Federal Debt, Student Loans and the Physician Workforce

As of June last year, Americans now owe more in student debt than they do in credit card debt. Student borrowers are winning the dangerous debt race as both amounts hurtle toward the $1 trillion marker, student debt rose by over 500% since 1999 (1). To put this in perspective, student debt has increased at nearly double the rate of inflation seen in the housing bubble that caused the recent financial crisis. There are foreboding similarities between real estate and education. Until 2008, it was assumed that both commodities would unfailingly rise in value and that the market was far from saturated. However, the number of unemployed college graduates is rising and a recent report found that two out of five student loan borrowers were delinquent on their payments at some point in the first 5 years of their loan (2). Moreover, unlike credit card or mortgage debt, student debt is not diffusible through bankruptcy, it stays with borrowers for life.

Despite this unstable situation, in August 2011 Congress passed the Budget Control Act that will abolish subsidies from a pillar of education finance—the Federal Direct Stafford loan. Although undergraduates with the loan will continue to receive subsidies, graduate students will start accruing interest while still in school. With the skyrocketing costs of higher education and the increasing time it is taking post-grads to pay off their loans, this amount adds up quickly. For example, a medical student who matriculates in 2012 and receives the unsubsidized Stafford loan for all four years of her schooling will graduate with $5000 more in debt than a medical student who graduated this year, all resulting from interest charges that accrued while she was studying full time. It often takes medical students 10 years or more to repay all their debt, and in that time interest will continue to add up so that she actually pays $10,000 just for the interest on that single, federally-provided loan. In total, $18 billion is being passed off onto graduate students over the next ten years (3) The removal of subsidies is a subtle step but it sends a strong message. If the federal government continues to retract its commitment to financially support higher education, it risks three major effects: exaggerating the student debt crisis, inhibiting diversity in higher education and discouraging the pursuit of non-profit or socially responsible careers.

Of the many students now financing their higher education, medical students take on the greatest debt because they borrow the largest amount upfront and often defer their payments during residency. With the average indebtedness now at $157,990, the extra $10,000 from the loss of subsidies may seem insignificant, however, it’s an abrupt addition to an already tenuous debt situation (4). The interest rate on the Stafford loan has more than doubled in three years, rising from 2.8 to 6.8%. Total student debt at graduation has increased by 74% since 1999, about 6-7% per year most recently. With physician salaries increasing at rates between 2.6% for primary care physicians and 4.3% for specialists, the debt-to-salary ratio gap is widening quickly and this strain is unequally imposed on endangered primary care doctors. Currently, medical graduates are required to commit approximately 9–12% of their after-tax income to paying off their educational debt (5). This leaves many physicians paying off their loans into their 40s and 50s, when they should be saving for their children’s tuitions.

Event with its precipitous rise, the threat of debt has not curbed the attraction of medical school; there are now two applicants for every one spot (6). But this should not be hailed as a sign of a healthy system. While the applicant pool may still be competitive, it is becoming more economically and ethnically homogenous (5). Over half of medical students now come from families in the top 20% of incomes while only 3% come from the bottom 20% (7). Despite fervent efforts by medical schools to build diversity in the classroom, cost remains the strongest deterrent to minority students considering a medical degree.8 Studies have shown the benefits of a diverse physician workforce, but the escalating financial commitment is discouraging those students that the profession needs the most (8).

The specter of debt profoundly influences students as they consider their post-graduate career options. Graduating medical students must pick between careers with large salary disparities. Not surprisingly, studies have shown a correlation between the higher paid specialties and the number of residency spots filled (9). As average indebtedness has dramatically risen, the number of applicants to primary care residencies has been shrinking. The annual survey of graduating medical students by the American Association of Medical Colleges (AAMC) found that 42.5% were influenced by their level of debt when choosing a specialty (3). The relatively low pay of primary care careers compared to sub-specialties and the pressure of over $150,000 of debt weighs on the minds of even the most altruistic students. This dilemma is not limited to medicine; these same pressures apply to any graduate student trying to leverage an advanced degree to aid their community. Congress’s removal of subsidies across the board will only further tip the scales away from socially responsible career choices.

