7/23/2014 5 sensible ways to decrease medical school debt

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5 sensible ways to decrease medical school debt
JOANNE CONROY, MD | EDUCATION | JULY 4, 2014
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There is a tremendous amount of handwringing among students, workforce researchers, and
medical school deans about the record amount of debt that medical students incur more
than $175,000, according to the Association of American Medical Colleges. This has unintended
consequences, including student selection of more lucrative specialties and placing medical
education beyond the reach of low-income and minority students. The average household income
for a matriculating medical student is more than $110,000 per year. We must get serious about
reducing this debt. A talented medical workforce is a national priority.
Dr. Louis Sullivan authored an op-ed piece published in the Washington Post, The Outrageous
Cost of Working in Medicine. In the piece, Sullivan discusses this challenge from both diversity and
equity perspectives. He wrote, You shouldnt have to come from a wealthy family (or be willing to
tolerate a lifetime burden of debt or the deferral of buying a home and starting a family) to go into
health care. Yet 60% of medical students hail from families with incomes in the top 20 percent of the
nation. Meanwhile only 3% come from families with incomes in the lowest 20%.
National policymakers believe that, because professionals with medical degrees have high earning
potential, they should therefore be in a position to repay loans in excess of $250,000 to $300,000. It
simply hasnt worked out that way for many talented young people who have turned away from the
health professions altogether. The gentrification of health care serves no one well.
(In this post, Im not talking about financing graduate medical education (GME), which is funded by
Medicare, Medicaid, and academic institutions. In March 2001, Joe Newhouse and Gail Wilensky
published an article in Health Affairs on GME asserting that it does not meet the economists
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7/23/2014 5 sensible ways to decrease medical school debt
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definition of public good: benefits that are equally available to everyone that cannot exclude
consumers from consumption. In the same issue, Uwe Reinhardt and Adepeju Gbadebo pointed
out that if GME is indeed a public good, society must also be willing to pay reasonable costs. In
return, the leaders of academic medicine must inform society what each component of their social
mission really costs, and be willing to be held more formally accountable for their use of the
resources.)
What options exist to decrease undergraduate medical school debt?
1. Decrease medical school tuition and increase efficiencies. Tuition is actually a small part of
most medical schools revenue. Most revenue comes from clinical services, transfers from teaching
hospitals, and research funding. Although less than 5% of total revenue at most schools, tuition
payments are still significant enough that their loss would impair the institutions ability to sustain
their missions. There is significant variation in medical school tuition between and among public and
private institutions. We could analyze the costs of education to determine if efficiencies can be
realized using shared core faculty, distance learning, and MOOCs (massive open online courses) to
inform society what each component of their social mission really costs, and be willing to be held
more formally accountable for the use of resources, per Reinhardt and Gbadebo.
2. Make medical school free and government-funded. Peter Bach and Bob Kocher propose
that medical school should be free. In their New York Times editorial, they advocated a new way of
paying for medical training to address the looming shortage of primary care doctors and to better
match the costs of specialty training to the income it delivers. They proposed that the government
pay medical school tuition and then defray the costs of $2.5 billion per year by charging doctors for
specialty training. This is not the first proposal to recommend making primary care training more
accessible. The National Health Service Corps helps doctors repay their loans in exchange for a
commitment to work in an underserved area, but few doctors sign up.
3. Make medical school more affordable for students committed to public service. The Wall
Street Journal published an analysis of federal student loan debt forgiveness programs, which
increased nearly 40% in the past six months. One program, Pay As You Go, requires borrowers to
pay 10% a year of their discretionary income annual income above 150% of the poverty level
in monthly installments. Under the plan, the unpaid balances for those working in the public sector or
for nonprofits are then forgiven after 10 years. At least 1.3 million Americans are enrolled in the
program.
4. Apply workstudy principles to medical school. One undergraduate school, The College of
the Ozarks, is turning college debt on its head. Tuition is free but students work 15 hours a week on
campus. Students from low-income homes can further defray debt by working over the summer to
cover room and board. Part of their GPA is determined by how they do their jobs; those who shirk
their duties are dismissed. In this school, there is an unmistakable quest to succeed.
I wonder what we could do with this model in medical education? Our applicants are talented,
committed, and hard-working. Why extend their adolescence by keeping them in the arms-length
learner space, when there are many entrustable professional activities that students can perform
7/23/2014 5 sensible ways to decrease medical school debt
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skillfully while they train? Sometimes these frontline positions can be more instructive than hours of
class time.
Student debt has nearly doubled since 2007 to $1.1 trillion, disproportionately driven in large part by
graduate school debt. With pay-as-you-go shouldering $72 billion in debt, government officials are
scrambling to find ways to rein in the costs of this program. However, many believe that these
programs are necessary, particularly for those who want to take lower-paying jobs in the public
sector. Some students who have over $300,000 in debt after undergraduate and medical education
say that these programs will allow them to work in specialties that are less lucrative but important for
the health of populations. These programs are notably one of very few ways to get out of student
loan debt which, unlike consumer debt, not even bankruptcy or death will resolve.
5. Consider income-share agreements. An Wall Street Journal article, A Better Way to Finance
That College Degree, suggested that it is time to look beyond traditional student loans.
Today, easy credit from federal loan programs provides little incentive for campuses to keep tuition
low, and many students and parents gladly borrow to pay these increasing costs, only to run into
financial trouble when the loans come due, write Miguel Palacios and Andrew P. Kelly. In the federal
student-loan system, lenders dont consider the likely return on degree programs when making
loans, leaving students with no information about the value of different options. The standard 10-
year repayment plan demands the heftiest percentage of a graduates income in the years
immediately after graduation, threatening young adults with financial ruin if their choices dont lead to
a steady income.
Palacios and Kelly propose a creative alternative: In capital markets, risky investments often are
funded with equity instruments under which the investor shares in the profit or the loss of the
investment Enter income-share agreements (ISAs), which are essentially equity instruments for
human capital. Investors finance a students college education in return for a percentage of their
future income over a fixed period. ISAs are not loans and there is no outstanding balance. If
students earn more than expected, they will pay more, but they also will pay less or nothing if
their earnings do not materialize.
This is catching on in areas of the country under different names. In Oregon, state legislators in
2013 introduced a Pay it Forward plan that would allow students to attend public colleges tuition-
free in exchange for 3% of their income after graduation.
There is still much work to be done, but consider how this could be used for medical education debt.
We have the income data. The United Kingdom has been doing this for a while. In the UK,
repayments for medical student debt are based on earned income. Anyone earning over 21,000
per year is obliged to start paying back their loans. Repayments are made monthly at a rate of 9% of
the income earned over the 21,000 threshold and is taken directly from salary by the employer.
Borrowers continue to pay 9% of residual income for 30 years or until the loans are paid off. If their
income drops because they work part-time, are on maternity leave, or stop working completely, the
repayments stop.
7/23/2014 5 sensible ways to decrease medical school debt
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We must seriously rethink how we finance medical education. Giving investors and the federal
government a stake in the economic success of students could unleash more educational
opportunity for all.
Joanne Conroy is chief health care officer, Association of American Medical Colleges. She blogs
at Wing of Zock and can be reached on Twitter @joanneconroymd.
TAGGED AS: MEDICAL SCHOOL
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James O'Brien, M.D. 19 days ago
If you signed up for medical school after 2010, I have to assume you knew the risks you
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