There are now about 40 osteopathic medicine schools, including osteopathic medicine college at Marian University, offering 4-year medical school programs.
AACOM conducted a survey in 2017 which included asking how many student debt DOs there were.
The thousands of people who responded to the survey had an average student debt of $247,218 related to their medical education and it is growing. Compare that with MDs graduating with an average of $190,694. That’s a whopping $56,524 debt!
The typical DO has a student loan of around $400,000. The mixture of deferred loans, some of which were interest-bearing and inefficient to repay their loans, leads to substantial loan growth even 3-5 years out of med school. So is it financially worth it?
Were wages worthy of the osteopathic doctor? Seeking different pay for DOs vs MDs is a challenge, but we know the salary is quite close.
Because 57% of DOs are physicians of primary care, the median salary is most likely in line with that. According to the Bureau of Labor Statistics, the average wage for all family and general practitioners is $208,560.
The median wage for a college graduate is roughly $66,000, according to the same report. So becoming an osteopathic medicine doctor leads to an increase in earnings of $142,000 per year compared to the average graduate of college.
Let’s just say that $142,000 in additional income covers a post-residency DO’s entire 30-year career. This translates to an additional $4,276,000 for a DO salary in lifetime earnings relative to someone with a bachelor’s degree. That’s a lot of it!
Taking out $247,000 in loans to make an additional $4,276,000 tends to make financial sense on the surface, but many doctors don’t give priority to repaying their loans or are on an inefficient schedule that can make the $247,000 in debt much more difficult to repay.
So let’s work out how much it will cost to repay the debt in order to find out if the cost is worth it.
Doctor of Osteopathic Medicine Student Loan Repayment Options
There are two optimal ways in which OTs can pay off student loans from study. It just happens that they are at opposite ends of the spectrum.
Choice 1–Aggressive payback: For people who owe 1.5 times their income or less (e.g. a DO who earns $200,000 with loans at or below $300,000), their best bet in most (but not all) situations is to throw away every dollar they can find to repay their loans as quickly as possible, no longer than 10 years.
The caveat with DOs is that there are a lot of options for loan forgiveness so even a DO with $300,000 in debt or may not want to entirely pay off their loans.
Choice 2–Pay as little as possible: for people who owe more than double their income (e.g. a DO that earns $200,000 and owes $400,000 or more).
The goal is to negotiate an income-driven repayment plan that will keep their payments small and optimize loan forgiveness whether it is forgiveness for public service loans (PSLF) or taxable loan forgiveness.
Type of Employer Student Loan Repayment for Doctors of Osteopathic Med.
Loan repayment can go one of three ways for DOs.
No 1 Option: Refinance and pay back the loans to become debt free in 10 years or less
2a Option: Work for a private/for-profit company and get on PAYE or REPAYE
2b Option Work for a non-profit or government employer and go for PSLF
Based on which direction a DO takes, what loan repayment looks like and if it’s “affordable” for them will be dramatically affected.
Let’s compare the gap between options 2A & 2B before we get to Option 1. Let’s presume two separate people, Joe & Melva, each owe $350,000 to become a DO at 6.8 percent.
They make the average salary of $208,000 with an expected increase of 3 percent each year. Both of them chose PAYE as their income-driven repayment plan (pay as you earn).
During their 3 years of residency, they have worked for a non-profit and have 3 years of credit to PSLF by being on PAYE. A student loan payments were small due to an income as a resident over those 3 years of residency.
Now that residency is over, Joe works for a non-profit hospital (eligible for PSLF) and will continue on the PSLF path, while Melva works in a private practice (not eligible for PSLF).
More About Loan Repayment for Doctors of Osteopathic Med
The bottom line is they have the same exact factors. The only difference is the type of organization at which they work post-residency and that has a drastic effect on loan repayment.
Joe’s loans are slightly more competitive, even with all the same reasons. Just $145,725 is expected to be spent on repaying his $350,000 student debt loan, $0.42 on the dollar. Plus, in seven years since he’s only 3 years gone, he’ll be debt-free.
On the other hand, Melva is projected to make payments totaling $413,862 for 17 years and then have a $112,119 tax bomb due in 17 years for a total of $526,061. Which means it will cost her $1.50 to pay back every dollar she borrowed.
The strange thing about these income-driven programs is that their loan repayment will be the same for 7 straight years as both of them are on PAYE.
The big difference is that Joe’s debts would be forgiven tax-free, while Melva would have to make payments for an additional 10 years and the remaining amount of debt would be forgiven, but she would pay taxes on the balance she was forgiven.
The disparity of employer form with the same conditions is a $380,000 change in cost to repay the loans.
Melva can either stay on PAYE for 17 more years or refinance and pay back the loans over 10 years at 5% interest.
Here are the pros and cons for each option:
Affordable monthly payments which will allow her to save, invest and put money toward other financial goals (pro).
Has 17 years to save up for the taxes owed (pro)
Loan balance will be paid down from $350,000 to $280,000 (pro)
It will take her 7 years longer vs refinancing (con)
She’ll be out of debt in 10 years or less (pro)
Total out of pocket cost is about $71,000 lower (pro)
Once she refinances, the federal loan program benefits are gone for good (con)
Stuck with $3,700 monthly payments for 10 years with little to no flexibility (con)
This is a decision that Melva will have to make.
Does she want to work towards her other financial goals like buying a house, saving for retirement, etc? Then PAYE is the way to go.
Her payments will be lower, and as long as she takes advantage of that to build her wealth, then that could be the better option. That’s why the net present value (NPV) is lower for PAYE even though the overall cost is higher.
That could pay her $50,000 in return for 2 years of service to qualify for her loans. She may apply for more money to be paid for 1 year of service at a time after that 2 years is up.
Is Receiving a DOs Degree Worth The Cost?
Since they have the opportunity for excess earnings of more than $4,000,000 vs. a college graduate, the financial answer is yes, but there is a substantial price to pay.
We will also have to control their feelings by getting massive student loans for 10 to 20 years and will not actually be able to celebrate and enjoy the higher income before their loans are processed. Student loan payments during that period will be a way of life.
When they view it with a long-term mindset, after being student-free they will still have a nice long career to live.
Work selection is the financial factor #1 that will influence how a DO can repay its loans. If they are lucky enough to work for a non-profit full-time, it could save a ton of money and make the degree a no-brainer.