how is average indebtedness so low?

[readmypostsMD]

so it seems that most schools have an average indebtedness of around 200k, yet based on yearly COA, that figure should be higher.

eg Tufts COA is around 100k, yet average indebtedness is only 222k

what gives? what happened to the other 200k?

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[KnightDoc]

so it seems that most schools have an average indebtedness of around 200k, yet based on yearly COA, that figure should be higher.

eg Tufts COA is around 100k, yet average indebtedness is only 222k

what gives? what happened to the other 200k?

Some people receive merit money (not necessarily Tufts, but, in general), others receive generous need-based aid, and still others have wealthy families and do not have to borrow a lot. Remember, it's an average. If a four year COA is $400K, some will borrow $400K while others borrow $0!

The only people borrowing the full amount are those who come from families of means who for whatever reason are not receiving any help from their families. There is no reason to expect that would constitute a significant portion of any given class. When you think about it like that, the average indebtedness is actually right around where one would expect it to be.

 

[Lucca]

1. finaid, 2. med students tend to come from very well-off families, on average

https://www.aamc.org/system/files/reports/1/october2018anupdatedlookattheeconomicdiversityofu.s.medicalstud.pdf

about 20% come from top 5% income families (>220k/yr), 50% of med students come from top quintile income families (>120k / yr) , about 80% from the top 2 quintiles (>75k).

 

[readmypostsMD]

1. finaid, 2. med students tend to come from very well-off families, on average

https://www.aamc.org/system/files/reports/1/october2018anupdatedlookattheeconomicdiversityofu.s.medicalstud.pdf

about 20% come from top 5% income families (>220k/yr), 50% of med students come from top quintile income families (>120k / yr) , about 80% from the top 2 quintiles (>75k).

I guess I'm just confused. I come from a very well-off family that is contributing $0 to my medical education and I didn't receive any aid

 

[LizzyM]

I guess I'm just confused. I come from a very well-off family that is contributing $0 to my medical education and I didn't receive any aid

The expectation is that your "well-off family" will support you in your education rather than expecting the school to beg donors to contribute so that you can receive a merit scholarship. If you were a hot prospect, the school might offer merit aid to draw you in, but if you are average for a specific school, they have no incentive to give you merit aid... there are plenty of other "average for them" applicants who will be happy to attend in your place.

 

[A_Knowbody]

Your family wealth disqualifies you from need-based aid. It sounds like the school's you've been accepted to either don't offer merit based aid or you did not qualify for it.

As KnightDoc said, typically the only people floating the whole 400k are those from well-off families who are not offering financial support. That sounds like your situation.

I understand your frustration on parental income being accounted for, even when yours are not helping. I think it's important to understand that while your parents might not be helping financially, they always have the potential too. If finances were seriously a consideration, it's unlikely that someone from a wealthier situation would drop out or become homeless due to debt burden. It also helps level the advantages that many of the disadvantaged have already had to overcome to get to a point where they are a successful applicant.

 

[readmypostsMD]

Your family wealth disqualifies you from need-based aid. It sounds like the school's you've been accepted to either don't offer merit based aid or you did not qualify for it.

As KnightDoc said, typically the only people floating the whole 400k are those from well-off families who are not offering financial support. That sounds like your situation.

I understand your frustration on parental income being accounted for, even when yours are not helping. I think it's important to understand that while your parents might not be helping financially, they always have the potential too. If finances were seriously a consideration, it's unlikely that someone from a wealthier situation would drop out or become homeless due to debt burden. It also helps level the advantages that many of the disadvantaged have already had to overcome to get to a point where they are a successful applicant.

well... goodbye primary care... plastic surgery here I come...

 

[KnightDoc]

well... goodbye primary care... plastic surgery here I come...

If only it were that easy!! 🙂

 

[meronebib]

If I’m not mistaken, this isn’t really indebtedness—lots of schools estimate their students’ indebtedness based on how they analyzed your financial situation. So, if a school determined that your parents will pay your education completely, and your parents don’t pay anything, that still counts as $0 of debt for you when the data is gathered. I think the better way is to look at the loan data, of course...

