment for you. This will require you to live like a resident for at least half your career or throw yourself onto the mercy of your fellow taxpayer.
- If the ratio is >4X, this is pretty much impossible. An $800K student loan at 7% would require payments of $114K/year for 10 years, or 76% of the net income of a doctor making $200K. You simply cannot do this and programs such as PSLF are too legislatively tenuous to make this large of a bet on.
If you are paying off student loans, be sure you have refinanced the lowest possible rates. If you go through the links below, you will also get cash back (put it toward your loans) with no additional cost to you.
What do you think? Does medical and dental school cost too much or too little? Why do you think the % of indebted students is going down while the median debt is going up? Comment below!
† Bonus includes cash rebates and value of free course. Borrowers who refinance more than $60,000 in student loans using the WCI links will be enrolled in The White Coat Investor’s flagship course, Fire Your Financial Advisor for free ($799 value). Borrowers will still receive the amazing cash rebates that WCI has negotiated with each lender. Offer valid for loan applications submitted from May 1, 2021 through March 15, 2024. Free course must be claimed within 90 days of loan disbursement. To claim free course enrollment, visit https://www.whitecoatinvestor.com/RefiBonus.
Thank you very much for this post. I graduated in 2014 with less than the average debt reported that year, with undergrad debt included due to working and scholarships. Fortunately I fell in love with with a specialty where my debt to attending income ratio is <1X, and I've already refinanced. However, I kick myself for not more seriously considering the medical school that offered me free tuition for all 4 years. I can only speculate how my future would be different; but my debt would certainly be minimal to none. I feel many premeds do not receive enough info about the financial consequences, and too many make decisions based on romanticized perspectives of how lucrative a physician career is.
That is quite interesting that the trend is going down for medical school debt and contrary to what I thought was happening.
You are correct that self-reporting introduces a lot more inaccuracies.. I certainly did not know how much debt I had signed up for when I graduated medical school and it would have been an educated guess at best.
With a lower match rate and higher Debt burden, Caribbean medical schools are quite the gamble. For those who don’t match and graduate with that kind of debt, the chances of paying it off with a non-medical career are near impossible.
I agree about the gamble part for many Caribbean schools. However, Caribbean schools are not the same either. There are more than 50 medical schools in the Caribbean, most of them with miserable match rate, but many like Ross, AUC, St George’s have excellent match rate.
Of those that matriculate…
Those match rates are less excellent when you take attrition rate into account.
I graduated in 2012. I went to a state medical school. I worked through undergrad and the first 2 years of medical school and lived like a bum and my living expenses were truly minimal. I only took out what was needed. Yet I still ended up with over the average debt for my year. I chalked it up to enough other people who either had scholarships or rich parents dragging the average down.
So if you are a premed and do not have a scholarship or rich parents expect your average to be at least 25% higher!
I remember filling out the survey as well. I remember just adding up how much I took out each year and putting the total down. I did not consider the interest that had already accumulated which was likely in the 10-15K range.
Great post! It would be great if this was required reading before deciding to be premed!
This is a fantastic post, one of the best articles I have seen online looking at these trends. I’ve published several papers on the AACOM data looking at how debt affects students, and looking at the AAMC trends DOs are canaries in the coal mine for the medical student debt crisis with AAMC students at debt levels similar to where DOs were in 2010.
Also I can say from personal experience that when I filled out the survey I hadn’t looked at my loans yet and under-reported by a good 50k.
Again, great post. I will say that this issue has had a growing focus in research, and there are definitely people trying to figure out what to do about it as it has large workforce implications.
Who the flip are all these debt free people??? This is a very strange mystery to me. Are people’s parents really paying for 8 YEARS of education? Bananas!
As a hopeful note, I was apparently an oddball with quite a lot of undergrad and med school debt, but it got blasted within 4 years of leaving residency. You can do it, young uns!
So we are some of those 25%-er folks. I know others who did indeed have 8 years paid for by well-off parents (plus have somewhat lavish lifestyles/vacations as students). I think our personal situation was unique. Here’s how we graduated debt-free:
-Parents paid for undergraduate, in addition to us both having part-time student and/or full-time summer jobs. Med spouse graduated early, too, and as a graduation gift received that “extra” money set aside for the final year. Both sets of parents were clear that we were “on our own” after bachelor degrees.
-Med spouse went to an affordable school ($18-20k/year). Got married as an MS1. Carpooled to school/work. Strict monthly budget. Meal planned. Saved Christmas and birthday money from grandma.
-Non-med spouse worked full-time throughout medical school. $40k salary sure goes a long way.
-Non-med spouse also went to grad school on a full ride plus received $5-7k/year in “living-expense” scholarships/grants.
-Lived rent-free in a family-owned property. Relative wasn’t looking to sell just yet, but wanted someone to fix the place up and maintain it. Non-med spouse put in a lot of “sweat equity.”
-Other items that helped us… discovered White Coat in med school. We were both on the same page for financial habits/goals. Maintained a healthy e-fund (even from beginning of marriage thanks to savings from college jobs). Opened roths for both. Non-med spouse contributed to retirement w/ work match.
There are a lot of factors in our situation. And in retrospect, changing one thing could have easily produced a different outcome (ex: buying a condo as a med student, living above means, no full-ride for non-med spouse grad school, etc). We were extremely fortunate to have no educational debt.
Additional hypothesis on the decline in #people taking out debt: More non-traditional students who have worked and saved up for medical school and/or have working spouses. There’s gotta be this data out there, right? Or perhaps expansion of programs to get students to primary care by paying their medical school in exchange for practicing in rural areas.
And I got scholarships in med. school too, but they probably averaged about $1k/year. I would guess that if you broke that $1-$24,999 category down further, you’ll find that the numbers in this category are closer to $1 than $24,999.
