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Students: How to safely wade the waters of 6-figure debt

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This is the first in a series of articles on money management. The second article, “How interns and residents can stay afloat while anchored to debt,” focuses on financial issues important to residents.

Michael Mank, OMS I, wasn’t thinking about money when he decided to go to medical school. The 24-year-old Buffalo, N.Y., native had previously pursued physical therapy as an undergrad and was seeking a profession in which he could serve others.

But Mank quickly educated himself on debt, budgeting and basic personal finance when he started figuring out how he was going to pay for school.

“While I knew that medical school was expensive, I didn’t realize it was this expensive,” says Mank, who expects to take out more than $120,000 in loans to pay for the first two years of his education at the Midwestern University/Chicago College of Osteopathic Medicine (MWU/CCOM) in Downers Grove, Ill.

Mank, who would like to go into primary care, has taken steps to cut down his student debt, such as living at home and working for two years after undergrad to save up for medical school. He buys gas and food in bulk at Costco. He’s applied for scholarships, though they’re hard to land as a first-year student.


“The purpose in going to medical school is to get the degree. It’s not to have a penthouse apartment.”
Kantrowitz of

Mank’s situation isn’t uncommon. Nearly half of DO and MD grads carry a six-figure debt burden on graduation day, says Mark Kantrowitz, the publisher of the college planning sites and

Another incoming student, Adam Thompson, OMS I, shares Mank’s sentiments.

“When I decided to start applying, I knew it was going to be a pretty large financial burden,” says Thompson, of the University of Medicine and Dentistry of New Jersey-School of Osteopathic Medicine (UMDNJ-SOM) in Stratford. “It’s pretty daunting as someone who’s in college and has college loans already to pay for. But I knew that people did it, so I could do it too.”

First-year tuition at osteopathic medical schools averages $39,033 for in-state students for the 2012-13 school year, according to a survey by the American Association of Colleges of Osteopathic Medicine. Tuition increased on average by about 4.5% two years in a row at the colleges. Last year, DO graduates with debt reported owing an average of $207,317 for their medical education, according to another AACOM survey. Of the graduates surveyed, 93% reported having medical education debt.

But Kantrowitz and other finance pros stress that learning to make smart borrowing—and budgeting—decisions can help students cut their debt load as they pick up money management skills that will aid them for the rest of their lives.

Twice the price?

Rule No. 1? Don’t borrow the maximum allowed, and don’t spend your refund check—your loan money in excess of tuition and school fees—on a vacation, says Kimberly Brown, PhD, the director of finance at Midwestern University and chair of AACOM’s Council of Student Financial Aid Administrators.

“What we do is we kind of illustrate to them, if you had $5,000 extra this quarter and you use that to go to Europe, here’s how much you really paid for that Europe trip by the time you pay it off over a 10-to-30-year repayment at the interest rate,” she says.

In this vein, figuring out how much debt you’ll have and working out how much you’ll be paying in interest is another important first step to financial health in medical school, says Sharon Howard, the director of financial aid for the West Virginia School of Osteopathic Medicine (WVSOM) in Lewisburg.

“The major thing that they need to think about is how much it’s going to cost them by the time they get it repaid,” she says. “Just because they borrow a dollar today doesn’t mean that’s what that money is actually costing them.”

Kantrowitz agrees and gave this example: A $100,000 loan at 6.8% interest paid back over 30 years will ultimately cost the borrower of about $235,000. “The total interest exceeds the amount you borrowed,” he says. Whittle the repayment term down to 10 years, and the borrower will only pay about $138,000—or more than three times less interest.

“There is a tendency to spend money because you can and to borrow to the limit. But the purpose in going to medical school is to get the degree,” Kantrowitz says. “It’s not to have a penthouse apartment.”

For many former students following a 30-year repayment plan, Kantrowitz says, every dollar they spend while living on loans ultimately costs them $2. “You’re effectively paying twice as much for it. So before you spend student loan money on anything, whether it’s an apartment, a gadget, a car, double the price and ask yourself, ‘Would I still buy it at twice the price?’ Because realistically, that’s what it’s going to cost you.”

Another day older and deeper in debt?

Howard says students often overborrow because they anticipate landing a job with an institution that will pitch in to repay their loans.


“Medical students need to do well in school to have more access to grants and scholarships.“
Patel of

“That is one reason it is somewhat difficult to keep student borrowing to a minimum,” she says. “because all they see is down the road, where a hospital is going to offer them a big package of salary and loan repayment. So they aren’t too worried about how much they borrow now.”

