- December 31, 2020
- Posted by: Francis
- Category: Grad Student Guides
An area of education where ISAs have not yet been applied is medical school. However, the proposed framework for a medical education ISA is essentially identical to that of college and trade-school ISAs, in that a student would agree to pay a set percentage of their future earnings, for a fixed term, to an investor in exchange for that investor financing their education. Yet, while the structures are identical, there are many factors which differentiate medical education ISAs from others.
The timeline for medical education and training is much longer than other professions. Generally, a student begins postgraduate medical studies within two years of completing an undergraduate degree. They then spend four years in medical school and three to eight years in post-graduate training (residency) before being eligible to practice medicine on their own and begin making an income that could realistically pay back the cost of education.
But, it is important to recognize that medical students have significantly lower attrition and loan default rates compared to four-year college students, a deficit of professionals in their field guaranteeing employment, and projected income that far exceeds graduates not pursuing additional higher education. These factors actually make income share agreements with medical students a radically different and safer prospect from the investor perspective when compared to those for undergraduate studies and even other graduate programs.
Still, when modeling medical school ISAs, it is important to consider the significant variation of projected incomes and required length of post-graduate schooling across the medical specialties. For instance, pediatricians (three-year residency) have among the lowest average salaries ($225,000) for physicians, while orthopedic surgeons (five-year residency) have among the highest average salaries ($482,000). Thus, the percentage of income required to be “shared” with investors will vary significantly.
In a similar fashion to college and trade-school ISAs, a medical school ISA would define upper and lower wage boundaries and the physician would only share their income when within these boundaries. A sound lower boundary could be set around $100,000, which would prevent physicians from having to share their income during post-graduate training or if they become unemployed for any reason. The upper boundary would be much more specific to the physician’s specialty, but could soundly be set at around 150 percent of the average annual income for each specialty.
These factors could make medical school ISAs a possible method for students to achieve an education that would have been otherwise financially unattainable, while also giving investors a reliable ROI.
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