[Editor's Note: I get lots of emails (40-80 a day) many of which suggest post topics or corrections to the website or book. I often use these opportunities to solicit a good guest post. I figure, “Hey, here's someone who knows more than me on a topic. Let's suck the knowledge out of his brain and share it with 10,000 other people. This post is like that. It comes from Mike Hewlett, who graduates from dental school this year. We have no financial relationship.]
Reading through The White Coat Investor I have been pleased with the advice included in the book. (Pleased because fortunately we’ve already been following most of it up to this point!) My wife and I are finishing dental school this summer and are about to begin practice, so we have been reading it to better prepare ourselves in managing our finances.
Dr. Dahle talks about the National Health Service Corps (NHSC) in chapter four of the book as an option to help pay for medical/dental school (and a few other health care professions), but he doesn't make much distinction between the Loan Repayment program and the Scholarship program. Granted, the NHSC has several programs to help professionals with their school costs, but these two are the ones I’m most familiar with. I'm a recipient of the 4 year NHSC Scholarship and wanted to offer some clarification about the subject.
There is more to be learned about these programs for sure, but I'll give a simple breakdown of the two programs. See the links below for more detailed information.
NHSC Loan Repayment Program
“Licensed health care providers may earn up to $50,000 toward student loans in exchange for a two-year commitment at an NHSC-approved site through the NHSC Loan Repayment Program (NHSC LRP).
Accepted participants may serve as primary care medical, dental, or mental/behavioral health clinicians and can choose to serve longer for additional loan repayment support.
Priority consideration is given to eligible applicants whose NHSC-approved site has a HPSA score of 26 to 14, in descending order. Eligible applicants may receive up to $50,000 in loan repayment for an initial service commitment until funding is exhausted”
- Financial support from the NHSC can be granted in return for working in clinics that meet a certain HPSA score for each year of support received, with a minimum of two years required. (HPSA scores are created by the federal government to identify areas or populations that have some type of access to care issue)
- This repayment is typically applied for near the end of your training or after you’ve gone through medical/dental school and are starting work
- The money is received as a lump sum each year to help pay down your existing loan balance (which has already been accumulating interest)
Overall the Loan Repayment (LRP) is a very crummy deal if only done for the financial aspect. It is money paid toward an already existing balance of school loan debt which accumulates interest from the start of medical/dental school. In most cases it makes little financial sense to select a practice location solely based on their promises of loan repayment. You could think of it as throwing a bucket of water on the raging bonfire that is professional school loans; every bit surely helps, but it won’t make that much difference in the end.
NHSC Scholarship Program
In contrast, the NHSC Scholarship program is very different in the financial impact it can have. The Scholarship program is similar in that you’ll work in the same types of clinics for a similar amount of time (a year for a year agreement as discussed above), but the way the money is paid differs.
Upon receiving the NHSC Scholarship before dental/medical school, all tuition and most fees are paid directly to the school each semester, tax and interest free. They also offer 2 and 3 year scholarships for those who have already started professional school.
“The scholarship pays tuition, fees, other educational costs, and provides a living stipend in return for a commitment to work at least 2 years at an NHSC-approved site in a medically underserved community.
For each year of financial support (up to four years), the student agrees to serve one year (minimum two years) at an NHSC-approved site in a high-need urban, rural, or frontier community across the nation.”
In summary, the payback time for each program is the same, a year commitment for each year of accepted support. However, the Scholarship is much more valuable compared to the Loan Repayment as it is paid in full upfront, thus there is no loan balance to accumulate interest on. I think of the Scholarship program as stopping the student loan bonfire from ever being lit.
- Financial support from the NHSC can be granted in return for working in clinics that meet a certain HPSA score for each year of support received, with a minimum of two years required.
- The Scholarship application can be started in the spring before you matriculate into your professional training program, or can be applied for after you’ve started school. The application cycle is once per year in the spring
- The money for tuition and fees is paid directly to your school, saving you the added cost of accumulating interest at the current rate of 5.84 – 6.84%
I'll share my own experience to illustrate how valuable the Scholarship can be.
4 years of tuition and fees for dental school where I attend is approximately $70,000 per year (not including living expenses which can tack on another $30,000 per year). Most of my fellow classmates will leave dental school with at least $280,000 in debt (that’s just the initial principal amount, also not including living expenses) at around 6% interest. The interest starts accumulating the moment you sign the loan notes, so they grow quite significantly as you are in school for 4 years. My calculations before receiving the scholarship had us leaving dental school with close to $500,000 in debt including living expenses and interest.
Thanks to the NSHC Scholarship which I received for 4 years, my tuition and fees have been paid each semester as I've attended, and we also receive a small stipend of $1300/month to help with living expenses. With my wife working part time, we'll leave dental school with comparatively little in loans, and owe 4 years in payback working in a qualifying dental clinic.
Each clinic where you can work varies in what they will pay but at least with dentists it’s generally in line with what most dental associates can expect out of school. I've recently been offered a general dentist position at a very good clinic that will pay around $125,000 plus benefits. This is a reasonable salary for a 1st year dental graduate even in private practice. And if you factor in the several thousand dollars in student loans each month for many years we won't have to pay (my calculations had me repaying about $5,000 per month for 10 years), that makes the NHSC Scholarship program much more financially attractive vs the Loan Repayment.
If I did the same deal (4 years of LRP) through the NHSC Loan Repayment, the max value it would have is $120,000 over 4 years to pay toward that approximate $500,000 loan balance I was previously expecting. Given the very large size that my loans would have been, it would be very unlikely for me to be out of debt in only 4 years. But with the NHSC Scholarship program we will be debt free, and should have a good start on building our nest egg.
[Editor's Note: A few comments are in order. There are some similarities with the military HPSP program (similar to the NHSC scholarship) and the military program for attendings (where, if you have no commitment, you are offered a signing bonus and a special payment each year you could put toward loans.) Like NHSC, if you know you're going into the military, the sooner you sign up the better the deal. The rise in medical/dental school tuition makes this difference larger each year because the NHSC/military loan repayment programs simply aren't offering the equivalent of a year's expense in medical/dental school.
However, Mike is leaving a significant point out of his discussion- he gave away a certain aspect of his freedom. He now HAS to work for an NHSC clinic for four years, no matter what other opportunities may come his way. That can be worth a lot of money. Apparently in dentistry, the opportunities are less attractive than in many fields of medicine. Physician scholarship recipients are likely working for a similar wage to what Mike is getting, but might have had the opportunity to sign for $200-300K in private practice. Granted, NHSC service is much less freedom limiting than military service, but there is still a loss of freedom. Also, Mike is still in school. So he's seeing all the benefits but none of the downsides. Most medical students on HPSP are pretty positive about the program too, until they become attendings, when many become much less happy with it. There is often a reason NHSC and the military have to throw money around to get people to take certain jobs.]
What do you think? Have you worked for the NHSC? What was it like? Would you consider it if you were facing a $500K debt in the face? Why or why not?Comment below!