NYU and the slow coming wave of “free” school

A couple of weeks ago, NYU announced that they were making medical school tuition free for every student. Dean Robert Grossman stated, “This decision recognizes a moral imperative that must be addressed, as institutions place an increasing debt burden on young people who aspire to become physicians.”

My first thought on this news was, Man, Harvard is going to be so pissed that they weren’t first.

The idea of free tuition has been discussed and debated in multiple contexts across Ivy-type schools for years. These institutions are not immune to the burgeoning reality that their educations are financially untenable for most people and crippling for others. With many such schools fostering endowments numbering in the tens of billions of dollars, actual tuition dollars are no longer the bedrock of a healthy world-class institution. Over the past ten or so years, Harvard has often led the way on increasingly generous undergraduate financial aid, and many similar schools have made corresponding efforts to make undergraduate education more affordable, but until now, no one has taken meaningful steps to fix graduate schools, many of which are now considered mandatory for advancement across many industries. Even this move is largely a token effort, as every other extremely expensive NYU school will still keep its top-dollar cost in the shadow of this brilliant PR stunt.

As an illustration of the numbers involved in making one small school free:

The annual NYU med tuition was an exorbitant $55k per year, and there are 442 total active medical students, which gives a total cost of $24 million per year. “Paying” this requires (according to NYU) an endowment of $600 million because the school is utilizing the famous 4% rule that would make this massive endowment essentially guaranteed to last forever based on historical stock market returns.

Numbers aside, I do agree with the words of the dean (though I would expand them). There is a moral imperative to fix the cost as well as the delivery of medical education. The length, cost, and inefficiency are all otherwise mutable strong arms that are breaking healthcare and squeezing the joy out of young doctors in training from coast to coast.

NYU will not be the only school to offer free tuition. Other rich schools in and outside of medicine likely have been and certainly will be shoring up their endowments to join the club as is feasible. I anticipate this is the first in a salvo of private schools slowly making various programs free, and this will speed up if/when PSLF is eventually canceled, as the program is basically the only justification for charging otherwise unmanageable amounts of money to students who are destined to never be able to actually service their debt. Beleaguered state schools with their chronically strapped budgets will struggle.

 

My second thought is that free tuition will now make NYU about as affordable as the best-priced state schools (because the cost of living in New York is otherwise so high). Four years of living expenses will never be cheap, and it’s much harder to scrounge time to be gainfully employed during medical school compared with college. Clinical rotations are inflexible more-than-full-time jobs.

This will also result in, I imagine, a huge increase in applications to NYU. When my wife and I applied to medical school, we only applied to state institutions back in Texas where we were still residents while away for college. We were not keen to spend as much in a single year as we could on the whole package. People like me may now decide to add NYU to the list, especially since NYC is glamorous.

 

So, good on NYU for being the first to pull the trigger. I hope more schools join their ranks, and I hope most of all that this well-publicized confrontation of medical training costs will lead to a paradigm shift that allows schools and hospitals to rethink the whole process. We can do so much better, for our doctors and for our patients

My books about Student Loans are free through the end of July

Last year I published a book about managing student loans for medical students and doctors. Earlier this year I extensively revised that into a new book for a general audience. This week, I updated both books.

And now, I’m giving them away for free (at least until the end of July 2018).

Student loans are now depressingly the largest category of consumer debt outside of mortgages. With another graduating class hitting the workforce, I wanted to make my student loan books available to everyone. These are around 45k words, so they’ll take a few hours to get through, but it’s time well spent.

 

 

Amazon doesn’t easily let you give away free books these days, so I’ve discounted them to $9.99 $2.99.

To get a copy for free, you can download one from your inbox by signing up below for my forthcoming very infrequent/sporadic email newsletter. And, if you aren’t interested in ever hearing from me again, then just hit the unsubscribe link in the first paragraph of the download email. I don’t have any interest in cluttering your inbox.

 

[sorry, promotion is over!]

 

If you’re a medical student or physician, click the box for Medical Student Loans. If you’re anything else, click the box for Dealing with Student Loans. These are essentially the same book adapted for different audiences. You only need one.

