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At Virginia Commonwealth University, where I'm applying in a little bit, you're mandated to stay within the top 1/3 of the class. Failure to stay in the top 2/3 gets you kicked out of the program, and then you have to retroactively pay back your tuition with interest.
I'm pretty sure the fear of God keeps those M.D/Ph.D students high in the class ranks, at least in Virginia.
I dont know where you got your facts. No program out there mandates you to pay back tuition even if you drop out after two years. They are under no obligation to keep a student in the MD or PhD portion. at my institution there have been a few people to drop out of the program. They usually had to simply pay for their remaining MD years. I've never heard of retroactive payment for tuition.
While I dont doubt some truth behind what you say about having to be in the top 1/3 there are MD/PhD programs that give their students the leg up when it comes to clinical years. This is key when deciding between MD/PhD programs. One "upper tier" program, for instance, mandates that MD/PhD students have a certain number of honors grades in order to graduate. While this is a mandate, MD/PhD students are essentially "given" one or two honors simply by being excluded from the class curve when tabulating grades. Other schools such as UIUC, you do you clinical rotations with nearly 90% MD/PhD students and are not compared to MD students. And at other schools, particularly some "prestigious" institutions 60-90% of the class gets the highest "honors" grades. I personally like the UIUC methodology. It makes more sense.
but the bottom line is...regardless of where you come from a Student A (MD) who has three honors (where 65% of the class gets honors) is most often ranked higher than Student B (MD/PhD) who has all high passes at a school where only the top 5% gets honors, regardless of whether student B is from a top tier school. I was just discussing this with one of the program directors today. This whole process of residency selection is wacky to say the least.