The increasing cost of undergraduate medical education and the decreasing availability of financial aid have resulted in the accumulation of a large debt for medical students that requires a reasonable solution. After reviewing suggested solutions to alleviate medical student debt, we have developed a unique proposal. The Strategic Alternative for Funding Education (SAFE) has the practicing physician pay for his or her medical school education after completion of residency/fellowship over a 10-year time interval when income will likely be rising. The amount paid yearly is calculated as a percent of the physician’s professional income. A strategic alternative for funding education has the potential to alleviate the pending crisis in medical student debt, allows medical schools compete for students based on the educational experience offered, and allows a student of any socioeconomic status to attend medical school and choose a medical specialty based solely on ability and desire.
There is much discussion and little action concerning the rising level of debt for students attending medical school. Many ideas have been proposed for dealing with the debt, but it continues to rise and an impending crisis is looming. Presented is information about the current levels of tuition and medical student debt, discussion of proposed solutions, and a new approach to resolve this problem is offered.
Scope of the problem
There are currently 18,000 first-year medical students, with total medical school enrollment exceeding 70,000 students. Because of the projected future shortage of physicians, the Association of American Medical Colleges (AAMC) has requested that all medical schools increase enrollment. Expansion of medical school class size will result in more students competing for the same or smaller pool of financial aid, while tuition costs continue to increase. Medical students are mortgaging their careers at a time when compensation remains relatively flat or decreasing in specific specialties.
The growth rate of medical school tuition continues to exceed the rate of inflation. In 2003, median tuition and fees at public medical schools were $16,322 and $34,550 at private schools. The AAMC has stated that for the 5 years starting in 2001, tuition and fees increased 11.1% per year at public institutions and 4.7% per year at private. In 2008, public institution tuition and fees were $23,260, a 42% increase in 5 years, and $43,897 at private schools, a 21% increase in 5 years. The 2007–2008 rate of increase was 5.8% for public and 4.0% for private schools. With the addition of living expenses and health insurance, the average cost of attending medical school in 2008–2009 is $44,390 at public and $62,243 at private schools. It is unlikely that this rate of growth in tuition and fees will abate in the future. There is no adequate explanation for this continual increase in tuition and fees exceeding the rate of inflation other than that of tuition being an increased source of income for medical schools.
Eighty-seven percent of medical students graduating in 2008 carried debt, with the median debt of students at public schools being $145,000 and $180,000 at private schools. Twenty-five percent of students had a debt of $200,000 or greater. These levels far exceed the 2003 predictions by the AAMC that if the rate of increase in tuition that occurred from 1999–2003 would continue through 2007, the median debt from public schools would be $122,000 and private schools $158,000. For the class of 2008, the AAMC underestimated the public school debt by 18.9% and the private school debt by 13.9%. It is impossible in these difficult economic times to predict what tuition and fees will be in any future time period if the current system remains unchanged.
Although the percent of medical students carrying debt has remained relatively stable over the last 10 years, the level of debt has dramatically increased. From 2001–2006, debt of students attending a public school had increased at the rate of 6.9% per year and 5.9% per year at private school. Analyzing physician compensation over a similar period, primary care physicians had an annual rate of salary increase of 2.6% and specialists a 4.3% increase. The annual rate of salary increase for full-time academic physicians has been 3.6%. These numbers are more sobering considering that medical student debt will continue to increase at a rate that exceeds the rate of inflation or physician income, making it more challenging for medical students to pay their future debt.
With the current economic downturn of 2008–2009 requiring massive government monetary stimulus, inflation is likely to emerge in the future with a resulting increase in interest rates that will further expand the debt load. From 2004–2007, the interest rate of the federal Stafford loan increased from 2.82% to 6.8%, an increase of more than 140%. In addition, the current economic crisis is likely to make educational loans more difficult and costly to obtain.
Trends in medical education costs support that only the wealthy will be able to attend medical school. For the last 20 years, 60% of medical students have come from families in the top quintile of income, 20% from the second quintile, and 20% from the bottom 3 quintiles combined, of which 3% are from the lowest quintile of family income. The cost of a medical education is the number one reason cited by minority students for not attending medical school.
There is conflicting evidence about whether the increasing debt has an impact on specialty choice. At the University of Minnesota, with its 2 campuses (Minneapolis and Duluth), a significant effect of debt on specialty choice was noted at one campus but not at the other. One report from 3 medical schools located in the South demonstrated no effect of debt on primary care residency choice for the years 2001–2005. However, the mean total debt for the study population was $90,000, far below the current level of student debt. A recent publication has demonstrated a strong direct correlation with specialties that have a higher overall salary and higher rates of residency fill with US graduates.
It is interesting that with the continued rise in tuition, the actual cost of educating a medical student is unknown. The last comprehensive study of this cost was performed in 1974 by the Institute of Medicine (IOM). In 1996, Chhabra, using inflationary adjustments, calculated that the cost would range from $21,000–$56,000, with the average being $38,000. However, these numbers can be altered as desired by allocating noneducational or minimally educational costs to the education bucket.
Suggested solutions
Numerous solutions have been proposed to stem the rising tide of medical student debt and the potential impact on the health care workforce. The American Medical Association (AMA) House of Delegates in 2008 discussed the debt problem and adopted multiple resolutions. Their first proposal was to shorten the length of undergraduate medical education predominately by eliminating the fourth year of medical school. As medical schools are currently dependent on tuition received for all 4 years, eliminating 25% of the tuition received by the medical school is unlikely to be adopted because of economics.
