Tips to manage med school debt AND to get better field experience
Pursuing a career in the medical, pharmaceutical or nursing industry is a dream a lot of people have, and for a good reason. Whether a student comes in looking for financial security, academic acclaim, or playing a part in the community as a role model—or simply living the passion to help people—a health-related degree can help you achieve all of this and more.
There’s just that little thing called “med school debt.”
Imagine it. You made the decision to become a healthcare professional and realized your dream. You’re helping people and earning a decent salary to do so. All those years of hard study and dedication have paid off, and now, you’re walking around your healthcare clinic or pharmacy setting feeling like a superhero, ready to help everyone in need.
And yet, much though you’d like to strut your stuff…there’s one last obstacle you need to tackle—student loan debt. Attending any health-related school is one of the most expensive graduate programs and are generally impossible to afford without getting a loan, unless you have a thick wallet at your disposal.
According to a recent analysis by Association of American Medical Colleges, 73% of medical students graduate with significant debt. In fact, in 2018, the average debt per medical student at graduation in the United States was a shocking $200,000.
For pharmaceutical school, the average debt is a little lower, but that’s hardly consolation. According to pharmacy times, the average debt per pharmaceutical student in the U.S. in 2016 was $157,425. For nursing school, the average debt was between $40,000 and $55,000. And although a health-related graduate will often imply a great salary, healthcare professionals are people, too. They have regular living expenses that can make paying off student debt a difficult and long-term task.
This article will examine why health-related schools are among the most expensive schools (if not the most expensive), how much it really costs to become a healthcare professional, and the best ways to manage debt after graduation. Let’s get started!
The cost of becoming a healthcare professional
As we mentioned, the average debt per medical student in 2018 was $200,000 in the U.S. This number has grown country by country for years, including climbing as much as $21,000 in the U.S. the last nine years. And it’s expected to grow even more in the near future.
To get a taste of how much more expensive a health-related degree is than sticking to a standard bachelor degree, the average sticker price of debt for other types of a bachelor in the States is about $30,000. And it’s worth mentioning that college grads around the world are more burdened by student loan debt today than ever. In the U.S. alone, Americans owe a shocking $1.56 trillion in student loan debt, which is about $521 billion more than the overall U.S credit card debt! (Read more about these stats at Student Loan Hero.)
But why is health-related education so much more expensive than other types of education? According to the above studies, the ratio of applicants to medical school to accepted candidates is 16:1. This ratio is certainly no surprise, considering the standards for excellence and the salaries of graduates. In other words, the field is competitive.
In the following list, you’ll see some of the highest and lowest annual salaries per medical specialty in the U.S. in 2018.
- Neurosurgery - $663,000 (highest paying specialty)
- Vascular surgery - $476,000
- Medical Genetics - $247,000
- Pediatrics - $222,000
- Pharmacist - $132,513
- Registered nurses - $73,550
If a health-related graduate can make all that money, how hard could it be for to pay off their student loans?
Not only is it hard, but anxiety-ridden for a graduate to pay off their loans, especially when playing with the psychology of facing such high numbers to pay off.
In fact, according to recent research, medical debt can influence young students’ and physicians’ major life choices. Medical student debt appears to influence the way students approach major life choices such as when to start a family, when to buy a home, and what specialty to choose. Students in debt even appear to select specialties based on a higher salary income, rather than selecting a specialty they love or primary care specialties.
This isn’t how we want the system to work, ideally.
Why is medical, nursing or pharm school so pricey?
Now, let’s break down the cost of attending a health-related graduate or doctorate school. To start, tuition and independent health insurance alone can cost more than $50,000 per year.
According to the AAMC, in 2018 and 2019, the average cost of tuition and health insurance per year of attendance at a public medical school in the U.S. was $36,755 for resident students and $60,802 for non-resident students (any student from abroad or even out of state). Tuition and health insurance at a private school averages more than $50,000.
And if that wasn’t enough, on top of tuition, there are hidden costs that really start to stack up considering the length of these programs. The length of health-related programs averages six to eight years for physicians and pharmacists (including pre-med and pre-pharm) and four years for nurses.
But then, we’re looking at three years of residency for physicians and pharmacists and up to one year of residency for nurses. During residency, most healthcare professionals have a lower salary.
So, if we take into account the years of study, the lower salary during residency, the interest of student loans over 20 or 30 years, and the student loan itself, the actual cost can be much higher than expected.
How best to repay health-related school debt
So, what are the best ways for a young health-care professional to repay medical school debt?
