We all know medical school is enormously expensive, with the average medical student graduating with $200,000 in student debt. But did you know that over a quarter of medical school graduates have no loans at all? This is the real cost of medical school.
How Many Medical Students Graduate with Debt?
Here’s a trend that will surprise you — the percentage of newly minted doctors graduating with medical school student debt is dropping. In 2014, 82.6% of students had medical school loans, trending down to 70.8% of students in 2020. In terms of the debt distribution, approximately 50% of students graduate with debt between $100,000 and $300,000. Approximately 12% graduate with $300,000 or more, 12% with less than $100,000, and 25% with no debt at all.
The median debt for those who need to take out loans is going up, meaning the average medical student taking out loans is in more debt than the average from just a few years ago. But the fraction of students graduating with any debt at all is decreasing. In the 1980s, rates hovered around 90%, in 2014 it was 82.6%, and in 2020 we’re at 72.3%. So what does this mean?
There doesn’t seem to be a simple and clear cut explanation. This decreasing trend cannot simply be explained by a few medical schools offering free tuition, namely NYU, Columbia, and Kaiser. Nor is it likely that this can be accounted for by masses of medical students going to service contracts, such as the military, to cover their medical tuition. One possibility is that scholarships are increasing in number and in value, which is part of the equation, but I don’t think this accounts for the whole story. The number of medical students receiving free money in the form of scholarships, stipends, or grants has slightly increased from 61% to 63% from 2014 to 2020. But the median scholarship amount has remained around $20,000 to $25,000.
Or perhaps it’s because more students from affluent families have parents who are footing the bill. For some time now, more than half of matriculating medical students have parents who are in the top quintile of income. Explaining that finding could be a separate article in and of itself, but what’s important to focus on here is the trend, which seems pretty stable. In the last decade, there doesn’t seem to be a shift to explain the larger number of students graduating without debt.
I’m not quite sure what to make of the data. What do you think? Let us know with a comment below.
Another interesting finding is that 2/3 of matriculating medical students have no loans from their college premed years, which is surprising to say the least. On a national level, 70% of college graduates take on student loans with a median of $29,000, yet only 33% of first-year medical students have any student debt, similarly with a median of $28,000. This is likely due to two main factors. First, the socioeconomic status of entering medical students is skewed towards more privileged backgrounds, therefore more medical students have parents who footed their college bills. And second, those who were successful in getting into medical school were very strong students and were therefore more likely to secure merit-based grants and scholarships, thus reducing their loan burden.
What Does This Mean For You?
So what does this all mean? The number of graduating medical students without any student debt is increasing. Maybe you’re rejoicing and giving your friends high fives right about now. Not so fast.
It’s important for premeds and medical students alike to keep this data in perspective and understand the nuances of what it tells us.
First, yes, it’s great that close to 30% of freshly minted doctors have no med school debt. That’s a substantial improvement from just a few years ago, and that’s something to celebrate. But understand that the median medical school debt has been increasing, meaning if you’re not one of the lucky 30% to graduate without any debt, your total loan burden is likely going up — more specifically, up from $180,000 in 2017 to $200,000 in 2020. Considering median debt amounts have been steadily rising for the last several years, it’s not unreasonable to expect that trend to continue, meaning if you’re graduating medical school in 2022 or 2025, the median student debt will likely be higher than $200,000.
Second, understand that when we talk about the median, that doesn’t mean you’ll necessarily graduate with that amount. You could be in substantially more or substantially less debt. In 2020, 11% of graduating medical students had between $300,000 and $400,000 in medical school debt, nearly 3% had between $400,000 and $500,000, and about 1% had more than half a million dollars in debt.
Third, understand the math that goes behind student loans and paying them off. Too often I hear students saying $300k in loans is no big deal, I’ll pay that off in one year as an orthopedic surgeon! Not quite. That $300,000 is going to be compounding around 6-7% per year during your residency training. So while you’ll be making minimum payments, the principal will actually be increasing during that time. Even as an orthopedic surgeon pulling in $500,000, you have to pay taxes, meaning you’ll take home between $289,000 and $335,000, depending on your state income tax situation. And out of that amount, you’ll need to pay your mortgage, utilities, health insurance, your kid’s daycare, car payments, car insurance, food, travel, Netflix, that new iPhone you gotta have, a new sim racing rig with VR headset, and of course save for retirement. And that’s before making a dent in your loans. Suddenly that $300k doesn’t seem like such an insignificant amount, particularly when you add the reality of the compounding effect working against you with your student loan interest rates.
And while there are many aspiring orthopedic surgeons, many are unable to match because it’s one of the top 5 most competitive specialties. If you end up going into sports medicine, internal medicine, emergency medicine, anesthesiology, or something else, you’ll likely be making substantially less than the average orthopod, meaning it’ll take much longer to pay off your loans.
DO and Caribbean Costs
While the default path in the United States is to attend an allopathic medical school, we cannot exclude the alternate paths from the financial analysis, namely osteopathic and Caribbean medical schools.
The American Association of Colleges of Osteopathic Medicine publishes similar data in their annual survey, showing similar trends.
In recent years, the median osteopathic medical school debt has been increasing, from $256,000 to $265,000. But similar to allopathic medical schools, the percentage of medical students that are in debt has been decreasing, from 85% in 2017 to 83% most recently.
Caribbean medical schools don’t have a central organization publishing this data, so it’s more difficult to pin down an exact number. It’s widely accepted, however, that students graduating from Caribbean medical schools have a greater student loan burden than those from US allopathic or osteopathic medical schools. This isn’t a surprise, considering these schools generally have substantially more costly tuition and fees. Depending on the article and school you’re looking at, a 40-50% increase in the median student loan burden for Caribbean grads, compared to US allopathic graduates, is not out of the ordinary. That means close to $300,000.
In terms of stratifying the financial cost of allopathic medical schools, osteopathic medical schools, and Caribbean medical schools, US MD schools generally have the best financial outlook, followed by DO schools, with Caribbean medical schools trailing.
We’ve already discussed why the finances even for US MD graduates is not a clear cut win. But what’s concerning here isn’t just that DO and Caribbean grads have more debt, but also the fact that greater proportions of these graduates end up in primary care and other specialties with lower average compensation. And while DO graduates have a similar residency match rate to their US MD counterparts, understand that a significant proportion of Caribbean medical school graduates fail to secure a residency seat. And without residency, they cannot practice as a board-certified physician, meaning they won’t necessarily be making six figures per year. And unfortunately, those student loans don’t disappear, even if you file bankruptcy. Imagine being in $300,000 in debt with no residency position, and no easy way to pay off your loans.
I don’t say this to scare you or discourage you, but to be realistic with you. That’s what we’re about at Med School Insiders. I care more about your success than your feelings, and if the numbers are making you uncomfortable, I prefer you getting comfortable with reality now rather than when you’re in six figures of debt and unable to do anything about it.
While your personal situation is going to vary and I cannot speak for every student watching this video, I’ll provide you with some general guidelines. First, make sure you truly want to go into medicine, and you understand that it’s not nearly as financially lucrative as pop culture has led you to believe. Second, try to attend a US MD school with favorable financial aid and scholarship packages over DO or Caribbean options. And third, be as competitive of a student as you can be, not only because US MD schools are more competitive than DO and Caribbean schools, but because if you’re in a position where multiple medical schools want you, you’re in a position of power to leverage more favorable financial aid packages.