Financial analysis of the Health Professions Scholarship Program
Each year, military recruiters descend upon medical schools and pre-med fairs with the intention of signing people up for either the Army, Navy, or Air Force. Their goal is to fill the military with physicians to care for the soldiers in battle. They will cite patriotism and throw out stories of hero doctors and tell you than you (yes YOU) can be a Hero, MD. The greatest incentive they have is the Health Professions Scholarship Program. HPSP will pay for all of your tuition, fees, books, and supplies. All you have to do in return is serve a commitment of one year in the military for each year you take the scholarship.
The Student Doctor Network has a forum dedicated to military medicine. Many current and former active duty physicians will attempt to dissuade candidates from joining using a variety of illustrative stories to show that the mil med is overly bureaucratic, promotes ineffective leaders, and punishers free thinkers and whistle blowers. Think Walter Reed, but on a nation-wide scale. While the posters of SDN have their own reasons for their dissatisfaction with the Defense Department, my goal is to provide a quick and dirty financial comparison of HPSP to the civilian route. In other words, is the scholarship worth it?
First, let’s see how much the military is paying. I’ll use my school as an example.
Tuition = $30,000
Health Insurance = $2,500
Books = $1,500
Supplies = $700
Laptop rental = $200
Rounding up, the military is paying about $35,000 directly for my schooling. I also get $17,000 a year for a stipend. Over the course of four years, the military will have paid $208,000 for me to go to medical school. Now let’s do a comparison of different specialties and see how they stack up to HPSP. For salaries of military doctors, I used the Navy’s Pay Calculator. For the salaries of civilian residents, I took a rough average of several hospitals’ pay tables for post-graduate medical education. For the salaries of civilian doctors, I used the information provided by Washington University’s Residency Web.
Let’s start with internal medicine. I’m going to make a few big assumptions:
- No deployments
- I used my zip code (a rather expensive area to live) for the Pay Calculator
- No inflation or changes in salary for either civilian doctors or military personnel.
- No interest rates on student loans.
- The military doctor has no prior experience and gets promoted to major after six years in service.
For the civilian doctor, let’s use a similar table. Since I’m going to account for the $208,000 in debt that this person has, I’ve added another column, Wealth after debt.
From these tables we see that at the 7 year mark—the point at which the HPSP commitment is over—the military doctor comes out ahead. In fact, even after the ten year mark the military physician has accumulated more wealth.
Now let’s run the same course for a general surgeon:
After just three years in practice, the civilian route wins. If these two surgeons practice medicine for the same amount of time, the military doctor will never catch up.
Now let’s consider a radiologist:
Here, the civilian route wins out after just 2 years of practice.
Conclusions: the Health Professions Scholarship Program is not a good financial motivator for luring people into the military. Only primary care physicians will see a financial benefit for joining the program. While my assumptions place limitations on the overall accuracy of my calculations, I stand by my initial statement. Worth noting, however, is that the military has no malpractice insurance and that there are lots of benefits such as free healthcare, cheap shopping and entertainment on base, and a tax break of almost $10,000. Also, the federal government has authorized the military to raise the HPSP stipend from $17,000 to $30,000 a year—although no appropriations have been made. In some urban areas, military students are forced to take out loans to make up for the paltry stipend that we graduate students are receiving. By raising the stipend, students will be able to live comfortably without resorting to more loans—something HPSP was supposed to do away with.
Howie said,
May 19, 2007 at 11:13 pm
Wow, this is a great article. It’s useful, witty, and insightful.
I’m a premed-head but I was also in the military for six years (as a medic). A lot of the doctors I worked for were idiots–but there were some that motivated me into becoming a doctor in the first place.
Because of this blog entry, I’m definitely going to consider HPSP only as a last resort (if I even get the luxury of choosing).
Bravo Zulu.
halfmd said,
May 19, 2007 at 11:28 pm
It was a bad move on my part. I knew that I would make less, but I was sold on the idea that the money would be offset by better lifestyle such as less paperwork, no admin hassles, and easy hours. Boy was I surprised that the opposite was true. And to top it all off, I may not even get into the residency that I want.
Nope said,
July 6, 2007 at 11:53 am
While I commend you for taking hard look at the economics of the program, I’m afraid this is not a realistic way to look at the HPSP. In fact, there is absolutely no way to end up ahead by taking the scholarship.
