[Editor's Note: This is a guest post submitted by Zachary Landau, an MSIV at Touro College of Osteopathic Medicine. We have no financial relationship, although he did apply for the WCI scholarship. At the time I edited this post, I had no idea if he was a finalist or not.]
The White Coat Investor website has been a wonderful read. For the few articles that apply to those with no income or financial assets, I am forever grateful. The rest of the articles were still enjoyable, like Fifty Shades of Grey. I played make-believe, dreamed of financial prosperity, and imagined a very different life. Unfortunately, we medical students are as far from financial grounding and meaningful control as Anastasia in Thomas Grey’s world. And, if we ever want to liberate ourselves from the sadistic bondage of student finances, we need to take control back from our academic institutions.
At the heart of the problem is a lack of transparency at most medical schools when it comes to money. These are real crisp green US dollars that are out of sight, out of mind, and out of pocket for medical students. Let’s work towards fixing things, with these concrete steps:
# 1 Demand Guidance
Schools provide health services, academic advisors, and counseling. Why are financial advisors noticeably absent from most medical schools? WCI readers likely don’t need professional guidance to make every day financial decisions, but the average graduate is in a different place. Many of my classmates don’t keep a budget. Those that do budget often slip during exams and holidays. A one-hour once-a-year sit-down with a salaried Financial Advisor would generate a better ROI at a medical school than the library coffee shop. [At least one medical school, OHSU, now has a CFP on staff-ed.] I imagine big financial institutions would bleed for the opportunity to gain an early relationship with the next generation of doctors. [True, but that doesn't equal medical students getting good advice.-ed]
# 2 Control How Your Money Is Spent
The world of for-profit medical schools is a scary place. However at all not-for-profit institutions, there should be an unspoken understanding that the purpose of the school is to serve its students. Is your university using tuition dollars to fund branch campuses and undergraduate programs? Does it have building projects aimed at prestige? Is your school bloated with faculty? It is your responsibility to know the answers to these questions and to demand change. If a quick Google search doesn’t land you on a budgetary report for your school, approach the school administration about this information. If you hit resistance, send an email to editor (at) whitecoatinvestor.com [I have no idea what he is going to do with the email, but I might be a little cautious about too much activism as school administrators not only control the cost of your tuition, but also write your Dean's Letter as you apply to residency-ed.] In general this is public information, and it may shock you. Your school may be funding affiliated hospitals with millions, making sizable commissions from on-campus retail, and subsidizing other university programs. Individual department heads may make seven figure salaries. Your school could be in the business of giving your money away as gifts!
Get this information. Share it. Organize a town hall meeting at your school, and ask direct and specific questions about financial conflicts of interest and wasteful spending. Demand quantifiable changes. Most importantly, use open discourse and public airing of financial “wrongs” to effect change.
# 3 Keep It Personal And Concrete
When you receive your financial aid disbursement it is neither a gift nor an allowance. It is a loan. Hearing classmates refer to this as “play money,” attempting to shake guilt while spending frivolously, is disconcerting. A student shouldn’t feel remorse every time he spends money, but he should recognize that he is making an educated choice. If you are the kind of person who has a hard time appreciating the cost of things, consider purchasing all non-essentials with cash. If that is impractical, consider keeping a personally tabulated ledger. When you are writing down the money that leaves your account each week, it will be hard to separate yourself from your spending.
In signing up for services, extrapolate the cost annually, and evaluate monthly. Put more simply; be sure that you are both willing to pay the full cost for a year of the service, and that you value it each month at the set price.
Total cost of large purchases should be your primary concern. Students are often easy marks for car salesmen. There are so many confounding factors: our lack of experience, our nebulous and false income, the common need for a cosigner, and the immediacy of our need. When weighing options and negotiating a purchase, always deal in terms of the total cost. Once you have settled on a price, you can then compare the interest rates of the car dealership, your local credit union, and your student loans. Car and furniture dealerships often shift the conversation towards monthly payments as a way to obscure the true cost of purchases.
#4 Be Greedy
This is a challenge for many. Medicine selects for selflessness, as our profession is one of service to others. The Physician’s Oath begins with a pledge to consecrate one’s life to the service of humanity. To break yourself of a cycle of financial sacrifice and victimization, appreciate that you will be best positioned to help your fellow man from a point of financial independence.
