By Dr. Jim Dahle, WCI Founder
By President Donald Trump signed the much-anticipated and discussed One Big Beautiful Bill Act (OBBBA) into law on July 4, 2025. As President Barack Obama famously said, “Elections have consequences,” and when American voters sweep one party into control of the House, the Senate, and the White House, society-changing legislation usually results. Examples include the Patient Protection and Affordable Care Act (PPACA) in 2009 and the Tax Cuts and Jobs Act (TCJA) in 2017.
Your feelings on the legislation are likely highly flavored by your political views, but the truth is that most people are affected both positively and negatively by such extensive legislative change. In this post, we'll outline the ways in which a typical white coat investor will be affected. Jim wrote the majority of the post, but Andrew Paulson, of StudentLoanAdvice.com fame who knows more about managing physician student loans than anybody in the country, wrote the student loan section.
A Caveat
As we write this post, this law has just been passed. Not every detail of how it will be implemented is known, and it is such a large piece of legislation that there might be errors in this post. If you see one, mention it in the comments, and we'll get it fixed ASAP. If there is something important we omitted that will affect WCIer families, mention that too, and we'll get it added.
Too Long, Didn't Read (TL, DR) Version
The tax cuts, both new and extended, are generally going to be good for the finances of white coat investors. Since taxes are mostly paid by high earners, any cut in taxes generally benefits high earners the most. The changes to healthcare will be mostly bad, as they will decrease the incomes of physicians, particularly those who own their own practices with a large Medicaid payor mix and especially emergency physicians, obstetricians, and others to whom EMTALA frequently applies. Just like the PPACA was good news for these docs, this law is bad news.
The student loan changes are close to disastrous for indebted white coat investors, with much less generous IDR programs and less debt that will be eligible for PSLF. There is precious little good news there for WCIers. While many current borrowers will be grandfathered into the changes, student loan refinancing is going to have a much bigger role in student loan management in the future than it has in the last four years.
The OBBBA, along with executive policy changes, is pretty terrible for many immigrants, including lots of students, residents, and physicians. The new law boosts military spending, but this won't have much of an effect on most WCIers. Base Allowance for Housing (BAH) will go up, and there will be more funding for military healthcare, so perhaps there will be a bit of a raise for military docs. There will be significant additional spending in rural areas, on transportation, and for border security. The budget deficit (and thus the federal debt) will be increased significantly, but discussion of that issue is beyond the scope of this article (although it may be discussed in a later post).
Whether the legislation is overall good or bad for the country is a matter of personal opinion, and it will be highly related to your political persuasion. Politics begins when reasonable people can disagree on a given subject. Bear that in mind when making comments on this post.
More information here:
Staying the Course Despite the Trump Tariffs
The Case for Ending PSLF — And What You Should Do
Tax Changes
Perhaps the greatest motivation for this bill was to extend (and often make permanent) the tax cuts implemented in the TCJA, many of which were scheduled to expire at the end of 2025. These include:
- New tax brackets with a top bracket of 37% are now permanent (the corporate rate of 21% was already permanent).
- Section 199A (Qualified Business Income-QBI) Deduction is now permanent (at 20% of QBI) for sole proprietorships, partnerships, and S Corps. High-earning doctors and other specified service businesses are still excluded. There is a new limitation on how itemized deductions affect the 199A deduction, but it's relatively minor.
- Higher estate tax exemption limits were extended and actually increased to $15 million per spouse and still indexed to inflation
- SALT deduction limitations were extended, but they are now less limited—at least until 2030, when it reverts to $10,000 per year for everyone. Now the state and local tax deduction (mostly state/local income but also property) can be as high as $40,000 (and increases by 1% a year through 2029), but it starts phasing out at a MAGI of $500,000 (single and MFJ, but not MFS, which is half that amount) and is mostly down to $10,000 by a MAGI of $600,000.
- Bonus depreciation extended. If you use your NetJets subscription (or other eligible business expense) only for business until the end of the year you buy it, you can basically expense the whole thing that first year. This is now permanent.
- Changes to some international income taxes. There are lots of these, but we think few will affect any WCIers at all. But if you pay tax on international income, it's worth looking at these.
- Opportunity Zone renewal and enhancement. Remember those funds some investors with large capital gains used to invest in real estate in supposedly downtrodden areas in order to reduce taxes? They're back. There might be more rural benefits this time.
These changes are mostly good for WCIers compared to pre-TCJA laws, although it would have been nice to see the discriminatory-feeling, specified service business limitations go away.