The crux of the problem lies in that you won’t pay off the loan in five years. Your analysis assumes that you devote your entire annual salary to repaying the loan. Student loans do not work like that, nor should they. Student loan rates are amongst the lowest in the country; one would want to pay them off as SLOWLY as possible because money deposited elsewhere would grow at a HIGHER rate. This concept is known as leverage: buying higher rates of return with money borrowed at low rates, and is practiced by almost every financial institution and high-net worth individual on the planet.
In truth, at prevailing rates, a student loan payment is only $1,280 a month. This sounds like a lot when you’re a student, but keep in mind that upon successful completion of a residency, you’ll probably step into job paying between around $12,500 a month to…who knows as a surgeon in a coveted field? Also keep in mind that student loan interest is deductible: without getting too much into the math, you’ll be paying the equivalent of around $800 a month in after-tax dollars. That equates to a maximum of 6.5% of your monthly income. Less than you’d spend on gas in a month.
Do your homework! If you wanted to learn more, I would suggest looking up the following:
- time value of money
- leverage
and – Student Doctor Network!
NavyDO said,
July 14, 2007 at 3:57 pm
It seems as though you have included some of the bonuses such as specialty pay in your calculations, but don’t neglect many of the smaller bonuses and tax benefits such as BAH which can add upwards of $2,000 of tax free income per month. Also, you should consider in your calculations the added benefit in interest reduction you can expect on your loans when the government pays for your medical education up front. Consider if you have $250,000 in debt upon graduation and planned to pay that off over 30 years at the current interest rate of 6.8%. You can expect to pay an additional $336,732 in interest on top of your original debt! Because the HPSP stipend is not enough to cover all costs of living, an HPSP student (like myself) may have around $100,000 in debt upon graduation. Paying this debt off will cost an additional $134,693 in interest over the same time period. Do the math and you’ll find a “hidden” bonus of over $200,000 or more if you decide to pay off your debt sooner. Just some food for thought . . .
AF Doc said,
August 15, 2007 at 12:54 am
As an Air Force Urologist, I concur completely with this assessment. HPSP only makes sense if you want to be a primary care physician. If you want to specialize (especially in a surgical field), you will never catch up with your earnings. Furthermore, depending upon where you are willing to live, many hospitals will pay off your student loans for you when you sign a contract with them. When they’re willing to do this, the benefit of HPSP disappears entirely. Much like the HPSP stipend that has not increased significantly in years, the bonuses that they give physicians have not increased in years, either. I strongly discourage anyone who wants to be a surgeon from taking the HPSP.
halfmd said,
August 21, 2007 at 8:21 pm
What disgusts me more than the money issue is the Air Force’s residency fiasco. Since I want to do emergency medicine, I’m setting myself up for a huge disappointment come Match time. While the military will not release any official statistics on the Match, the current thought is that only 1/3 of applicants to emergency medicine programs matched last year, meaning that the odds are definitely stacked against me. There is a very real chance that I might get stuck doing flight medicine—a field that I am not interested in, nor will it pay well. If I could go back in time, I never would have taken the scholarship. All of my friends are considering externships and various places around the country where they can train. Meanwhile, I’m worried that I’ll end up at a barely accredited program and watch my skills atrophy during my payback years.
jeff said,
December 18, 2007 at 8:31 am
well on the SDN forums, apparently you get so much less clinical experience as a surgeon.
i will be checking out this blog in the future and hope sincerely you dont get posted to flight surgery!
Think said,
February 6, 2008 at 7:28 pm
I understand that the money is less in the military vs. civilian world. So it goes. Don’t join the military for the money. Hands down. For that matter, don’t be a doctor for the money. Hands down. If you decide to be a military doc, do it with the knowledge that you are helping the soldiers of the US Armed Forces. Young folks many of whom came “up from nothing” so to speak, and many of whom have paid a price in our current conflict.
I for one am glad to be a military doc.
AF_Primarycare said,
March 10, 2008 at 11:43 pm
I agree with Think. I have 18 years in USAF. I’ve flown low level in F16,B1b’s,c130’s and Navy P3’s. I’ve deployed to jungles, the Balkans, Europe and the deserts;all of which have been highlights. I have been the only doc and I have save lives when there was no attending/consultant or lawyer (for that matter) around. I can’t tell you how good that feels. One of my physician commanders is in the AOR presently by choice. He told me you can loose a lifetime of memories taken up by rounds and meetings,but deployment memories will last a lifetime.
For those whose life is motivate by money the AF would not be for you, but that is not why I get up in the morning.
