Student loan debt makes it harder for doctors and lawyers to build wealth
- Despite the six-figure salaries, working as a dentist, doctor or lawyer isn’t the path to the wealth it once was, thanks to staggering results. student loan debt.
- Mike Meru, an orthodontist who went to dental school at the University of Southern California, owed more than $1 million in student loans as of Thursday, according to the Wall Street Journal.
- Meru is just one example of the rising cost of a professional degree in the United States.
- Many of the wealthiest people in the United States today work in technology or business – an MBA is often a better return on investment.
That’s a small sum compared to the $2 million loan balance he’s expected to face in two decades. That’s because Meru pays about $1,590 a month, or 10% of her monthly income, but not enough to cover the interest. At this rate, his debt is growing by $130 a day, according to The Journal.
Meru graduated from the Herman Ostrow School of Dentistry at the University of Southern California, one of the most expensive dental schools in the United States. He attended from 2005 to 2012, including his orthodontic residency, for which he paid tuition.
During this period, interest rates for graduate students reached 8.5%, reports The Journal – a considerable increase from the 2.77% set by the federal government for students in 2004, when Meru calculated that account given the expected salary, dental school would be a good investment.
Five years ago, only 14 people in the United States owed $1 million or more on their federal student loans. Today, 101 people owe at least $1 million, according to the report. And Meru’s situation shows that despite high salaries, becoming a doctor, dentist or even a lawyer is not the path to wealth he once was.
Tuition fees rise again and again
These numbers are not surprising given the cost of tuition.
Dental school is the most expensive professional degree program in the United States. In the 2015-2016 school year, private nonprofit dental schools billed an average of more than $71,000, while state public dental schools billed approximately $38,000, according to the Urban Institute.
During Meru’s first year at USC, tuition was $56,757, of which he owed $43,976 after his wife’s tuition was cut as a college employee, according to The Journal.
By the end of his sophomore year, USC tuition had risen 6% and interest rates were triple what Meru had expected, according to the report. Tuition fees rose 6% again in his third year, and before long Meru was deep in six-figure debt.
Average tuition for private medical schools was cheaper than dental schools in 2016, but not by much. Private programs charged $53,240 and state public medical schools charged $28,720.
Law school tuition is not far behind. Private law schools cost $47,450 on average in 2016, and public tuition in the state was nearly $19,000 less.
Although dental school has the highest average price for a professional degree, dentists are not the highest paid professionals. median income dentist in the United States earns $151,440 per year, and the median income doctor earns at least $208,000, according to the Bureau of Labor Statistics.
Additionally, while doctors are paid during their residency, dental specialists typically complete their residency at universities that charge tuition.
Technology and business pay well too
While dentists, doctors and lawyers earn six-figure salaries, many have student debt that exceeds their income.
A master’s degree in business administration also comes with expensive tuition, but traditional programs are only two years long, compared to three years in law school or four years in medical or dental school, not including the residence. With common six-figure starting salaries and average signing bonuses ranging from $16,000 to $30,000 for graduates of America’s top business schools, the return on investment of an MBA can be quite lucrative.
For example, the cost to attend Stanford business school is $119,000, and MBA graduates earn an average starting salary of $125,000, according to The Princeton Review. This is an estimated return on investment of 325% over 10 years.
Even public school MBA graduates do well. Arizona State University’s Carey School of Business has a total program cost of $68,000 and graduates earn an average starting salary of $98,000, representing a 250% return on investment over 10 years, according to The Princeton Review.
Meanwhile, software and IT services ranked as LinkedIn’s highest-paying industry in 2017″Salary status report.” The average mid-career employee of a Silicon Valley tech company makes well over $100,000, The HuffPost reported. Even employees with less than five years in their career at the biggest tech giants, like Google and Facebook, earn six figures.
Employees in AI-related fields — whether fresh out of school with a PhD or with less education — can be paid $300,000 to $500,000 a year or more in salary and in company shares, according to the New York Times.
In addition, many employees of Amazon, Google and Facebook show up with just a bachelor’s degree. Although they may also have student loan debt, their balance is probably much lower than that of vocational school graduates, who generally have higher interest rates. The loans are also unsubsidized for graduate students, meaning they start earning interest while the borrower is still in school.
spend a lifetime in debt
Meru took out a total of $601,506 in student loans during her seven years of study, according to The Journal. He has paid off $39,000 since consolidating his 50-plus student loans for the second time in 2015.
Although Meru has a reduced interest rate of 7.25%, his loan balance has increased by $148,948, reaching over $1 million today.
The expensive education helped Meru land a lucrative job earning $225,000 a year in a corporate practice – higher than the median income of $208,000 for orthodontistsaccording to the BLS.
But that six-figure salary isn’t all it’s supposed to be when there’s nearly a lifetime of student loan debt to take on.
Meru is now on a government-sponsored repayment plan of monthly payments capped at 10% of his discretionary income, so he can have enough money for his family of four, The Journal reported.
When his 25-year repayment plan ends and his balance finally reaches $2 million, that amount will be forgiven. The Journal estimated that it could cost Meru more than $700,000 in
payments at the prevailing tax rate.