There were plenty of new tax changes as well.
- Increased ($15,750 and $31,500 MFJ) standard deduction for 2025.
- Bonus deduction for the elderly. It's increased from $1,600 ($2,000 single/deceased spouse) to $7,600 ($8,000 single/deceased spouse) through 2028. This only applies to those with less than $75,000 of income, and it has been billed as “eliminating the tax on Social Security,” although it does no such thing directly. It is just an offsetting age and income-based deduction.
- Child tax credit increased to $2,200 (still $1,700 refundable). It still starts phasing out at a MAGI of $200,000 ($400,000 MFJ).
- Tax-free tips and overtime. It's temporary (through 2028) and phases out at higher incomes (MAGI of $150,000/$300,000), but up to $25,000 in tips and $12,500 in overtime pay get an above-the-line deduction now. I'm not sure most cash tips get reported anyway, but wouldn't it be cool if resident salary structures could be changed so that half of their income is due to working overtime?
- Auto loan interest deduction means up to $10,000 in auto loan interest on newly purchased cars can be deducted through 2028. It's only temporary, and it's limited to cars “whose final assembly was in the USA.” This makes buying brand new cars on credit slightly less stupid.
- Charitable donation deduction for non-itemizers is $1,000 ($2,000 MFJ) per year. This popular previous deduction is back starting in 2026 and permanent.
- 0.5% Floor on itemized charitable deductions, which means that the first 0.5% of your taxable income donated to charity is no longer deductible. The combination of the two changes means that Congress has decided to incentivize small gifts and disincentivize large gifts, but the changes are pretty slight. QCDs (the best way to give after RMD age) are unaffected.
- Trump accounts mean that when you have a new baby, you get a $1,000 credit into a Trump account, and $5,000 more can be contributed. It can apparently be used for school, small business expenses, or a first home. There's no tax deduction for contributions, but taxation will apparently be similar to IRAs. Details are still a little tough to sort out, there will be a post all about these soon. We're not sure the complexity is worth it, but “baby bond accounts” have had bipartisan support for years. If it gets more people saving and investing from birth, we think it's overall a good thing.
- University endowment tax is an increase in excise tax (0%-8% of value) on large (at least related to the number of students) endowments, and it will feel a bit confiscatory to many universities, their professors (including docs), and their donors. Like the prior excise tax established by the TCJA, it applies to net investment income, not assets. It makes us wonder what other types of “unapproved” nonprofit institutions could be targeted next. Churches, perhaps?
- Itemized Deduction Limitation somewhat similar to the “Pease” limitation of the past. Basically if you make a lot, your itemized deductions are only good for a 35% deduction instead of a 37% deduction.
- K-12 529 qualified withdrawals increased to $20,000 per year, up from $10,000.
Few of these will have much effect on the tax burdens of WCIers, but you may see a little bit of benefit or harm depending on your situation.
Healthcare Changes
You might have been feeling pretty good after reading the tax section above. This section will be more depressing.
- Medicaid/CHIP Community Engagement requirement says that if you're 19+ and without a “hardship event,” you'll have to spend 80+ hours a month working, in school, or doing community service, or you'll lose your Medicaid and your children's CHIP. Parents/guardians living with dependent kids can be exempted . . . if their state agrees to do so.
- Certain non-citizens can no longer enroll in Medicaid, CHIP, or Medicare, and they can't get premium subsidies or ACA plans. Undocumented immigrants have never been eligible, but these changes affect many “legal” immigrants, too. That might include a lot of your patients.
- Medicaid/CHIP Eligibility determinations will now have to occur every six months.
- Eliminate Medicaid payments to entities providing family planning, reproductive health, or abortion services.
- Increased cost-sharing means it'll be $35 co-pays for lots of non-primary care or mental health visits. This may reduce the percentage of “four-fers” in the ED.
- Medicaid payments are now capped at Medicare limits. That'll be 110% of Medicare limits for “non-ACA expansion” states (many “red” states). We didn't know Medicaid ever paid more than Medicare, but apparently, it can in some states. Some “Medicaid Direct Payment Programs” can be grandfathered in to higher rates, delaying this cap for three more years.
- State provider tax limitations. Apparently, something like 17% of state Medicaid expenditures are paid for by a “provider tax” on those providing the care. Limiting those taxes seems fair to me. Provider tax is really just a loophole states use to get more money from the Feds for Medicaid. Minimizing it or eliminating it for all states sounds like a good way to reduce fraud, waste, and abuse to me.
- Temporary doc fix with the 2.5% Medicare fee schedule increase for 2026. It's still not indexed to inflation; it's just a one-time “fix.” Just like all the other ones.
- Exemption of orphan drugs from Medicare negotiation. Drugs that are used to treat rare diseases can still be so expensive that your Medicare patients won't be able to afford them.
- Rural Health Transformation Program is the first good news for healthcare with $50 billion being set aside to help rural hospitals and providers.
- Biden-era healthcare rules delayed until 2034. These include such rules as minimum staffing in LTC facilities.
- Direct Primary Care (DPC) payments are now an eligible HSA expense. It's bonkers that they weren't before.
- Telehealth can also be paid for even before an HDHP deductible is met.
Overall, these changes might help some docs a little, but the decreased eligibility for Medicaid and CHIP will probably outweigh all of those changes. Estimates are that 10-17 million of the 72 million people on Medicaid will lose it. That will increase the number of “self-pay” patients by about 50%
Student Loan Changes
The OBBBA alters student loan repayment for all borrowers, with a more significant impact on current and future medical students.
Lower Borrowing Caps for Higher Education
Starting July 1, 2026, the OBBBA is introducing lower federal loan limits that will significantly impact medical and professional students. The Graduate Plus loan program created in 2006, will be discontinued as well.
New federal borrowing caps:
- $100,000 for graduate school ($20,500 per year)
- $200,000 for professional school ($50,000 per year)
- $65,000 (per child) for parent plus loans ($20,000 per year)
Please note: students still in school who borrowed before July 1, 2026, will have three additional years of borrowing under the older standard, allowing borrowing up to the cost of attendance.
Lower federal loan caps will force many students to rely on private loans to finance their education. Private student loans have less favorable terms and stricter underwriting requirements, and they commonly require a co-signer to receive them. This shift could disproportionately impact first-generation or low-income students, potentially limiting access to medical education.
There's a DO program in our home state of Utah called Rocky Vista University. For the 2025-2026 academic year, the cost of attendance (COA) is $120,098. A medical student can only borrow up to $50,000 per year federally in the future. The overall $200,000 loan doesn't quite cover half of this student's education over four years. Assuming the COA increases 5% per year, this student borrows $517,637 in student loans overall with $317,637 of that with private loans
That's a steep debt mountain to climb, regardless of specialty. And we aren't even factoring in interest growth while the student is in school, which could be nearly $100,000. This reliance on private loans that are ineligible for federal programs like Income Driven Repayment (IDR) or Public Service Loan Forgiveness (PSLF)—and often at higher interest rates (like 11%)—may dramatically increase costs for students. Schools may face pressure to curb tuition increases, but for now, students must plan strategically to manage this new reality.
PSLF Could Become Less Common
Over 1 million public servants have had their loans discharged through the Public Service Loan Forgiveness Program (PSLF). PSLF has become a lifeline for doctors and other public servants who work in nonprofits or academia. While earlier OBBBA drafts excluded medical residencies from PSLF eligibility, the final bill restored this key provision. However, with new federal loan caps now lowered for medical and professional school, PSLF becomes less attractive for future borrowers as they'll have less federal debt eligible for forgiveness.
Here's an example of two psychiatrists pursuing PSLF:
Doc A = $400,000 at 7%
Doc B = $200,000 at 7% (new federal limit)
Both earn $65,000 during their four-year residencies and $350,000 as attendings. They are in the newly proposed Repayment Assistance Plan (RAP = 10% of adjusted gross income).
Doc A benefits significantly from the original PSLF with more than $360,000 forgiven. Doc B would also benefit, but it would result in far less forgiven since they had a lower federal balance. Doc B may find private refinancing combined with higher-paying private practice jobs more appealing than PSLF-eligible employers. PSLF will still work out for those in lower-earning specialities or extended training periods (5+ years). But it's going to be far less of a factor for future doctors.
Repayment Plan Overhaul
OBBBA simplifies federal loan repayment options for new borrowers (loans on or after July 1, 2026) to two plans. Existing repayment options such as Income Based Repayment (IBR), Pay As You Earn (PAYE), Saving on a Valuable Education (SAVE), and Income-Contingent Repayment (ICR) will be eliminated for new borrowers. Existing borrowers must transition to one of three plans by July 1, 2028: Standard Repayment, Repayment Assistance Plan (RAP), or modified Income Based Repayment (IBR).
New Borrower (Post-July 1, 2026) Repayment Options
- Standard Repayment or
- Repayment Assistance Plan (RAP)
The new standard repayment plan term and payments are based on your loan balance.