Navymedstudent said,
April 3, 2008 at 8:10 pm
Student loans are at 7%. Nope is right, during your residency you don’t use much of any of your money towards loans. You should recalculate using those two assumptions. By the end of a 3 year residency, the loan is $255 k, 5 years is $ 291 k. 20 year monthly payments are $1977 and $2256, respectively. Although, with forebearance penalties due to the end of using the debt:income ratio, those amounts will increase. And that $12,500/month civilian (adjusted for the decrease in medicare reimbursements?) gets taxed down to under $9000. Food for thought anyways.
SpouseofaResident said,
April 25, 2008 at 2:44 pm
Just wanted to clarify what Nope said. When you are an attending and in repayment of student loans, your interest will not be tax deductible (unless you make below about $140,000 a year and married fililng joingly). If you are in a specialized field and clearing more than $200,000 NONE of your interest you pay is tax deductible. If you do qualify, only interest up to $2500 is calculated. More info at http://www.irs.gov.
ENSNavymedstudent said,
May 5, 2008 at 10:20 am
I agree with what a few of the previous military doctors said. When I talk to my friends about my scholarship and the US Navy I make it clear that if they want loan help, or a free tuition, the Navy is probably not for them. It is called national service, it is not a cake walk. I feel that sailors, air men, and soldiers that are in it solely for the financial benefits should not be in the military. Not to get all high and mighty, and I know I am a student with no military experience besides ODS, but, I knew before I signed my contract and received my commission that although the military would support me financially, I wouldn’t be making the enormous sum of money from the private sector.
The military is strained for doctors right now, and does try to entice people with bonuses and cash, but if that is all you are thinking about, I would strongly suggest that you do not accept the scholarship and leave the opportunity available for someone who is more concerned with service than necessarily money.
Cthulhu Dreams said,
May 29, 2008 at 7:54 am
What gets me though is why should people who want to join the military get jacked around. If they are going to pay you less, there needs to be other benefits – like better training (the militaries normal shining star) – but it appears he gets screwed there too. You’re trading less professional fulfillment for patriotism, and frankly modern armies are more professional (mercenary) and less patriots (badly paid volunteers).
Thats not a bad thing, just saying if the operation is to be sustainable long term, you need to offer a complete package.
College said,
June 18, 2008 at 10:02 pm
We are proud to add this scholarship “Health Professions Scholarship Program” to our database of scholarships at http://www.freetoapply.com
student said,
October 22, 2008 at 8:37 pm
The math here is all wrong.
You have to include interest at all levels. You have to account for massive tax differences. You have to include the Navy bonuses. When you account for these 3 items, you will find that HPSP is much more attractive. Unfortunately, medical students don’t understand finance very well.
halfmd said,
October 23, 2008 at 9:39 am
I wrote this piece before the military starting offering the signing bonus. The tax difference is the equivalent of about $10,000 in favor for the military. And given that civilian docs will be making more than $10,000 above their military counterparts, the tax difference doesn’t make that much of an impact. You’ve got me on the interest, but even then, several models have demonstrated that military docs will come out behind unless they pursue primary care.
fizzlemed said,
November 9, 2008 at 8:13 pm
I can’t tell you how thankful I am I read this post.
Joe said,
December 14, 2008 at 1:54 am
Don’t forget the $95,000 or so you get in stipend money during medical school.
Half M.D.: I mentioned the stipend above and used it in my calculations. The stipend has, however, raised considerably since I wrote this article.
Wes said,
January 15, 2009 at 1:37 pm
Does anyone know anything about the Navy HPSP? I understand you enter an internship and become a GMO after you graduate. What does this mean for you as a primary care physician? What are residency options like and what are you really likely to end up doing?
silvanus said,
February 5, 2009 at 6:09 pm
my son is a recent undergrad, i was recommending the HPSP to him. After reading all these comment I am very confused. Someone mention that the training is inferior, is this true. Someone please help me out here with these concerns. 1. He wants to be an orthopedic surgeon. 2. He don’t want to have a huge debt upon graduation. 3. How long after graduation will he be obligated to the military before he can go into civillian practice. Someone please help me out here.
Half M.D.: Why were you recommending HPSP to him if you have no experience with it? Furthermore, why are you the one writing me and not him? You need to list which branch of service he is interested in; but general, 1. he may not be allowed to do orthopedics and instead be forced into general medical practice or flight medicine. 2. Take the debt and never look back. An orthopod can pay off $200,000 in a few years. 3. There is a year-for-year obligation. If your son takes a four-year scholarship, the payback is four years as an attending. Residency does not count toward the payback.
