Becoming a physician is expensive!
For the 2013-2014 academic year, the average total student budget for public and private undergraduate universities was $19,338 and $39,028, respectively.
If one attends an average priced institution, receives subsidized loans and graduates in four years they will have about $100,000 of student loan debt from undergraduate college.
For the 2013-2014 academic year, the median cost of tuition and fees for public and private medical schools was $24,384 and $43,002 per year, respectively.
This does not include the cost of rent, utilities, food, transportation, health insurance, books, professional attire, licensing exams fees or residency interview expenses.
Therefore, the average medical student budget is about $45,000 per year; $30,000 for tuition and $15,000 for living expenses.
If one attends an average priced medical school, receives 1/3 subsidized loans and graduates in 4 years; at a 7% APR they will have $200,527 of debt from medical school at graduation.
If one borrows $22,500 bi-annually and two-thirds of this accrues interest compounded bi-annually at 3.5% – their total student loan debt for both college and medical school will then be $300,527. Forbearing this debt through 5 years of residency and paying it off over 20 years will cost about $788,880 of one’s net income.
Loan repayment programs such as those offered by the military are not a solution for the majority. Each year, about 22,000 medical students graduate from U.S. allopathic and osteopathic medical schools. Each year the military matches 800 students into its residency training programs, because that is the military’s anticipated future need for physicians.
The U.S. tax code allows taxpayers to deduct a maximum of $2,500 per year of student loan interest paid to their lender.
This deduction is phased out between incomes of $115,000 and $145,000. Therefore, this benefit is of no help to most physicians.
If one were to start a business, they could deduct nearly all of their expenses. Yet for unclear reasons, one cannot deduct the cost of becoming a physician; not the tuition or even the interest on the money they borrowed to pay their tuition.
During residency, if one makes payments of $1,753 per month, or $21,037 per year, to pay off the accruing interest, their debt will be still be $300,527 at the end of residency.
However, they will have spent $63,111 over the course of a 3 year residency or $126,222 over the course of a 6 year residency to keep their debt from growing.
Though paying off the interest during residency is the responsible thing to do; coming up with $21,037 each year from one’s net pay of $40,000 may be quite difficult.
Time spent training, student loan debt and the U.S. tax code makes the income of physicians deceiving. A board certified internal medicine physician who is married with 2 children, living in California and earning the median internist annual salary of $205,441 will be left with $140,939 after income taxes and $106,571 after student loan payments.
This is assuming a federal Income tax rate of 28%, California state income tax rate of 6.6%, Social Security tax rate of 6.2% and Medicare tax rate of 1.45%.
You can go to paycheckcity.com to get an idea of what one’s net pay would be for different incomes, states of residence, marital status, number of children, etc. Paying off a debt of $369,425 over 20 years at a 7% APR will require annual payments of $34,368.
Those student loan payments will continue to consume about $34,000 of their net income for 20 years until they are finally paid off.
What started off as $300,527 in student loan debt will end up costing $687,360. This debt that consumes one-fourth of their net income for 20 years wasn’t accrued because they bought a house they couldn’t afford – it is because they chose to become a physician.
Believe it or not, the amount of money reaching a physician’s personal bank account per hour worked is only a few dollars more than that of a high school teacher.
In order to make this calculation we will neglect inflation of the U.S. dollar by assuming that inflation will increase at the same rate as the purchasing power of the U.S. dollar decreases.
We will also assume that physician incomes keep pace with inflation. We will also assume that tuition costs, student loan interest rates, resident stipends, physician reimbursements and the U.S. income tax structure are as described above and do not change.
The median gross income (income before taxes) among internal medicine physicians is $205,441.
The median net income (income after taxes) for an internist who is married with two children living in California is then $140,939.
Internal medicine is a three-year residency, so throughout residency they will earn a total net income of about $120,000 and spend about 34,000 hours training after high school.
The total cost of training including interest, forbeared for three years and paid off over 20 years as explained above is $687,260.
One study reported that the average hours worked per week by practicing Internal Medicine physicians was 57 hours per week. Another study reported the mean to be 55.5 hours per week. We will use 56 hours per week and assume they work 48 weeks per year.
If they finish residency at 29 years old and retire at 65 years old they will work for 36 years at that median income.
