The pros and cons of student debt

Last week we talked about the blessing and burden of student loans: without them, higher ed can seem unattainably expensive, but with them we could be saddled with seemingly inexhaustible debt.

This dichotomy is acutely felt in professions where the price tag for school is a requisite component of their employee pipeline: e.g. doctors. Even though physicians enjoy higher wages than many, they also incur much higher student debt than most other professionals and don’t see a return on that investment until they’re finished with school and residencies (not to mention any fellowships or curveballs in their journey!).

Understanding the cost of going to school

If you took out federal student loans to pay for school, you went through entrance and exit counseling. For most, the former is an online process that you read and acknowledge (i.e. you scroll through and click “I agree.” without actually reading to get it over with). For most borrowers at this point (usually 18 years old), student debt is just an abstract concept.

By the time you graduate and complete exit counseling (a requisite for graduation, and one few pay close attention to), you’re ready to enter the “real world” of careers or graduate school and your student debt is just as intangible as before. It’s not until you get that first bill in the mail that you’re suddenly slammed with the reality of five or six digits of debt.

When you complete entrance counseling, the big takeaway is that this is a loan, not a grant, and must be paid back. It only has to be completed once when you apply for your very first loan. Thankfully, studentloan.gov is a lot better these days than it was a decade ago and covers things like payment plan options and PSLF, but few teenagers probably commit these details to memory. If they did (or entrance counseling was required every time you took out a loan), there would probably be more people applying for PSLF and more people succeeding with it rather than the current 2% success rate.

PSLF as a door-opener

In an ideal world, Public Service Loan Forgiveness would be a household phrase and it would be an active part of the student debt conversation from the start. Things are changing, but it’s still an oft-misunderstood program, despite the fact that it’s been part of the conversation since 2007; ten years ago, even most school student aid officers didn’t fully understand it, let alone advocate for it.

If more borrowers (and the general public) knew more about it, college could be a more realistic goal for many, and would keep fewer people from avoiding high-earning, but highly educated careers—especially folks for whom college debt is often a bigger barrier, like people of color, women, and those from economically disadvantaged communities.

Thankfully, organizations within these fields—like the Family Medical Education Consortium—are attuned to this reality, which is why they’re partnering with Navigate to educate their physicians about PSLF. More than many other medical disciplines, family physicians tend to come from diverse socio-economic groups and thus are more liable to be discouraged by the sticker shock of medical school. Fortunately, if they find employment at a non-profit hospital or clinic (which accounts for more than two-thirds of them), they qualify for PSLF and can see their debt functionally lowered by 25%, 50% or more.

Some real life PSLF figures

To illustrate our point, let’s look at the case of Drs. Tamara and Hayden. They just got married last summer after finishing medical school and starting residencies in family medicine last fall. Together, they owe about $650,000 in federal student loans with 6.5% interest. Thankfully, they contacted Navigate early in the process and are now working toward PSLF, which is going to save them a boatload of money. All told—based on our number crunching—they will repay about $200,000 of that debt. After ten years of payments on income-driven repayment plans (REPAYE), the remainder of their balance will be forgiven, which will clean about $750,000 of debt off their slate—almost 80% of their total owed.

Everyone’s situation is different, but a simple fact remains: nearly everyone who qualifies for PSLF stands to save some amount of money. It’s a complex process, but well worth it. PSLF isn’t the right step for everyone, but it deserves a look.