Rising Medical Education Debt a Mounting Concern

“The foundation of every state is the education of its youth.”

-Diogenes Laertius (c. 3rd century, AD)

Seemingly no one opposes the idea of high quality education or the cultivation of youth. If you’re ever in a pinch at a cocktail party – or better yet, if you’re running for office – espouse the education of young people. You’ll find plenty of friends and supporters for that platform.

The subject of medical education is no different. How often do we hear patients, family and friends agreeing about the importance of having “good doctors?” Physicians are still held in high regard. Some would say, “It’s not like it used to be!” Okay, this may be true in some ways. But as a group, physicians are consistently regarded as one of the top three or four most respected professions in the country by numerous polls, decade after decade. Moreover, young people still view medicine as a highly desirable field to pursue. Total applications to medical schools for the 2010–2011 year numbered more than any applicant pool for 15 years, and more women applied for spots last year and matriculated than ever before.¹

Yet, all is not roses for undergraduate medical education. Despite the encouraging trends above, medical education continues to confront a growing and pernicious problem at its very foundation: cost.

Between 2000 and 2010, the mean debt of medical school graduates increased from $88,495 to $157,944. That represents a 78% increase in graduation debt in 10 years. Comparatively, the consumer price index (CPI) increased 23.5% over that stretch.² Thus, for the last decade, the debt increase for medical school graduates more than tripled the rate of inflation.

In 2010, 30% of all medical students graduated with greater than $200,000 debt, with 42% of private medical school graduates exceeding this $200,000 threshold. Only 14% of all medical students graduate from medical school without student debt.

The average in-state medical student paid an average of $25,122 in annual tuition and fees in 2010, an increase from $12,082 ten years prior. The average medical student attending private medical school in 2010 paid $42,314 per year, an increase from $28,251 ten years ago.

While tuition increases account for the largest majority of the absolute dollar increase, these numbers do not account for the cost of health insurance and cost of living that typically add $15,000 to $25,000 per year to a medical student’s total cost of attendance. Over a four-year period, these non-tuition costs can often exceed $80,000. Indeed, some private medical schools asked fall 2011 matriculants to budget $75,000 for their first year. The expense of a medical education has become staggering.

Let us consider medical school cost in context. Over the last several years, the expense of attending college in the U.S. has risen sharply, despite recent economic stagnation and higher unemployment. Meanwhile, other professional schools uniformly have raised tuition. Plenty of young people want to become doctors, and practicing physicians still earn incomes higher than most professions. So, why should anyone feel sorry for medical students or graduates?

Historically, public opinion and policy decisions have treated physicians differently than many other professionals. Physician supply has been consistently treated as too important to leave to market forces alone. For nearly 50 years, the great majority of post-graduate medical residencies have been subsidized by Medicare, Medicaid, the Departments of Veterans Affairs and Defense, and sundry other governmental agencies.³ In similar fashion, the number of medical schools and the available number of post-graduate residency and fellowship training spots in this country have been tightly regulated by federal law. Thus, many argue that the growing cost of medical education, and its potential impact on high-quality physician supply, looms as a matter of great public importance.

Loan Repayment Terms Less Favorable

The tuition cost equation does not conclude at graduation. While many generations of physicians have weathered school loan repayments well past residency, new graduates must cope with unprecedented initial debts, often accumulating at unfavorable rates. Worse yet, repayment options have become more financially challenging.

In 2009, the reauthorization of the Higher Education Act and the College Cost Reduction and Access Act resulted in the elimination of the “20/220” medical student loan repayment pathway. In its place, Congress implemented the Income Based Repayment (IBR) plan. Under the 20/220 pathway, the federal government paid the accrued interest of subsidized loans during residency, while interest continued to accumulate on unsubsidized loans. Approximately two-thirds of medical student graduates in residency training qualified for the 20/220 pathway, and they were not required to make repayment during the deferment, or 20/220 qualifying, period.^{4, 5}

While nearly all resident physicians who qualified for 20/220 deferment are eligible for IBR, stark differences in programs exist. Most notably, deferment is now effectively unobtainable, and monthly payments are required starting at the beginning of residency.⁶ Alternatively, resident physicians may enter a period of forbearance, where interest capitalizes on all loans until a repayment period is instituted. The Association of American Medical Colleges (AAMC) estimates that the average first-year resident physician (PGY-1), earning a median salary of $47,716, will pay $393 per month for the average medical student debt. Higher earners with higher debt face $500–600 per-month payments.⁷

Under the current IBR plan, only federally guaranteed loans are eligible for repayment under IBR. As the percentage of indebted students increases, and as their total debt burdens grow, many students require more financial support than federal Stafford loan allotments can cover. Increasing numbers of students must rely on supplemental loan sources, including Graduate Plus Loans – a federally backed education loan with fixed rates at 7.9%. Moreover, the IBR rules and repayment options do not apply to many private loans, some of which accrue interest at 9 to 12%.

