[Editor’s Note: Tomorrow (Saturday July 6th) at midnight is the last day of the 15% off sale for our online Fire Your Financial Advisor course. Use code INDEPENDENCE19.]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 3/4 of med students pay for medical school with loans. The other 1/4 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
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, & Carribean Schools?
What About DOs?
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.
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.
Fixed 3.48% - 7.94%
Fixed 3.45% - 7.49%
Fixed 3.49% - 8.36%
Fixed 3.29% - 6.69%
Fixed 3.49% - 9.99%
Fixed 3.20% - 6.25%
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!