- 10-year payoff for balances of $1-$24,999
- 15-year payoff for balances of $25,000-$49,999
- 20-year payoff for balances of $50,000-$99,999
- 25-year payoff for balances of $100,000 or greater
Standard repayment would not qualify for the PSLF program.
The Repayment Assistance Plan (RAP) is an income-based repayment plan similar to previous programs. However, RAP bases payments on Adjusted Gross Income (AGI) rather than discretionary income. Dual-earning couples can exclude spousal income by filing taxes as Married Filing Separately. Some of the previous bill texts had discussed INCLUDING spousal income regardless of tax filing (so it's nice to see this wasn't included in the final bill). RAP deducts $50 per monthly payment per child (two children = $100 monthly deduction).
Here's how they calculate your payment based on AGI.
A noteworthy difference with RAP vs. previous IDR plans is the payment cliff. Here's an example.
- AGI: $99,999 * 9% / 12 = $750 monthly payment
- AGI: $100,000 * 10% / 12 = $833 monthly payment
Making $1 extra in this case would bump up your payments $83 per month and $1,000 for the year!
RAP qualifies for PSLF and has an IDR forgiveness track over 30 years of payments. That's 5-10 years longer in repayment than other IDR plans. The minimum payment is $10 per month, so there won't be any more months of zero dollar payments. Similar to the previous Revised Pay As You Earn (REPAYE) and Saving on a Valuable Education (SAVE) is the interest subsidy with RAP. If your monthly payment does not cover the monthly accrued interest, the government would waive 100% of the unpaid interest. This prevents your loan from growing higher when you move into repayment. In addition, the government will provide up to a $50 monthly subsidy to ensure your principal balance decreases by at least that amount monthly.
Existing Borrowers (Pre-July 1, 2026) Repayment Options
Existing borrowers will need to move into one of these three repayment plans by July 1, 2028.
- Standard Repayment,
- Repayment Assistance Plan (RAP) or
- Modified Income Based Repayment (IBR)
The modified Income Based Repayment (IBR) plan is quite similar to what IBR was previously. The modified IBR has two versions.
- Pre-2014: Loan originating prior to July 1, 2014 (15% of discretionary income), 25-year IDR forgiveness
- Post-2014: Loan originating on July 1, 2014, to June 30, 2026 (10% of discretionary income), 20-year IDR forgiveness
The only change to the IBR plan is that it drops the partial financial hardship requirement to enroll in it. It'll be easier to switch into now.
Selecting the optimal repayment plan amidst all this change can be tricky for your student loan strategy. Run the numbers or get professional advice now to ensure you're on the right track.
More Noteworthy Student Loan Updates
- Stricter deferment and forbearance rules: Forbearance is now limited to no more than nine months during any 24-month period. It also eliminates economic hardship and unemployment deferments.
- Increased reliance on private loans: With lower federal borrowing caps, more borrowers will require private student loans to finance their education. You'll need to shop around to find the best rate.
- Parent Plus Loan challenges: Parent Plus Loan borrowers need to consolidate their loans and enroll in the ICR plan by June 30, 2026, to be eligible for IDR plans.
The One Big Beautiful Bill Act affects many aspects of the lives of most Americans. We'll continue to explore its implications on the personal finance and investments of white coat investors in future posts.
What do you think? What did we miss that is important in your financial life? Try to minimize your political commentary in the comment section below, or you may find your comment being edited or even deleted.
I thought that in this bill they passed site neutrality. I didn’t see that mentioned
I think you’re thinking of a different bill:
https://www.crfb.org/blogs/new-site-neutral-bill-introduced-senate
So now only rich kids will be able to go to medical school or to any higher education such as good quality law school or MBA.
Just more to expand and consolidate the chasm between the upper class and the lower class.
And one can’t declare bankruptcy to get out of paying back school loans, so god forbid someone develops a disability or has a serious injury which will need extensive time off, or has to leave a career to care for a disabled child .
In a few more years there won’t be enough docs to care for people.
Those first 2 sentences encapsulate the main point of it all. The 3rd is kind of a bonus for them.
Agreed. I will note having graduated from a private medical school, I found my student loan burden was less than my peers who attended public/state schools. These private programs were heavily endowed and while federal loans were a big part of the package, loans offered through the school (endowments) with very low interest rates were offered to make the overall package tolerable. Obviously not available to every medical school but may become the growing trend not to mention more programs are offering 100% tuition free from private to state medical schools. Let’s keep the faith and organize to make sure medical school remains accessible!
