Report Drops Call to Privatize College Loans

Medical students and their undergraduate and graduate school peers dodged a financial bullet Aug. 10, when the Commission on the Future of Higher Education dropped a recommendation that effectively would have limited federally subsidized school loans to low-income applicants.

The excised recommendation had been part of the commission's final draft report on postsecondary education in America (PDF file: 28 pages / 179 KB. More about PDFs). to Margaret Spellings, secretary of the U.S. Department of Education.

"It is clearly a good choice to remove the recommendations found in Section III, No. 2, relating to student loans from consideration in the report, which we have done," wrote Charles Miller, chair of the commission, in an e-mail to his fellow commission members. "The financial aid recommendations in the draft report are very powerful as they stand without it."

The section to which Miller referred had noted that less than 25 percent of government-guaranteed college loans are granted on the basis of financial need and said, "a private sector education lending market has fully developed … which provides a variety of competitive lending products offering many options for funding education expenses." The excised recommendation had suggested "wider utilization of these options by many families would result in the private sector providing more funding for higher education and in freeing scarce public funds to focus on aid for economically disadvantaged students and families."

The decision to remove the recommendation may have implications for family medicine and other primary care specialties. Although no conclusive connection has been made, some studies have indicated a relationship between high debt and medical students' specialty choices, according to the AMA.

"Several peer-reviewed studies indicate that high levels of debt affect specialty choice (driving students away from primary care) and lead to depression, burnout, and feelings of excessive burden among residents," according to the 2003 Report of the American Medical Association-Medical Student Section Task Force on Medical Student Debt. (PDF file: 44 pages / 267 KB. More about PDFs.) "Complementary data indicate that the debt burden falls more heavily on students from underrepresented minority groups. These groups therefore feel a greater burden and are particularly discouraged from entering medicine and from practicing in medically underserved areas."

The decision to drop the recommendation followed an outcry from medical students, who responded to calls for action and contacted commission members to express their concerns about the recommendation.

In correspondence to the commission, students from the American Medical Student Association pointed out that increasing reliance on private loans would increase educational debt by "at least $32 billion in additional interest payments based on the current private loan interest rates." Such additional debt increases the likelihood that students from low- and middle-income brackets would eschew higher education, a direct contradiction of the commission's goal of increasing access to educational opportunities. Moreover, such a policy would reduce diversity in the physician workforce, they said.

Their position is borne out by the Association of American Medical Colleges' 2004 report, "Medical School Tuition and Young Physician Indebtedness," based on AAMC Graduation Questionnaire results.

"A concern of many is the fear that the financing requirements of a medical education will put it beyond the reach of students from middle-class and working-class families," the report says. "This concern is well founded, as the fraction of medical students who come from families in the top quintile of family income has been in excess of 60 percent for at least the last two decades, while the bottom three quintiles of family income together account for only about 20 percent of medical students. Students from families in the lowest quintile of family income account for less than 3 percent of the class."

Moreover, lower-income students bear the greatest burden. Approximately 37 percent of 2003 graduates entered medical school with debt already incurred for their undergraduate education, according to AAMC data. The median debt amount is $16,000 for public medical school graduates and $17,000 for private medical school graduates. By the time they graduate from medical school, students from families earning as much as $75,000 have borrowed more than $100,000 in total educational debt, compared with students from families earning more than $500,000, who have borrowed approximately $50,000.