No More Subsidized Loans
This may not apply to many of the attendings who read this blog, but for the pre-med and medical student audience, I hope you didn’t miss this news item a few weeks ago. One of the consequences of the partisan bickering in Congress this Summer was the bipartisan agreement that graduate and professional students will no longer have access to subsidized student loans. They’ll still be able to get unsubsidized Stafford loans, but combining this development with rapidly escalating undergraduate and medical school tuition and fees, will have profound consequences for future doctors.
This all begins one year from now, in July 2012. Consider that a medical student used to be able to get up to $65,000 in subsidized loans at 6.8%. Let’s assume he was able to defer the interest on those loans throughout medical school and residency, then pay them off over 10 years as an attending. How much more will his medical school cost him with this change? Previously, the graduating resident would have $65,000 in loans. Now, he has $93,590. Over the next ten years, the total of his payments would have been $89,762. Now, the total of the payments would be $129,244, a difference of $35,654. According to the article, this will save our government $18.1 billion. While I’m in general all for a smaller government (although it turns out the money saved is going to be used for Pell Grants instead, which only some medical students qualify for, and even those who get the full $4K award would be better off with the subsidized loans), I’m not really sure this is where we want to save our money. When combined with higher amounts of unsubsidized loans already due to skyrocketing tuition, and lower physician reimbursement, this could be a disaster for future access to care as more physicians are forced out of lower-paying specialties and areas of the country due to student loan burdens.
I was actually hoping you would address this. I’m an MS1 and have been following your blog since June. After hearing of this, I think a lot of my peers are looking for more loan forgiveness programs and/or higher paying specialties since their net worth is now decreasing even more with the new government debt plan. I’d love to hear your advice for all of us still in medical school (or pre-med) who are now looking at a bleak financial future out of med school (ie. your standpoint for your student loans vs. investing post for those who will have unsubsidized loans increase by $8500 each year).
If I understand the plan correctly, won’t this only extend Pell Grants for another few years? What then? Does everybody lose?
Does this have any impact on the Income Based Repayment plan that is available to graduates and pays the interest on your subsidized loans for 3 years following graduation?
i wouldnt do anything but be a little more frugal during your early years. You will get through it. I wouldnt even be surprised if things changed again before then. I wouldnt pick a specialty based on money alone. You will have a higher chance of being unhappy. Its actually hard enough to decide what you want to do but fortunately some of that is bc so many of the choices are good. i walked to work and was very careful about things like starbucks, etc since those things add up quickly. What things are appropriate for you will be different but as long as you live frugal during residency and for the first few years after training, you will pay off the loans. Looking at the AMGA 2010 survery data, the lowest avg salary is pediatric pulmonary 172k and very few are below 200k. Of course initially you could be below average but id bet you still do well. If you avoid the financial pitfalls, i think you will do well in medicine for years to come.
Jason- I wasn’t aware the Pell Grant increase was temporary in the current legislation. (You’re probably right.) Never fear though, this is one area that Congress monkeys with often. Chances of it being the same 5 years from now are very low. Whether it is better or worse, however, is anyone’s guess.
Ryan- I don’t think this particular piece of legislation changes the IBR program. I’m still researching that for a later post though. I’m just not very up on it as it wasn’t available to me or my classmates so it takes me a little while to learn about subjects I know little about through personal experience.
Rex- I agree don’t pick a specialty for money alone. But if there are two that you equally like….