Lets Run The Numbers:
True Hourly Wage for a Medical Doctor
[(140,939 x 36) + (120,000) – (687,260)] / [(56 x 48 x 36) + (34,000)] = $34.46
The adjusted net hourly wage for an internal medicine physician is then
$34.46 per hour
And Now The Moment You Have All Been Waiting For…
Physician Assistant – True Hourly Wage
The median gross income (income before taxes) among Physician Assistants is $100,000
The median net income (income after taxes) for a Physician Assistant who is married with two children living in California is then $76,277
Physician Assistants do not have a residency. They spend about 6,400 hours training after high school plus they will need roughly 2,000 hours of direct patient care experience prior to applying to PA School. PA school is roughly 4,300 hours of training. This is made up of 2,000 hours of didactic and 2,000 hours of clinical hours plus the amount of time it takes to get a bachelor’s degree.
The total hours of training for a Physician Assistant is roughly 12,400 hours of training after high school.
The total cost of training if one attends an averaged priced institution and pays off their debt over 20 years at a 6.8% interest rate is roughly $197,176. You can estimate your own payments here.
One study reported that the average hours worked per week by a practicing Physician Assistant was 40 hours per week. Another study reported the mean to be 42 hours per week. We will use 41 hours per week and assume they work 48 weeks per year.
If they finish PA School at 27 years old and retire at 65 years old they will work for 38 years at that median income.
Since most PA’s do not receive a pension we will say our hypothetical PA will get a 3% employer match for 38 years and I am going to ignore interest on this income so it is about $114,000.
Lets Run The Numbers:
True Hourly Wage for a Physician Assistant
[(76,277 x 38) + (114,000) – (197,176)] / [(41 x 48 x 38) + (12,400)] = 42.63
The adjusted net hourly wage for a Physician Assistant is then
$32.29 per hour
And Just For The Fun of it Because Both of My Parents are Teachers
True Hourly Wage – High School Teacher
The median gross income among high school teachers, including the value of benefits but excluding their pension, is about $50,000.
The median net income for a high school teacher who is married with two children living in California is then $42,791.
This is assuming a federal Income tax rate of 15%, California state income tax rate of 6.6%, Social Security tax rate of 6.2% and Medicare tax rate of 1.45%. You can go to paycheckcity to get an idea of what one’s net pay would be for different incomes, states of residence, marital status, number of children, etc.
Teachers spend about 6,400 hours training after high school, the amount of time it takes to get a bachelor’s degree.
The total cost of training if one attends an averaged priced institution and pays off their debt over 20 years at a 7% interest rate is $186,072.
At this income one would be able to deduct the interest on their student loans from their income taxes; however, those savings are not accounted for in the calculation below.
High school teachers have about 10 weeks off each summer, 2 weeks off during Christmas, 1 week off for spring break and 1 week of personal paid time off. Therefore, high school teachers who work full time average of 40 hours per week for 38 weeks each year.
Yes, teachers spend time “off the clock” preparing for class, correcting papers, etc. However physicians also spend time “off the clock” reading, studying, going to conferences, etc. If a high school teacher finishes college at 22 years old and retires at 65 years old, they will work for 43 years.
Most teachers also receive a pension. We will assume their gross annual pension including the value of benefits is $40,000 which is a net pension of $35,507. If they die at 80 years old they will receive this pension for 15 years.
Lets Run The Numbers:
True Hourly Wage for Teacher
[(42,791 x 43) + (35,507 x 15) – (186,072)] / [(40 x 38 x 43) + (6,400)] = $30.47
The adjusted net hourly wage for a high school teacher is then
$30.47 per hour
For The Love of Money
The median gross income among internal medicine physicians is $205,441.
The median gross income among high school teachers, including the value of benefits but excluding their pension, is about $50,000 per year.
The Median gross income among physician assistants, including the value of benefits is around $115,000 per year.
Accounting for time spent training, student loan debt, years worked, hours worked per year and disproportionate income taxes – the net adjusted hourly wage of an internist is $34.46 per hour, while that of a high school teacher is $30.47 per hour and that of a physician assistant is $32.29.
Though the gross income of an internal medicine physician is 4 times that of a high school teacher, the adjusted net hourly wage of an internal medicine physician is only 1.13 times that of a high school teacher and 1.07 times more than that of a Physician Assistant! Click To Tweet
PA vs. MD Round 1 – goes to MD (but by an extremely narrow margin)
*Oh yeah, and how about that stay at home 35-year-old living in the basement in our poll? If anybody has time to do that calculation please post it in the comments section… We may all be working way to hard!
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