A solid case could be made that the most powerful natural law in the universe is the “law of unintended consequences.” It’s definitely the dominant force when it comes to public policy.
For example, in 2007 Congress created the Public Service Loan Forgiveness program, which was designed to encourage young workers to seek government and nonprofit jobs that pay far less than what they’d get in the private sector. The program forgives the remaining balance on direct loans after a borrower has made 120 qualifying monthly payments under a qualifying repayment plan while working full-time (30 hours per week) for the government or a non-profit. The payments are capped at 10 percent of discretionary income, defined as a borrower’s adjusted gross income minus 150 percent the federal poverty level. Any balance remaining after the 120 payments is forgiven, tax-free.
The intention was to encourage people to become schoolteachers or social workers. But there’s another group that found a way to take advantage of this subsidy: doctors.
Doctors typically earn between $50,000 and $60,000 in the first three to eight years out of school as they complete training, known as “residency.” Thus, the amount they pay under income-based repayment will be low, at least through training. Their salaries skyrocket, to $180,000 and above, once out of training.
The WSJ calculates that the average doctor who participates in the program will earn roughly $131,000 forgiven, tax-free, in 2024. (The figures use a discount rate of 6 percent. Without the rate, the average forgiveness would be about $200,000 in 2024 dollars.) The Association of American Medical Colleges estimates that the doctors would, over the course of ten years (3 resident, 7 post-resident) pay about $100,000 toward their student loans.
In other words, individual doctors would pay about 44 percent of their student loan bill and the taxpayers would pay the other 56 percent.
If such loan-forgiveness programs should exist (which is debatable), then some doctors — such as those that exclusively serve the poor — ought to qualify too. But to make the subsidy available to all of them is unfair to the rest of us. The taxes of schoolteachers and social workers shouldn’t be used to pay the medical school loans of well-compensated MDs.
Americans already pay a high cost in both medical care and higher education. We shouldn’t also get stuck with the bill our physician’s tuition.