USC Keck School of Medicine: Medical Students at White Coat Ceremony
by Richard B. Willner
Medical students have always incurred a huge debt to finance their education, but currently this debt is at an unmanageable level. The prohibitive cost of a medical education has reached a critical point where the integrity of the entire medical profession is threatened. The combination of exponential increases in medical tuition, the current legislative changes governing loans, and stagnant physician income will eventually leave medical students with educational debt so great that their earnings may be insufficient to even meet debt payments. While the government continues to increase the cost of practicing medicine, decrease reimbursements, and increase the costs of regulatory compliance, physicians are left to deal with these financial constraints.
As a result of the downturn in the economy, federal and state budget cuts have compromised funding for medical education. According to AAMC data, the price of public medical education has increased by a staggering 312% over a twenty year period. The average medical student will graduate with $157,000 in student loans. With the price of a medical education at an all time high, the AAMC reports that “in recent years, physician incomes have increased only slowly, and in constant dollars, the amounts have trended slightly downward.” Thus, while salaries fail to increase, the expenses continue to mount.
The increasing cost of medical education is partially due to a lack of a “standard” cost for attending a medical school. These costs can vary widely even between schools in the same city. With institutions using medical student tuition to fund expansions and institutional projects that only indirectly affect the students, it is difficult to even put a price on the actual cost of medical student education.
Though the increasing costs of a medical education are concerning, the recent change in legislation is one of the greatest issues plaguing medical students today. In 2007, Congress passed the College Cost Reduction and Access Act (CCRAA) (P.L. 110-84), with the intent to help students manage the increasing costs of education. This legislation benefitted undergraduates by increasing the maximum pell grant awards, lowering the eligibility requirements, and offering $5,000 in loan forgiveness to those employed in areas of high need.
However, this legislation adversely impacted residents by abolishing the 20/200 government pathway. This pathway qualified residents, based on economic hardship, to defer loan repayment for up to three years during residency based on the following criteria: full time employment, debt > 20% of income, and income not greater than 220% of the poverty level. Thus, residents could defer their loans, not be responsible for repayments during this low salary time, and could avoid accruing interest on their subsidized loans during residency.
As of July 1, 2009, the 20/200 pathway was replaced by the income based repayment (IBR) system. The rationale behind this new program was to encourage immediate payment on loans and prevent the large accumulation of debt upon completion of training. However, the implications to medical residents are astounding. Instead of deferment, those entering medical residency are now forced to begin loan repayments during their first year of residency; a time of minimal income. During residency, the government will only pay the interest on the subsidized loans if the resident is making monthly payments towards their debt. Monthly payments in the IBR program will be capped at 15 percent of monthly discretionary income. (approximately $350/month for residents). After 25 years of consistent payments, any remaining debt is forgiven. Those who cannot afford to make these monthly payments during residency will be forced to place their loans in forbearance, during which interest accumulates rapidly on ALL loans. In addition, interest may be capitalized under forbearance, making this a more expensive option for borrowers.
Another grave concern facing medical students is President Obama’s budget proposal for 2012, where he seeks to eliminate the government payment of interest on subsidized loans during medical school. Instead, he encourages reallocating this money to Pell grants for undergraduate students. Starting July 1, 2012, this bill will take effect. A student can borrow up to $8,500 a year from subsidized loans where the federal government pays the interest while the student is in school. Over the course of their training, students can accrue up to $65,500 from subsidized loans. A student who borrows the maximum of $65,500 in subsidized loans would owe $207 a month just in interest payments over the course of 10 years. Currently, the government pays that $207 each month the student attends school until six months after graduation. Eliminating the interest payment on subsidized loans will further increase the debt one is facing upon completion of medical training.
The challenges facing current medical students are astounding. This is a call for action.
Contact your congressman and let them know how you stand on these important issues. Without a united voice, the medical profession will not prevail in this fight.
http://well.blogs.nytimes.com/2011/07/28/the-hidden-costs-of-medical-student-debt/
www.studentloanborrowerassistance.org
http://money.cnn.com/2011/08/01/news/economy/debt_ceiling_students/index.htm
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Bill Gunderson 