Topics include:

  • Borrowing less and minimizing interest accrual during school
  • How Federal Loans Work & Federal Repayment Options
  • Income-driven repayment (IBR, PAYE, REPAYE, and ICR)
  • Federal “Direct” Consolidation
  • Forbearance & Deferment
  • Public Service Loan Forgiveness
  • Maximizing PSLF
  • Long-Term (IDR) Loan Forgiveness & Loan Repayment Programs (LRP)
  • Private Refinancing
  • Taxes & Retirement

Please consider sharing this. There are very few good resources for student loans and a lot of misinformation. I wrote these books because no one else had. I hope you enjoy them.

Graduated and Extended Payment Plans now count toward PSLF (temporarily)

The new budget just passed ponied up an extra $350 million to help those ineligible for PSLF due to repayment plan technicalities. Here is the language, followed by the translation.

From the recently passed budget (aka Consolidated Appropriations Act, 2018), SEC. 315 (pages 1008-1010):

For an additional amount for ‘‘Department of Education—Federal Direct Student Loan Program Account’’, $350,000,000, to remain available until expended, shall be for the cost, as defined under section 502 of the Congressional Budget Act of 1974, of the Secretary of Education providing loan cancellation in the same manner as under section 455(m) of the Higher Education Act of 1965 (20 U.S.C. 1087e(m)), for borrowers of loans made under part D of title IV of such Act who would qualify for loan cancellation under section 455(m) except some, or all, of the 120 required payments under section 455(m)(1)(A) do not qualify for purposes of the program because they were monthly payments made in accordance with graduated or extended repayment plans as described under subparagraph (B) or (C) of section 455(d)(1) or the corresponding repayment plan for a consolidation loan made under section 455(g) and that were less than the amount calculated under section 455(d)(1)(A), based on a 10-year repayment period: Provided, That the monthly payment made 12 months before the borrower applied for loan cancellation as described in the matter preceding this proviso and the most recent monthly payment made by the borrower at the time of such application were each not less than the monthly amount that would be calculated under, and for which the borrower would otherwise qualify for, clause (i) or (iv) of section 455(m)(1)(A) regarding income-based or income-contingent repayment plans, with exception for a borrower who would have otherwise been eligible under this section but demonstrates an unusual fluctuation of income over the past 5 years: Provided further, That the total loan volume, including outstanding principal, fees, capitalized interest, or accrued interest, at application that is eligible for such loan cancellation by such borrowers shall not exceed $500,000,000: Provided further, That the Secretary shall develop and make available a simple method for borrowers to apply for loan cancellation under this section within 60 days of enactment of this Act: Provided further, That the Secretary shall provide loan cancellation under this section to eligible borrowers on a first-come, first-serve basis, based on the date of application and subject to both the limitation on total loan volume at application for such loan cancellation specified in the second proviso and the availability of appropriations under this section: Provided further, That no borrower may, for the same service, receive a reduction of loan obligations under both this section and section 428J, 428K, 428L, or 460 of such Act.

Mhmmm, almost English.

This Republic-passed bill signed by a Republican president includes a seemingly random $350 million for temporarily expanding PSLF. (The Dems, of course, were pushing for $2 billion.)

Even while the ultimate fate of PSLF remains hotly debated, there are additional funds to allow individuals with Direct loans to have their payments under the “Extended” and “Graduated” plans count toward the 120 necessary monthly payments for PSLF forgiveness. Normally, only payments made while in an income-driven repayment (IDR) or the standard plan count toward PSLF.

A lot of people who gave up on the idea or were told they don’t qualify should go back and do some basic arithmetic to see where they stand.

All of the other requirements still apply: as in, you’ll need Direct (not FFEL) loans and have had made 120 on-time monthly payments while working full-time in a qualifying public service job with a qualifying employer. A new application form will be released in the next 60 days.

An unusual caveat is that this particular expansion is first-come, first serve. This makes some sense when you consider that this expansion is really about trying to further the spirit of the original program; these new inclusion criteria are not part of the master promissory note but are really just throwing frustrated borrowers a bone.