Tag: education

Private schools and costs, revisited

Private schools and costs, revisited

College admission letters officially came out a few weeks ago, and there were many happy parents as well as some disappointed ones.  One of my colleagues’ daughters received her acceptance letter to Harvard. He had kept me in the loop during the application process and her daughter had already been accepted into Stanford and Berkeley, both with full tuition scholarships. I congratulated him and we had no further discussion about it.

Implicitly we both knew that she was going to Harvard even though there were two full scholarship offers at great schools.  I guess you know where I stand in terms of private vs public education…
There is no end to the debates about private and public schools.  The contention has always been that private schools confer no guaranteed return on investment despite having a higher price tag than publicly funded schools.  We’ve all seen private grade schools that are great, and probably an equal number that are lousy.  I recall that in childhood many of the doctors’ kids all enrolled in a private school only to find that the public city schools offered better advanced classes. I attended public schools that were considered some of the worst in the entire country up until college, and managed to develop a relatively good career.  It all depends on where you live and options are around.
The money bloggers are relatively vocal in their opposition of private education, from secondary school all the way into college.  The doctor money bloggers in general seem to favor the public school route, but their rationale also involves saving oneself from unnecessary expenses.  There is nothing wrong with that viewpoint, especially when these very same money bloggers have hard evidence from their own experiences that they carved out a financially successful lifestyle without the huge price tags.  I would venture to assume that the physician bloggers who developed successful professional careers without shelling out the big bucks would also argue that private education confers zero advantages.  There is a saying in medical school “P = MD”—if you can make it through, an “M.D” is an “M.D” whether you got it in the Caribbean or Dublin.

The evolution of medical school tuition costs
We’ve seen quite a few changes in the medical school world over the past year and a half.  We’ve seen that New York University’s medical school is waiving tuition for all of its students.  Likewise, Columbia University has also has a program that covers all need-based aid.  Most recently, Washington University in St. Louis also announced that it will cover the cost of tuition for its entering medical school class.
That’s three private universities using their endowment to eliminate tuition cost out of the picture.  
For those of you who aren’t familiar, these three medical schools are highly competitive.  I remember that there was a time that WashU gave its first year students a t-shirt with the student’s MCAT score on it.  Many aspiring doctors would strongly consider finding a means to fund their tuition at these schools if they were accepted.  

Free private education for all?
How would your opinion of private education change if it were all free? This is an interesting thought exercise, as many private schools survive solely on the premise that they offer a higher quality of education. Most non-parochial primary and secondary schools have certain testing requirements for entrance, whereas non-magnet public schools simply require you to live within a certain vicinity.

Residency and fellowship
Doctors have to train beyond medical school in order to enter the profession.  It’s pretty clear cut that a top tier residency will likely offer a stronger peer group and potentially a higher quality of training.  Many of these training programs are tied public universities (at least one in most states), but a large number are also tied to private universities with affiliated hospitals.  Most medical students aren’t really going to care whether they train at a private or public hospital.

Private education isn’t exactly like setting your Benjamins on fire…

One reason for this? Residents are paid during their training, so you might as well go to the best program you can get accepted into as long as it works with the rest of the family.
Interestingly, many dentists I know who enter residency (dentists are not required to train after dental school) still opt for the private route, with the hope that they will get “better” training.  Their rationale? Dentists have to pay for their residency.

Professional school, colleges, and primary school
If money weren’t a factor then choice of all other schooling will likely distill down to two factors: (1) quality of education and (2) convenience.  Gee, that sounds like the same criteria that most people look at to try to justify the cost of private education.  Many of my colleagues consider that paying for a child’s four-year education will only sent them back four years of retirement.  We all know that this translates to more than that due to investment growth, but I still see perfectly rational people make choices that perhaps are a little bit irrational.  That is the beauty of human nature!

By the way, tuition alone at Harvard for the upcoming school year runs upward of $46,000.  Early retirement anyone?

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The most common questions asked by college applicants

The most common questions asked by college applicants

College application season is in its full swing, and parents are just as anxious (sometimes more anxious) about where their children end up.  I volunteer for my alma mater to interview applicants, and it seems like every year there are more students applying.

What is awe-inspiring about meeting these brilliant kids applying for college is that so many of them are so determined to make a difference in the world. At their age, I was simply trying to get good grades and follow the rules. In retrospect, I was not mature enough (or did not have the advice) to realize that understanding the rules is only but a small part of the big picture.

The application process is just as interesting to me as it is nerve-wracking for the students.  I find that the questions asked are the most entertaining. I would stratify them in three categories:

Generic but sincere 

These are the questions that I would’ve asked when I was in high school. I’d say that the majority of what I am asked fall into this category.

“What did you like the best about college?”

“What do you think helps College X stand out from the rest?”

“Does College X have Major Y or Club Z?”

There is nothing wrong about any of these questions. If I had to make any criticism of them, it would be that the answer to half of these questions could probably be found on the college website.  The other half of them are questions that I, as an alum, should hopefully be able to reflect upon and provide my opinion.  I enjoy being asked these questions, because they actually help me recall both the great experiences as well as those I wished I could wipe from my memory.

Thought-provoking questions

I’d categorize these questions as relatively thought provoking questions that had stumped me when they were first asked. Over time, I’ve come to find a satisfactory answer for my applicants, but certainly these are questions that have often triggered further questions.

“If you had to do it over again, would you have attended College X?”

“What did you regret about college?” or “What did you regret about attending College X?”

As an honest answer to myself, it really doesn’t matter to me at this point if I regretted going to college, because there is a very low likelihood that I’d ever “repeat” college. Sure, if I had made different decisions, maybe learned a little bit more about handling my money a little better earlier in life, I might not have even entered a career in medicine.

Questions that should not be asked 

Rarely, some questions I am asked are far out in left field. These are the ones that be no means should I know the answer to or should be asked in public. I suppose that the students that ask the most bold questions are the ones that get furthest in life.

Last week, one applicant digressed into a discussion about alumni donations. One student casually brought it up:

Applicant: I heard that college are always looking for funding.

Me: [silent]

Applicant: My father’s donated hundreds of thousands of dollars to College X

Me: [silent]

This came after a lengthy discussion of the Model UN club that he was a participant in. In all fairness, I’ve learned not to dismiss speculation or questions that I don’t know the answer to. Maybe if you donated several million dollars to a school, your heirs would get accepted?

Good luck to all college applicants in 2018!

The Private College 529 Plan – Alternative Education Savings

We hear a lot about 529 Plans—a way to contribute to your children’s college education while receiving some state tax deductions.  I think 529 Plans are great in that you can save up for college education while getting some tax perks. If you live in a state that allows you to take state tax deductions on 529 contributions, you can reduce around 5+% of the contributed amount towards taxes. Not bad.  If you live in a state without income tax, you can still benefit by contributing to 529s by having the growth tax-free. If the stock market goes on a tear for a whole decade before Junior goes to Harvard, you can really come out ahead by not paying taxes for the investment growth:

You get about $69,000 in growth at 8% before taxes on $1000 monthly contributions for a decade.

In this example, a $1000 monthly contribution for a decade will get you $120,000 in principal and roughly $189,000 after investment gains. You basically “gain” $69,000 tax-free.

What if you want to do better?

Come the Private College 529 Plan.

The Private College 529 Plan is a privately run investment vehicle in which you essentially prepay your child’s college tuition in today’s money as a credit for future tuition. Think of it like a points system that we see in credit cards. It is an interesting concept since private college tuition inflates at an insane rate. For instance, tuition at my college is now three times higher than what it was when I attended. I can tell you now physician salaries aren’t three times higher now compared to back then either (in some specialties it’s actually lower!). Shocking.

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I presume that this sort of system works by investing your contribution in a black-box system sort of how those life insurance investment vehicles work (cough::whole life insurance). This isn’t a bad idea in this case. The burden of growing your money is placed on this investment group, and it is honored by the university that your kid ends up attending. The catch is that your kids has to get into a participating college.

What if my kid needs to attend an Ivy league school?

Smart Money MD is a big fan of going big.

You might also like: Is a degree from a prestigious medical school advantageous for doctors?

Fortunately there are some top-tier colleges in this program. A complete list is here, but I’ve taken the liberty of listing schools that Tiger moms would typically approve of:

  • MIT
  • Princeton
  • Caltech
  • Amherst
  • Stanford
  • Duke
  • Johns Hopkins
  • Emory
  • Pomona
  • Rice
  • U of Chicago
  • Wellesley
  • WashU
  • Rhodes College (maybe)
  • Vanderbilt

My apologies if your favorite alma mater is actually on the Private 529 Participating college list but wasn’t listed above. What’s more critical is that Princeton is the only Ivy League school currently participating in this program. If Junior’s parents and grandparents are Legacy Yalies, this program won’t cover her tuition (yet)!

Realistically the number of participating private colleges is exhaustive. Based on what I’ve seen, most private colleges that kids would be most likely attending are on here. I suspect that today’s tuition of approximately $45k annually will likely balloon up to $90k+ in another decade. You’d have to be making pretty darn good investments to double your investments tax-free in a decade.

What if my kid doesn’t get into any of these colleges?

This might happen. Or they end up getting into a solid public university on a scholarship. You can still transfer the funds/credits over to another kid’s account. If you decide to withdraw the money, you will end up paying tax on any gains that have accumulated (capped at 2%) plus another 10%. I suppose that the penalties are somewhat onerous but not unexpected given the potential gain.

Overall, I don’t think that this is a bad investment if the criteria fits your children’s educational goals.  It’s just tough to predict how their educational trajectory will progress years ahead of time. I also assume that the usefulness of the private 529 plan also depends if the program will still exist by the time your child goes to college too (just like Social Security).

Do you plan to use the Private 529 Plan?

