May 2005

Paying for Medical School: Debt Matters

Despite efforts by medical schools, legislatures, and professional organizations to put the brakes on educational costs, medical students are accumulating more debt than ever. According to financial aid administrators, it is not at all uncommon for medical students to graduate with six-figure debt loads.

The American Medical Association found that 63 per cent of 2004 graduates carried personal debt of $100,000 or more.

As one student put it in an interview with American Medical News, such debt loads are "like having a mortgage before you earn your first dollar of income."

Help and Self-Help

The Association of American Medical Colleges has several programs that help young physicians manage debt by delaying or reducing monthly repayments until they have achieved a more stable level of income. These options include loan deferment, debt forbearance, and graduated payments based on salary.

The Medical Student Section of the American Medical Association is lobbying for help at the federal and state levels as well. Its proposals include setting tuition caps, making more medical scholarships tax exempt, and putting more funds into grants and scholarships.

However, medical students can do a good deal to help themselves by minimizing the amount of educational loans they take out in the first place. Modest as it may sound, simple day-to-day economizing can make a significant difference in the amount of debt a doctor carries at graduation.

Be Realistic

Timothy Wu, M.D. of AdmissionsConsultants suggests that individuals start by taking a long, hard look at how well their school choices fit their career goals. The top ranked research school in the country may not be a wise choice for someone who wants to be a primary care physician, as they may never make enough salary to comfortably pay off the necessary student loans. A less expensive school might be a better choice.

"Take a look at reality," Wu said. "The big picture. Ask, 'what am I going to do with my life?'" It's important that school debt does not wind up interfering with your goals.

Michael Machen, director of financial aid at the University of Chicago, agrees.

"Be realistic," he says.

Machen explained that students need to take a close look at their careers post graduation and ask themselves these questions: is the school you want to attend going to allow you to do the work you want to do? Is that work going to allow you to pay off your student loans?

Read the Small Print

Yet, Machen concedes, even the best informed students often choose their dream school over a more practical choice. So the question of how to pay for it arises.

"We counsel students to create a budget and live as leanly as possible," Machen explained.

The University of Chicago, like other schools across the nation, offers debt and financial aid counseling that goes well beyond help with filling out forms. The school offers financial planners, debt counseling, repayment information, and general support.

But Machen also offers some simple advice that students can act on before they ever set foot in their first class.

"Read what you are sent," he said, explaining that some of the most common money problems could be avoided if prospective students read their financial aid packages carefully. "I know there is a sense of information overload, but it's relatively straightforward."

Once you are engaged in the financial aid cycle, both Wu and Machen agree on one basic point.

"Be polite," Machen said. "Word does get around."

In dealing with financial aid officers, prospective students need to remember that they are only one of thousands of applicants that school employees deal with every term. Flaring tempers and angry words will only come back to hurt you.

"They feel entitled to the money," Wu said of people who cause commotions in financial aid offices or over the phone. "That doesn't get you anywhere."

"If You Live Like a Doctor When You're a Student..."

However, once your loan money is deposited in your account, then what? Common sense and thrift can make a big difference in a student's long-term financial health.

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