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SBA Hot Topic Tuesday –Student Debt Deters Doctors from Small Business Ownership

July 9, 2019

By Caity Witucki
Contributing Editor, SBA Hot Topic Tuesday

SBA Hot Topic Tuesday –Student Debt Deters Doctors from Small Business Ownership

Student Debt is causing many doctors to not establish their own practices and apply for SBA loans.

Health care remains the top small business employer in the United States, employing over 8.8 million. However, as of 2018, less than one-third of physicians identified as independent practitioners.

The number of doctors entering private practice is declining due to financial pressure which is caused by student loans. As a result, areas that used to be served by small business private practices are experiencing a deficit in medical professionals. Today, nearly 15,000 primary care professionals are needed to address existing shortages across the country.

Many medical professionals now owe over $200,000 by graduation, and those who pursue more specialized medicine, such as cardiothoracic surgery and dermatology, can accumulate over $500,000 in student debt.

Furthermore, the medical student’s income during residency is not usually high enough to cover the accruing interest. Therefore, students often accrue interest during residency which adds to their debt.

Since the average primary care physician earns only $195,000 after residency, medical students are seeking a greater financial return and more stability by specializing in specific areas of medicine and working for large non-profit entities where they can expect to earn about $284,000 and may receive loan forgiveness.

Programs, such as Public Service Loan Forgiveness, incentivize graduates to work for non-profit medical organizations where they may have over $100,000 in student loans forgiven.

Working for large established hospitals and medical groups also provides recent graduates with more financial stability without the risks involved with starting a small business private practice.

Many doctors would rather have loan forgiveness and a steady paycheck than go into small business private practice.

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