Written By Rob Bertman, CFA, CFP®
An Osteopathic Medicine degree used to be looked at as less than getting an MD, but oh how times have changed.
DOs and MDs work hand in hand everywhere everyday. There are more than 100,000 practicing DOs which has tripled since 1990.
57% are primary care physicians and make up a quarter of all primary care physicians according to the American Medical Association. The other main areas of focus are in anesthesia, obstetrics and gynecology, surgery and psychiatry.
Getting an Osteopathic medicine degree is catching fire. 25% of med school students are training to be DOs and residency matching and accreditation for MDs and DOs have merged.
However, there is a high price to pay to get the degree, and it hangs over the head of many DOs.
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Doctors of Osteopathic Medicine graduate with more student loans than anticipated
There are now nearly 40 colleges of osteopathic medicine, including Marian University College of Osteopathic Medicine, offering 4-year med school programs.
In 2017, AACOM did a survey that included asking how much student debt DOs have. The thousands of people who responded to the survey had an average student debt of $247,218 related to just their osteopathic medical education and it’s rising. Compare that to MDs who graduate with $190,694 on average. That’s $56,524 more debt!
We’ve seen it here at student loan planner too. The average DO has around $400,000 in student loans. So why are we seeing more debt than the average graduate according to the survey?
The combination of deferred loans from undergrad, some of which were accruing interest and being on an inefficient path to pay back their loans leads to significant loan growth even 3-5 years out of med school.
So is it financially worth it?
Doctor of Osteopathic Medicine salary comparison
Are Osteopathic Doctor salaries worthwhile? It’s a challenge to find separate salaries for DOs vs MDs but we do know that the compensation is fairly similar. Since 57% of DOs are primary care doctors, the median salary is most likely in line with that. The median salary for all family and general practitioners is $208,000 according to the Bureau of Labor Statistics.
According to the same source, the median wage for a college graduate is about $66,000. Here’s a graphical summary from The Balance Careers if you want more info.
So becoming a Doctor of Osteopathic Medicine leads to $142,000 more in earnings per year compared to the average college graduate.
Let’s just assume that $142,000 in extra income sustains throughout the entire 30-year career of an DO post-residency. That works out to an extra $4,276,000 in lifetime earnings for a DO salary compared to someone with a bachelor’s degree. That is a huge number!
Taking out $247,000 in loans to make an extra $4,276,000 tends to make financial sense on the surface, but many doctors don’t prioritize paying back their loans or are on an inefficient plan which can make that $247,000 in debt much more costly to pay back.
So in order to find out if the cost is worth it, let’s figure out how much it will cost to pay back that debt.
Doctor of Osteopathic Medicine student loan repayment options
Here at Student Loan Planner®, we have done over 1,600 consults and advised on over $400,000,000 of student debt. Our experience shows that there are two optimal ways for OTs to pay off student loans. They just so happen to be on opposite ends of the spectrum.
Option 1 – Aggressive Pay Back: For people who owe 1.5 times their income or less (e.g. a DO who makes $200,000 with loans at $300,000 or less), their best bet in most (but not all) cases is to throw every dollar they can find to pay back their loans as fast as possible, no more than 10 years.
The caveat for DOs is that there is a bunch of loan forgiveness opportunities so even a DO with $300,000 in debt or may not want to pay off their loans in full.
Option 2 – Pay the least amount possible: For people who owe more than twice their income (e.g. a DO who makes $200,000 and owes $400,000 or more), the goal is to get on an income-driven repayment plan that will keep their payments low and maximize loan forgiveness whether it’s public service loan forgiveness (PSLF) or taxable loan forgiveness.
Type of employer student loan repayment for doctors of osteopathic medicine
Loan repayment can go one of three ways for DOs.
- Option 1: Refinance and pay back the loans to become debt free in 10 years or less
- Option 2A: Work for a private/for-profit company and get on PAYE or REPAYE
- Option 2B: Work for a non-profit or government employer and go for PSLF
Depending on which path a DO chooses will dramatically affect what loan repayment looks like and if it’s “affordable” for them.
