Medical School: Is the price tag worth it?

The road to becoming a physician is a long one filled with twists and turns, filled with a grueling curriculum. Let’s look at the numbers. 

By the #’s

According to the AAMC, the average cost of attendance for one year at a public medical school (including tuition, fees, and health insurance) was $37,556 for in-state students and $61,858 for out-of-state students in 2019–2020. Therefore just four years of medical school will cost an in-state student $150,224 and out-of-state $247,432. This does not take into account tuition increases on a yearly basis and not accounting that medical school is usually paid for by student loans that carry interest rates. Currently, the average student loan interest is 5.8%.

In-State Tuition Example: Assuming 5% interest rate

These numbers assume at the end of graduation from med school you will start making these payments. The reality is you are not. 

Following med school graduation you will need to complete a minimum of three years post-graduate training (a.ka. Residency). According to Medscape, the average medical resident is earning $61,200 per year. My salary as a first year resident is $48,000 to give some context. Most residents are making bare minimum payments through government programs such as income based repayments, which does not touch the interest rates on this loan. Even worse some have put their loans on deferment or forbearance (I’ve done this as well). 

The reality is that the loan will continue to earn interest as you are training. Therefore assuming a three-year residency, your loan of $172,428.80 will have incurred $13,613.64 of interest and would have ballooned to $186,042.44.

Assuming you came out of undergrad without debt and started med school at age 24 (currently the national average). We are looking at….

Four years of med school + three years of residency (minimum) for our example above cost $186,042.44. 

According to Medscape 2019 report, the average primary care physician earned $195,000, specialists $284,000. The physician’s overall average salary was $313,000.  

If you owe $186,042.44 and you make $195,000, personally it’s a fair trade-off and you should be able to pay this loan back within 2-5 years (if you follow the live like a resident principles), not taking into account any loan forgiveness or payback programs. 

However, given that most residents finish their graduate training in their mid-30s, and having gone through the gauntlet of the medicine, you can see why some physicians go crazy once they start getting their first big doctor (a.k.a attending) paycheck. If you go out and buy that brand new car, the doctor house with all the fixings and take that luxurious vacation, and buy all the new clothes you wanted you can can put yourself in a huge hole in terms of paying back that loan, even with the high income, you will find yourself living paycheck to paycheck. 

The math

Let’s break down the $195,000 per year salary, assuming a state like Florida

Monthly $195,000/12 = $16,250

Semi-Monthly (every two weeks)  $8,125

After taxes and insurance that two weeks paycheck looks like $5,500

Pay it off in 5 years

Paying off $186,042.44 in 5 years: Requires about 32% of your take-home pay. 

Monthly Loan Payment: $3,510.85

Number of Payments: 60

Cumulative Payments: $210,651.02

Total Interest Paid: $24,608.58

Pay it off in 3 years

Pay it off in 3  years: Requires about 50% of your take-home pay.

Monthly Loan Payment: $5,575.86

Number of Payments: 36

Cumulative Payments: $200,730.91

Total Interest Paid: $14,688.47

As you can see it will take an additional 3-5 years to pay this off depending on your specialty. If you are in a high paying specialty making $300k+, you can pay it off sooner, but for most physicians, if you follow the live like a resident principles you can pay it off in 2-5 years. 

This includes giving yourself a pay raise out of residency. During your training You have been living on an average of  $61,858 a year, in my case much less. Let’s say you increase your lifestyle and salary to $75,000 a year, and throw as much as you can at those loans, then they will be off your back in no time and your future self will thank you. 

As you’ve seen, 4 years of undergrad, 4 years of medical school, 3+ years of residency training, plus additional fellowship training accumulates a ton of debt. From our example above, from the start of medical school, you have 10-12 years BEFORE you can get back to broke i.e to $0. WHAT??? Yes, that is the reality. Medical school and training  cost you money, for those 10-12 years you were borrowing money and incurring interest, meaning you had a NEGATIVE balance. Once you pay off those negative balances, not you get back to $0 and can start building a POSITIVE net worth. 

$1 Million Dollar Mistake

The average household income in the United States is $56,516.

Assuming you went to a state school for undergrad and you had no student loans and at the age of 24, you started making $56,516 per year for 10 years, over those 10 years you would have made a gross income of $565,160. During that time if you invested $10,000 (20% of your income) a year at 8% interest in the stock market, you would have made an additional $156,454.87, totaling $ 721,615. This assumes no bonuses, no raises.

If you increase that salary to $75,000 *10 years….you start seeing the numbers increase and that $Million looks like a reality. 

Some sectors and states, some individuals can make $100K coming out of college. 10 years later, they would have made over $1 Million dollars….

While those that pursued medical school would have been paying back debt, just to get back to broke. 

In the long term can a physician catch up? Of course, they have a high income and in theory more discretionary money they can invest, but that takes intentionality and not trying to keep up with the Joneses. 

Numbers don’t lie…

Although individuals working can gross over a $1 million in their lifetime, the reality is that the average u.s savings is less than $50k.  The system is broken and financial literacy is not taught at an early age. 

The issue with the system is that most people do not invest their money and are living paycheck to paycheck. For me, my first engineering job out of college I did not even invest in my company’s 401K. It was opt-in, and I had no idea what it was. For the first five years of my career, money came and went and I had zero savings and investment to show for it. 

This is one of the major issues with financial literacy in the U.S. Although many individuals will  have grossed over $1 Million in that timeframe, it does not mean they have $1 Million in the bank.

Medicine is not a get rich quick scheme, it takes a lifetime of work starting as early as childhood. Remember when they asked you, “what do you want to be when you grow up?”

This is not a decision that should be taken lightly. However, with the right passion, desire, and support, trust me you’re going to need a lot of social support; your dream of becoming a physician can come true. If money is your only goal…..find something else.