Ali H. Abdallah, OMS III, of the Touro College of Osteopathic Medicine in New York City, anticipates having close to $300,000 in student loan debt upon graduation. He would like to go into primary care, and says that with the primary care physician shortage in the U.S., he hopes that support and loan repayment programs for primary care doctors will become increasingly common in the future.

“I’m on the optimistic side,” he says. “I believe there’s going to be more support for medical students because it’s going to reach a breaking point where physicians can’t sustain themselves. It’s already occurring. I’m hoping that the support is going to be there.”

On the flip side, financial planner Julie Murphy Casserly, author of The Emotion Behind Money, cautions medical students against counting on loan forgiveness or a high-paying job, even if their chances of landing them are high.

“So many people in our society today believe that if they get that job with the big salary, that will fix all their cash-flow problems,” she says. “And that can’t be further from the truth because once you get the bigger salary, you actually wind up increasing lifestyle, and you typically just have more problems if you don’t put a plan in place.”

Borrow smart

Once students wrap their heads around how much money they’re going to need to borrow, they can make smart decisions about the types of loans they get, Kantrowitz says.

“They need to borrow federal first because the federal loans are cheaper,” he says. “They are going to save you the most money, and they have the most flexible repayment terms, especially if you’re going to end up at a place like NIH where you might be able to get upfront loan forgiveness.”

But Casserly suggests students look into alternatives to conventional loans. “Maybe you have somebody who would like to privately fund your student loans, where you can get a lower interest rate than what you can get through the normal federal programs,” she says. “That’s a creative solution because that could cut your payments down significantly.”

While it’s not an option for all students, Casserly points out that a student could borrow from a relative at an interest rate of 3 or 4% rather than the typical 6.8% rate that federal direct unsubsidized loans carry, which would benefit both the borrower and the lender because interest rates on savings vehicles are unusually low today.

Can schools help?

Students can use resources such as and to map out their loans, start thinking about debt repayment plans, and learn the basics of how interest on a loan is compounded. Also, many osteopathic medical schools offer their own resources to help students.

“The financial aid staff does have an open-door policy, so we definitely advise students to come speak to us one-on-one before they accept any type of loans out there,” says Joseph Sanchez, the director of financial aid at University of North Texas Health Sciences Center (UNTHSC) in Fort Worth, which encompasses the Texas College of Osteopathic Medicine.

Thomas Moorman, the vice president for student affairs at UNTHSC, says university staff arrange yearly money management presentations for osteopathic medical students, during which students can ask about anything related to personal finance.

First-year student Mank says he’s been impressed by MWU/CCOM’s approach to helping students manage loans and budgeting. In fact, he says his attitude toward debt changed when he heard MWU/CCOM’s director of financial aid services give a presentation on loans and money management. One of the director’s standout quotes from the speech, Mank says, was “Live like a student now, not later.”


“Once you get the bigger salary, you actually wind up increasing lifestyle, and you typically just have more problems if you don’t put a plan in place.”
Casserly, financial planner

“That has really stuck with me and kind of dictates how I spend my money each week as I’m here at school,” Mank says. In fact, he adjusted his loan amount the very next day.

Students at schools without advanced resources to aid them in budgeting, borrowing and financing their education may have to seek out those resources on their own. The Council of Osteopathic Student Government Presidents (COSGP) has compiled information on scholarships, financial aid and more. Students should know that many scholarships don’t receive enough applicants, says Jace Eichorn, OMS III, of Edward Via College of Osteopathic Medicine-Virginia Campus and COSGP’s national treasurer.

Budget, budget, then budget some more

Once medical students and premeds work out how much they will need in loans, how loans work, and which scholarships to apply for, they can look into lifestyle decisions that will allow them to accrue less debt in the first place.

The first step? Track your spending, says Jessica Patel, personal finance analyst for

“It all comes back to budget,” she says. “If you can figure out beforehand where your money is going and how much you’re planning on needing each month—if you know that you’re going to need X amount for housing, and X amount for food, and X amount for your car loan or whatever else you may have, then you’ll know in advance how much more you’re going to need and where that money for loans is going to come into play.”

Crunching the numbers before entering a program will help keep students from getting in over their heads while they’re in school, Patel says.

Sharing living expenses with roommates is another major way to cut costs, says Web publisher Kantrowitz, and medical students won’t be spending much time in their homes anyway. Living close to school can slash transit costs as well. Speaking of transit, medical school might be a good time to ditch your car if you can, says Kantrowitz, as it’s a way to eliminate multiple costs such as insurance, a car payment and gas.