If your school offers a limited number of federal work study programs, consider these opportunities yours. They are not given to the students with the greatest need, but rather to the students with the greatest initiative. Many library-based and office-based federal work study positions are nothing more than generously paid study hours. When federal work studies do require honest effort, they are usually self-serving. Tutoring classmates is an opportunity to further learning. Laboratory scutwork fortifies your resume. Teaching Aid positions are an opportunity to master a subject and secure a glorifying, trumpeting, immediately personal letter of recommendation.
Do not feel the need to reciprocate reckless spending. By dining out with a large group and then splitting the bill into equal portions, the frugal classmates are subsidizing Mr. Surf-And-Turf and Ms. Three-Martinis-With-Lunch. Ask for individual checks. Spend your time with like-minded individuals. Organize low-cost group experiences. Good financial habits are visible in your twenties; to those who matter, they can be quite attractive.
When food and other resources are free, avail yourself of them. While you might be teased for taking the serving tray of sandwiches at the end of a guest lecture, you’ll have lunch for the week. When your school offers PPD testing, cleanings at the dental school, or a stocked Physicians lounge, have at it. Eating a soup or salad for lunch every weekday might be disappointing, but using hospital-provided food to supplement your breakfasts and lunches (and all-too-often dinners) can have a huge impact on your grocery budget.
Scholarship money, the holy grail of student debt avoidance, is something to fight, beg, and claw for. Like much in life, you cannot win if you don’t play. Understand the number of applicants for a given fund and the time investment necessary to compete. When in doubt, bet on yourself. I have heard myriad classmates write themselves out of consideration. They say, “I’m not the best neurology student in our class” or “I am not even going into pediatrics.” While scholarship opportunities often have specific focuses, the impact of a well-written application cannot be overvalued. If all else fails, persistence can triumph. Student Doctor of The Year is rarely awarded to a first or second year student, but it is often won by honorable mentions from prior years. Be that student under consideration for the fourth year running. It will be up to the scholarship committee to justify why you should not receive the money.
Conclusion
To borrow from my early analogy, unless you want to be on the rough receiving end of your financial dealings, demand guidance, control how your money is spent, keep things personal, and be greedy.
Personal finance is not Whose Line Is It Anyways. In this game, everything is made up and the points do matter. Talk to your preceptors and other practicing physicians about finance.
What do you think? How can medical students succeed financially? What is the long-term impact of the financial habits you acquired in med school? What can medical schools do to help? Comment below!
Thanks for writing. I know it’s a lot of work. Still I think you will some day realize that the cost for medical school isn’t that bad. When you look at what you get compared to a highly rated college, it’s a great deal.
Be careful about being brainwashed at free events. I’d still attend them.
I’d be happy if they just increased financial education. Heck if they just told doctors to avoid financial advisers and insurance agents they would do a ton of good.
There is a lot of burn out in medicine and being excessively focused on every penny I believe contributes to it especially during the “slim” years.
I agree wholeheartedly. Staring at my debt is frustrating, but when I look at while I’ll be making in less than a year it is very manageable – you just need to stay grounded. It’s worth it in the end.
“Be careful about being brainwashed at free events. I’d still attend them.”
Ding, ding.
Most free events I went to in college or medical school, in particular related to financial stuff where heavily slanted toward providing services or products that are not in most people’s best interests.
It’s pretty simple until you get through residency
1) take on as little debt as possible
2) don’t buy a house
3) max out a Roth every year in residency
4) pay down school debt as quickly as possible (live like a resident for residency + 2 years)
Awesome post, unfortunately there are some challenges to the schools providing financial advice. Unfortunately, most doctors do not understand personal finance, so it would be hard to vet the appropriate financial adviser that would not prey on students. My financial adviser recommended by my residency recommended that I go into forebearance and put money into his mutual funds instead with large AUM fees. A friend in another program had a financial adviser recommended by the program that offered a service for $1200 to fill out your taxes and student loan paperwork for the three years of residency. The company folded after intern year but the friend is to exhausted from intern year to try to get her money back.
I have found that most of the attendings I work with have no concept about personal finance. Honestly, if they did understand more about personal finance they likely would not be in academic medicine where they are making half of what they could at a private institution (at least in my department this is not true for all academic medicine positions). Just from a year of reading this website, I have fired the financial adviser recommended to me by my residency, gotten out of forebearance, started maxing out my Roth IRA, and switched to the HSA/High Deductible Plan at my program. Now I have attendings asking me for personal finance advice, and I direct them to this website.
