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Loanscribe: Consolidating & Reducing Medical Student Loans

Just ask Jonathan Bush and his “More Disruption Please” Athenahealth program – disrupting the medical ecosystem with hackathons and start-ups is hot. But most entrepreneurs and developers realize that successful disruption requires a physician who understands clinical workflow and data analysis. As the Editor-in-Chief of MedTech Boston, I’m often approached by start-ups looking for those kinds of physicians. I tell them that’s it tough to find a physician for less than $200/hour.

Why? Most young physicians finish residency in their mid-30s, usually with a husband or wife (who is sometimes also a physician), and often with 2 to 3 children. That’s two adults in their mid- to late-30s with a total of $400k in debt trying to raise young children. You know them because they drive the beat-up Honda and are always looking for a babysitter. So, as I tell start-ups, these doctors will consult with your company, but it’ll cost you – mostly because they paid more than they could afford for their credentials.

I absolutely love my friend, Angela*, who has studied everything from dance and anthropology to public health and biology. She has a bachelors degree in human biology and anthropology; a masters in public health; an MD and then combined residency focusing on pediatrics and internal medicine; a population disease-focused fellowship; and now an almost-completed medical administration degree from Harvard. I truly believe she will be the next Surgeon General. We want and need more Angelas.

But how did she pay for all of these degrees? How does anyone in their 20s find 200K to pay for medical school after four years of college? With student loans, of course – just like most medical students. In fact, the American Medical Association calls loans “an inevitable reality of attending medical school.” 

“When I did my first masters, I took out loans but I also condensed my program into one year so I could lower expenses,” Angela says. “But in medical school, your time is not your own. It’s owned by the program. You can’t work on the side to pay down the loans.”

After two years spent working in the public health field, four years of medical school and an extended residency, Angela’s student loans loom large – $180,000 large – in the back of her mind.

I’ve also worked with a young medical student named Steven who will eventually find himself in a similar situation. Steven is in his second year of medical school at Tufts University and, like most of his classmates, he’s living on student loans, too. Without those loans he simply wouldn’t be able to foot the bill for the sky-high cost of his program. Luckily, Steven has no loans from his undergraduate program and he hopes to start paying down his loans when he enters his residency in several years.

“I’m sure this will become something I think about down the line. But it’s too early to think about it now,” Steven says. By the time he finishes his program, Steven will likely owe over $100,000.

Steven and Angela’s stories are common. According to an October 2013 report from the American Association of Medical Colleges, the minimum cost of medical school – at a public institution, most likely – still costs upwards of $162,000 for four years. Because of this, 86% of medical students graduate with debt. 40% of graduates will leave medical school with over $200,000 of debt, and 79% will leave owing over $100,000.

Based on these numbers, Steven and Angela are actually lucky. But like many other students, Steven can’t become a doctor without borrowing – it’s simply too expensive. Angela, too, couldn’t get where she wanted to be without taking out loans. They’re simply two members of a growing march toward a student loan debt problem that some say could cripple our generation.

Though the majority of physicians have student loans, most also aren’t equipped to ask the right questions about their student loans. While learning about Positive Predictive Value and Negative Predictive Value, the Accreditation Council for Graduate Medical Education (ACGME) forgot to build Econ 101 into the 4-year medical educational system.

This is where Loanscribe – a medical student loan consolidation company – comes into the picture.

When Samip Joshi and Jason Doshi, Loanscribe’s cofounders, sat down with Joshi’s sister – a doctor plagued with student loans- they were surprised to hear that their background as mortgage financiers interested her.

“She asked me how mortgage refinancing worked, and I told her we pay off the old loan and issue a new loan based off the terms you want,” Joshi says. “Then she said – why can’t you do that with my loans? I thought, what a good question.”

Loanscribe was born. Often, industry analysts equate medical school to buying a house or a car (though not as fun). “An equally important contributor to the problem has been our society’s placid acceptance of educational debt as the norm, a prerequisite to becoming a doctor. Obtaining a medical education is like purchasing a house, a car or any other big-ticket item, the thinking goes,” Dr. Pauline Chen said in a 2012 New York Times article. “Going into debt and then paying over time with interest is just the way the world works.”

Based on the idea of mortgage refinancing – essentially looking at student loans as a mortgage on medical school – Joshi and Doshi use many of the principles of their work in real estate finance to bring benefits to doctors and outside investors.

First, Loanscribe pays off a doctor’s entire government loan amount, transferring the financial burden to a third-party investor. Then the doctor is allowed to pick the terms and conditions of the newly consolidated loan. For example: After many years of school, Angela had multiple loans, with interest amounts ranging from 3.5% to 6.5%. Even after just two years of school, Steven already had several loans, too – one with 5.41% interest rates and the other with 6.41%. (Ok, I’m now thinking that I’m profoundly lucky to have one large loan of $89,000 at 2.25% and no children at 34-years-old.)

Interest rates are the big problem – they can tack thousands of dollars onto an already sky-high amount, Joshi says. Loanscribe allows doctors to put their loans into one pot, so-to-speak, picking the terms and conditions of that loan – and often reducing interest rates. Doctors can choose from 5, 10, 15 or 20-year repayment programs (federal government options usually only include a 10-year repayment program). And the faster the loans are repaid, the lower the rate. For example, depending on credit scores, a doctor on a 5-year repayment plan could be given an interest rate as low as 3.5% for his or her entire loan amount.

“Every little bit helps, honestly,” Joshi says, “and you can see the amount in your daily life. This lower rate will save you at least a couple thousand dollars each year, and maybe a lot more.”

How is Loanscribe able to provide this service – and for free, too? “We drew every parallel in the mortgage industry,” Sam says. “Investors and banks are happy because doctors are incredibly low-risk candidates, and these fixed loan rates are actually much higher than in the mortgage industry. If I am an investor, this is a safe and lucrative option. That’s a hot commodity in finance.”

You read that right: Loanscribe is 100% free for doctors, with the costs of running the platform coming from investors rather than medical professionals.

Other questions about Loanscribe often center around the federal 10-year forgiveness program. If a doctor works full-time in AmeriCorps, the Peace Corps, or several other public service organizations (including the military or law enforcement) for ten years after residency, he or she may be eligible for this kind of program – but most doctors don’t choose to go this route. And the federal 25-year loan forgiveness rule, based on Income Based Repayment – which many students mention when you ask them about loans – will rarely apply to doctors, Joshi says. If it does apply, the amount paid will be significantly larger than the amount originally owed.

Ultimately, the uniqueness of the medical education system, medical student loans and the opportunity for high paychecks immediately following graduation means that most doctors will benefit from the program Loanscribe offers.

“Medical student debt is a huge issue,” Angela says. “It’s one of the things that the AMA has been focused on for quite some time and it continues to become more and more pronounced. This is a pretty amazing option.”

Steven agrees, and says that he will likely make use of Loanscribe – which plans to go live in early November – once his medical school work is done. “This is very useful for doctors and residents to think about,” he says. “We’ll have borrowed every year.”

*Name changed; This story was made possible with considerations from Loanscribe.

Jennifer M. Joe, MD

Jennifer M. Joe, MD

    My passion is healthcare optimization, whether that is with innovation, making scientific discoveries, or improving delivery. I love bringing people and ideas together and making projects work. With this, medicine exists to improve lives, and I will strive to always help patients and those around me.

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