UMDNJ-SOM’s Thompson employs some of these tactics. He lives with his girlfriend and walks to school instead of driving. He also keeps track of his cash flow.

“I use as something to keep me aware of my spending and my budget,” he says. “It’s a pretty useful tool. It’ll break down all of my spending across accounts and tell me how much I’m spending on certain things like groceries or gas or anything like that.”

A more prosperous tomorrow

Budgeting and cost cutting in their training years will help students later on when they start earning a higher salary and have to plan for retirement, buying a home and saving for an emergency fund—all while juggling six-figure student loan debt.

And though carrying such a big debt can be a tough fate, medical students can rest assured that they’re investing in their future—and that they’re going into a comparatively high-paying field.

“No one likes debt,“ says David Morganstern, a certified financial planner, member of the MD Preferred Financial Adviser Network and CEO of Confluence Wealth Management. “Everyone wants to have financial freedom and to not be burdened, but a doctor’s earnings are going to be significantly above average in time. Once students get out, their lifestyle is going to start to change dramatically for the better.”

Remember why you’re in medical school—and that focusing on your studies and being a great student can also help you financially,’s Patel says.

“Medical students need to do well in school to have more access to grants and scholarships,“ she says.

Mank says that, while the idea of taking on so much debt is daunting, he talked to several physicians beforehand who said going to medical school on loans was a good idea.

“I was always assured that I would be able to manage my loans whether I went into pediatrics or family practice or neurosurgery,” he says.

However, reducing debt will only leave medical students better prepared to enjoy the high salary when it eventually comes their way, Kantrowitz says.

“Once all your debts are gone, then you can start spending the money like there’s no tomorrow.” he says, wryly. “There’s a lot of freedom that comes with not owing anybody anything, and you save more money if you’re very aggressive in paying down these debts.”

17 Responses

  1. TwoFists on Aug. 31, 2012, 9:08 p.m.

    As a recent graduate, I find this financial advice nauseating if not appalling. The message is if student weren’t living a lavish lifestyle there wouldn’t be a debt problem. Well most students are studying on Saturday night and not living it up on the town. Even if you scrimp and buy as few textbooks as possible, eat economy food, ride your bike to school the first 2 years. You might save a few thousand dollar, so instead of having 376 K in debt at end of residency you will have 370k… a whopping 1.6% savings. Shop around for your loans, look for good interest rates. Let me save future student some time. Federal loans at 6.8% Stafford (which likely aren’t enough to cover your tuition) and 8.9 (APR > 10%) for the grad plus loans are the best you can get. [if you can get] Private loans will be close to the same interest but variable rate (they are only going up from here) and require more demanding payback after graduation. You are told about private loans to make you feel like you have options- You don’t, unless you have a rich uncle or plan on selling your soul to the military industrial complex.
    The party line is that rising tuition rates are not a problem of the schools but one of economical living of students. The truth is that real wages for physicians has declined over the last 20 years and Medicare reimbursements are continually threatened to be cut another 30%. Yet over this same amount of time medical school tuition has gone up more than 50% with no significant change in the quality of education and no sign of slowing of rising costs. 4.5% year over year tuition increase…there is no justification for this; nothing else in the economy saw inflation at 4.5%. University staff salaries (not-higher level administrative), utilities, malpractice insurance, cadaver prices, etc, none saw increase in cost near 4.5%.
    Beyond tuition, osteopathic students incur greater amount of spending in transportation to clinical rotations that can be spread across large cities and around different states. The expectation of audition rotation and the process of interviewing for residency can quickly add up to over $10,000 in none-tuition education expense.
    The AOA needs to get serious about holding deans’ feet to the fire over tuition cost and student incurred expenses. There is an ethical and fiduciary responsibility to audit school tuition increases with a stern and skeptical eye. When insurance companies started raising premium over 5%, the state jumped all over them, why is no one scrutinizing the tuition increase at osteopathic schools. Law school graduate sued their schools when there wasn’t jobs with high enough pay for them to repay student loans.
    The real financial advice that student should be told is, “don’t worry about the debt, you can always start another osteopathic school in your home town to pay off your loans. “

  2. Indebted on Sept. 1, 2012, 10:04 a.m.

    This article has no substance for a medical student. We are all living as slim as possible. A few grand here and there from living expenses is not a big deal in 10 years when we are paying it off, but it is a huge deal now when I am deciding whether to eat lunch or not.