Another AMA proposal was the use of endowment funds to lessen the impact of tuition. A further suggestion was to make the cost of tuition or loan repayment tax deductible, placing some of the burden on the federal government and easing debt repayment.
Dorsey et al have suggested 4 proposals for medical student debt reduction, along with an analysis of their financial impact. The first is that medical schools reduce tuition. As the money received from tuition is one of the few monetary sources of unrestricted funds for the medical school, this suggestion is unlikely to occur. A second suggestion is to increase the salary of residents to make debt payment easier. Most hospitals and/or Medicare are unlikely to do this. Alternatively, the length of residency could be decreased. However, with the current work-hour restrictions and the new IOM suggestions for further control of resident work hours, faculty concerns are being heightened about the competency of current graduates and the impact that a shorter residency will have on their quality of training. The fourth suggestion, similar to that of the AMA House of Delegates, is to decrease medical school duration.
An economic analysis of all their proposals revealed that the best impact on reducing medical education debt was to shorten medical school duration. The debt reduction occurs because of the extra year of income generation by the physician. The Strategic Alternative for Funding Education (SAFE) program will allow medical schools to seriously consider this proposal based on sound educational principles with minimal concern over the economic impact to the medical school budget.
SAFE proposal
The SAFE proposal is predicated on the fact that students who attend medical school will not be responsible for any tuition or fees during medical school, residency, or fellowship. The basis of this approach is that each medical school graduate after completing residency/fellowship will return a fixed amount of his or her gross yearly compensation from medical practice to the medical school for a period of 10 years.
With the SAFE program, the percent of compensation to be paid yearly by the attendee for a period of 10 years is 5%/year for public medical schools and 10%/year for private schools. The actual amount will vary yearly based on gross compensation changes, but the percent will be constant. The level of debt was determined by using the amount for 2008 tuition and fees: $93,040 for public schools and $175,588 for private schools. Using data based on the AAMC 2007–2008 salary survey for all specialties, the physician gross compensation will average $250,000/year over a 10-year period. Therefore, the physician who attended public school will carry a debt of $93,000 and pay $12,500/year (5% of gross compensation), or $1044/month. Amortized over the 10-year payback period, the physician will pay a total of $125,000 ($32,000 above the cost), which equates to a 6.25% interest rate. Similarly, the physician who attended a private school will have an initial debt of $175,000, with a payback of $2083/month, for a payment of $250,000 ($75,000 above the cost), resulting in an interest rate of 7.5%. These interest rates are competitive with the current Stafford loan rate. Those students who are financially successful in lucrative specialties will return more financial support to their medical school, whereas those in primary care specialties, public health professions, or charity work will pay less. For those who take time off for personal or professional reasons, payment will be suspended, with the length of payment being extended to a length equal to that of the time away from work. For parttime workers at 0.6 equivalent or less, an extra year will be added for each year of their part-time work. Those students who never enter a medical field will not be responsible for their tuition payments. This represents a very small percentage of the current medical school graduates.
As the education at a private medical school is more costly, it is appropriate that those who attended pay a higher percentage of their yearly income. The end result of SAFE is that it becomes a major financial benefit for medical schools to control their educational costs, as lowering these costs will increase their financial return from the medical student.
SAFE has the potential to allow specialty choice based on desire and not on medical school debt. It is improbable that schools will be able to successfully select students who are more likely to enter lucrative specialties so that the school will receive a higher financial return. The total amount of money each graduate will return to his or her school will vary, with physicians in more lucrative specialties paying a higher amount than those in primary care specialties. The amount is one that should be able to be paid without markedly affecting the lifestyle of the physician. The extra money that will be received by most of the medical schools can be used to assist those students who need help with living expenses by either a grant or a loan. Donors could be solicited to give monetary donations specifically to be used for living expenses, which would require a much smaller amount than that necessary to establish a scholarship.
Medical schools will be able to partially fund the start-up years of the program with money that is currently being used for financial aid and scholarships. For those institutions needing assistance in the initial funding of this program, we suggest the federal government supply low interest loans to be paid back over a fixed period. This investment by the federal government will result in a medical workforce that will be more diversified and possibly larger.
The earliest time that medical schools can expect to see return of funds will be 7 years after the medical student matriculates for those doing a 3-year residency, with the remainder starting to pay at 8–12 years after entering school, depending on the length of residency and fellowship. By the 12th year of the program, the majority of students will be paying back their commitment, and the return of the funds to the medical school will become self-perpetuating. As the SAFE program matures with payback from the graduates, the medical school will be able to predict with some certainty the amount of money to be received each year.
Having this program in place eliminates the need to constantly increase tuition and removes the economic impact on medical schools from the loss of tuition if a future decision is made to shorten the length of medical education. This proposal would remove the stress felt by medical students who are currently accumulating debt at an alarming rate. As many of these students are or will be in dual-career relationships, their level of debt is often much larger. Medical schools will benefit by not having to constantly address the need to increase the amount of funds available for educational aid. The federal government should become a stakeholder in this program by allowing the physician payback to the medical schools to be tax deductible or paid on a pretax basis.
This is an opportune time to design a better approach to deal with the escalating cost of medical education. SAFE allows medical schools to compete for students based on quality of the educational experience and not by the amount of financial aid available. Also, SAFE allows medical schools to adhere to their stated missions of education and improvement of the health of all people. SAFE would be a great legacy for those of us involved in medical education to leave for our future students and physicians.
Reprints not available from the authors.
Cite this article as: Weinstein L, Wolfe H. A unique solution to solve the pending medical school tuition crisis. Am J Obstet Gynecol 2010;203:19.e1-3.
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