At PracticeMatch, we understand that student loans are a great concern for physicians and can sometimes even impact career decisions. As a result, we've partnered with resources to help you ensure you maximize savings opportunities as you progress through your career. You can also now search ONLY for jobs that qualify for the Public Service Loan Forgiveness (PSLF) program by selecting 501(c)3 in the search parameters.
Today, the average doctor is transitioning to practice with over $200k in federal student loan debt. Because 90+% of residents and fellows work for a 501(c)3 teaching hospital, PSLF is available to most. At transition, a student loan strategy "fork in the road" exists based on the type of organization that employs you, and your future household income.
For-Profit, Private Practice, and Independent Contractor Doctors: PSLF is not available, but other options exist to lower the cost of debt. Additionally, more employers are offering lump-sum repayment and monthly contributions. In these cases, refinancing to lower rates in the private marketplace may be optimal.
If you think refinancing is suitable for you based on your prospective employer and/or household income, you can get quotes from the link below in just 2 minutes, without affecting your credit score. Additionally, PracticeMatch candidates get a $500 cash bonus to refinance if your loan balance is $100k or more!
BenElevate offers tech-enabled tools that help borrowers identify their eligibility for the Public Service Loan Forgiveness (PSLF) program, and maintain annual compliance with evolving economic profiles and legislation. Users are also able to digitally sign and submit annual PSLF Forms... all for less than $50 per year! PracticeMatch candidates receive a 15% discount with the coupon code "PM15":Register for PSLF Assessment
With BenElevate's PSLF Eligibility & Savings Estimator, you can find out if PSLF will deliver you savings in just seconds:
Doctors Without Quarters (DWOQ) offers detailed one-on-one repayment consultations which include PSLF navigation and process execution, free refinancing suitability analysis, and a 15% discount on comprehensive loan support services with the promo code PM15. Select from either option below:
DWOQ can assist graduating students and continuing residents and fellows seeking to utilize federal programs such as income-driven loan repayment or Public Service Loan Forgiveness.
In addition, as a PracticeMatch member, you're entitled to a 15% discount on all DWQO Services with coupon code "PM15".
DWOQ offers free refinancing suitability analysis for those considering refinancing to lower rates. If refinancing makes economic sense to you, DWOQ will introduce you to a competitive lender (or lenders) and advocate you in the process. Refinancing is often a competitive option for those transitioning to practice, currently in practice or with a high household income.
Last year, President Biden finally announced his broad student loan cancellation program. Over 20 million borrowers applied, and then the program was blocked in federal court, and now a fight is underway. The program details were:
We're not sure how this will play out, but the good news for borrowers is that payments and interest are halted on all federal student loans into mid-late 2023 or until this cancellation is approved.
The CARES Act halted BOTH accruing interest and payments on all federal student loans as of March 13th, 2020. loan statements should show 0% interest, and servicers have enacted the payment suspensions.
By Executive Order, and again by the Dept. of Education, this payment and interest relief has been extended several times. The most recent extension will extend out to the end of August 2023, or 60 days after President Biden's loan cancellation program is approved... whichever comes first.
If you have made any loan payments through ACH since March 13, 2020, these payments are eligible for a refund by contacting the loan servicer.
Income-Driven Repayment plans that were set to renew during the loan suspension period have been extended, and recertification likely won't be required until 2024. No action is required on your part; your servicer will notify you of when it's time to recertify/renew. That said, any borrower is welcome to recertify proactively if they wish.
Similarly, anyone wishing to make loan payments during the freeze may do so manually. That said, it is not necessary to make payments for Public Service Loan Forgiveness as the payment freeze qualifies if you are meeting the other program requirements.
The CARES Act does NOT apply to private, institutional, most FFEL (2010 or earlier), Perkins and other Non-Direct loans. Loans refinanced to a private lender (Sofi, Laurel Road, CommonBond, Splash, etc.) also are NOT eligible for the stimulus.
Of the five income-driven repayment (IDR) plans available today, there are really three that are most suitable for physicians in training or pursuing PSLF: Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE). Where the term IDR is used below, it is a reference to ALL of these programs.
Income-Based Repayment (IBR) was launched in 2009, and is a federal repayment program that limits monthly loan payments to 15% of your discretionary income.
IBR is also a qualifying repayment plan for the Public Service Loan Forgiveness (PSLF) program. Taxable loan forgiveness is granted through IBR after 25 years of repayment. However, payments in IBR are capped at the 10-year standard payment amount established when the borrower entered IBR. Because of this cap, many attending physicians would pay off their loans through IBR before the 25-year forgiveness period expires.
Note: IBR is least used by today's graduates with the introduction of these next two:
Pay As You Earn (PAYE) was launched in 2012, and similar to IBR newer federal repayment program. Similar to IBR, PAYE limits payments to 10% of a borrower's discretionary income instead of 15%, and taxable loan forgiveness would be granted after 20 years of repayment. The payment cap is also the borrower's 10-year standard repayment amount, and PAYE is a qualifying repayment plan for PSLF as well. Only borrowers who have NO OUTSTANDING BALANCE on a federal student loan issued prior to October 1st, 2007, and who took out a federal student loan ON or AFTER October 1st, 2011, are eligible.
