HPSP Financial Analysis

[The White Coat Investor]

A few years ago I ran the numbers to see what a great deal I got by going the HPSP route. I was surprised to realize I came out waaaaaay behind. This was chronicled in this thread: http://forums.studentdoctor.net/showthread.php?t=351167

But things have changed quite a bit in the 12 years since I started medical school. Aside from the signing bonus and a monthly stipend that is over twice as high as what I was paid, tuition is up 150% at my medical school and loan rates are up from <2% to 6.8%+.

So I was curious, is HPSP a good deal for an emergency doctor now? Running the numbers again reveals that it is pretty much a wash for an emergency doc who went to a private med school or went out of state to a public school. If you're in a lower paying specialty, it is a good deal. A higher paying specialty or a cheaper medical school? Still a bad deal. You can read more on my blog:

http://whitecoatinvestor.com/?page_id=152

Obviously this analysis addresses only the financial aspects of the scholarship and military service.

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[BloodnGuts]

So I was curious, is HPSP a good deal for an emergency doctor now? Running the numbers again reveals that it is pretty much a wash for an emergency doc who went to a private med school or went out of state to a public school. If you're in a lower paying specialty, it is a good deal. A higher paying specialty or a cheaper medical school? Still a bad deal. You can read more on my blog:

http://whitecoatinvestor.com/?page_id=152

Obviously this analysis addresses only the financial aspects of the scholarship and military service.

I am actually curious as to this as well. I recently signed my contract and took my oath. Before I agreed to the commitment I did take into account whether or not I was making an incredibly stupid financial decision, and the conclusion that I came to was that this was a good decision for myself and my family.

It seems that whenever I see a breakdown of the value of the HPSP scholarship a number of $150,000 is thrown out as that is the average debt of medical students. However, as an out of state student I was looking at a figure closer to $270,000 in loans. Add to that that my son is due the first week of medical school I am sure that I have some upcoming costs that the 20K sign on bonus will help cover.

Not having to worry about money is a huge weight off my shoulders as I am currently the sole provider to our family. I'm from a humble background, I'm interested in family medicine, and I have been interested in military medicine for years now. So I'm not too concerned (right now) if I will come out "behind" by taking the scholarship, because I know that my families financial needs will always be met for the next four years and beyond. The idea that I may come out "ahead" financially in the long run because I am interested in primary care is that much cooler though.

 

[dillydally]

the conclusion that I came to was that this was a good decision for myself and my family.
.

For someone interested in primary care and is the sole provider of a family, it's definitely an awesome deal. More lucrative specialties? I think it's about even or you might lose out a bit. The freedom to get into the residency you want and do a fellowship in the military? Severely limited. The feeling of financial security during school/residency for someone with a wife and kids to support? Priceless.

 

[orbitsurgMD]

I am actually curious as to this as well. I recently signed my contract and took my oath. Before I agreed to the commitment I did take into account whether or not I was making an incredibly stupid financial decision, and the conclusion that I came to was that this was a good decision for myself and my family.

It seems that whenever I see a breakdown of the value of the HPSP scholarship a number of $150,000 is thrown out as that is the average debt of medical students. However, as an out of state student I was looking at a figure closer to $270,000 in loans. Add to that that my son is due the first week of medical school I am sure that I have some upcoming costs that the 20K sign on bonus will help cover.

Not having to worry about money is a huge weight off my shoulders as I am currently the sole provider to our family. I'm from a humble background, I'm interested in family medicine, and I have been interested in military medicine for years now. So I'm not too concerned (right now) if I will come out "behind" by taking the scholarship, because I know that my families financial needs will always be met for the next four years and beyond. The idea that I may come out "ahead" financially in the long run because I am interested in primary care is that much cooler though.

"Average debt" is meaningless on a practical level. To politicians and policy advocates, it is a handy figure, but it doesn't represent reality as most people borrowing would experience. Those average debt figures are averages themselves of those who borrow substantially, military scholarship recipients who borrow much less and those with the resources to pay full freight without borrowing. If you are not coming from a family with the excess disposable income to pay the $30,000 (very cheap state school) to $70,000 (typical private school) annual costs of a year of medical school, and who would not need these calculations anyway, you are really looking at $150,000 to $300,000 in borrowed money at whatever prevailing interest rates are.

 

[Mirror Form]

For someone interested in primary care and is the sole provider of a family, it's definitely an awesome deal. More lucrative specialties? I think it's about even or you might lose out a bit.

