Each year, medical students incur more than $166,750 in medical school debt, according to the AAMC. Despite the organization’s conclusion that medical student debt is not a determining factor in choosing a medical specialty, the cost of education is a major concern for the future of health care. Medical students and physicians across the US have made extensive time commitments during their 20s to mastering the foundations of medicine and completing a residency. New physicians today face an exorbitant amount of debt that takes anywhere from 10 to 30 years to repay. We must continue to attract the brightest and smartest students into medicine without deterring them by cost. All Americans and the newly insured 32 million US citizens are counting on my generation to become the future of medicine. We cannot afford to let a price tag deter us from this responsibility.
When a friend and I created our medical school’s first student state lobby day, the solution proposed by many legislators was to find a side job or take out more student loans. As any physician would know, medical students already work and study for more than 70 hours a week, which does not allow for earning a substantial side income.
I propose a unique business model, “Invest in a Medical Student’s Tuition Program,” (IMSTP) to help mitigate student loan debt. I began working on this idea three years ago, after I presented it to the AAMC’s Organization of Student Representatives. My goal is to create a new venture that would eliminate one of the two financial problems facing students: cost of tuition and interest rates. Because the cost of tuition is set by the university, I decided to tackle the 6.8 percent interest rate set by federal government Direct Loans.
I wondered, Could we curtail the total cost of medical students’ education by decreasing interest rates by 50 percent on loan repayments by creating a platform for private investment? IMSTP is a unique solution and the FIRST business model of its kind to help decrease the cost of attendance while incentivizing investors to make fiduciary investments in medical education.
Private investors would invest their money in a pool, from which medical students would draw their loans at a 3.4 percent interest rate. That’s half the interest rate that the U.S. Department of Education charges on its Direct Loan Program, the primary government loan program used by medical students. The lower interest rate would save students nearly $50,000 over the course of their education. Investors make money, medical students pay less… It is a WIN-WIN proposition!
The loans would have a low probability of default; most medical students ultimately take residencies and move into the working world from there. The benefits to investors include a reliable return on investment and an opportunity to do good for society.
The program has received some coverage in the press. I have met with numerous federal and state legislators, such as Senator Chuck Grassley (pictured at left); and I have an upcoming meeting with Iowa Governor Terry Branstad to discuss tax incentives for investors to make this financial tool a competitive alternative to current investment options.
We owe it to the future of health care to make medical school as financially feasible as possible to as many students as possible. Please lend your support.
Shady Henien is a fourth-year medical student and Student Body President at University of Iowa Carver College of Medicine and serves on the AAMC Organization of Student Representatives.He can be reached at Shady-Henien@uiowa.edu. This post originally appeared at Wing of Zock.
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You ask What is the Value of Lectures when students can cover more studying on their own? Tell you what, I raised that same question to one of my professors. And he sent me out and gave me an appointment with the Dean. I am one of those students who would rather be anywhere studying than listening to old farts drone on and on and on about 50% medicine and 50% rubbish.
MD.MA,
You are right that I don’t have a lot of knowledge about the topic, not being in the finance or banking industry. Your name would seem to indicate that you are a physician in Massachusetts – or someone with a Masters Degree who lives in Maryland What “relevant knowledge” do you have on this topic?
The main reason I said “No” to using donations to “buy down” interest rates is that it seems a circuitious route to accomplishing a WORTHY goal. Let us suppose that we have an amount of money that we wish to donate to a medical student. We can use that amount of money to “buy down” the interest rate on a loan, or we can simply give that money to the medical student to reduce principal.
So for example, in one case we have a medical student that owes $100,000 at 5% and another in which the student owes $200,000 at 2.5% (and I know these are probably not the mathematically correct numbers – which because of my lack of “relevant knowledge”, I am unable to calculate) Why is it better to have a low interest than a reduced principal?
I agree that Medical Students coming out of training are facing a huge financial burden – much greater than when I finished training. I think that it definitely affects their future specialty and other practice choices. I think the solution is twofold; reduce the cost of a medical education and increase government financial support.
I was a member of a class of about 250. During the first 2 years, we mostly sat is class and listened to lectures – many of them bad. Some of the top students in my class NEVER ATTENDED CLASS! What was the value of those lectures? How much should a med student pay for them if he/she can do just as well on the Boards and never listen to them?
During the last 2 years, we rotated around the various services at University Hospital and other hospitals. And although there was teaching, most of it was from residents and in exchange for which, we were their “scut monkeys” – we started IVs, got results from the lab, etc. etc. Again, what was the value of this experience and how much should med students pay for it?
I am extremely skeptical of statements like: “It costs $75,000 per year to educate a Med Student”. I believe there is a tremendous amount of cost shifting occurring. I am also not convinced that some of the traditional elements of medical education still make sense. Do we really need to dissect a cadaver? Do we really need to learn about the Krebs Cycle?
I guess in summary, I do feel we have a problem, but am looking for more fundamental change. Using donations to buy down interest rates doesn’t seem to do much.
Thanks for investing so much time and energy into this. The difference between a novel idea and a meaningful change is often just the energy of a few individuals. Shane, you are one of them.
6.8% on loans to the government is a despicable practice, let alone its impact on our ability to maintain financial solvency post-graduation. Reduction of interest through private investment is a mutually beneficial practice that increases prosperity of all parties involved, rather than dumping interest down the government’s money-pit.
I doubt legacyflyer has any relevant knowledge for that “no,” but I do, and it’s a great idea.
“Could Private Investment Be a Game Changer for Med Student Debt?”
No