Some may argue that the government’s provision of financial aid has caused the inflation of educational debt by making it too easy for students to acquire loans. While there is some evidence that increased federal funding results in educational institutions increasing tuition to match demand (10) this doesn’t mean the solution is for the federal government to join the feeding-frenzy. Even if reducing access to loans would exert pressure to lower tuition, it will disparately discourage minority students and those from families with lower socioeconomic status. Removing interest subsidies while maintaining the availability of loans will do worse by drawing students further into unsustainable debt and doing little to curb education costs. If our country wants to continue producing diverse doctors dedicated to serving their community, it should not discourage higher education by making the debt burden untenable. Instead, it should support the efforts of students with continued financial aid and work with institutions to lower tuitions and increase the value provided to students.

The Budget Control Act may not be the only legislation coming from this Congress that threatens medical education. A joint select “super” committee will be formed to propose plans for a $1.2 trillion deficit reduction. Federal loan programs are not immune to further cuts; more subsidies could be removed, even for undergraduate students, or the total amount of aid available could be reduced. Graduate medical education funding will certainly be considered since previous proposals included cuts in Medicare’s contributions to resident salaries and the academic hospitals that train them. Insecurity about funding and support during residency training will further strain the minds and wallets of young physicians, forcing them farther from lower paid primary care careers. If we want the United States to remain a leader in healthcare innovation and produce a generation of physicians capable of surmounting this century’s challenges, we must give a voice to future students and demand that our government protect those that pursue higher education and socially responsible career choices. Without continued support, the medical profession will end up crippled and distorted by the growing weight of unmanageable debt.


1. Indiviglio D. Chart of the day: student loans have grown 511% since 1999. The Atlantic. August 8, 2011. Accessed September 7, 2011.

2. Hacker A, Dreifus C. The debt crisis at American colleges. The Atlantic. August 17, 2011. Accessed September 7, 2011.

3. Nelson L. A graduate student burden. Inside Higher Ed. August 17, 2011. Accessed September 7, 2011.

4. Association of American Medical Colleges. Medical School Graduation Questionnaire: All Schools Summary Report: Final. Available at: http://www.aamc.org/data/gq/allschoolsreports

/gqfinalreport. 2009. Accessed September 7, 2011.

5. Jolly P. Medical school tuition and young physicians’ indebtedness. Health Aff (Millwood). Vol 24. 2005:527-535.

6. Association of American Medical Colleges. Applicants and Matriculents Data. Available at: https://www.aamc.org/data/facts/applicantmatriculant. 2010. Accessed September 7, 2011.

7. Greyson SR, Chen C, Mullan F. A History of Medical Student Debt: Observations and Implications for the Future of Medical Education. Acad Med. Vol 86. 2011:840-845.

8. Sullivan LW. Missing Persons: Minorities in the Health Professions, A Report of the Sullivan Commission on Diversity in the Healthcare Workforce. 2004.

9. Ebell MH. Future salary and US residency fill rate revisited. JAMA. Vol 300. 2008:1131-1132.

10. Singell LD, Stone JA. For whom the Pell tolls: the response of university tuition to federal grants-in-aid. Available at: http://darkwing.uoregon.edu/~lsingell/Pell_Bennett.pdf. 2005. Accessed September 7, 2011.

Ian Metzler is a medical student at Harvard Medical School studying health systems improvement at Children’s Hospital Boston. John G. Meara MD, DMD, MBA is a plastic surgeon-in-chief at Children’s Hospital Boston and associate director of the program in global surgery and social change at Harvard Medical School. He is also Chair of the Legislative Committee for the American College of Surgeons. This post first appeared at Costs of Care.

3 replies »

  1. Another effort at indentured servitude by those trying to dictate the course of care who are not themselves providers. I think a lot of people who talk about the status of medical eductation these days are trying, sometimes very desperately, to paint the rosiest picture as able to not let the brutal facts get in the way. Who is going into medical school since the mid 2000’s? It is not people who genuinely think and know they can make a difference in people’s lives, if they are paying attention to the growing micromanagement and non clinical intrusions into everything that is the health care process. If you believe otherwise, then I can only surmise 1, or both, of 2 things: people are trying to figure out ways to still make a sizeable income as a physician, which will not lead to good choices at the end of the day, or, people are terminally optimistic that a national health care system will be implemented by the end of this decade, and then foolishly think that health care will be most effective and applicable to every single citizen in the country.

    I ought to know about the latter thought, as I once thought national health care would be the better of other evils, but, I was young, naive, and terminally optimistic. 10 years of being a provider was the proverbial chemotherapy I needed to find remission. Politics, greed, and sheer control issues are the rule of thumb as of now. And enslaving students to have to pay off large loans is not helping people. Let’s see who is cute and fancy in twisting the facts into another delusional system of false hope, as things stand as of October 2011.