 

[deleted994889]

The calculated COA is the maximum amount a school can offer each student in federal loans. By necessity, this number is an overestimate in order to cover as much of a student's expenses as possible. The actual COA, and the average calculated by the school, is lessened by:
1. Family contribution- med students tend to come from affluent families who are able to pay part/all of actual COA
2. Scholarships- institutional/outside, need/merit, military
3. How much the student actually spends- students typically don't spend the maximum estimate i.e. split rent with 1 or more roommates, or even commute from home
4. Private loans (see below)
5. Student contribution- some might have past savings or income from moonlighting during school

If I’m not mistaken, this isn’t really indebtedness—lots of schools estimate their students’ indebtedness based on how they analyzed your financial situation. So, if a school determined that your parents will pay your education completely, and your parents don’t pay anything, that still counts as $0 of debt for you when the data is gathered. I think the better way is to look at the loan data, of course...

My guess is schools use data on the average amount of federal loans as their main calculation since they directly handle those loans. They could simply look up how much federal debt their graduating class has and calculate the average. I'm not sure if private loans are included or even make a difference since the schools don't handle them directly and the vast majority of loans are Federal anyways.

 

[DokterMom]

well... goodbye primary care... plastic surgery here I come...

Better start saving for that application cycle! Between away rotations, a boatload of applications and hopefully, a handful of interviews, plan on spending at least $10,000.

 

[KnightDoc]

If I’m not mistaken, this isn’t really indebtedness—lots of schools estimate their students’ indebtedness based on how they analyzed your financial situation. So, if a school determined that your parents will pay your education completely, and your parents don’t pay anything, that still counts as $0 of debt for you when the data is gathered. I think the better way is to look at the loan data, of course...

I don't think so -- I am pretty sure that student loans have to go through the school before they can be approved (either federal or private -- since the loans are not collateralized, even private loans need a verification from the school regarding COA, you being enrolled and in good standing, etc.), so the schools have good numbers on actual amounts borrowed, not just the amount they think you should borrow. Of course, this doesn't account for mortgages taken out to pay for school, but I think it is all student loans actually taken without regard to what the school thinks your parental contribution should be.

 

[Morc]

Those with Canada goose jackets in college are the reason indebtedness is so low

 

[A_Knowbody]

I’m from a low income family. I had full tuition and basically all my housing covered with need based aid in college (I paid $2K/year at a top private undergrad)

I got $0 in need based aid from my public MD school. Many schools give nothing in need based aid

To answer OP’s question: you would be surprised how many of your med school classmates come from crazy wealthy backgrounds. Many of them will have physician parents. I have many friends whose parents can pay outright for the full cost of med school. I have other friends whose parents pay for their full living expenses, so they only take out $160K in tuition. Then people like me who are the first in their family to go to college and get stuck with a $300K+ bill as a result

Fair point. Not everyone from low-income backgrounds gets need-based aid. I'm sorry I discounted your experience.

 

[A_Knowbody]

As a resource, I have used You are being redirected... as provided by the AAMC.

See the downloadable DFC.

 

[himitsuda]

You'd be surprised how many rich kids go into medicine (or not, after looking at the bill). A good chunk of my classmates come from physician households (or higher SES households in general) and are having their parents pay for their entire COA. They couldn't believe that I was paying my way entirely through loans and that my parents weren't able to contribute past groceries + gas.

 

[A_Knowbody]

Yeah, the article Gonnif shared and the DFC (which the article referenced) states that ~27% of medical students (c/o 2019) graduate completely debt free. I'd imagine most of those are from parental contributions rather than from full-ride scholarships or grants.

 

[deleted688779]

I’ve always been wondering about this as well, especially regarding whether need-based scholarships play a role in significantly lowering debt. From what I have heard, schools don’t give much need-based scholarships and if they do it barely makes a dent?

 

[LizzyM]

I can't tell you how many applicants I've seen who come from families where both parents are physicians, or both lawyers. Or one of each. Or business executive (MBA) and stay at home parent. There are many, many households with kids in med school that have incomes of >$400K. And those are the working class compared to the multi-millionaires. (I have even seen an application from someone whose father is a well known individual with a net worth upward of $200 million.)

 

[Obnoxious Dad]

It's not the debt at the end of medical school that matters. It's the debt at the end of residency that's critical.