Agree! I got a couple scholarships during med school, but each was only about $1k. With a tuition of $30k this makes such a small dent, to make the numbers meaningful, should definitely drill down further in this category.
Just a thought – could the increase in debt free students be from spouses paying? I don’t think I saw student household income during school reported there. If the classes are aging (I think I remember that stat from somewhere) then you could have an increasing number of students with a spouse who has already graduated from high income professional school and can cover the tuition.
Also, since it’s self report, could be kids who don’t understand the loans are in their name and not their parents’ names.
While HPSP equivalents aren’t rising too much (though I’ve heard rumors of big corporations offering a similar deal now), could there be an increase in kids who paid for undergrad with tuition assistance while on active duty military, then used their GI bill for med school?
Sadly, I had zero idea what I owed at the end of med school. I still don’t know what that total was. I just remember they raised tuition 4% every year and it was no problem just taking out the maximum living expenses loan and thinking it would be a snap to pay off as a doctor.
I tell my students that rotate me about this. I took out about 200k loans from a DO school. I took out the minimum loans except for the last year. I don’t think I could have done it cheaper and these soared to 300k in 6 years of residency and fellowship. This was a shock.
The second shock is when you get home with 50% of your check after taxes and retirement. Then when you pay your loan payment only half goes to principal. So it takes about 4 dollars in earnings to pay off one dollar of loans if you just make the payments. So students that have 300k that turns into 400k will need 1.6 million in earnings to pay off their loans. This is what residents need to hear. It should be like a light bulb that helps them pay it off sooner.
Thank you for this! It’s nice to see but again, it can be misleading. I went to an Ivy League med school in an expensive northeastern city and at the end of med school our dean quoted our classes average debt per student to be ~200k. The caveat to this was the ~25-30% of my classmates had $0 in loans because of parental/spousal support or a few had military scholarships. Therefore those who left having to take out full loans for med school had debt that was in the $300k+ range (tuition+living was ~80k per year not including interest and yearly 3-4% increase).
At the end of the day, I’m a first generation college graduate from an immigrant family and so being able to attend an elite college and med school was like hitting the academic lottery for me. I have finished residency and my debt to income ratio is <1. I truly appreciate my education, what I get to do for people everyday, and the WCI for all the knowledge I have learned about personal finance to help me with my future.
But for students with no financial support from home and limited guidance, getting through higher education with today’s debt load is daunting, really a bit ridiculous and needs to be mitigated! I can’t even imagine if it gets worse in the future!
“My recommendation remains the same for taking on student loan debt or professional school. Consider your debt to attending income ratio.”
When do you suggest people make this calculation? Do you look at peak earnings, or initial attending salary? Amount of the loan taken out? Or the max amount owed after it grows in training for 3-7 years?
For example, my wife was nearly 2X when she finished residency, when comparing what was owed at the time, to what her initial income was at her first attending job. However, if you were to look at what she owed at the end of medical school versus what she is earning three years out of residency, it’s closer to 1X.
Obviously its too late for us to do anything about it, but the massive amounts owed, high interest rates, and wide variation in potential salaries can make a pretty big difference , and might help someone make a more informed decision.
Most docs hit peak earnings relatively early but if you want specifics, I guess I’d take the average income for your specialty and your debt burden at the completion of training to make the ratio.
The point is 1X is very reasonable, 2X is difficult but doable, and 3-4X+ really requires some serious shenanigans to overcome.
The problem with this approach is the path to a specialty is rather foggy at best for most MS’ the first two years. Additionally, most recommend making an attempt to minimize compensation in making career choices. Then it changes to maximizing the comp and contracts when looking for a paycheck.
The sad part, the vast majority will end up in lower paying specialties, the costs are committed upfront and sunk costs.
https://www.aamc.org/data/workforce/reports/492556/1-1-chart.html
“So it takes about 4 dollars in earnings to pay off one dollar of loans if you just make the payments”
Work just as hard keeping loans down as becoming a physician. You can’t fight the odds, but you can influence the results.
Financial planning and debt management absolutely should be a required course in medical school. These fact that these numbers are under reported is absolutely insane. And what happens when you have two physician family going into a low paying specialty? Absolute bonkers.
Thanks Jim for this post.
Agreed. When we have medical students come through the first day I give them a brief overview of what the month will be like (a lot of them are just rotating through, not necessarily interested in my specialty). The second day I talk to them about finances and all the stuff I wished someone would have told me. Then I send them over to WCI, POF, PIMD, bogleheads sites for more (read: better) info. I can’t tell you how many 4th years come through without the core basics of finances (just like when I was in their shoes!).
Here are my numbers:
Graduated DO school 2012: $276,000 taken out in loans
Graduated Anesthesia residency 2016: $388,000 refinanced with SoFi to 3.375%
Total loans paid off 7/10/19: $410,000
I figure that if I had stayed with a 10-year IBR repayment, I would have paid back $546,000. They certainly didn’t tell me that on the first day of medical school!
Great job man! Congratulations!
Hi. Writing a medical essay is not an easy task. If professors most often say not to write about abortion, car accident, COVID-19 how could the topic be overused? With this logic, it seems as though professors are just trying to evade a touchy subject rather than the supposed overuse of a specific topic. For example, https://legitwritingservices.com/best-essay-writing-services-on-yahoo-answers/ will satisfy your professor in all topics with a 5% discount.
This analysts if flawed. You did not take into account COVID-19 interest considerations and different payment methods such at REPAYE
Your spelling of analysis is flawed. You didn’t take into consideration the letter “i”.
I think I wrote that post before COVID, so feel free to adjust as needed.
Not sure what REPAYE has to do with your debt at the time of med school graduation. I certainly referred to IDRs in # 4.