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Strange Things in the Precious Metals
Issue #531, July 17, 2018

Buying Years of Retirement
Issue #530, July 09, 2018

Rent-A-Kid for Retirement
Issue #529, July 02, 2018

The Dark Side of Student Loans
Issue #528, June 25, 2018

The Cost of Out-sourcing Convenience
Issue #527, June 18, 2018

Social Security: 66 or 70?
Issue #526, June 11, 2018

Student Loans: There’s (Unfortunately) a Lot More!
Issue #525, June 04, 2018

Co-signing a Note
Issue #524A, May 31, 2018

The Knight Frank Luxury Index and Collectables
Issue #524, May 28, 2018

The Importance of Diversification: The Myth of Diversification
Issue #523, May 21, 2018

How to Save Thousands on Your Food Bill
Issue #522, May 14, 2018

MoviePass and Other Things
Issue #521A, May 10, 2018

Degree Inflation, Long Training Periods, and “Certification”  Part III
Issue #521, May 07, 2018

Degree Inflation, Long Training Periods, and Certification” Part II of III
Issue #520, April 30, 2018

Follow-up on Several Things
Issue #519A, April 25, 2018

Degree Inflation, Long Training Periods, and “Certification”: Part I of II
Issue #519, April 23, 2018

The Kids Birthday Party Hustle
Issue #518A, April 18, 2018

A Pension Question: Part II of II
Issue #518, April 16, 2018

A Physician is an Executive
Issue #517A, April 11, 2018

A Pension Question: Part I of II
Issue #517, April 09, 2018

Is the Correction Over?
Issue #516A, April 05, 2018

Used Car Dealers, Student Loans, the Chinese, and Uncle George’s Rule
Issue #516, April 02, 2018

Starter Homes
Issue #515, March 26, 2018

Redecorating: Beware!
Issue #514, March 19, 2018

NASDAQ Closes at Record High
Issue #513, March 12, 2018

A 40% Chance
Issue #512, March 05, 2018

Several Things
Issue #511, February 27, 2018

Human Capital, Education and Wealth
Issue #510, February 19, 2018

Another Stock Market Update
Issue #509A, February 18, 2018

Some Thoughts on Savings
Issue #509, February 12, 2018

A Stock Market Upfate
Issue #508S, February 10, 2018

Who Can You Trust? Part II of II
Issue #508, February 05, 2018

The Christmas Decoration Pre-worn Jeans Hustle
Issue #Interim Bulletin #507A, February 03, 2018

2018 Outlook for Financial Markets
Issue #507, January 29, 2018

Who Can You Trust? Part I of II
Issue #506, January 22, 2018

Life Insurance Settlements
Issue #505, January 15, 2018

Commodities and Buying the Breakout
Issue #504, January 08, 2018

Buffett Wins His Bet
Issue #503A, January 04, 2018

Practice Real Estate and Free Agency
Issue #503, January 01, 2018

Outlook for 2018: Part III: Stocks and Bonds
Issue #502, December 25, 2017

My Outlook for 2018: Part Ii: Precious Metals
Issue #501A, December 21, 2017

Outlook for 2018: Hard Assets: Part I of III
Issue #501, December 18, 2017

More Thoughts on Bitcoin
Issue #500A, December 14, 2017

Fees and Good Relations with Bankers
Issue #500, December 11, 2017

Salvator Mundi
Issue #499A, December 07, 2017

Should You Rent or Own a Home?
Issue #499, December 04, 2017

A Gift Subscription
Issue #Interim Bulletin #498A, December 02, 2017

Stocks vs Real Estate: Asset Allocation: Part II of II
Issue #498, November 27, 2017

When Good Enough is Fine
Issue #497A, November 22, 2017

Stocks vs Real Estate: Asset Allocation. Part I of II
Issue #497, November 20, 2017

The Saudi Arrests and the Perils of Foreign Investing
Issue #496, November 13, 2017

Gambling and Las Vegas
Issue #495, November 06, 2017

Some Tips on Auto Insurance
Issue #494, October 31, 2017

Bitcoin and the Digital (Crypto) Currencies
Issue #493, October 23, 2017

The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017


By Robert M. Doroghazi, M.D., F.A.C.C.