Revised Pay As You Earn (REPAYE) become available in December of 2015, and it may make sense for continuing Housestaff to consider entering it. Here's a brief summary of its features:
Once you enter one of these IDRs, you cannot be removed from them (although you can switch between them as appropriate), even if the hardship that qualified you does not exist after training (hopefully it does not because you are making enough income!). Therefore, a critical part of your repayment strategy is to perform an analysis and determine the best course of action based on your salary and sector of employment AFTER training.
Refinancing, in student loan terms, is when a borrower essentially eliminates their federal student loan debt by securing a private loan, ideally with a lower interest rate.
The issue to consider is suitability, as lenders tend to be transaction-focused and refinancing isn't always the best option for you. Borrowers pursuing PSLF should NEVER refinance. For those in or headed to private or for-profit environments, during the CARES interest and payment pause, many graduates have chosen to keep their loan status federal, but the rising interest rate environment that began earlier this year may soon eliminate the availability of lower rates. As of this draft, several lenders were offering rates as low as 4.5%, which still represents a generous rate reduction for most recent graduates and eliminates the uncertainty around CARES and the regulatory environment.
Once you refinance federal loans to a private lender, you lose all of the federal benefits discussed in this article, so proceed with caution. There are excellent resources available to help:
The Public Service Loan Forgiveness, or PSLF, program was created in 2007 to encourage student loan borrowers to work in Public Service roles. It offers UNLIMITED, TAX-FREE loan forgiveness to borrowers who meet the three (3) core program requirements for ten (10) cumulative years:
Physicians uniquely can benefit from this program because most residency and fellowship programs are 501(c)3 organizations. Due to high levels of debt and modest incomes during training, debt levels increase during this time and 10 years after graduation, many doctors will still have substantial debt available to be forgiven.
In October of 2021, the Department of Education announced an overhaul of PSLF and a one-time IDR adjustment, which is expected to improve the forgiveness status of millions of borrowers... including many of you. The PSLF loan type and repayment plan requirements have been loosened to include payments made on ANY federal student loan while working full-time in a qualified environment since the program's inception in 2007.
Recent graduates likely don't need to take any action as a result; the changes are intended to support borrowers who had FFEL loans or used a repayment plan that wasn't "Income-Driven" in the years after PSLF was created. Here are the key takeaways:
For updated information on the evolving legislation and the PSLF and IDR waivers, visit our blog here.
Regarding future changes to PSLF, physicians pursuing it should be reassured that these changes will likely apply only to new borrowers. The Master Promissory Notes you signed to borrow each loan for medical school included language about PSLF and your right to utilize the program. Thus, a legal contract between you and the federal government says you borrowed under the assumption you'd be able to utilize the PSLF program under the terms at the time you took out the loan.
In July 2010, Direct Loans became the lender for all federal student loans. Stafford and Grad PLUS loans borrowed prior to this time may have been originated by a private lender (Sallie Mae, Wells Fargo, etc.) under the FFEL program. These loans need to first be consolidated to Direct Loans before making IDR payments on them will qualify for PSLF. Furthermore, Perkins and select need-based loans are not eligible for and IDR on a stand-alone basis, but they can be consolidated to Direct Loans for eligibility. Variable rate loans originated before July of 2006 can also be fixed at extremely low rates through consolidation.
If you've yet to enter an IDR, the first step in your action plan is to review all of your loans and determine if a consolidation is necessary to maximize your savings opportunity.
All IDRs use your previous year's tax return to establish your payment for the next twelve months. If you're married, it may make sense to file your taxes married and separately during your training to maximize your savings opportunity. For our clients, we perform an analysis of the impact filing separately can have on your loan savings opportunity, which can be shared with your tax advisor to make a final decision.
Interns may wish to file a tax return for the prior year, particularly if you had little or no income in your last year of medical school. This strategy can often yield a $0 payment in your first year of training. If no prior tax return is available when you apply for an IDR, you'll be asked for a payroll stub. Your loan servicer will then annualize this figure, which could result in a payment closer to $250 - $400/month.
This is the most critical loan decision you'll make if you've been using available IDR's strategically during training, particularly if you're deciding between offers from a PSLF-qualified employer and a private sector employer after training. In one of our case studies, a graduating resident after 4 years of training with $250,000 in federal student loan debt was comparing a $150,000 salary directly by a non-profit hospital, and a $205,000 salary from a for-profit program. After contemplating the after-tax impact of Public Service Loan Forgiveness and the corresponding reduction in payments required for the next six years, the $150,000 salary was actually worth over $240,000 on average for that six-year period. Only by utilizing an IDR during training can you position yourself for this opportunity.
DWOQ offers PracticeMatch candidates PSLF reviews, refinancing suitability and discounted one-on-one consultations with a dedicated Advisor. Learn more on DWOQ's website, and use the coupon code "PM15" for a 15% discount.
BenElevate has created a tech-enabled tool for employers, recruiters and individuals which includes a detailed PSLF Opportunity Assessment, digital signatures for the PSLF Forms, and annual monitoring and compliance for under $50/year. Learn more and register here.