Sunday, August 2, 2015

Driving an Uber to get Through Med School Debt-Free?

From a July 16 Politico article:
But as he told reporters before being whisked away in another Uber, he’s having encounters that are shaping his views everyday, referring to a college student in Los Angeles who gave him a ride. 
“Because of Uber, he’s going to go to medical school debt-free,” Bush said. “We have $1.2 billon of student loan debt; we have people who are stuck because we haven’t reformed our higher education system. Uber’s giving that person a chance to start out and fulfill his dream.”

Student debt advocates are no doubt encouraged to see so many presidential candidates discuss student debt. While the price problem isn't going away any time soon, it's also good to see discussions of the potential benefits of the sharing economy to help students pay for college expenses. Certainly the flexible hours and independence would work well for students balancing classes, homework, and everything else. 

But still: Jeb Bush said his Uber driver could go to Med school debt free from driving an Uber car. Is that typical? What would that look like? 

Well the median debt load from medical school is $180,000.  Take away the median non-medical school debt of those graduates and you're left with $160,000. Let's assume it takes 4 years to complete that degree and the debt is spread out evenly. That's $20,000 per year, or about $110 per day. 

The average Uber driver in the Los Angeles market (where Bush talked to this man) makes $16.98 per hour, but that's gross wages. The missing factor here is how many miles Uber cars drive. Then we'd apply the federal governments' $0.57 cost per mile, to get an idea of the actual income (Uber drivers need to pay for gasoline, depreciation, and insurance). Pando just assumed a 5 mile average trip length, which I'll use here, but if anyone has a better assumption I'm all ears. But this assumption cuts the wages by $2.88, meaning the average Uber driver could earn $14.11 per hour.

So a medical student with the median debt load,  driving an Uber car in Los Angeles, would have to work 7.8 hours per day, every day, for 4 years. That's 1,460 days straight. Every weekend, every holiday, while pursuing a medical degree. 

Now did this man take on the median amount of debt? There's no way of knowing (just as there's no way of knowing if he already owned a car or not, a huge variable in the sharing economy).  Los Angeles is home to the medical school with the 7th highest average debt, the University of Southern California (Keck), where the average debt load is $219,473, much higher than our baseline.  But let's say the man was on the 20th percentile, meaning that 80 percent of all medical school graduates took on more debt than him: you'd still have to drive 3.9 hours per day.

To tell you the truth, that's a lot more feasible than I thought it would be. Disruptive technologies and business models that allow students to work on their own time and make well-above a service sector wage are very exciting, and should fully explored. But I'd caution against holding them up as a panacea to our college affordability problem. Fully addressing that will take state reinvestment, bolstering of the Pell grant for income students, holding bad actors accountable, and reforming our loan repayment system. 

Assumptions and calculations in the chart below: