Why High-Income Doctors Continue to Drown in Debt
On average, physicians make the highest salaries across the nation. But many doctors still continue to drown in debt due to student loans and poor spending habits
Attending medical school and becoming a physician has long been a noble and sought after career choice. Also, one of the highest paying. In U.S. News and World Report’s 2019 Best Paying Jobs List, (which also takes into account employment, growth rates, and job prospects) the 11 best-paying jobs are in the medical field. The highest is an anesthesiologist, paying a median annual salary of $208,000.
But to get there, medical students continue to take on hundreds of thousands of dollars in debt to complete their programs. And when physicians finally start their practices, many continue to struggle with large amounts of debt throughout their careers.
When physicians make such hefty salaries, why does this happen?
Medical school debt statistics
Medical school isn’t cheap, of course, and most med students get student loans to cover the substantial costs. Recent data from the Association of American Medical Colleges shows that in 2018, 76 percent of med students graduated with debt, and the median debt was $192,000. Private medical schools have even higher tuition, and 21 percent of students graduating from those schools have $300,000 or more of debt.
The average cost of a four-year med school program is $242,902, and private schools have a median cost of $322,767. It’s easy to see why most students have to resort to loans to pay for their medical education – especially given that full tuition scholarships are pretty rare in this field.
While many physicians do then see high salaries after graduating and completing postgraduate training, trying to start an adult life and establish a career can be extremely difficult with a couple of hundred thousand dollars in debt hanging over their head.
Spending habits of doctors
Let’s take a look at some of the ways doctors can have bad spending habits once they’re practicing which contributes to a massive amount of debt.
1. Doctors are supposed to have money, right?
Sometimes doctors, young or old, may feel the need to show others that they do, in fact, make a lot of money. It’s ingrained in our culture for us to assume that physicians make way more money than the rest of us.
That doesn’t mean that they have perfect lives or make smart financial choices, however. Sometimes doctors feel that they have to spend money in order to live up to that expectation. They’ll buy the bigger house and the snazzier car because they worked hard, and this is when it’s all supposed to pay off.
Family and friends may also be encouraging this behavior, as others start to depend on loved ones they assume can bail them out. Sometimes, physicians themselves overestimate their own salaries and compare their lives to other doctors who make more money than they do.
2. They’ve waited long enough
Consider the fact that doctors spend much of their young adult lives in school or residencies. After college, graduate school, medical school, a years-long residency, and finally a fellowship in some cases, it could easily be ten to fifteen years that young physicians are just studying and scrimping before they start making a salary.
Once they’re out of school and residency, doctors often start buying. A lot. They spend their new money instead of putting it toward the student loan debt they’ve accumulated. And it makes sense – they’ve been learning, doing rotations, and living off of meek funds for years. They’re finally making real money, so of course they’re anxious to start enjoying life.
3. Doctors haven’t been trained about financials
Again, it may be easy for people to overlook the financial needs of doctors: They make plenty of money or at least they will someday. And doctors themselves start to believe this, so they may totally neglect good saving habits or ignore wise investment choices, including saving enough for retirement
Doctors may not understand how daily spending needs to align with overall financial goals, or they may not know how to save the most on taxes. Physicians need the same financial training as the rest of us. They should look to financial programs or resources for those in medicine or set up an appointment with a professional financial advisor.
Provident CPAs & Business Advisors understand a large amount of debt that comes with medical training, and we help physicians figure out how to navigate one of the biggest drains on income – taxes. Among our strategies is assessing whether doctors can declare themselves as independent contractors rather than employees of a medical group, which could save them big come April. Contact us for more advice on tax planning and a proactive strategy. Every dollar saved on taxes is another dollar toward diminishing that debt.