Dec. 12 (Bloomberg) -- Caribbean medical schools would have a harder time accessing federal loans for their U.S. students under a bill U.S. Senator Richard Durbin plans to propose today.
The Illinois Democrat and Senate majority whip aims to eliminate exemptions to loan rules to ensure U.S. taxpayers aren’t financing foreign for-profit medical schools that saddle many students with mountains of debt and questionable outcomes.
Durbin wrote to Education Secretary Arne Duncan in response to a September Bloomberg Markets report, asking whether the schools have access to millions of dollars in federal funds “with little to no oversight or accountability.” From 1998 to 2008, U.S. students borrowed $1.5 billion to study medicine at 21 standalone foreign medical institutions, according to a government report. About 90 percent of that money went to three for-profit schools in the Caribbean.
“Many of these students get the very worst outcome: deeply in debt, no completion of course that leads to becoming a licensed doctor,” Durbin said in an interview. “These schools have been given special treatment under the law, and that has to come to a stop.”
Under the bill, U.S. students would only be able to get federal loans for foreign medical schools that maintain a 75 percent pass rate on the U.S. Medical Licensing Exam and whose student bodies are made up of at least 60 percent non-U.S. citizens.
Three schools exempt from those rules are St. George’s School of Medicine in Grenada and DeVry Education Group Inc.’s Ross University School of Medicine in Dominica and American University of the Caribbean School of Medicine in St. Maarten. They gained the exemptions by having long-standing clinical programs approved by a state. Their students received about $470 million in U.S. government loans in the year ended June 2012.
About 70 percent of St. George’s students are from the U.S., as are 91 percent at Ross and 86 percent at AUC, according to the schools.
Two other schools that would be affected only by the citizenship exemption are Universidad Iberoamericana, known as Unibe, a private, non-profit school in the Dominican Republic, and Saba University School of Medicine, owned by Equinox Capital, a private equity firm based in Greenwich, Connecticut. Saba became the fourth for-profit Caribbean school to gain U.S. loan access in July.
Almost 30 foreign medical programs are approved for federal loans, including McGill University in Canada, according to the U.S. Education Department.
Thousands of U.S. students who didn’t get into medical schools at home attend Caribbean colleges. They take on more debt and drop out at a higher rate compared with their counterparts stateside. The median federal loan debt of graduating students at St. George’s, Ross and AUC was at least $232,000 in the year ended June 2012. That compares with $170,000 for U.S. students, according to the Association of American Medical Colleges.
Many DeVry students quit in the first two semesters, leading to an attrition rate about eight times that of U.S. medical schools.
The Durbin bill could affect enrollments, a measure of revenue at for-profit schools, said Jeff Silber, a managing director at BMO Capital Markets, who follows the industry.
“If this law goes through, it would be something that likely would adversely impact enrollments,” Silber said in an interview. The schools “would have to ramp up marketing expenses to ensure they get a strong pipeline of non-U.S. citizens.”
In the year ended June 2011, 81 percent of revenue at DeVry’s two medical schools came from U.S. student loans, according to federal data. The company derived 34 percent of its $1.96 billion in fiscal 2013 revenue from medical and health-care education, including a chain of U.S.-based nursing schools. Silber said he expects the segment to make up about 40 percent of revenue for 2014.
“Senator Durbin seems intent on denying U.S. citizens the ability to pursue their medical education,” Sharon Thomas Parrott, a spokeswoman for Downers Grove, Illinois-based DeVry, said in an e-mailed statement, adding that the bill would “leave thousands of highly qualified U.S. college graduates without an option for medical school.”
Durbin’s bill also proposes repealing exemptions to the pass rate, which was increased to 75 percent from 60 percent in 2010. The measure isn’t likely to be as effective as the citizenship rule because some schools inflate pass rates by kicking out underperforming students before they have a chance to take the test, said Glenn Tung, associate dean for clinical affairs at Brown University’s Warren Alpert Medical School, who has studied for-profit medical schools.
“If they set high enough benchmarks to even take the USMLE part 1, then their pass rate will be exaggerated,” Tung said. “What is the percent of matriculants who never get to take the test? All of our students are required to take the test.”
St. George’s had a 97 percent pass rate in 2012 for Step 1 of the exam, taken after the first two years of medical school, while DeVry’s Ross and AUC had a 96 percent rate, according to data provided to the Education Department. All three schools reported rates for the three sections of the exam above 75 percent.
The percent of students and where they come from is irrelevant at St. George’s when its students exceeded the U.S. pass rate, the school’s chancellor, Charles Modica, said in an interview. He called the proposed bill “misguided.”
Ross students can take Step 1 of the test only after passing all courses in the basic science curriculum in the first four semesters, passing a fifth semester course and passing a pre-test, Dean Enrique Fernandez said in a 2011 affidavit filed in federal court. The school’s handbook also includes the requirements.
Ross students “are required to take and pass a comprehensive exam before taking USMLE Step 1 and proceeding to clinical training,” Thomas Parrott said. “This is in line with common practices used by U.S. medical schools.”
Syed Husain said he was dismissed from Ross in 2009 and wasn’t allowed to take the test. He said he didn’t even qualify to take a pre-test because he didn’t complete all the required courses in the time allotment.
Now in his 40s, he has $230,000 in federal debt and $12,000 in private loans for his time at Ross. The former Chicago resident who works in a non-health related field said he won’t earn a doctor’s salary to pay his loan balance, which is increasing as interest on deferred loans accrues.
“Because of my age, if I don’t pay down this debt, everything I pay to Social Security is down the tubes,” he said.
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