Before we get to Option 1, let’s compare the difference between options 2A & 2B.
Let’s say that two separate people, Mike & Amanda, each owe $350,000 at 6.8% from becoming a DO. They both make the average $208,000 salary with expected 3% raises each year. They both choose PAYE (pay as you earn) as their income driven repayment plan.
Both worked for a non-profit for their 3 years of residency and have 3 years of credit toward PSLF by being on PAYE. Over those 3 years of residency, their student loan payments were minimal because of their salary as a resident.
Now that residency is over, Mike works for a non-profit hospital (eligible for PSLF) and will continue on the PSLF path, while Amanda works in a private practice (not eligible for PSLF).
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.
| Borrower | Payments | Forgiven balance | Taxes | Total cost |
|---|---|---|---|---|
| Amanda | $413,862 | $280,498 | $112,199 | $526,061 |
| Mike | $145,725 | $351,275 | N/A | $145,725 |
Even with all the same factors, Mike’s loans are significantly more affordable. He is only projected to spend $145,725 paying back his $350,000 of student loan debt, $0.42 on the dollar. Plus, he’ll be debt free in 7 years since he’s already 3 years in.
Amanda, on the other hand, is projected to make payments totaling $413,862 over 17 years then have a tax bomb of $112,119 due in 17 years for a grand total of $526,061. That means every dollar she borrowed will cost her $1.50 to pay it back.
The weird thing about these income-driven plans is that their loan repayment will be identical for 7 straight years since they’re both on PAYE. The major difference is that Mike’s loans would be forgiven tax-free whereas Amanda would have to make payments for an additional 10 years and the amount of loans remaining would be forgiven but she’d pay taxes on the forgiven balance.
With identical situations, the difference in type of employer is a $380,000 swing in cost to pay back the loans.
PAYE without Public Service Loan Forgiveness vs Refinancing for doctors of osteopathic medicine
Amanda can either stay on PAYE for 17 more years or refinance and pay back the loans over 10 years at 5% interest.
| Repayment plan | Payments | Forgiven balance | Taxes | Cost | Loan payback | First monthly payment |
|---|---|---|---|---|---|---|
| PAYE | $413,862 | $280,498 | $112,199 | $526,061 | $327,386 | $1,585 |
| Refinance | $455,274 | N/A | N/A | $455,274 | $367,199 | $3,712 |
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)
Refinancing
- 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 Amanda 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.
If she wants to be debt free as soon as possible and is she willing to sacrifice to make it happen? Then she should lean toward refinancing and/or finding an area where there’s a shortage of doctors and apply for the National Health Service Corp (NHSC) Loan Repayment Program. That could pay her $50,000 to apply to her loans in exchange for 2 years of service. After that 2 years is up, she could apply to get more money awarded for 1 year of service at a time.
Is receiving a doctor of osteopathic medicine degree worth the cost?
Since they have the potential of more than $4,000,000 in excess earnings vs a college graduate, the financial answer is yes but there is a significant price to pay.
On top of the financials, they will have to manage their emotions of having massive student loans for 10 to 20 years and won’t necessarily be able to celebrate and enjoy that higher income until their loans are dealt with. Student loan payments will be a way of life during that time.
If they approach it with a long term perspective, they’ll still have a nice long career remaining after being student debt-free.
Job choice is the #1 financial factor that will impact how a DO can pay back their loans. If they are fortunate enough to work full time for a non-profit, it could save a ton of money and make the degree a no-brainer.
Just like any profession, DO candidates should only choose to pursue this path if they are all in and don’t let student loans make them regret their decision.
Doctors of Osteopathic Medicine need a plan for student loan repayment
If you graduate with an osteopathic medicine degree don't worry you can find a clear path to pay back the student loans. A path that could save significant money.
Student Loan Planner® has done over 10,000 student loan consults for clients with over $2,000,000,000 of student loans. Whether you are a DO who works for a private practice or hospital, we can help you figure out the optimal path to pay back your loans in just 1 hour.
Have you debated studying Osteopathic Medicine? Does reading this change your mind at all? Comment below!