 

[Tiran145]

I’m from a low income family. I had full tuition and basically all my housing covered with need based aid in college (I paid $2K/year at a top private undergrad)

I got $0 in need based aid from my public MD school. Many schools give nothing in need based aid

To answer OP’s question: you would be surprised how many of your med school classmates come from crazy wealthy backgrounds. Many of them will have physician parents. I have many friends whose parents can pay outright for the full cost of med school. I have other friends whose parents pay for their full living expenses, so they only take out $160K in tuition. Then people like me who are the first in their family to go to college and get stuck with a $300K+ bill as a result

Middle class family, but same here.

 

[readmypostsMD]

It's not the debt at the end of medical school that matters. It's the debt at the end of residency that's critical.

This may sound stupid, but do people ever go to drastic extents during residency to reduce loan burden? Like living in a van or something?

 

[openstage]

I think people are forgetting the embedded pre med expenses that favor middle and upper income families. Many of us have spent over $10,000 just to get to this point. These sound familiar?

1. MCAT and test prep
2. The primary and secondary apps, travel and interviews, clothes
3. Doing research instead of working in the summers.
4. Study abroad
5, Hundreds of hours of shadowing and volunteering instead of doing a workstudy job.
6. Some costs associated with doing a poster and presenting.

I’d add that many exceptional students come from families who provided financial supports throughout high school. Travel, tutors, AP classes etc... So it makes perfect sense that Med students come from these kind of environments.

 

[Obnoxious Dad]

This may sound stupid, but do people ever go to drastic extents during residency to reduce loan burden? Like living in a van or something?

You don't need to live in a van and eat noodles off a hot plate. Train as a resident in a good quality, high paying residency program in a city in the Midwest or South that has a low cost of living. Avoid the Northeast and the west coast. When you're finished then go find yourself a high paying job in a city with a low cost of living and live like a teacher until you're debt free. That's how to get them paid off fast.

 

[KnightDoc]

This may sound stupid, but do people ever go to drastic extents during residency to reduce loan burden? Like living in a van or something?

Why would you want to subject yourself to such deprivation when you are going to be making a very nice living in a few short years? It's one thing to not borrow money during residency to take vacations or buy a car you can't afford. It's quite another to live in a van to save however many thousands of dollars an apartment will cost when you will be making hundreds of thousands of dollars per year in the foreseeable future.

 

[Fishwithadeagle]

1. finaid, 2. med students tend to come from very well-off families, on average

https://www.aamc.org/system/files/reports/1/october2018anupdatedlookattheeconomicdiversityofu.s.medicalstud.pdf

about 20% come from top 5% income families (>220k/yr), 50% of med students come from top quintile income families (>120k / yr) , about 80% from the top 2 quintiles (>75k).

How many of those families making 120k / year are actually contributing any significant amount to student expenses and tuition.

 

[KnightDoc]

How many of those families making 120k / year are actually contributing any significant amount to student expenses and tuition.

Probably not so many, depending on their savings, but remember -- that quintile only starts at $120K. As income increases from there, so does ability to contribute. Willingness to contribute is another matter entirely! 🙂

 

[Fishwithadeagle]

Probably not so many, depending on their savings, but remember -- that quintile only starts at $120K. As income increases from there, so does ability to contribute. Willingness to contribute is another matter entirely! 🙂

It's unfortunate that certain students can be absolutely screwed.

 

[finn_]

It's unfortunate that certain students can be absolutely screwed.

It's definitely something that I've encountered as well. I'm not from a low-income family, but I'm also not from a family that can shell out the $400K that schools think I can, so I get left in the middle zone where my parents can't realistically afford to foot the bill, but I don't get any aid. Luckily some schools offer merit aid, but it's honestly crazy to me that non-trads still have their parents' financials taken into account.

I also fell into the trap of believing the average debt number. I saw Stanford's average debt was $89K, but didn't stop and think that there are people on both extremes as well...

 

[Fishwithadeagle]

It's definitely something that I've encountered as well. I'm not from a low-income family, but I'm also not from a family that can shell out the $400K that schools think I can, so I get left in the middle zone where my parents can't realistically afford to foot the bill, but I don't get any aid. Luckily some schools offer merit aid, but it's honestly crazy to me that non-trads still have their parents' financials taken into account.

I also fell into the trap of believing the average debt number. I saw Stanford's average debt was $89K, but didn't stop and think that there are people on both extremes as well...