I agree with your first line. I disagree with your last one. There are enough “rich kids” to fill the entire class. They might not be as good as what you would have had if less well to do people had easier access to credit.
Their goal of more students paying full tuition is the reason universities quake at the idea of fewer student visas.
Universities claim it is to offer opportunities to the “best and the brightest”. They fail to understand that we rabble who still owe student loans to care for our fellow humans might take umbrage at their phrasing.
At least now they will pay taxes on their endowments because they aren’t giving that money to students. They place ideology above students and faculty. Fortunately there is no separation of university and state in the US Constitution.
Why would a “rich kid” go to medical school at this point? There are much more reliable and stable ways to make a living.
Same reason the rest of us went, or did you just go to med school because you wanted a reliable and stable way to make a living? 🙂
A choice that we all felt super compassionate about. Money making was not the ” first choice”.
I was a poor kid who went to medical school, worked my way through, borrowed heavily during the hyperinflation years of the Carter administration (13+% HEAL loans), and paid every cent back with no breaks, giveaways, etc. I had over $200k in debt when my starting salary out of residency was around $100k.
Suck it up buttercup. Why should I subsidize other peoples’ extravagances?
Since when is medical school tuition an extravagance? Medical school costs a lot more now, and even with working part time, students need to borrow more than you did way back when. Remember, we are talking about LOANS here, not gifts!
I also struggled to pay back loans and wish that stress on nobody. The interest rates are predatory and we need providers desperately. Very shortsighted thinking.
I find the description of student loan interest rates as “predatory” fascinating. At what rate would you loan your money in an unsecured manner to a student with unknown future potential? Having been a “peer to peer” lender previously, the 6-11% at which people currently borrow is lower than I would offer as after defaults/delays I’d find the compensation too low for the risk I was taking on. So if 7% is predatory, what is fair and what will you loan money at?
I was under the impression that federal loans were guaranteed by the federal government. Is this not true?
No, if the borrower defaults, the government is supposed to make the lender whole. That’s the guarantee. Not sure how or when the process actually works though.
I thought student loans are now disbursed directly by the federal government since the end of the FFEL program in 2010 (prior to which the federal government provided 97% principal recovery to the affected bank if someone defaulted)? I would assume MOHELA, etc get some sort of cut for managing the loans without having to take any of the risk from the loan per se.
I’ll be honest. I don’t know exactly how any of it works as I don’t really work in the student loan industry or for government. I guess if it comes directly from the government the government doesn’t need to “back it up” too.
Re: “I’ll be honest. I don’t know exactly how any of it works . . . ”
Boring! While your honesty as host is certainly refreshing, at least google it, or ask alexa, or your dog, or one of the AI mushrooms that live inside your phone.
“Where is paraguay?”
“No idea, but let’s talk about it while standing in a room full of maps!”
Thanks for the feedback and for letting me know that commenters expect me to do their Googling for them. This is what Google AI says in response to “does the federal government itself issue student loans”:
The U.S. Department of Education is the lender for the William D. Ford Federal Direct Loan (Direct Loan) Program. This program offers several types of loans, including Direct Subsidized Loans for undergraduates with financial need, Direct Unsubsidized Loans for various student levels regardless of need, Direct PLUS Loans for graduate students and parents, and Direct Consolidation Loans to combine eligible federal loans. While the Department of Education is the lender, private companies known as loan servicers manage billing and other loan services.
So it sounds like the check comes DIRECTLY from a government agency, at least currently. I’m not sure that’s the way it was 20 years ago though.
I was happy with the 3% rate I was able to get when I consolidated in 2006 at end of med school. Then I followed the advice of this blog and paid it off in 7 years as a PCP with starting salary of 50k. lower rates means extra payments
Nice work.
You are assuming that these people would be able to get loans in the first place. Most private loans require a cosigner and if their parents can’t do that for them then it might be impossible for them to take out enough in loans to attend medical school at all. Also a reliance on high interest private loans continues to push students into high paying specialties, driving them away from the specialties that are most in need.
Agreed. Also depending on their race they also may not get approved now that Trumps executive order Restoring Equality of Opportunity and Meritocracy,” aims to limit the use of “disparate-impact liability,” including in fair lending enforcement under the ECOA. So if we are no longer enforcing fair lending poor minorities will not get approved for private loans.
What you just mentioned will go over most people’s heads…. including the WCI himself. This is not a reality most have to reckon with.
The last thing most people want is racist lending practices, but it definitely has not been very long since those were widespread. Certainly a potential risk of changes.