Though you qualified it, I would like to reiterate that not all academic are clueless financially by virtue of being in academics. Some may value the additional job satisfaction that comes with teaching and doing research enough to make a little less.
There are lots of reasons why people are in academics. Very low on that list is accepting low pay for the teaching/research experience. Its just that no one pays you for it anywhere else. Sometimes the high end acuity patients you prefer are at large institutions and you like more complexity, the big collegiality, etc….Often I suspect its simply tradition and what most assume you are supposed to do.
Seriously doubt that most are consciously choosing lower pay, there are trade offs and maybe the uncertainty of private practice and debt burdens makes it simply not worth the stress, people want security. Also, its plain easier to do and requires less nights stressed if things will work out.
I meant no disrespect to academics and do not think that every academic physician is not making good financial decisions. In my speciality at my institution the academics are paid less to work more than in the community with much less ancillary support. That is not the case for my friends in the same institution but in a different specialty.
As a general rule, academics tend to have a little less business sense/experience/interest. Nothing wrong with that, but it does often translate into a lower income for the same or even more work. Lots of nice things about academics too, of course.
It just depends. Im sure some of the academic guys can make more, maybe lots more who knows. I know they work a ton more though, like theyre still in residency a ton. I am super happy with my work/life/pay balance, theres no way the per hour amount is close.
Im sure some specialties do great, it would be interesting to see if anyone has already put together a list of specialties that thrive in either scenario. It might even be state specific.
Good article (as a side note, are you aware your email comes a day later… This is new, IMO, don’t like it).
Although true, med students are financially ignorant, I think this concept is barking up the wrong tree. When I entered medicine and signed up to $300k in student debt the LAST thing I was thinking was paying it back… I just wanted to be a doctor and take care of people…. Thinking of the financial “reward” at 24 yrs old was impossible (no med school admissions team would dare accept this contemplation). It wasn’t until I finally was called doctor and the federal government sent me my first loan balance repayment schedule that I stopped and uttered “holy $***, I’m in trouble”.
The REAL education needs to start at the high school level, in the home, and media. If this country really knew what $300k compounding at 6.8%interest looked like and how it drives their physician decisions I think the entire med school student loan conversation would change.
That conversation will never happen and as a country we are barreling towards a very real financial disaster, much worse than 2008/9 when the student loan bubble pops. Just watch.
Although I agree that we are full steam ahead into the education loan bubble. I just can’t fathom how it will affect our economy. These loans are all backed by the US government. Therefor not a single bank will go bankrupt when these loans start to default. Eventually our taxes will help cover all that bad debt. I just don’t foresee an economic meltdown when this bubble pops. What i do foresee is that the cost of eduction will be forced to become more reasonable as more and more high school students will be priced out of a standard college degree.
Don’t fathom?
Consider massive defaults on trillions of dollars of student loan debt (once it becomes popular to do so, it becomes impossible to enforce consequences of defaulting-look at the housing crisis, do you have any idea how many people were able to change their mortgage terms, reduce their mortgage, or flat walk away without penalty?).
So once the debt default starts growing, the only solution is to raise taxes to cover this new “entitlement” program, a-la student loan forgiveness/please don’t default/name the program. A raise in taxes to cover this will affect take home pay for every American, this in turn drives a sub-optimal and probably negative economic return, imports go down…world economy starts asking again why the dollar is a stable reserve currency and then the topic of trading oil (which our economy runs on) on another currency enters the picture…financial Apocalypse.
Simply…That’s how this bubble could really screw things up. IMO.
First, there is 1.3ish trillion in student loan debt. Although there are defaults, there is nothing on the scale of massive. Second, the market is not large enough to cause even a ripple through the greater economy than the current one it already is, delayed household formation and consumption patterns.
Third, the debt is for the most part held by the federal government, is not securitized and leveraged into shady assets sold to people that have no idea what they are. It is mostly boring debt, held by one of the most stable and credit worthy countries in the world that also issues the worlds reserve currency.
Lastly, most people can pay off their loans, very few are like the ones hyped by the media. Even then, when it comes down to it people just hate that they have to choose to put so much money to the debt and not to something more enjoyable (i know, I started with 500k). This is mostly a spending problem, with few and far between people scammed by for profit “colleges” that will most likely have their debts erased. However, in the end for all the rest of us while it will crimp our living large hopes, it wont be that big of a deal.
There is no true student debt bubble, more like a bubble on bubble calling.
