Published in the AAMC Reporter July/August 2015 issue
By Whitney L.J. Howell
The incoming student’s strategy for covering his costs at Drexel University College of Medicine was a financial disaster waiting to happen, said Michael Clancy, the school’s director of financial planning. The student planned for a parent to cover most of the bill through a broker loan, while the remainder was charged to a credit card. A consistently paid minimum balance would avoid any interest charges, the student believed.
Clancy recognized the flawed reasoning and knew he had to speak up. “I calmly explained that wasn’t how credit cards worked and asked if his parent understood how broker loans—margin loans based on the value of a securities account—[functioned],” he said. “Based on that interaction and another consultative meeting, they changed their approach.”
While most financial planning conversations focus more on loan repayment details than avoiding potential catastrophe, this scenario underscores the need for medical schools to help students navigate tuition and repayment of debt. A 2014 AAMC report revealed that 84 percent of medical students graduated with an average debt of $180,000.
Many repayment options exist, such as loans linked to income level and the federal Pay As You Earn program that establishes monthly payments equal to 10 percent of discretionary income. Other loan forgiveness options, including the Public Service Loan Forgiveness Program and National Health Service Corps, also are available. But the existence of these programs does not mean that students understand the financing of their education. Increasingly, the onus of clarifying the process falls to medical schools, and many are adopting creative strategies tailored to each student’s circumstances. Cookie-cutter approaches to managing medical education debt usually don’t work because each student’s financial situation is unique.
Oregon Health & Science University (OHSU) and Drexel both hired certified financial planners to provide personalized guidance for their students. Kribs and Clancy make presentations during student orientation and at mandatory meetings. Often, the planners work with students for all four years and offer one-on-one sessions. “It’s taking their personal puzzle and putting the pieces together with them,” said Justin Kribs, OHSU’s certified financial planner, who has created webinars on financial topics for students as well. “What’s great is we’re starting students at square one and getting to ask them what they want to accomplish, how they will get there, and what things are in their way.”
Since joining OHSU, Kribs said he has advised more than 1,000 students. Third- and fourth-year students are required to meet with him at least once. Many students want to know how to minimize the amount of money they borrow, he said. Others want advice on managing the financial aspects of getting married or having a child while in school.
Julie Fresne, AAMC student financial planning director, acknowledges that the debt the typical medical student incurs is high, but noted that after controlling for inflation, the figure has remained relatively constant for roughly six years. And it is a burden worth assuming, she added. “The AAMC believes a career in medicine is an excellent investment with very good job security and excellent income potential. There are enough flexible ways to repay student loans and provide a secure living and retirement,” Fresne said.
Improving financial literacy
Financial aid professionals at Tufts University School of Medicine begin early during the admissions process to engage students in discussions about the intricacies of loans, debt management, and repayment. Launched in 2010, Tufts’ Planning for $uccess program provides students with “financial literacy education that dives much deeper than typical debt management and loan repayment,” said Tara Olsen, Tufts director of financial aid.
Workshops and lunch-and-learn sessions teach Tufts students about credit, mortgages, contract negotiations, and taxes. The financial aid office also publishes quarterly newsletters with spending tips, student discounts, and low-cost local activities.
The University of Missouri (MU) School of Medicine introduced its financial literacy program in the 2009–10 school year. Available to all students, the initiative addresses financial topics in 30-minute sessions that are posted online as well. Students receive incentives to attend the sessions, too, explained Cheri Marks, MU’s student financial aid and records coordinator. When they show up or complete a task such as submitting a budget sheet, they are entered into a $500 scholarship drawing.
“It takes a while for this new language to sink in because [it uses] terms students are unfamiliar with,” Marks continued. “In the past, they might have thought about [their financial situation] when they got their financial aid package and not again until after they got their money.”
The MU initiative incorporates the AAMC’s FIRST (Financial Information, Resources, Services, and Tools) program, which is available to medical students around the country seeking support to manage finances, understand loan repayment options, and learn about various types of loans. FIRST provides access to the MedLoans® Organizer and Calculator, helping students track loans and test sample repayment scenarios, and $ALT®, a money-management skills program. The program also offers loan and debt management webinars.
At Michigan State University College of Human Medicine, fourth-year medical student Joseph Meleca proposed a one-credit business and finance elective inspired by his front-office experience at his uncle’s private cardiology practice. He got the idea from observing that he and his peers had little understanding of how to finance their education or manage their living expenses. Approved by school administrators, the 11-week program invites financial experts to speak at all of the school’s campuses to elevate students’ understanding of medical school financing, debt management, billing and coding, and practice management.
After the first year, 85 percent of students reported that they benefited from the course and believed it would be helpful for incoming students. Thirty percent said it should be in the permanent curriculum. In fact, this elective, now in its third year, is the basis for a potential 60-credit MD/MBA program at Michigan State University’s Eli Broad College of Business.
It’s imperative for medical students to understand how their financing choices will affect their future decisions in practice, Meleca said. “If medical students don’t have this knowledge, they go into residency without it, and then they have even less time to learn it.”
To read the article at its original location: https://www.aamc.org/newsroom/reporter/julyaugust2015/439854/medicalschoolstakingactiveroleinhelpingstudentsmanagedebt.html
