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August 2002
Volume 66 |
Number 8
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RESIDENTS' REVIEW
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| Managing Debt
After Medical School |
Jason T. Vigue, M.D.
ASA Resident Delegate to AMA Resident and Fellow Section
Debt is now a ubiquitous feature of medical education. Many students
enter medical school with undergraduate loans and continue to
borrow from the federal government, private banks, and family
and friends during medical school and residency. The degree to
which student loans influence career decisions is unknown but
thought to be significant. The Association of American Medical
Colleges (AAMC) cited the median indebtedness of all 2000 U.S.
medical graduates at more than $94,000 and growing at a 6-percent
annual rate. From 1985 to 2000, average resident debt increased
211 percent, with 29 percent owing more than $110,000. With medical
school debt and resident physician work hours on the rise, the
American Medical Association (AMA) House of Delegates offered
several measures to help young physicians manage medical school
debt and the repayment process.
AMA has lobbied members of Congress to make deferment for economic
hardship easier to obtain and to extend the deferment options
to the full term of residency. Currently, a resident earning $35,000
per year (the estimated average national stipend for a PGY-1)
would qualify for hardship deferment with $72,000 in federal student
loans. Under the AMA Resident and Fellow Section (RFS) proposal
for economic hardship, the same resident would qualify with only
$47,800 in federal student loan debt. At the 2001 Interim Meeting,
the AMA Council on Medical Education issued Report 3, outlining
the measures taken by AMA to elevate student loan debt to one
of its highest legislative priorities.
Currently, there are two bills introduced into Congress this
year that address medical education debt:
S.1762 – On February 8, 2002, the President signed
into law S.1762, ensuring the availability of affordable student
loans. This bill extends the current interest rate calculation
for student loans under the Federal Stafford Loan Program. The
new law extends the use of the current formula until July 1, 2006,
at which time the rate will convert to a fixed rate of 6.8 percent.
If financial conditions force lenders to charge a higher rate,
the federal government will make up the difference.
H.R. 3273 – The Consolidation Student Loan Flexibility
Act of 2001: This legislation seeks to provide physicians with
greater flexibility when consolidating student loans by repealing
the "Single Holder Rule" provision in the Higher Education
Act of 1965. This law has traditionally required borrowers to
refinance through their current lender when all loans are borrowed
through a single lender. This new legislation would allow physicians
to obtain the best repayment options available in the marketplace.
For many years, AMA has asked Congress to restore the deductibility
of student loan interest. In 1997, Congress partially reinstated
deductibility. In March 2001, the RFS, with assistance from the
AMA Political Action Committee, held a Resident Lobby Day in Washington,
D.C., to raise awareness of medical student loan debt. On June
7, 2001, President Bush signed the Economic Growth and Tax Relief
Recognition Act of 2001 (H.R. 1836), now Public Law 107-16. This
law increased the income level for eligibility for student loan
interest deduction from $55,000 to $65,000 for single taxpayers
and from $75,000 to $130,000 for married taxpayers filing joint
returns. It also repealed both the limit on the number of months'
interest paid is deductible and the restriction that voluntary
payments of interest are not deductible.
Finally, it is important to remain positive about the debt load
in light of the excellent prospects for future earnings that will
make that debt manageable. A systematic approach to a resolution
of this dilemma is required, and not unlike a patient problem
list, debt can be categorized and eliminated. Student loans are
the best financial investment we can make because those loans
allow us to pursue our professional dreams.
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Jason
T. Vigue, M.D., is a CA-3 and Chief Resident in Anesthesiology,
University of North Carolina at Chapel Hill, Chapel Hill,
North Carolina. |
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