By Joy Sorensen Navarre, Financial Advisor, Foster Klima & Company, Inc.
Doctors are knowledge-driven people; therefore, the best way to reach them regarding financial matters is to inform and educate them. Unfortunately, many health care systems fail to educate physicians and advanced practice providers about their top personal financial concern: student loan debt.
As a financial advisor, I discovered the emotional impact of this information gap when a physician dissolved into tears in my office. She told me that a hefty $2,500 monthly student loan payment would force her and her spouse to postpone their dreams of buying a home and starting a family. Imagine her relief when she learned about free federal loan repayment and forgiveness programs available to ease the burden. Over time I discovered she was not alone. Many medical professionals carry substantial educational loan debt and lack the knowledge about programs to help with managing their debt.
To solve the problem, I reached out to leaders in hospitals and universities. Today, an exciting campaign to raise awareness about student debt relief for medical professionals is underway across the country. It’s being led by physician recruitment professionals, hospital executives, physicians, pharmacists and financial advisors.
Here are six reasons you should talk about student debt relief for medical professionals with the administrators and physicians at your organization.
Reason 1: Most physicians and advanced pracatice providers graduate with a staggering amount of educational debt.
With the rising cost of medical school education, high interest rates on student loans and declining public subsidies for graduate education, medical professionals and their families bear an increasing financial burden. In fact, according to the Association of American Medical Colleges, in 2013, 86 percent of graduating medical students carried outstanding loans. It seems that excessive student loan balances are common. In a recent poll of 100 new medical residents at a Midwest hospital, 70 percent of respondents carried student loan debt of at least $100,000. For 13 percent of respondents, loan balances topped $300,000.
Reason 2: Student loan repayment options abound, yet many physicians, hospitals and recruiters are unaware or make incorrect decisions.
One of the broadest loan forgiveness options available for professionals with high student debt was established in 2007—Public Service Loan Forgiveness. Borrowers working at a nonprofit or public hospital may qualify for forgiveness of their Federal Direct Loans after making 120 qualified, on-time payments. When paired with an income-driven repayment plan during residency, monthly payments become more manageable. Nationally, it’s estimated that 25 percent of the workforce may qualify for this program, but the rules are complex. Physicians often tell us they have heard of the programs but fail to take action because of misinformation or difficulty determining if the program makes sense for their situation. For more information, see Studentloans.gov.
A recent text from a medical resident demonstrates the information gap. He wrote, “Does loan forgiveness apply to residents or just to students? I’m not aware of too many loan forgiveness programs once you’re in residency.” The answer is: Yes, many programs do apply to residents. The vast majority of debt relief applies to borrowers during the repayment period.
Many in-house physician recruiters believe a good solution is to partner with student loan experts who offer personalized consults to their physician and advanced practice provider candidates.
Reason 3: Physician distress has been associated with harmful effects on patient care.
A 2011 JAMA study by Colin West, M.D., found that higher levels of educational debt were associated with lower quality of life and higher rates of burnout among internal medicine residents.
Through the awareness campaign, medical professionals overcome feelings of isolation and hopelessness when it comes to managing their large student loan debt. Learning about loan repayment resources helps physicians take control. The spouse of a New York University medical resident confided, “After talking to you, I don’t feel despair about our student loans.”
Reason 4: Physicians with higher levels of student debt pursuing primary care may need repayment support.
Studies show that students with high debt may be less likely to pursue family medicine or other primary care specialties. Instead, these students seek specialties with higher income so they are able to pay off their debt quicker and easier.
One hospital provides a student loan repayment lecture to all new medical residents during orientation. The hospital partners with financial advisors who provide free consultations to help the residents determine their best loan repayment option. With resources for loan forgiveness or income-driven repayment plans, medical residents may feel open to choosing primary care careers. See studentaid.ed.gov for more information.
Reason 5: Controversy makes headlines more often than common sense.
Perhaps the most common concern I hear related to student debt relief is the fear that Congress or the president may change the rules on loan repayment programs. Many blog posts and news articles emphasize the uncertainty; however, in consults with the U.S. Department of Education, legal experts have determined that “the administrative, political, and legislative hurdles required to retroactively limit or take away Public Service Loan Forgiveness for current borrowers make it extremely unlikely that the program will disappear retroactively.” Borrowers must make decisions by applying current law to their family situation, and should create a contingency plan to protect themselves in the event the law changes.
Reason 6: Physicians are slow to act regarding their personal student loans without adequate preparation or confirmation of a hypothesis.
Physicians are experts at observing and understanding a situation, applying appropriate knowledge and taking direct corrective action for patient care. Why do they delay action regarding student loans? Perhaps the biggest obstacle to taking control of their student loan debt is a lack of knowledge. Dr. Huy Nguyen agrees, “Understanding my loans helps me make better financial decisions. I wish someone had talked to me about this in medical school.”
Some physicians wish to validate that their loan repayment plan is solid; they wish to test and confirm. Other physicians find the topic to be confusing and troublesome. In my experience, when physicians feel informed to take action during residency and fellowships, they save themselves and their families substantial dollar amounts.
Keep the conversation going!
Leaders in hospitals and universities may wish to join the campaign to raise awareness about student debt relief for medical professionals. A free toolkit is available at: http://files.consumerfinance.gov/f/201308_cfpb_public-service-toolkit.pdf.
Choosing the best plan depends on individual circumstances and future career plans. One size does not fit all. A borrower may wish to use the links in this article to fully understand their options and may also wish to talk with a tax or financial advisor for more information.
Advisors from Foster Klima & Company, Inc. are available to discuss student loan forgiveness and repayment strategies. They give presentations at hospitals and conferences across the country. Look for them at the Public Service Loan Forgiveness booth at the 2014 ASPR Annual Conference.