DecidingWhichPath said,
February 21, 2009 at 12:58 pm
Can anyone answer this question for me? Are the calculations above from halfmd inclusive of Insurance Premiums? I am a post graduate student thinking about going back to med school, and am deciding whether or not 1. I want to fund my education rather than take out a loan, 2. practice without malpractice insurance ripping me a new a hole, 3. help out people (of course).
Of course, as another poster mentioned, I would also love to travel all over and see/help out those who selflessly are giving their lives up for us.
I have heard that military doctors do not need to pay premiums, and that this usually is a roadblock in paying back student debts. Is this assumption wrong?
Thanks
Half M.D.: Those numbers do include malpractice insurance. If you’re taking home $200,000 a year, the roadblock to paying back student loans is poor spending and has little to do with the cost of malpractice.
Mike said,
March 19, 2009 at 12:52 am
These numbers are TOTALLY wrong.
In all your calculations, you forgot to add interests accruing on your loans, the tax differences in pay, tax-free income in the military (VSP, BAH, BAS). In the military you don’t need malpractice insurance. I’m not a recruiter for the military but based solely on numbers, the military comes out ahead of most specialty except possibly the highest paying ones like opth, derm, ent, radio, plastics, etc.
I just did simply calculation of the general surgery military vs. civilian pay based on your existing numbers.
At year 9 of military, you will have earned $870817 minus an average of 27% income tax and you NET $635,696
At year 9 of civilian, you will have earned $1,200,000 minus an average of 30% tax which is because of higher tax bracket for a net of $840,000.
$840,000 – $635,696 = $204,304 NET more wealth for a civilian surgeon however your education cost $208,000 + interest so in essence it is a complete wash.
The calculations above also don’t include HPSP stipend and sign-on bonus etc. But the bottom line is the military option is indeed an equal to better financial total package depending on your specialty and of course, your medical school.
Jambony said,
April 9, 2009 at 2:03 pm
these numbers do not include loan interest? That is the biggest part of loan repayment. Has anyone seen a more comprehensive calculation of the two financial paths? thanks.
Military Surgeon said,
May 9, 2009 at 9:10 am
I am a HPSP scholarship winner and military surgeon who is getting out after my 4-year commitment. Accounting for tax-free portions of my pay, I make roughly $160,000 a year. Although, in my last year of commitment I did not take the fall specialty bonus ($36,000) so I could get out at the earliest possible time. Note: To receive all physician bonuses an additional 3 months must be served, taking total service to 4.25 years. In effect, the HPSP is really a 4.25 year time commitment, if you want all the bonuses.
In regards to the above math, the calculations are not perfect but the conclusions are correct. If you go into primary care you are money ahead, if you’re a surgeon you’re money behind. Roughly, any specialty that makes over $300,000 a year will be money behind (e.g., anesthesia, radiology, cardiology, GI).
More importantly, you sacrifice choice by taking the military scholarship. The key phrase is “needs of the military” and it comes to bear when you make a career choice, preferred residency choice, choice of fellowship and place of practice. The military does not have to allow you to train in your specific medical area of interest (e.g., orthopedics), may not allow you to pursue a civilian residency (e.g., UCSF internal medicine residency vs. military residency), does not typically allow for fellowship training straight from residency and gives little choice in where you live.
The scholarship hurts those students who wish to pursue a prestigious civilian residency, because you will probably get chosen for a military residency. I’ve seen this happen with medical students who graduate at the top of their class and are competitive enough to attend top-notch residencies, but are chosen to complete military residencies. It affects medical students pursuing popular residencies that the military only needs a set amount. I’ve seen this happen with medical students desiring ophthalmology, orthopedics, and neurosurgery residencies. They were not granted permission to train in these residencies straight from medical school. So, they either choose a different residency that the military needed, or served as a general medical officer for 2-years and made to reapply to the military residency selection process in hopes of being granted permission to pursue a residency in their chosen career field. The above also holds true for applying for fellowships (e.g., vascular surgery, cardiothoracic surgery). You must understand, once you accept the scholarship you will lose ultimate decision making capacity over your career.
