With all the attention student loans are getting, many people assume that those not paying their loans maybe have degrees in fields that aren’t hiring or didn’t finish their degrees. And when you think about a segment of graduates that should have no problems paying off their educational debt, doctors would top the list. But in fact there are 1,000 doctors that are in serious debt to the government for their student loans and who are either unable or unwilling to pay them off and have the government hot on their heels.
The loan program the doctors, dentists and chiropractors used to finance their educations was the Health Education Assistance Loan (HEAL) program. HEAL was established to offer middle class students the chance to pursue careers in medicine and offered private loans guaranteed by the federal government that unfortunately charged interest rates up into the double digits. The program ran from 1978-1998 and loaned $4 billion to more than 157,000 students. 95% of borrowers have either paid off or are current on their loan payments, but $300 million in loans defaulted and were paid off by the federal government.
$116 million of the defaulted amount owed by 930 medical professionals is currently in collections by the Health Resources and Services Administration (HRSA). There are also another 30,000 borrowers that still owe, but are current on their obligations. HRSA spends nearly $3 million a year administering the loans and collecting the debt. But are their tactics acceptable and how much enforcement is too much? With interest payments on these loans unreasonably high, how much of the repayment dollars have gone to private lender profit and is this debt unreasonable?
Some of the tactics HRSA has used is tax refund seizure, garnishment of unemployment checks, judgments in federal court and banning those in default from being able to bill Medicare or Medicaid. Some of this seems standard and some excessive, particularly taking unemployment checks. But the worst collection tactic employed by HRSA is naming and shaming. They posted a public list – called the “deadbeat doctors list” – of doctors’ names that were in default. That seems like a violation of privacy and against debt collection tactics. Just because it was the government that did it, doesn’t mean it’s a legitimate activity.
Two of doctors cited from the list (that we will not name) include:
$$ A family medicine practitioner whose loans have skyrocketed from $222,000 borrowed to $933,000 now owed. She practiced for five years and then left medicine to become a stay at home mother who later went back into medicine, but not for money – she’s a medical missionary who works in impoverished areas.
$$ A chiropractor who found the industry was too competitive and couldn’t make a living and has since suffered a disability that makes him unable to work in his field even if he could make a profit at it. His debt is over $570,000 – I wonder how much he actually borrowed and how much of this is the result of high interest rates.
Overall, physician student loan default rates are low – typically around 1% – despite most graduating with very high student loan balances. Most average $162,000 in educational debt by the time they graduate. The higher balance seems to be manageable though as the default rate is far lower than the average.
It’s true that some doctors are making big bucks and practicing in plush officers with designer aquariums matched to their exquisite decor. But for many doctors, it’s a career that’s not nearly as high paying or glamorous as TV’s medical dramas would have us believe. Smaller practices generate a living wage for doctors that accept Medicare, Medicaid and low-paying HMOs, but they are not living large. So it’s understandable that some would struggle with their repayments.
It just seems like there should be a better way to make student loan debt more manageable. Actually, for most borrowers there can be a better way. Whether you are a graduate or are still in school, if you borrowed to finance your education, it’s important to proactively manage your debt to make sure you don’t end up on some terrible government list. Consider consulting an expert in optimizing and managing student loan debt now!