On student loans
Most students who attend medical school in the US do so with student loans. Yes, some have military scholarships and some have wealthy parents, but most don’t. I’m guessing that most students reckon they’ll easily pay off the loans with the income that an MD or DO degree commands, and so far, they’ll be right.
But the immensity of these loans has negative externalities. Here are two:
1. It affects the residency choices of graduates. Students with large loans (not just med school but college loans) are incented to choose highly compensated specialties like surgery, dermatology, cardiology and ophthalmology and not the less well-compensated fields of family medicine, pediatrics and geriatrics;
2. It affects decisions about whether to promote academically marginal students. Students who flunk out of medical school are at risk for default, and too many defaults could affect the loan rates for future students at institutions that enforce academic rigor.
Indeed, students who don’t pass the USMLE step 1 exam on the first try are finding it difficult or impossible to match for a residency, and residency is a mandatory step to achieving medical licensure in the US. If you can’t practice medicine, how are you going to pay off hundreds of thousands of dollars in student loans?
Like everything in capitalism, there can be unintended consequences.
But the immensity of these loans has negative externalities. Here are two:
1. It affects the residency choices of graduates. Students with large loans (not just med school but college loans) are incented to choose highly compensated specialties like surgery, dermatology, cardiology and ophthalmology and not the less well-compensated fields of family medicine, pediatrics and geriatrics;
2. It affects decisions about whether to promote academically marginal students. Students who flunk out of medical school are at risk for default, and too many defaults could affect the loan rates for future students at institutions that enforce academic rigor.
Indeed, students who don’t pass the USMLE step 1 exam on the first try are finding it difficult or impossible to match for a residency, and residency is a mandatory step to achieving medical licensure in the US. If you can’t practice medicine, how are you going to pay off hundreds of thousands of dollars in student loans?
Like everything in capitalism, there can be unintended consequences.
Today a high school graduate that becomes a master plumber will have more income in his lifetime than a GP medical physician when factoring in loans and time in training.
@Jackson,
I’m seeing an average annual salary of ca. $95,000 for master plumbers and ca. $145,000 for primary care physicians. That’s nearly 50% more for the GP. Yes, there’s the opportunity costs of four years in college and four in med school, but after that, residents make pretty good money and many moonlight in the ED. Over a ca. 35-year career, you can pay off your loans and still do better as a GP than as a master plumber. But I’m sure you can find a few master plumbers that make more and some GPs who make less.
The cost to operate a medical practice( insurance etc.) vs a plumber must be consider as well.
@Jackson,
The number I quoted was the GP salary, not the income of the practice. Similarly, the master plumber number was salary, not company income.
We had a master plumber diagnose and oversee the replacement of a cracked stack pipe in our house back in 2022. He was expensive but worth it. He had at least one on-site assistant (presumably paid) and he had at least one office staff to handle the bill. The company carried his name, so I assume he owned it, but I doubt the people that worked for him did it for free.
So if your point is that not all the money your insurance pays for your GP goes into his/her pocket, I agree. Similarly, the money you pay for a plumbing company that has a master plumber doesn’t just go into the master plumber’s pocket. That’s why I quoted salary numbers.
Rabbit stew!
Joel, I really don’t understand the hand-wringing around the figures. It’s an interesting bit of work to pull those out and we can all understand the possible statistical issues with averages.
Nevertheless, I think your optimism that the $50,000 difference will allow the MD to catch up is an untested intuition. Try putting together something that considers 1) taxes and 2) time value of money. In a couple minutes I put together a spreadsheet starting at age 22 where the MP is making $95,000 and the MD is starting medical school. The MD doesn’t reach the full $145,000 for 8 years in my example (four for school, four for residency). Then, I reduce the $50,000 salary difference for FICA tax, 22% marginal tax, and 4% as a typical state income tax. I also assumed that the MD took out $300,000 in student loans, that they accrued interest while in school, but that they did not accrue additional interest during residency due to the benefits of the SAVE repayment plan. I used a 5% interest rate. After 8 years, I had the MD put all of the aftertax excess income (a bit above $33,000 per year) toward the loans, which would then accrue interest. The MD paid off the loans around age 44, about 22 years in. Next, I considered that the MP had a capacity to save money in the first 8 years that the MD did not have. I assumed the plumber lived frugally for those 8 years to match the lifestyle of a medical student and then resident; I modeled saving $35,000 per year. I then compounded this $35,000 at 5%. So, once the MD had paid off the student loans at age 44, they had to start saving the excess $33,000 or so to try and catch up with the MP’s early savings. The MD could not. At age 44, the MP already has over $600,000. By age 70, the MD is again $600,000 or so behind ($2.3M vs. $1.7M). The only savings I modeled were the MP saving for the first 8 years and the MD paying off the loans and saving with the excess income. I assumed away any savings in the base $95,000 salary after year 8 since that might be equal between MD and MP.