If you can accept the following: 1. You lose decision making capacity over your career, 2. As surgeons you will be deployed overseas (~20% of my time spent in war zone, 10 of 48 months); 3. DOD/VA disability does not take into account your physician bonuses, therefore if you get hurt you will be compensated at current rank only which may not be enough to support your family, 4. Only one life insurance company currently insures active duty military members (USAA, Max policy $1mill + 400k from military = 1.4 mill total) which may not be enough to support your family, 5. Doctors have been killed-in-action during the current conflicts – Then I would make these recommendations.
Recommendations:
1. If you want to serve your country, take the scholarship.
2. If you know you are going into primary care (e.g., family practice, pediatrics. internal medicine) and know that you do not want to complete a civilian residency – Take the scholarship.
3. If you know you want to be a surgeon – Don’t take the scholarship. Get into a civilian residency, make sure you don’t want to complete a fellowship, then look into the Military Financial Assistance Program (FAP). In fact, If you’ve attend a state medical school, you might actually be money ahead with the FAP route (vs. HPSP).
Michelle said,
May 18, 2009 at 5:40 pm
When reading this, I must remember that it was created by a med student/doctor. So I will keep in mind a lack of business knowledge in my comments. Time value of money is a huge thing here. So are taxes. Some of the pay a military doc gets are tax exempt, like housing and food allowances. That aside, the main thing missing here is the cost of health insurance. All of my husband’s classmates that went the civilian route are paying some if not all of their health insurance as residents. That will continue after graduation from residency.
My advice to anyone reading this site, listen to what Military Surgeon said. Doctors deploy just like the rest of the military. There are dangers and if that is not something you want to do then don’t take the HPSP scholarship. Also, the military is a way of life, not just a job. While the medical corp is not like the regular military, they still have rules. You have to cut your hair and wear a uniform. I, as a thirtysomething married to someone who spent 8 years enlisted, was not surprised by this. But you would be surprised how many 26 year olds take exception with these simple things. If you are seriously considering this option, talk to a military resident or military doc to find out what it is really like.
Half M.D.: You know residents that are paying health insurance? Med students do, but residencies cover most—if not all—of the expenses, similar to many other civilian jobs. And yes, the full coverage that the military provides is certainly a plus of working there. I know of one physician who has a child with special needs who has to stay in the military for nothing else than the free healthcare.
Dean said,
June 27, 2009 at 1:03 pm
Military Surgeon,
Can you explain more to me about the FAP program and how it may be a better option than the HPSP?
Kevin said,
July 2, 2009 at 6:48 pm
Think makes a very good point. I know all of you didn’t become a doctor for the sole purpose of making money, that would be a poor decision. The amount of studying and work that goes into completing the four years of medical school, passing three medical licensing board examinations, completing 3-9 years of grueling and sleepless residency, passing your specialty licensing boards, continuing medical education, and the rigorous work schedule you will have for the rest of your life wouldn’t be worth it if you didn’t enjoy practicing medicine. (Physicians have the highest suicide rate of all professionals). If money is the main reason you want to practice medicine, I wouldn’t want to work with you.
The military offers a way to serve your country while receiving some very competitive financial benefits. Just as money shouldn’t drive you to choose medicine as a career, it should not drive you to join the military. It is a very different life style and is demanding in a unique way.
I would now like to point out some things this site did not include in the calculations and address some fallacies (I will focus on the Navy because that is the branch I am in):
1. The Navy (I cannot say about other branches) will not force you into a residency you do not want. If you do not get the residency you want, you can do a GMO tour, flight surgery, transitional year, undersea medicine, or defer to civilian residency. As the Navy is getting rid of GMO tours, civilian deferments will be much more common.
2. As others pointed out, student loans rack up huge amounts of interest.
3. Investing the positive cash flow you have during medical school means you to EARN interest. Over 7 to 13 years, this can add up.
4. There is now a $20,000 signing bonus
5. Monthly stipend payments are $1981 as of July 2009
6. The tax benefits are about $6000 PER YEAR (Again, consider interest earned by investing this)
7. You can’t factor in any loans you may take out in addition to your stipend while on HPSP because you would be taking the same amount of money out in loans as a civilian.
8. Cost of living in the military is drastically lower than in the civilian world. You get discounts everywhere, all your purchases at exchanges and commissaries are tax free, these places usually have very good deals, free health insurance, and no malpractice.
Bottom line; the military is not for making more money, it is a way to serve your country, gain some incredible experience, meet incredible people, and offer a medical career with salaries that are COMPETITIVE with civilian practice, not necessarily better.