The Problem with Medical Student Debt is—the Med Schools

Issue #474, June 12, 2017

    A Resident asked my opinion on how he can pay off his student debt, which is more than twice the national average. I had some suggestions, and have thought of more since we spoke (see below), but while we were talking I came to the brutal realization that it’s too late: the damage has been done, he already has far-into-6-figure debt.
    I played this out in my mind. When does the problem start? I kept going back. 4th year med school? 3rd year? 2nd year? No. It starts when they start school. The basic problem is that med school tuition—all college tuition—is too high.
    The average (mean) med school debt is $175K. Because of parental resources and/or scholarships, about 15% graduate debt-free. Thus the median for those with debt is $180K. I am convinced that if students worked more along the way and were thriftier, they could decrease their debt by 10-20%. $2.74 per day (the cost of a Starbuck’s coffee) x 365 ¼ days per year, is exactly $1,000.
    Here is my point: what is the cause for the other 80% of med student debt? It is the med schools relentlessly raising tuition, gouging the students for all they can get.  But there are actually 2 parts. One is the enabler, and this is clearly the government guarantee of student loans. Industries capture a subsidy by raising prices. Universities capture the student loan subsidy by raising tuition, which the student funds by borrowing more, a classical positive feedback loop.
    In bygone times, which are now by and gone, when a banker loaned money, it was directly from their, and their depositor’s, pocket. The bankers were all old fuddy-dud curmudgeons, whose only response to anything seemed to be “No”. But they provided the discipline, the control, the checks and balances, for the system. Now with the government guaranteeing student loans, (and most everything else), the originator just writes the loan, keep the fees, and sell the note off. It’s now someone else’s problem. Considering that the government guarantees the vast majority of the student loans (95%+), that someone is you and me. Life is easy when it’s other people’s money. 
    The med schools relentlessly raise tuition. My last year in med school at the U. of Chicago in 1976/77, tuition was $1,500 per quarter, $6,000 for the year. At the U. of C., and other similar, first-class private schools, tuition is now in the mid to upper $50Ks. Let’s round that to $54K, which is 9x the $6K I paid ($60K would be 10x). Over this period (see below), the cost of living has risen 4.2x. Thus med school tuition has risen more than twice as fast as the cost of living. Med schools can make all the excuses they want, but I’m not impressed: this is just price gouging.
    Medical schools need to make a good-faith effort to get tuition under control. The first place to start is the bloated administration and their bloated salaries. When I was in med school, there was the Dean of the school and the Dean of Students. Now there are more Associate Deans, Assistant Deans, Vice Assistant Deans and Program Directors than Carter’s has Little Pills. There are med schools where a $1,000 tuition cut for every student in the school could come out of the Dean’s personal salary—and the Dean would still pull down 7-figures!!
    Med school hospitals are (supposedly) non-profit, yet many make multi-millions in profits. In 2013, Stanford made $224.7 million in profits, which is enough to fully fund the tuition for all of the med students at Stanford—for the next decade (see below).
    This runaway increase in med school tuition is just one more factor that decreases the attractiveness of a career in Medicine for the smartest kids in the class.
    These were my recommendations for the young man with the crushing debt.
    1) Everyone can be thriftier.
    2) He noted that he, his wife and 3 children are accustomed to living on a Resident’s salary. He realizes he needs to continue this mindset when he goes into practice.
    RMD comment: I’m impressed that he already appreciated this. When one goes into practice, salary can triple or quadruple overnight. What was previously a luxury can easily become a necessity. Some undisciplined people can completely lose control, with spending far outpacing even the astronomical jump in salary.
    3) Pay off the smallest note first, because it decreases debt service. Say you have one note for $10K (car) and two student debt notes of $100K each. You can pay $99K on one of the large notes, but debt service still hasn’t dropped, where paying $10K on the car note immediately frees up cash.
