From the Journals

Resident debt burden may cloud professional future



Surgical trainees have a large, potentially unmanageable debt burden and are in need of long-term financial education to help better navigate the growing cost of medical education, according to new research.

“Surgical residents are highly leveraged financially and have minimal financial training,” Sarah E. Tevis, MD, of the University of Texas MD Anderson Cancer Center, Houston, and her colleagues wrote in a study in the Journal of the American College of Surgeons. “This places residents in a volatile financial situation as they complete their training and start accumulating debt liabilities, such as mortgages and child care, in the face of tremendous amounts of educational and other debt liabilities.”

Studies of resident debt load typically account for medical education debt, but not for other debts such as undergraduate loans, consumer debt, and mortgages. Residents’ actual debt burden may be considerably higher than has been reported.

The researchers sent surveys to all surgical residents at the University of Wisconsin, Madison, in 2015, with 105 responding (an 80% response rate). Of those responding, 38% reported having more than $200,000 in educational debt, and 82% had a moderate- or high-risk debt-to-asset ratio.

“We found that surgical residents are dangerously overleveraged, with 70% of residents found to have high debt-to-asset ratios,” Dr. Tevis and her colleagues wrote, with the addition of mortgages and vehicle debt on top of educational debt being the key factors of moving residents into the high-risk debt-to-asset category.

The debt-to-asset ratio was calculated as the sum of student loan debt + nonstudent loan debt + credit card balance + mortgage debt + vehicle debt divided by the value of home and other real estate + value of household vehicles + amount in savings + value of retirement investment. A debt-to-asset ratio of 0.5 to 0.9 was considered moderate risk, with a ratio greater than or equal to 0.9 considered high risk.

The debt-to-income ratio was calculated as the sum of student loan debt + nonstudent loan debt + credit card balance + mortgage debt + vehicle debt divided by total household income. A high-risk ratio defined as being greater than 0.4, the line at which surgical trainees might be restricted from obtaining a traditional mortgage.

Total household income included personal income, domestic partner income, military income, and any income from moonlighting, rental properties, and other sources of revenue. Assets included home and second home purchase prices when applicable, value of vehicles, amount in savings, value of retirement accounts, and value of investments. Contributors to debt included student loan, nonstudent loan, mortgage, vehicle financing, and credit card balances.

Salary data for U.S. residents, which strictly tracked U.S. inflation, was calculated over a 15-year period (2000-2015) using data from the Association of American Medical Colleges for comparison.

In examining debt-to-income, researchers found that “83% of residents have a high-risk debt-to-income ratio [greater than 0.4],” the authors wrote. “We found that the majority of residents were classified in the high financial risk exposure cohort when comprehensive total debt liabilities were considered. In this group of highly leveraged residents, over 80% of residents were dangerously unable to manage regular monthly liabilities with their current level of income.”

No statistically significant association between sex, residency year, residency program, or who manages finances and risk debt-to-asset ratios were found in this study.

The authors noted that, although this study did not look at the psychological impact of significant debt load and lack of training on how to manage finances, these factors have been shown in other studies to correlate with resident burnout and psychological stress.

Dr. Bruce Harms

Dr. Bruce Harms

Bruce A. Harms, MD, FACS, coauthor of the study said in an interview, “We are in an evolving era in surgery and in health care in general and financial resources are being stretched. We don’t know for sure that the rising educational debt and overall debt burden as residents enter their prime years will drive the next generation of physicians to certain career choices. It may even perhaps drive a given fully trained young surgeon away from a practice that is more exposed to an underserved population. Excessive financial debt induced stress may influence a resident’s decision on what they do with their skill set but to what degree is largely unknown.”

Dr. Harms added that residents may assume that when they eventually enter practice, they will have a pathway and the means to deal with educational debt. “They would be correct in that starting salaries are keeping pace with inflation. However, in many instances, they are also entering a time in their lives when they will be taking on additional debt in the form of home mortgage, family, and child care costs. I believe, in most instances, residents are focused almost totally on their residency training and many other financial considerations take a back seat and ‘we’ll deal with our debt problem in the future’ attitude. Residents for the most part don’t have the financial means and resources to deal with debt anyway during the course of their lengthy residency training. The exception would be having a secondary income from a spouse or partner that would allow for a more robust debt-attrition strategy. Also, residents are likely not focused on or considering a strategy for the best return on investment of their time, additional expense, and career delay from their prolonged pathway to becoming a fully trained surgeon.”

The bottom line is that basic financial educational is not included in core surgical training even though most surgical residents would like some degree of financial education. That is the basic problem and shortcoming of existing residency training programs, Dr. Tevis and her colleagues wrote.

Given the financial burdens that education and other factors are placing on surgical residents, Dr. Tevis and her colleagues proposed “that formal training in the business of medicine and personal finance for surgical residents be strongly considered at the training program level or in partnership with other organizations, such as the American College of Surgeons, in an effort to improve the financial status of residents and prepare them for their careers, both personally and professionally.”

Dr. Harms noted, “It is probable that in most cases, educational loan debt principal is not being paid down to any significant degree given the current residency salary structure. We can only hope that residents are given some degree of good information on strategies for managing educational loan debt, which may include federally sponsored loan repayment programs such as [those offered] through NIH-sponsored research or federal loan forgiveness programs that residents may qualify for. In most cases, federal loan forgiveness programs require a minimum monthly payment that is calculated based upon current income. As an absolute minimum, interest payments should be made as additional interest debt will add significantly to the overall debt burden as interest will continue to accrue.”

Getting that financial training early could have significant benefits on the back end. The study authors noted that salary data from the Association of American Medical Colleges showed assistant professor salaries mirrored inflation metrics, but even better, surgeon salaries continued to exceed inflation-indexed targets and continued upward trends even through recession periods.

“Therefore, the financial pathway, built on increases in surgeon starting salaries exceeding annual inflation, presently still exists for deleveraging of critical debt exposure if personal finances are optimally managed,” the authors stated.

The study did have its limitations. It did not include certain variable expenses such as utilities, food, and other shopping habits, although that may have been captured as the survey asked respondents to list other “major” sources of income and debt. It also was limited to surgical residents at a single institution and may not be applicable to other specialties or geographic locations. It did not assess whether residents with mortgage payments were able to make educational loan payments beyond the minimum.

The investigators reported no conflicts.

SOURCE: Tevis SE et al. J Am Coll Surg. 2018 May 31. doi: 10.1016/j.jamcollsurg.2018.05.002.

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