    Nothing will be done until schools are held accountable. I’m at Nova Southeastern and saw my tuition increase 12% after my first year and it has been going up at a similar rate since. We are forced to buy board review courses that run upwards of a thousand dollars. These things all add up and shows that there is no consideration from the schools regarding cost. As students, we have no recourse. You can’t just get up and transfer if you are not getting your money’s worth. Schools can rob us blind and there is nothing we can do about it. Tuition should be locked in for the four years that we are here.

    I guess this is our penalty for choosing osteopathic medicine over state-funded allopathic medicine. I am a strong believer in osteopathic medicine, but I’m not sure that it is worth it.

  3. robert migliorino,d.o. on Sept. 4, 2012, 9:45 p.m.

    Caveat emptor…be aware that entering practice is no guarantee that you will become wealthy. Given the regulations,ancillaries overseeing your load & pleasing everyone by agreeing to provide their every wish ,all have a huge effect on one’s income.True,tuitions have risen incredibly but so have school expenses,especially salaries.You wouldn’t begrudge those profs their sabbaticals,would you?

  4. robert migliorino,d.o. on Sept. 4, 2012, 9:48 p.m.

    A question…if financial planners are such experts in the field,why are they still working?

  5. Judean Johnson, DO on Sept. 7, 2012, 4:05 p.m.

    The truth of the matter is…that landing that high paying job is the only realistic way to pay down our educational debt in a timely manner…Sure, you can always opt for Income based repayment, and have your loans forgiven after 25 years, but who wants that type of debt hanging over there heads for that long? While loan forgiveness programs do exist, they are few and far between, furthermore they pay a base salary that is significantly less than other private sector jobs. When you sacrifice so much to go to medical school and so much to help others its a shame that we are burdened with such a high debt load.

  6. Itsaracket on Sept. 7, 2012, 4:08 p.m.

    Medicine itself may not be a good business anymore, but educating doctors certainly is. This is not a problem solely restricted to osteopathic medical colleges but one that plagues the entire educational establishment. No one is addressing the fact that (particularly in undergraduate liberal arts programs) many degree paths are little more than jobs projects for otherwise unemployable PhDs. At least we have a job waiting on the other end.

    Someone needs to directly address the double digit tuition increases that are turning a generation of students into lifelong indentured servants.

  7. CascadeCrunch on Sept. 7, 2012, 4:30 p.m.

    Any article preaching fiscal responsibility and conservative spending habits will be quickly dismissed by some who would more readily find blame in others for their debt. But at the end of four years the the responsibility for my debt will fall on my shoulders even if I think it isn’t fair. All I can do is try to live more carefully now.

    Thank you, Rose Raymond, for bringing up a difficult truth and providing me and my peers with tools to face this challenge.

  8. Hamana on Sept. 7, 2012, 6:48 p.m.

    While I agree with Rose Raymond for her insight, I can’t help but agree with all of the comments that readers made. As a LECOM OMSII, I am finding out more and more that the school really is robbing us blind. They claim that they are keeping tuition costs low, though they seem to charge an unreasonable amount PER SEMESTER for technology and graduation fees upwards of $200. Multiply this by four years per person (our class size is a little over 200), and you have more money than I believe the school needs. They are taking more money than they should from us that we haven’t even started to pay back yet, and will probably not pay off for many years, and then try to blame it on our habits? Shame on them. Here’s a thought…take that money, and hire better teachers. We deserve that much at least, because we are paying big money for our education, and the quality of our education is what we are depending on in order to be able to be good physicians that can help others and help ourselves and our families achieve a comfortable (not lavish, don’t even believe that is possible to say anymore for the average physician) lifestyle at some point in our lives (you know, before we die).

  9. What? on Sept. 7, 2012, 7:30 p.m.

    What a useless article.

    I guess I’ll go sell my 10 year old rusted car now, and my 6 year old laptop, and my non-existent tv, cancel the cable I dont have, break my penthouse apartment lease and try to save some money. Hell, I could just drink rain water and plant a garden for sustenance, then I dont have to pay for groceries either!

  10. OklaDO on Sept. 7, 2012, 11:31 p.m.

    At least people are talking about student debt. While I applaud the suggestions to live within a budget, this is not the major source of debt for medical students, it is the tuition and fees of the medical school. On the subject of living expenses, it was less expensive for my wife and I to live in an apartment across from school then to live on campus. So if the school (a non-profit entity, as there was no for profit medical schools in the USA when I was in school – a pox on RVU) could not provide housing for less then the private sector, I am not sure that the school aught to be handing out too much blame to the students on what the must spend on cost of living — are you listening, MWU?