So, adequately accounting for taxes and time value of money, even that $50,000 salary difference might not enable the MD to catch up.
@Cervantes,
“I put together a spreadsheet starting at age 22 where the MP is making $95,000″
LOL! There’s one problem right there. Why do you assume that a MP makes $95K right out of their apprenticeship?
“So, adequately accounting for taxes and time value of money, even that $50,000 salary difference might not enable the MD to catch up.”
The word “might” is doing all the work in that sentence. Look, I personally know an MD/PhD who never passed boards and so isn’t licensed to practice medicine. I’m sure his lifetime earnings won’t match a MP who starts at $95K right out of the box (your assumption).
I see your assumptions. Like all models, your conclusions are only as good as your assumptions. I don’t accept that your model describes either the typical MP or the typical MD/DO.
Joel, respectfully, you’re the one claiming that a MD only making $145,000 in family practice will beat the plumber. I showed that, due to training time and taxes, it is not evidently clear that this will happen. You provided the average salary for a master plumber of $95,000, not me. Chuckling and attacking my “assumptions” that were borrowed just from you is not a substitute for real math. I’m happy to do math for you if you want to supply an alternative salary trajectory for the plumber.
@Cervantes,
Respectfully, I’m the one claiming “But I’m sure you can find a few master plumbers that make more and some GPs who make less.”
I read and understood your post. Your math is “real,” but your models and assumptions are hypothetical.
Your models, assumptions and math don’t interest me since I already stipulated that an MD in family practice won’t always and everywhere have a lifetime earning greater than every single master plumber. You made my point: it is feasible that under some boundary conditions a MP will come out ahead.
@Cervantes,
The average age of a master plumber is 58, not 22, so the average income of a master plumber is unlikely to apply to a 22 yo fresh out of an apprenticeship.
The average age of a GP is 48. So the average income of a GP is likely to be achieved by someone quite a bit younger.
If you want to continue playing with your arithmetic, you might include those demographic realities in your “real math.”
Master plumbers around NE Wisconsin seem to make much more than $95,000. Actual earnings often shoot way up if premiums are included. Even new construction plumbing jobs frequently rely on premium rates in spite of starting with full-planned build schedules. They often are called on to recover slips earlier in the build. You see plumbing or electrician trucks still on-site after about 6 PM and it’s almost certainly premium hours. It’s funny sometimes to hear complaints that builder so-and-so kept things so on schedule that ‘we only made what our contract said’.
@Eric,
And what do GPs make around NE Wisconsin?
“Even new construction plumbing jobs frequently rely on premium rates in spite of starting with full-planned build schedules.” No doubt. How much of that money finds its way into the master plumber’s pockets? Show your work.
Location, location, location. As I posted above, I’m sure you can find master plumbers that make more than $95K/yr and GPs that make less than $145K/yr. That doesn’t falsify my point.
Maybe apples to oranges but my son is framing houses right now for one of the biggest building contractors in Minnesota ~ does everything from concrete to windows: nobody puts in ‘premium hours’
Those trucks you’re seeing after six are probably individual contractors wrapping up a second gig, because one gig doesn’t pay enough and hey! it only take twelve hours of labor to be punch-drunk, fall off a ladder
One thing that does happen is contractors leave trucks and trailers locked up on jobs sites overnight as storage …
There are many ways to function as a plumber. Union plumber? Working for a contractor. Running your own business. Working for a plumbing business, one office or multiple offices in the region. Working as part of the maintenance staff for a business, or a management firm. The place I worked for advertises openings for skilled maintenance positions starting in the mid 80’s, plus all the company benefits.
I imagine GP’s have a range of positions open to them as well.
First define and find comparable employment conditions, then location of employment, and define what is included in income. Then make the comparison.
@Jane,
The average salary figures I cited are just that: averages. There are distributions associated with each average, and I didn’t see a source that specified the variance. That’s what I meant above when I wrote: “I’m sure you can find a few master plumbers that make more and some GPs who make less.”