Wednesday, May 9, 2012

HPSP Cost Analysis

The theme of this week was, "You signed up for the HPSP?! I had a (relative) who did and it was a terrible experience, nothing went right, recruiters are all liars, et cetera ad nauseum." The HPSP or Health Professionals Scholarship Program is the name that the armed services gives to the deal they make with interested and qualifying medical and dental students. Each branch of the military has essentially the same deal which is that in exchange for a four year commitment to the branch once you have graduated, they will pay tuition, books, fees, plus a small stipend for the four years of school.

I've heard arguments for and against ever since general chemistry back in undergrad, but honestly haven't talked to anyone who has been through the program. I made the decision to do it shortly after hearing the words, "We'll pay you..." After having been in just short of a year there are still some aspects (such as how the residency match works) that are unclear to me. For now, I'm collecting paychecks and hoping that things will work out. I'm not a finance major and so this is a rough sketch of private versus military doctors (I am ignoring the 7.9% GradPlus loans that finance anything over the $18,000/year Unsubsidized Stafford loans and $4,500/year Subsidized Stafford loans which go away in 2012).

Each school has a maximum amount per year that they will let you take out in loans. They calculate this number by adding together all tuition, fees, books, and personal expenses. The personal expenses include their estimates for food, rent, recreation, travel, etc. which all vary greatly depending on how parsimonious a student is, but they "award" about $19,000 a year.  

Funding from Loans                       One Year      Four Years (with interest)
                                                     $72,000        $317,157

Using my school as an example (on the high end of tuition, I know) here is what the Air Force pays me.

                    Yearly                  Total
Tuition $51,510.00 $206,040.00
Health Insurance $1,500.00 $6,000.00
Books $1,670.00 $6,680.00
Supplies $700.00 $2,800.00
Stipend $21,924.00 $87,696.00
Sign On Bonus $20,000.00 $20,000.00
Laptop Rental $200.00 $800.00
Total $97,504.00 $330,016.00
Remember this is at the end of four years of medical school. During residency which lasts 3-6 years, you make about $50,000/year (very rough estimate depending on the hospital). The total you actually pay back would be quite a bit more than the numbers above because repayments enter a period of forbearance during residency in which you don't have to pay anything, but interest accrues. I'm not a finance major, but for an internal medicine residency lasting three years, interest on $317,157.00 at 6.8% would be an additional $64,700 for a grand total of $381,800.00. For a general surgery residency lasting 5 years, tack $107,833 onto the amount borrowed for a grand total of $424,990 when you begin repayments.

I used the FAFSA repayment calculator for the following based on the amount an internal medicine resident might expect to pay.

                                                                             Monthly          Total Paid
Standard Repayment Plan (10 Years)                  $4393/month   $527,252.00

Extended Fixed Plan (25 Years)                          $2650/month   $794,991.00

Graduated Plan (25 Year Incremental Increases) $2163/month   $861,113.00

So if I were going into internal medicine, the real value of having the military pay for it is the fact that I don't have to pay $530,000. Savings would be bigger for a longer surgery or radiology residency. The question really is, to what extent is the cost of debt to finance medical school offset by the expected salary? Medscape just released the average Physician Compensation Report for 2011 and here are the results.

 Here's how the numbers compute first for an internal medicine residency and then for a surgery residency.

At the bottom line, the military doctor comes out ahead in either field. In order for the civilian route to come out in front, you can either go to a less expensive school, or pick a better paying specialty like radiology or neurosurgery. There are other comparisons, but we'll save those for another time.


  1. Not doing HPSP was one of the hardest decisions I've ever had to make. There are so many pros and cons both ways. I think it's an admirable thing to do and hope it works out for you!

    1. I was just accepted for HPSP, and was wondering what your thought process was for not taking it?

      Thank You