According to the American Medical Association, the average medical student graduated from medical school owing $139,751 in student loan debt in 2007. Considering that the starting residency salary averages $44,747 and doesn’t rise much throughout his residency, making payments on the debt during this time constitutes a hardship for many young doctors.
Expense of Becoming a Doctor
According to The College Board, the median cost of fees and tuition for public medical school for the 2009-10 academic year was $24,384; meanwhile, private medical schools cost $43,002. Living expenses and profession-related costs, including professional attire, books, licensing exam fees and residency interview expenses amounted to around $15,000, making the average yearly total for a medical student’s budget come in at about $45,000 per year.
Expense of Borrowing
At this rate, if the student graduates in four years from an average priced medical school with loans that are 1/3 subsidized (interest paid by the government) and calculated at a 7 percent annual rate, he will have a debt of about $200,527. If he borrowed $22,500 twice per year (1/2 of $45,000) and the remaining 2/3 of the interest is compounded bi-annually at 3.5 percent, his total college and medical school debt would be $300,257. With debt-forbearance during his five-year residency and a 20-year payment plan, the total owed would be $788,880.
The IRS allows a maximum $2,500 per year deduction for interest paid on a student loan. However, this deduction phases out when the taxpayer earns $115,000 and more, making most doctors ineligible for the deduction. Dr. Benjamin Brown, author of "Informed Consent,” points out that a business is allowed to write off almost all of the costs of becoming a business, but a doctor is not allowed to deduct the cost of becoming a doctor—or even the interest on the loans.
According to U.S. News and World Report, the federal government’s National Health Service Corps and various state agencies are making generous loan forgiveness programs available for doctors and nurse practitioners who plan to go into family or internal medicine. Similar programs are available to doctors who plan to practice in rural areas low on doctors. For example, a Rhode Island program offers up to $80,000 over four years to primary-care doctors who practice anywhere in the state and the state of Minnesota will pay up to $100,000 over four years in debt forgiveness to doctors with certain specializations who practice in designated areas of the state.