    4) This young man is going to need a very high paying job. A general rule: you need to keep student debt less than 1 year’s anticipated salary, because above this it gets increasingly difficult to service the debt. The interest payments eat you up. Ex: someone who wants to be a teacher needs to keep student loans below $30K.
    This man’s best chance is to go to an underserved, and generally less desirable, area, say rural Montana or Maine or wherever, where hospitals must offer $400-600K a year to attract a surgeon. In this situation, the hospital should also be amenable to paying off his loans, at say $30K per year, if he stays 5 years or more.
    5) I presume his hospital has a policy for physicians-in-training and moonlighting. When I was an Intern and Resident at the MGH, none of us moonlighted. When I was a Cardiology Fellow at Barnes, we all moonlighted, some much more than others. I did the Friday night shift at St. Joseph’s Hospital in Sr. Charles. It added 50% to my Fellow’s salary. If possible, this young man should consider moonlighting.
    6) After receiving a commitment, some groups/hospitals will give physicians an advance on their salary, say $2,500 per month during their last year of training. In whatever way, this young man needs all the money he can get, as early as possible.
    7) Debt is financial slavery. The pressure to service this debt is beyond onerous. One must be very—very—careful not to do something, such as unnecessary procedures, to compromise their integrity and endanger patients. It’s very easy to rationalize doing a procedure when you ring your own cash register. 
                      Consumer Price Index (CPI):     
      Year                                                   CPI
      1914 (creation of Federal Reserve)          (base) 10.0
      1951 (year I was born)                              25.4
      1964 (govt. stopped making silver coins)            31.0
      1969 (I graduated HS)                                35.6
      1976                                                   55.6
      1983                                                   100
      (In 14 years, the costs of living tripled. Thank you LBJ, Nixon and Carter)
      2006                                                   200
      2016                                                   237
    The mega-cap tech stocks, which had accounted for about 40% of the increase in value of the S&P 500 this year, were slammed at the end of last week. The mid-year Roundtable is in today’s Barron’s. Some were quite bearish, especially Felix Zulauf, who notes his trend and momentum indicators are still bullish, but show signs usually seen going into a peak, which could occur in July or August. He then feels there is a window of vulnerability, and markets could drop as much as 20% from August to November.
    RMD comment: Zulauf is my favorite. I pay attention to what he says.
    Yesterday’s Columbia Daily Tribune: The University of Missouri has faced a double whammy from falling enrollment and cuts in state funding. The School of Medicine and MU Health Care (University Hospital) chipped in money to help cover the shortfall.
    RMD comment: I had a Commentary in last November’s American Journal of Medicine on “Why are “Non-profit” Hospitals so Profitable”? Since they’re so flush, now they should cut med school tuition. 
    I’ve made 2 presentations over the last month. On May 18, I gave Grand Rounds at Northside Medical Center in Youngstown, OH on “Managing Your Personal Finances”. On June 6, I spoke to the Boone County Medical Society here in Columbia on “Trends in Medicine”, with a special focus on bureaucracy and the recent fiasco of Maintenance of Certification (MOC) and the American Board of Internal Medicine (ABIM), based on the 6 Commentaries I had last year on “Negative Secular Trends in Medicine” in The American Journal of Medicine”. Please consider me when you are looking for a presentation on personal finances or on one of the subjects discussed in the articles.   
    Received an awesome note from a subscriber in response to last week’s Interim Bulletin on “Critters and Varmints in your Home and Yard”. Will save that for next week. I’m traveling next weekend to Vegas to play in the Super Seniors event (65 and above, so I’ll be one of the puppies in the group) at the World Series of Poker, so the next newsletter will probably come out a few days early. 

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