There is no one-size-fits-all answer to that question, of course. The right method will depend on several factors, including:
- The total amount of debt
- The type of health-care study
- Life goals and family living
Although health-related education almost always means larger student loan debt, there are several ways you can manage paying it off (to help both practically and emotionally). Let’s examine some of the best recommendations doctors, nurses and pharmacists have shared with us.
Meet Mary. After a lot of effort and determination, Mary finally graduated from a private medical school and is now ready to help patients and peers.
But while she’s in action at the very start of her career, Mary needs to pay off her student loan debt. Mary took out $200,000 to be able to afford medical school. Her interest rate was set as six percent on a 10-year repayment plan, one that gave her a preferred rate for paying the loan of twice as fast as her peers.
The total amount that Mary has to pay, including interest, will be $260,000 in 10 years, and her monthly payments would be $2,220.
Let’s see what options Mary has to pay off her debt with deferments, loan forgiveness and more. But before starting, remember that Mary’s options won’t necessarily apply to all health-related studies mentioned in the article. So read up, but be ready to apply the specifics of your unique situation.
Deferring debt during residency
One option available to Mary is to pause her student loan during her medical residency. This option is made available to professionals in medical or pharmaceutical residencies because, as we know, a healthcare professional will earn less in this stage.
According to Medscape, the average resident salary is $59,300. That doesn’t quite cut it for a $2,000+ student loan payment each month. And so, it might be easier for Mary to repay her loan after residency.
That said, this option has a catch. It may relieve some of Mary’s stress, but her final debt will actually become higher because loan will still accrue interest. If Mary decides to go with this option, she will have to pay approximately $30,000 more to repay her loan (if she defers it for three to four years).
If you or Mary can’t afford to repay your debt during residency and decide to go for this option, it’s recommended to at least pay some of the interest costs during that time to avoid a major increase in your total debt after deferment.
Student loan forgiveness programs
If Mary or any other young health professional’s annual income is low—this usually means your whole salary is less than or equal to half your overall debt—a good option to examine might be a student loan forgiveness program.
Public Service Loan Forgiveness (PSLF), for example, in the U.S. can offer students loan forgiveness after 120 qualifying payments. To be qualified for a loan forgiveness program, a nurse, a pharmacist or a physician like Mary should work at least 10 years in the public sector. Some examples of public sector workplaces include:
- The military
- Public health sector and hospitals
- Non-profit hospitals
This option has its pros and cons. If you work in the public sector, you will a ton of experience. In addition, if you love helping people, working in the public sector can be very rewarding indeed.
The cons are that, usually, you can’t exercise much preference over the location of the public facility you work in, and the salary will not be what your private practice peers see. Since you might not control the location of where you will be working, this option may interfere with certain life choices, including starting a family.
Income-driven repayment programs
Although Mary loves helping people, she has some hesitations about the PSLF option because she also wants to start a family with her partner. If you’re in a similar situation, an income-driven repayment (IDR) program might be a good alternative to PSLF.
By selecting the IDR option, your monthly payments to repay your loan will be capped as a percentage of your income. An IDR program typically lasts for 20 to 25 years. After that, the remaining amount of the loan—if any—is forgiven.
However, an IDR program can have certain tax implications. Some research, assumptions about your projected income over the repay period, and estimations of the loan’s balance after the repayment period might be necessary to decide if this is the option for you.
Refinancing health-related school loans
If you need a student loan, there are two formal ways to get it. You can either go through a private lender or through a federal loan. There are some differences between these two options, of course.
A federal loan will have about 2 to 3 percent higher interest rates than a loan from a private lender, for one.
A federal loan typically has both high balances and high interest rates. There’s a big opportunity here to reduce your debt by refinancing your school loan via a private lender. Some of the best loan refinancing lenders offer interest rates as low as 2%.
Let’s see how much Mary’s loan could be reduced if she selects the refinancing option. As we mentioned, Mary has a principle debt of $200,000 with 6% interest on a 10-year repayment plan. Mary has decided to refinance her loan through a private lender and reduce her interest to 3%. By doing so, Mary will be able to:
- Save $34,704 from the overall amount she owes within 10 years.
- Reduce her monthly payments by approximately $300 (from $2,220 to $1,931).
This is an excellent method to reduce your overall debt. However, it comes at a cost. By refinancing your federal loan through a private lender, you lose several federal benefits including loan deferment, loan forgiveness, and IDR payment programs.
The refinancing option concludes our recommended methods for you and Mary to repay the debt of your student loan. If your debt is high or has a long-term repayment period, those factors might influence your decisions and, ultimately, your life.
It’s normal to experience anxiety around medical student loan debt, especially in your first years as a healthcare professional. But there are options that can help. Your debt can’t stop you from realizing your dream—so, take your time, do your research, and select the best possible method to whip your loans into shape.