Do I need to send my kids to private school?

should my kids go to private schoolI think that all parents hope that their kids live better and more successful lives than themselves. We strive to give them the best opportunities possible, whether it is through education, extracurricular activities, or cultural exposure. I can certainly say that I certainly had a more luxurious childhood than my parents, and that subsequent generations are having more luxurious lifestyle than I did.

One common point of contention I encounter with present education is whether to put your kids through public or private primary school. This is strictly a first-world problem, as one would assume that most public primary education schools (K-12) in the U.S. are relatively safe. The real question is, which situation would allow my child to thrive and succeed? Would public school be good enough for my kid? What is the best way to get my daughter into an Ivy-League school?

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Private school is superior


Assuming that life is fair and that you get what you pay for, private schools MUST afford better opportunities for your children. Better education. Better teachers. Better extracurriculars. Better counselors. Hell, the average private elementary tuition was $8441 per year. For high school, it was $12,900. I’ve seen private non-boarding high school tuition in the Northeast running in the $25,000 range. Those in Manhattan are even more.

If you can afford to actually pay your teachers, shouldn’t you get a superior education? Furthermore, the cost filters out those in the lower income pool, which can potentially filter out the less educated!

Those of you who balk at the cost of private schools can read the article from Time Magazine in 2014 arguing that private school can potentially save you money. That’s right. Private school is cheaper because if you send your kid to private school, you don’t have to pay as much for your house to be in a good school district. A nice house in a B- school district will save you money.


When was the last time someone you knew chose a “B- school district” to save money because their kid goes to private school? There are families without kids who buy homes in good school districts simply to help increase resale value. Most people I know who send their kids to private school actually live in good school districts anyway.

You will spend more in a private school.


This not only includes the cost of tuition, but also any ancillary costs like textbooks, school trip fees, uniforms, and sports equipment.


Is it really worth it?


Going to a private school will not guarantee that you will get into an Ivy League school. It can certainly give you a supportive environment to potentially increase your changes of entrance into a good college, but by no means does it guarantee success. Highly successful students from middle-range public high schools are also likely to enter great colleges as well—it ultimately depends on your beliefs, access into good private schools, and your wallet.

As a high income professional, you should be able to afford to place your kids in these opportunities. Just understand that costs of about $50,000 a year for two kids in private school for at least 4 years will add up. This doesn’t even include college! If you have plans to retire early (FIRE), make sure you save up as much as you can before you decide to send your kids to private school.

(Photo courtesy of Flickr)

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Why Doctors Need To Care About Money—And So Should You

doctors need to care about money“I’m not in it for the money!”

That is a common statement that I used to hear in medical school. Those who say it are truly lost souls who make that blanket statement mistakenly attacking his peers. You’d be better off saying that to your college roommate who went into investment banking making $200,000 a year while you’re still eating microwave ramen.  Frankly, I could probably count on one hand the number of people I knew in school and training who were blatantly in it for the money. Half of my peers probably wished they had gone into a career for the money before sinking a decade of their lives into it.

Why Doctors Need To Care About Money

Money pays the bills, your rent, your debt, and your kids’ educations. It would be a shame to spend a decade of your youth busting your ass to obtain the prestige of a doctor yet still not having enough money to put your kid through college. Retirement certainly sounds pretty good by the time you’re in your seventies still trying to do an appendectomy.  Ironically, according to the late Thomas Stanley, wealth doesn’t even necessarily correlate with education. That doesn’t mean that education SHOULDN’T correlate with wealth. It’s up to you to make it happen.

Life isn’t fair either. How much you earn as a physician is often dictated by insurance companies. If you join a hospital system or a healthcare practice, your revenue will be siphoned off by the administration and your employer. Being more knowledgeable in finance will help you get a reasonable compensation package. Know how you bring in money, and how you’re paid. It all starts with a financial education.

One of the problems I’ve seen with doctors and money is that it’s taboo to discuss the two together, especially in a university setting. Why should we care how much it takes to cure someone? The interesting aspect of healthcare for most of us is the science. In contrast, the tech, financial, and corporate industry has not qualms about including cold hard cash in discussions: Series A, Series B funding, IPOs, options, going short.  On occasion we hear about a few bad eggs in healthcare who swindled millions from Medicare (and make our industry look pathetic), but this occurs much more frequently in finance with little repercussion to its industry.

Just remember, you can build wealth in healthcare and STILL be an ethical, caring, physician.

All Doctors Are Capable Of Learning About Money

We don’t all need to be financial advisors in our spare time or become as knowledgeable as Bill Bernstein in finance, but it really is not that difficult building a basic comprehension of financial vocabulary. You also want to be knowledgeable enough to say “no” to your cousin’s pitch for universal life insurance he sells through his firm.

Remember that you spent weeks studying for USMLE Step 1. You probably didn’t even like studying that. Imagine spending an hour of your week reading on finance. You don’t have to like that either. Even after 6 months, you’ll likely be more well-versed than the majority of your healthcare peers.

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