Exactly, the debt is not held by banks, therefor banks will not go bankrupt by defaulting debt. It will get paid by taxpayers though. In reality what may happen, and I hope happens is that the kids of parents who have a ridiculous student debt educate their own kids from making the same mistakes. In the long run it should lead to lower cost for attending higher education in the next 10-15 years.
Why go $100K into debt to only make $40K/yr?
Some student loan debt is federal, some is private.
I agree with your long run thesis, the actual bubble which is in tuition, and way out of line with inflation, wage growth, and value (on average) will be the one that breaks. This will be good long term as its doing only very few people well and not focused on educating the country for the overall good, but mostly tv contracts for football programs.
Well, let’s think about this for a second. Is there really a bubble here that is going to burst? I would argue probably not, although I do expect the rate of education inflation to decrease. Some schools will go out of business, but most will not. As people become wealthier, they can spend a higher percentage of their income on luxuries like an expensive education for their kids. Many of the most expensive schools have large endowments and don’t even need to charge tuition really. Many universities are backed by state taxpayers. I guess I just don’t expect to see tuition being cut in half any time soon.
I still think there is a problem that needs to be addressed, but I just don’t think anything is going to burst.
Bursting in the traditional sense where a portion of the economy takes a big hit is definitely a bit hyperbolic on this issue which is really very concentrated and isolated.
I agree with your take overall. The situation is bubbly only in that the rate of increase has far outpaced everything else and is disconnected due to outside systemic drivers, and the muted return on that asset is causing people to second guess it. However, its been the benefit of TINA, and I would still recommend and agree that its ultimately, “worth it”. Its outlier nature makes it bubbly, but the area really cant pop like a bubble.
Now the conversation socially has turned to this topic and I am at least hopeful there will be a compression in the inflation factor and more parity in prices, better spreads if you will.
Also, the analogy with mortgages also doesnt fly as one is secured by an asset (though you could argue that non dischargeable aspect makes them so) and the other isnt.
Lets not forget to mention there is nothing wrong with changing the terms if it is legal and allowed, and theres also nothing wrong with refinancing. Even foreclosure, even strategically, is well within your rights and outside of the moral aspect that is taken way too seriously (not by banks of course they will foreclose when it makes sense, just borrowers) and is simply a choice of yours that is written into the contract. Yes, it has consequences but it is your legal right contractually, if you no longer like the terms you return the asset. Stop making more of things than they are. Banks are at the very minimum at least as much to blame as the borrowers, or is there some magic rule in the universe where you get guaranteed return without risk? Default and foreclosure is their risk.
I just noticed that on Monday. I’m not sure what happened but will look into it. I’m sure it’s easy enough to fix.
I’ve moved up the publication time by one hour for Friday and two hours for next Monday. We’ll see if that fixes the issue. Maybe it’s a daylight savings time thing, but I’ve never had this happen before.
The cost of medical education is two fold. One is the cost of actually educating students. This includes facilities, educators, and subsidies to clinical sites. The other and more profound cost is based on supply and demand. Many students will pay whatever it takes to get that education. This is most true for foreign MD programs and DO programs. These tend to be some of the most expensive Medical Schools. After all the only people that go foreign or DO are desperate and will do whatever it takes to become doctors (I was one of them.) These schools are for profit and will charge as much as the students are willing to pay.
My advice is to shut up, don’t cause any waves, get your education, get a good residency, and get out. As mentioned before, these schools are for profit and have no problem making your life a living hell if you mess with their pockets. After all you rely on that school to get your residency.
As for your second topic of discussion here is my additional points of advice regarding medical school/student finance:
1) Realize that for every dollar you borrow, you will pay back ~$2.50. Therefor that $400 iPhone actually costs $1K. It is more imperative than ever to understand what are wants, and what are needs. Buy your needs, you have no choice, then decide how valuable are your wants. More often than not, by making that distinction we can get away from some wasteful spending.
2) Learn to cook. I see way too many medical students wasting money on unhealthy fast food, pizza, or worse, the cafeteria. By learning to cook, you will save money and eat healthier
3) Live close to the school so that you don’t need to drive every day. Cars are extremely expensive, and the cost is much more than just the cost of gas. If you can get your car to last all through med school and residency by driving less, you will find yourself with much less debt.
4) Live with roommates. This will cut your cost of living expenses almost in half.
5) Consider any form of income you can possibly make without affecting your education. For example tutoring other students is a great way to make a little extra spending cash and retain some of that knowledge. Just make sure the extra work does not affect your education. Getting good grades would be your number one priority.