This is precisely the case for me as well. I don't even know if being a non-trad matters. There are simply families that are not going to fund any part of the education as they are not required to. Expecting parents to contribute anything is crazy, especially at the cost of medical school.

 

[deleted994889]

You don't need to live in a van and eat noodles off a hot plate. Train as a resident in a good quality, high paying residency program in a city in the Midwest or South that has a low cost of living. Avoid the Northeast and the west coast. When you're finished then go find yourself a high paying job in a city with a low cost of living and live like a teacher until you're debt free. That's how to get them paid off fast.

I agree with all points except for living like a teacher until debt free. If you have a federal IDR plan, making payments for 20 years may actually be cheaper than aggressive repayment. This is mostly for people who will have a debt-to-income ratio >1.5 upon attending. Less than 1.5, aggressive repayment will usually be the best option. As usual, one should always run the numbers to make sure. That said, even following a IDR plan, living modestly may still be a good idea if one is saving for something big (house, business, etc.).

 

[finn_]

This is precisely the case for me as well. I don't even know if being a non-trad matters. There are simply families that are not going to fund any part of the education as they are not required to. Expecting parents to contribute anything is crazy, especially at the cost of medical school.

Yes, fair enough—I think you’re totally right and I completely understand that there are other situations outside of my own which are also unfair!

I guess was just speaking from my own experience about how absurd it feels to have paid my own bills/worked for 2 years and then be treated as a dependent and told I don’t qualify for aid.

 

[Wolvvs]

I agree with all points except for living like a teacher until debt free. If you have a federal IDR plan, making payments for 20 years may actually be cheaper than aggressive repayment. This is mostly for people who will have a debt-to-income ratio >1.5 upon attending. Less than 1.5, aggressive repayment will usually be the best option. As usual, one should always run the numbers to make sure. That said, even following a IDR plan, living modestly may still be a good idea if one is saving for something big (house, business, etc.).

How would that work? I just looked up REPAYE and it says that you'll be forgiven for 50% of the difference between the annual required payment and annual interest charge for unsubsidized loans. And while the interest won't capitalize it's still going to be there until you pay it off, meaning debt is just going to get larger and larger.

 

[deleted994889]

How would that work? I just looked up REPAYE and it says that you'll be forgiven for 50% of the difference between the annual required payment and annual interest charge for unsubsidized loans. And while the interest won't capitalize it's still going to be there until you pay it off, meaning debt is just going to get larger and larger.

You're referring to the REPAYE interest subsidy which is in addition to the loan forgiveness. For example, if your monthly payment is $1000, and your interest charge for that year is $3000, you will get $1000 (monthly payment) + a $1000 subsidy (50% of $3,000-$1,000) subtracted from your loan total. PAYE and IBR do not have this subsidy.

With one of four income-driven repayment (IDR) plans, your monthly payment is based on how much you make (10-20% of discretionary income, recalculated every year based on salary, family size, etc.). After making 20 years of payments (10-25 years depending on plan), the remaining balance is forgiven (though you owe taxes on the forgiven amount). The loan forgiveness amount (less the tax on it) may outweigh the interest you'd save by paying off sooner. This is generally true if your debt is high enough (debt-income ratio ~1.5:1) even for specialists. You also have to take into account the value of the extra money you'd have instead of making loan payments.

 

[Wolvvs]

You're referring to the REPAYE interest subsidy which is in addition to the loan forgiveness. For example, if your monthly payment is $1000, and your interest charge for that year is $3000, you will get $1000 (monthly payment) + a $1000 subsidy (50% of $3,000-$1,000) subtracted from your loan total. PAYE and IBR do not have this subsidy.

With one of four income-driven repayment (IDR) plans, your monthly payment is based on how much you make (10-20% of discretionary income, recalculated every year based on salary, family size, etc.). After making 20 years of payments (10-25 years depending on plan), the remaining balance is forgiven (though you owe taxes on the forgiven amount). The loan forgiveness amount (less the tax on it) may outweigh the interest you'd save by paying off sooner. This is generally true if your debt is high enough (debt-income ratio ~1.5:1) even for specialists. You also have to take into account the value of the extra money you'd have instead of making loan payments.

I somehow completely missed the fact that it would be forgiven after a certain amount of time. Thanks for the explanation, that makes a lot more sense 🙂