  11. Ray Nowaczyk on Sept. 8, 2012, 1:45 p.m.

    My advice to grads coming out of residency is simple and the same I gave to my daughter who is a third year med student. First I was a latebloomer myself finishing Med school in 97′ and graduating residency in 00′. One mistake I see is that as physicians we sacrifice and go without that others not in medicine are already getting. So when you finish residency do not go out and buy a big house and expensive cars. Alot of docs do exactly that, once you have a big house then you have to furnish it, insure it and then these docs get caugt up in keeping up with other docs. My advice is continue to rent for about five years out of residency and save as much cash as you can (so you can put a down payment on a modest home after 5 years and not have to pay PMI on the home) and pay an additional payment to your student loans every six months, at least. Pay off student loans asap, high interest loans first. Work in rural U.S. less than 60,000 people and ask about loan repayment some pay 20,000-50,000 a year towards your student loans. Always a good thing to have someone else pay your loans off. I worked in rural community for six years that equals to 120,000 off my loans. Also I would reward yourself with a decent car so you do not feel you are still going without but, buy 2 years used with low miles. Cars are the worst purchase, they lose 30% of their value as soon as you drive them off the lot. I have followed these and will pay off my 190,000 loan off this year (12 years after graduation). Oh yeh do not let the lenders etend your years to pay your loan off, if they get their way you will never pay your loan off. They will make tons of money off you though thru interest. Good luck

  12. Frank on Sept. 8, 2012, 11:11 p.m.

    I’m not sure what financial responsibility this article is referring to. I lived on $16k last year and still took out more than 70k in loans. I planned every meal and ate out 1x/month. TwoFists is absolutely on the money (pun intended) when they say that a whopping 1.6% savings gets one nowhere. In reality, it is the ridiculous tuition (and subsequent rise) which are UNJUSTIFIABLY crippling medical students (especially DO’s).

    There are obviously layers of misconduct here and I believe the most substantial layer is the government funding of education. School administration has no incentive to rein in spending and expansion when they know that students are guaranteed loans. Furthermore these schools source “exceptional application interest” as justification of increasing tuition. Am I to believe that type A medical applicants are magically going to stop applying because prices are just “too high”??? Forget it. The average applicant has one thing on their radar – becoming a physician. Furthermore, the vast majority of these applicants are applying for selfless reasons (probably contributing to the ridiculous debt each is willing to incur).

    If only someone important would see the comments below. The reality is there to see. The real culprit is not the student. Savings come from responsible spending. If I can live below the poverty line, then my school can forego expansion and salary raises like the rest of the US economy (for the last half-decade).

  13. Poor on Sept. 11, 2012, 10:56 a.m.

    Crazy thought, but if we actually were able to elect our leaders for the AOA, NBOME and our regional directors, wouldn’t they be held more accountable to us and our needs?

  14. Ohio on Sept. 11, 2012, 10:59 a.m.

    If being so heavily in debt is not enough, we shall soon see the a contract from our leaders where if you decided to attend a DO school, you’ll be forced to sign something binding to be in an Osteopathic primary care residency and must continue through your training and remain in that primary care position. Ohio anyone?

  15. Protect The Penthouse. on Sept. 11, 2012, 11:41 p.m.

    Once you realize that Osteopathic education is no different than any other franchised professional school like Devry, ITT or University of Phoenix, it actually makes sense. Just like any other franchise, a fee is paid to the corporate office (AOA) to use the license and the name, and you get as many students through the door as you can and you make a killing if you can increase tuition and class sizes every year. The top franchisees are rewarded with leadership positions that they get handed for being so profitable which also funnels money up to the corporate office. If anybody causes any trouble, you send the branding/licensing (NBOME) office after them and threaten to pull their charter.The AOA and NBOME Protect The Penthouse by failing a large amount of students somewhere along the line and make sure that the majority of them do go into positions they tell the public they’re helping out with, whether they want to or not.

  16. Daniel Reynolds on Oct. 10, 2012, 3:08 p.m.

    Great comments. i feel for the latest D.O. coming out. They have little hope of having a nice lifestyle.

  17. Bryan G on Nov. 9, 2013, 10:43 a.m.

    Great points. The business of DO school is downright appalling. What I find MOST impressive is I’m paying $41,000 to my school while I’m out on rotations. Where is that money going? Not really sure. It’s not going to the clinicians I’m rotating with who have volunteered their time in exchange for lousy CME credits. I understand why some places have started charging for rotations. It’s to stick it to the schools. Problem with that strategy is, they again trickle it down to the students. It’s absurd, but what do we expect? The entire country is structured like this.

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