So, if you run the numbers, the transition to IBR was a big deal for medical students and graduates. Suppose a maximum Stafford subsidized loan borrowing of $8,500 per year, for a total of $34,000 at graduation. Compound that total monthly for three post-graduate years, the same period of time that interest previously did not accumulate under the 20/220 plan, and it equates to $7,670 of interest, a total that continues to compound over a physician’s 10- or 20-year repayment period. Given that Stafford subsidized loans have the best federal borrowing terms, nearly every medical student graduates with the allowed maximum borrowed – thus, the IBR decision affected the vast majority of graduates.

Recent changes to Stafford loan interest rates further confound the financial problem. Until 2006, interest rates for Stafford subsidized and unsubsidized medical student loans were advantageous for students and residents. Interest rates ranged from 1.87% while in school, grace periods, or deferments, to 2.47% while in forbearance or repayment. Since 2006, graduates have faced a starkly different financial picture. Stafford loan interest rates are now fixed at 6.8%, up to 3.5 times higher than the pre-2009 era,⁸ and 3.5% over the current prime interest rate (today’s rate, as we write this article).⁹ While fixed rates of 6.8% do not compare historically very high, they are substantially higher than most other conventional loan rates in the current climate. With the stock market and general economy puttering, rates in the 6% to 12% range are tough to swallow.

Greater loan totals, a worse borrowing environment, and increasingly prolonged periods of post-graduate training (and thus delay to capably repay loans) combine to make medical student loan repayment more challenging than ever before. Many stakeholders believe that current tax law sides unfavorably against those carrying medical education loans.

Interest repaid on qualifying medical student loans can be deducted from federal taxes, and is usually the lesser of $2,500 or the total interest repaid per year.¹⁰ In that the vast majority of IBR repayments during residency and fellowship go to interest, and not principal, individuals participating in IBR typically repay in excess of the maximum allowed tax deduction for medical student loan repayment.

Moreover, medical school graduates can only deduct interest repaid for single incomes $75,000 or less; if married, $150,000 or less.¹¹ That is, tax deductibility disappears for nearly all graduates upon completion of their residency or fellowship training. During the remainder of their repayment period, whether 10, 20, or 30 years, they are unable to deduct any further interest repayment.

Are Specialty Choices Impacted?

Many stakeholders have raised concerns that rising medical education debt may be fueling current trends toward physician sub-specialization, away from traditionally lower compensated primary care fields. In the 2009 AAMC Medical School Graduation Questionnaire, more than 9,300 fourth-year medical students responded to the impact of debt on their specialty choice. Six percent replied that debt had a strong influence and 16% replied that debt had a moderate influence on their specialty choice.¹²

When the AAMC and other organizations posed the question to the U.S. Government Accountability Office (GAO) in 2009, the GAO reported no significant concern that levels of indebtedness were influencing specialty choice.¹³ Anecdotally, many physicians, particularly in younger generations, report that debt definitely affects specialty and primary care supply. Markedly decreased graduate enrollment in primary care residencies coincide with debt growth over the last decade and seem to speak against the GAO’s conclusions. Furthermore, the GAO’s report contrasts with other reports and articles from the mid-2000s,^{14, 15} which suggest that the amount of medical education debt substantially impacts specialty choice – and perhaps even physician diversity. In a smaller survey, when gifted undergraduate students not applying to medical school were asked why they were not, only minority students said the cost of medical education was the number one reason.¹⁶

Other studies suggest financial reasons contribute to lukewarm interest and decreased number of applications to primary care residencies. In a study by the Josiah Macy Jr. Foundation, scholarships were strongly associated with increased likelihood of primary care practice, family medicine careers, and rural practice.¹⁷ Moreover, in a 2011 survey, medical students considering primary care, but ultimately selecting controllable lifestyle specialties, were more likely to consider applying for a primary care specialty if provided a financial incentive.¹⁸ These incentives included pre- or post-residency bonuses, or increases in annual salary.

Emotional and Psychological Burdens

The emotional and psychological burden of medical education debt may weigh more heavily on young physicians than previously understood. Recently, West and colleagues at the Mayo Clinic performed a comprehensive study of more than 16,000 Internal Medicine residents in the United States. Residents who owed greater than $200,000 scored lower on quality of life and work-life balance survey scores, when compared to colleagues with less than $50,000 in education debt. Responses from these same heavily indebted residents indicated greater emotional exhaustion, depersonalization and burnout potential, versus their peers who owed less. Perhaps just as alarming, higher debt residents performed consistently lower on the 2008 Internal Medicine In-Training Examination than trainees with less loan burdens – irrespective of gender or year in training.¹⁹

So where do medical students and graduates turn for help? Some resources exist to help students plan borrowing and repayment, such as those posted on the websites of the New England Journal of Medicine, the American Academy of Family Physicians (AAFP), and the AAMC.^{20, 21, 22}

