Defusing the Student-Loan Debt Bomb

Terri Cullen
Published: Monday, Mar 07, 2011
Ifreke Williams, a third-year med student, stands in front of a camera holding a print-out of her outstanding student-loan debt to date, and the numbers are sobering: “Medical School Debt: $226,000 (Now)—$295,000 @ Graduation.”

Williams shared her story with to raise awareness of the staggering amount of debt many medical students face, along with the difficult career and life decisions that result from it.1 “The thought of starting life with such a huge debt is very frightening, especially since I plan on going into primary care and not a lucrative medical specialty or subspecialty,” she writes.

Medical student loan bill: $160,000

Medical students in the Class of 2009, including both public and private schools, graduated with a median student-loan debt of $160,000, according to a survey by the Association of American Medical Colleges (AAMC).2 But that figure is skewed by the number of students who receive financial assistance from their families, schools, scholarships or other forms of aid. Students like Williams who need to rely almost entirely on loans to pay their education costs often borrow far more: The AAMC survey found that 17% of private-school grads had incurred debt of $250,000 or more.

Students leaving med school with the equivalent of a mortgage in debt is severely limiting the choices young physicians can make—both in terms of their families and their finances. More residents burdened with six-figure debt are shunning family medicine and primary care, concerned with the relatively low pay and looming threat of sharp reductions in government Medicare payments. Physician shortages in primary care are the most pronounced in rural areas and in regions of the country where the cost of living is high. And, regardless of their chosen field, many young physicians find they must make sacrifices in their personal lives to service their debt, such as putting off buying a house or starting a family.

Policy makers are finally starting to take notice of the impact education debt is having on the U.S. healthcare system, and new legislation is being considered to help ease the burden. We’ll look at some new and existing government programs that are attempting to help physicians manage, or in some cases eliminate, their student-loan debt.

Married couples get a break with new IBR rules

Two important changes went into effect on July 1, 2010, that may make some physicians eligible for the Income-Based Repayment (IBR) plan that were not eligible before. A change in the way household income and debt is formulated could mean lower payments for married couples.

IBR is a payment option for federal student loans that keeps monthly loan payments affordable with payment caps based on the borrowers’ household income and family size. In most cases, loan payments are less than 10% of their adjusted gross income. Borrowers in the plans are also eligible for forgiveness of any remaining student-loan debt after 25 years—or just 10 years if they work in the public service sector, including jobs in government and nonprofit 501(c)(3) organizations. The program covers most federal loans. The 10-year payment period doesn’t have to be consecutive; so, for example, a borrower can work in public service for five years, go into the private sector for a few years, and return to complete the 10-year requirement when the time is convenient.

Under the rules that went into effect in July, IBR eligibility will be based on either the balance when the loan first entered repayment or on the current loan amount—whichever is greater. So borrowers with loan balances that have increased due to accrued interest would be eligible to qualify based on what they actually owe. An online calculator available at, can tell you if you’re eligible for IBR under the new rules.

Up until July 1, married couples who both had federal student loans typically paid higher monthly IBR payments than single borrowers. For married couples who file jointly, lenders will now use a formula that factors in the couple’s total outstanding federal student-loan debt and adjusted gross income to come up with the minimum monthly payment. Previously, the formula didn’t combine the couple’s total student-loan debt, leading to monthly payments that were up to twice the amount that two single borrowers would have to pay.

If you’re married and your spouse has federal student loans too, contact your lender to ensure your payments reflect this new rule change.

Forgiveness programs on the rise

Physician shortages have vastly increased the number of national, state, and local loan-forgiveness programs offered to young physicians, most with the aim of boosting the number of physicians in primary care. Currently, there are a number of state and federal bills under consideration that would offer loan-forgiveness or partial-repayment programs to physicians who agree to work in certain fields or underserved areas of the country.

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