6) Be frugal, but don’t be cheap. As medical students we give up a chunk of our youth to become doctors. Don’t waste it away. Spend some money on experiences with friends and dating. You will cherish those more than anything else.
Please be cognizant that there is a big, big difference between absolute and real value of money. That $2.50 you pay for $1 borrowed is not anywhere close to 2.5x as much in *real* value of money.
Inflation, time-value of money, opportunity cost are three concepts that we would be wise to understand.
If Americans are not taught the importance of saving from their parents, they will work forever
After I read random walk down wall st I learned wall st is crooked and so I indexed
In one hour I can teach all there is to know
Lastly they need to see the rule of 72 and its wealth creation
Yes most Americans are financially ignorant and it needs to be a course in high
Would it not be interesting to create a questionnaire. And see what level docs are at
Medical school budgets are more complicated than you’re suggesting. Large donors often give money specifically to build shiny buildings, it’s not that your medical school is spending its money poorly. (They might be, personally I think basically all professors should be required to fund themselves with grant money and the first two years should be taught with massive online classes, but that’s neither here nor there.)
Luckily you don’t really need to understand how a school spends its money, you only need to understand how much it is going to cost you.
To offer a slightly different viewpoint a degree of consumption leveling makes sense. How many extra shifts would you have to pick up as an attending to pay for a smart phone all through medical school? Probably not that many.
Med school isn’t a time to spend frivolously, but getting Chipotle for dinner every day the week before an exam isn’t going to change your retirement plans dramatically.
Fund themselves with grant money? You have to think through the unintended consequences of a policy change before just throwing it out there. Humans respond to incentives and how systems are constructed. What do you think will be the professors primary objective and occupy most of their time, teaching or writing grants? This is analogous to politicians who spend most of their time groveling for cash and hardly any doing their supposed job.
I dont think a standalone medical school professor requires the kind of salary a practicing physician makes (solely from teaching) given the trade offs and balance they receive, but I’d want them focused on that specifically and not how they were going to be paid.
since graduating d school in 75 I think americans are basically ignorant but improving; proven by the growth of index funds
I was able to amass 4 million dollars in 25yrs personal and retirement by indexing and compounded growth
whats better than living off unearned income and a fruitful retirement
I would not call it unearned Ken. You earned it, then put it at risk while not using it for something else and were rewarded handsomely. Its earned,.
It’s not Ken calling it unearned. That’s how the IRS defines it. You don’t pay payroll taxes except on earned income. You can only contribute earned income to retirement accounts. Stock dividends, capital gains, real estate rents etc are all unearned/investment income which is treated differently.
*facepalm*
One frustrating thing is dealing with student loans. Now they are adding revised PAYE which has lots of little rules. There are some huge decisions to make. If you do a long residency/fellowship and are 3 years from loan forgiveness, it might be a huge mistake to enter private practice vs a non-profit and get forgiveness. Hopefully the financial aid counselors can be of help (I wouldn’t hold my breath, they didn’t give us much guidance on the future)
I agree with you, Mike. This is probably the most frustrating part. I still question whether I did the right thing financially by planning to pay back my loans aggressively vs. going for loan “forgiveness.”
as those of us know, its all about being an educated investor
We who win know how to win this game
The rest are clueless: sad but true
share the book with colleagues or gift them
You point #2 brings to mind some thoughts. In the real world everything is negotiable (not always easy however). I do wonder if you were a top student if you could renegotiate your tuition? It would be an interesting experiment. Furthermore, I wonder if any group of medical students with decent financial information (hard to come by) could actually negotiate down tuition (or more creatively other “expenses”). The key would be to have other similar schools information and demonstrate discrepancies.
No way. This is a terrible idea. All you are doing is exposing the fact you will be a problem student and cause headaches not only throughout your school life but also career. If you enjoy such things you should become a lawyer. Besides you can geo arbitrage for better rates.
Also, you are in no way in a position to make such ludicrous demands. In game theory this would be referred to as a dominated strategy, ie, always a loser. There is almost exponential demand for medical school spots, supply is not the issue, they dont “have” to negotiate, they just cut you from their pool and move on. Its the same reason out of state proportions have risen at many colleges, they can.
Awesome discussion here. Just want to clarify that I (the author) am not the Zach commenting. Zach- thanks for driving a great discussion. 🙂