These resources include information about The National Health Service Corps (NHSC), which provides primary care physicians $60,000 towards student loan repayment, working full-time at an approved NHSC site, for two years of service. Physicians can apply to extend their service, for as much as $170,000 for five years.²³ About half of NHSC physicians serve in federally-supported health centers. Other approved sites include rural and Indian Health Service clinics, public health department clinics, hospital-affiliated primary care practices, managed care networks, prisons, and U.S. Immigration and Customs Enforcement sites.²⁴

The Patient Protection and Affordable Care Act (H.R. 3590) attempted to address physician workforce distribution disparities, particularly the relative paucity of primary care physicians. As it pertains to medical student debt, this law increased the annual NHSC loan repayment amount.²⁵ Prior to this, the American Recovery and Reinvestment Act of 2009 expanded Title VII and NHSC programs. The NHSC estimated these changes would result in an additional 4,250 NHSC practitioners.²⁶ While this program will continue to help a small percentage of medical school graduates, past trends suggest it will ultimately have little impact on the indebtedness of most medical school graduates.

Graduates Face Shortage of GME Training Positions

As prospective medical students calculate the risks and benefits of attending medical school, another variable has emerged in the equation: graduate medical education (GME) training positions. The AAMC issued a 2006 statement calling on medical schools to increase enrollment by 30% over 2002 levels in the following decade.²⁷ Assuming an average of four years of GME training per resident, this growth in annual graduates would require more than 21,000 additional GME positions during the next decade.²⁸ However, in 1997, the Balanced Budget Act (BBA) placed a ceiling on the number of residents and fellows that the Medicare program, the largest financial contributor to funding of graduate medical education, would support.

In 2011, the National Residency Matching Program (NRMP) reported match data consistent with increased medical student applicants for a relatively unchanged pool of graduate medical education positions. A total of 23,421 PGY-1 positions were offered through the NRMP match, for 24,413 U.S. senior medical student applicants.²⁹ Moreover, the number of 2011 NRMP scramble positions was 1,035, a significant decline from 2,383 ten years prior, and a significant shortcoming for the 2,352 unmatched applicants applying to these positions. Of these 1,035 scramble positions, 606 of them were for preliminary positions only, not full residency spots.³⁰ These data reflect the fact that the number of medical student applicants has already outpaced available PGY-1 positions, and continued increase in medical student class size without concomitant increase in PGY-1 position will only worsen this issue.

Current and potential medical students may find these numbers create a dichotomous situation – one that seems to make physician supply of public importance at the undergraduate level, but does not fully support the path to complete training at the graduate level. Combined with rapidly rising student debt, medical education may be perceived as a greater gamble than ever before.

Conclusion

The medical profession, particularly through organizations like the St. Louis Metropolitan Medical Society, the Missouri State Medical Association, and the American Medical Association, has already advocated for many potential improvements in response to this mounting concern. It has called for transparency of tuition costs, changes in borrowing and repayment environments, increased tax deductibility of loan interest payments, and matching of GME spots collinearly with the increase in undergraduate medical education positions. Indeed, had it not been for professional medicine’s efforts, policy decisions like the IBR would likely have been worse for physicians. Despite efforts by the house of medicine, medical student debt grows. It is hard to imagine a rapid turnaround of the financial environment for medical students and graduates, particularly in the context of our country’s economic times. As a profession, however, we must continue to advocate for our young colleagues and emphasize that the cost of medical education goes far beyond the bottom dollar – medical education is, and always will be, of great public importance.

In conclusion, the percentage of medical students graduating with debt is higher than ever. The total costs of medical school by graduation and by completion of training are higher than ever. These debts are growing at a rate that far outpaces inflation, and are occurring in a setting of stagnant reimbursement rates. Debate continues as to whether this trend will influence specialty choice and physician diversity. Recent data suggest that heavy debt loads may levy a weighty psychological burden on young physicians, putting them at risk for burnout and interfering with the quality of their education and job performance. The number of medical school graduates has increased in recent years, in attempt to address projected physician and primary care shortages. However, available post-graduate training spots have increased to a much lesser degree, leaving the proposition of attending medical school a potentially larger financial risk than in decades past.

Physicians are expected to be busy in coming years with an aging population and with laws permitting citizens to more readily access the health care system. Time will tell how or if quickly mounting medical education debt will impact the physician workforce or the population’s access to high quality and timely care.

Biography

Joseph A. Craft III, MD, FACC, (above left) is a cardiologist with Mercy Clinic in St. Louis. He is a member of the St. Louis Metropolitan Medical Society Council and Third District Councilor to the MSMA. He chaired the AMA Resident and Fellow Section and the MSMA Resident and Fellow Section. Timothy P. Craft, MD, is an orthopaedic surgery resident at the Medical College of Wisconsin. A St. Louisan and brother of Dr. Joseph Craft, he is a graduate of the University of Virginia School of Medicine. He chaired the MSS of the Medical Society of Virginia, and was the Student Representative on the AMA Council on Medical Education.

Contact: Jcraft11@yahoo.com

Reprinted with permission from the St. Louis Metropolitan Medical Society magazine.