That's going a little far. There are a lot of factors that are difficult to take into account. For example, if you have to move around several times in the military, you might take a finacial loss selling your house. Or you may end up blowing away a lot of money in rent, which is what has happened to a lot of military members recently. 2 years of rent in some locations is going to be equal to one to two years of your scholarship. Whereas, in the civilian world you could choose your location and put that money towards a mortgage instead, knowing that you won't have to move soon. Also, being forced to move around a lot will severly hamper your spouse's income potential if he/she works.

The freedom to get into the residency you want and do a fellowship in the military? Severely limited.

Which is the main problem with HPSP. Medical training is just far too long and hard to sign away control of it to the government.

The feeling of financial security during school/residency for someone with a wife and kids to support? Priceless.

Yeah, earning a nice income level in residency really is nice, and is one of the main advantages IMHO.

That said, if you're concerned about your family, there is more to consider:
1. You wont' be able to choose where you live, so you'll likely end up somewhere w/o any family to help w/ the kids.
2. You could get deployed for 6-12 months, leaving your spouse alone in a location where she does not have any family for support. This could also be very difficult on your spouse and kids.

So while that extra income in residency seems nice, it's definitely not a reason for joining the Army. Only do HPSP if you actually want to be in the army and your spouse is supportive of it.

 

[bobbyseal]

One thing I noticed doing my taxes this year, that I think gets overlooked in these forums is a little known tax benefit with ISP, ASP, and MSP contracts. Although these are subject to federal withholding taxes, FICA and Medicare are not taken out. So, that effectively increases those pays by 7.65 %. Also, it's fairly easy to not have to pay state taxes. Thus, for those guys who live in a place like California, your take home salary may be comparable to the civilian guys who have high tax rates.

 

[Mirror Form]

One thing I noticed doing my taxes this year, that I think gets overlooked in these forums is a little known tax benefit with ISP, ASP, and MSP contracts. Although these are subject to federal withholding taxes, FICA and Medicare are not taken out. So, that effectively increases those pays by 7.65 %. Also, it's fairly easy to not have to pay state taxes. Thus, for those guys who live in a place like California, your take home salary may be comparable to the civilian guys who have high tax rates.

Good points. God blessed Texas! Also, I don't believe BAH is taxed either. So there is another huge tax break.

 

[BloodnGuts]

Good points. God blessed Texas! Also, I don't believe BAH is taxed either. So there is another huge tax break.

Getting away without paying state taxes will probably weigh in more than it should in my residency rank list.

 

[Perrotfish]

You wont' be able to choose where you live, so you'll likely end up somewhere w/o any family to help w/ the kids.

Do we really choose where we live anyway? I ended up somewhere completely random for college and again for medical school and most of my friends got shipped out to a new random location for residency. The only time that I really lose out on control that I would otherwise have is the 4 years I would spend paying back my obligation.

 

[Mirror Form]

Do we really choose where we live anyway? I ended up somewhere completely random for college and again for medical school and most of my friends got shipped out to a new random location for residency. The only time that I really lose out on control that I would otherwise have is the 4 years I would spend paying back my obligation.

I would argue that most civilian residents do choose their location. Most of my friends from med school applied to numerous programs, but they only chose too apply to programs that were in places they'd want to live. They didn't apply to programs located in Hawaii or El Paso. And if you're determined to be in a certain location, it's usually doable (or you can at least get close). Of course if you're applying for a highly competitive speciality you may have to go wherever you match.

I'm not trying to complain about not getting to chose your location. My point is simply that it's something that needs to be considered, and not just for financial reasons. For example, if you're single, do you really want do your residency in El Paso and then spend the next four years at Fort Polk?

 

[samuraiR]

if you are in theater isnt your entire income tax free? and you get hazard pay? Or am I wrong about that?

 

[NavyFP]

if you are in theater isnt your entire income tax free? and you get hazard pay? Or am I wrong about that?

No, your entire pay is not tax free. For officers, the tax free exclusion is up to the level the Master Chief Petty Officer of the Navy (or service equivalent) would make if he were in theater. (Base pay plus hostile fire pay) That works out to be about $7700 per month. If you are in theater for a year it is about $94K that is not taxable.

Extra pay for being in theater:

Hostile Fire Pay - $225 (for being in a combat zone)
Hardship Pay - $50-150 depending on the country. AFG - $100 (because where you are sucks compared to being home)
Family Separation Pay - $250 (consolation money for being away from your family, you don't get it if you have no dependants)
Per Diem - an extra $3.50 per day for incidentals

Our lump sum bonuses are essentially all taxable. If you are a junior O3, you will have a small portion of your ASP or ISP that is not taxable, for us senior guys, we have some taxable income every month.