This comment is in response to the Suck It Up, Buttercup sentiment.
So, I grew up with enough and not more, lived that way through medical school, paying for my education through a combo of work, grants and loans.
In residency, I married the love of my life, who, ten years into the marriage, decided that he was all done using his words, and chose instead to use his fists. We had kids. I moved out, while working full time, single parenting, paying my rent, half the mortgage, all the kids medical costs and the fees for an excellent lawyer, and am now nearly divorced. I live in a no-fault divorce state. It doesn’t matter what I went through. I outearned him since completing training and he gets half our savings, the savings that exist because I graduated college with a 3.98 Summa Cum Laude, got into and out of medical school, worked hard in residency and contributed my earnings to our savings. Now I’m a doctor working really damn hard to make ends meet because it’s expensive to raise kids on a single income, even a physician’s income.
And starting August 1, I will have to find several hundred dollars more a month to pay my loans which are now coming out of hibernation and maybe might but probably won’t be forgiven. Despite me paying them for 24 years.
I don’t have the hardest life ever lived, by any stretch. Just one that included events I may never stop having nightmares about.
If you, sweet Buttercup, could suck up all memory of my terror so I didn’t have to lug it around with me every waking minute, it would surely be easier to exist.
That’s why we help others, even when we were not helped. Because we are decent people who don’t wish suffering or trauma on others just because we survived suffering or trauma ourselves.
I wish I was astonished by your post. It would mean I’d never heard such self congratulatory lack of empathy before. But I have. Neither your rags to riches hard-won struggle to become a doctor nor your lack of even a drop of the milk of human kindness are unique or original.
I’m sorry that happened to you.
To all commenting on this thread: Recognize that people have strong feelings about the subjects discussed in this post. That’s why politics exists, because reasonable people can disagree on the right thing to do in these situations. While it’s fun to argue for our own personal point of view, let’s remember to be kind and recognize that others do not feel/believe/experience life the same way we do.
All of these comments seem to be focused on whether or not we are going to allow people to get shackled into near insurmountable debt or not instead of looking at the real problem which is the cost of attending these schools that is increasing at 2-3 times the inflation rate for many years now.
I agree the tuition is the problem.
Bravo!!
So well articulated
All the best to you
I had tears reading through your post. I am so sorry this happened to you. Life can be so cruel sometimes. This too shall pass. Stay strong and best of luck!
Eiligh, thank you so much for sharing your story. I am so sorry for what you’ve endured. May you find the grace to heal from all these hurtful memories, the strength to overcome challenges every day, and peace knowing that you’ve given your best shot. May providence be your partake in all your needs. May you enjoy all the new and beautiful memories coming your way. And may you receive all the rewards that go to brave people like you. May God bless you, Eiligh.
The idea that medical school is an extravagance is shocking. It’s hard, at times demoralizing, and an essential step towards a lifelong careeer of self sacrifice. We already don’t have enough physicians- any barrier to training them will worsen that.
I’m not sure reducing loans will actually reduce the number of docs, although I think it may change who those doctors are. If we really want more docs, the problem is residency slots anyway.
I completely disagree. We are facing an impending physician shortage and this will make it worse. These poor kids that no one cares about make up most of our primary care physicians. Rich kids will likely be advised not to become doctors because it will continue to be the field of debt, disrespect and litigation. Now that IMGs are also not welcome, we will join the ranks of Canada and Australia with an over taxed system and not enough bodies. Ironically, these two countries stand to benefit from the current exodus of physicians. Although I am proud to be a physician, I will absolutely steer my privileged children into less traumatic professions.
Do you have any data that suggests people from lower SE backgrounds are more likely to go into lower paying specialties? I’ve never seen it if it exists.
But I think it’s pretty clear that medical school classes can be completely filled by people from wealthy families. They mostly are already. Making med school more expensive or more difficult to borrow to buy isn’t going to change the number of docs coming out of them in my opinion. But it’s very likely we won’t get the best docs we could if we can manage to keep it affordable. Even among the well to do the calculus changes when it costs more. Maybe the best and brightest will choose finance or real estate or law or tech instead because the price is so ridiculous.
Maybe that is one of the points of the OBBBA. Access to medical care will again be a priveledge of the rich.
Sort of like one of the intended unintended consequences of the ACA was consolidation of healthcare into either hospital systems or large groups, therefore squeezing out many private practice docs and raising healthcare costs overall? Just sayin.
Is that the equivalent of “I had cancer and didn’t get this life saving treatment so why should you?” “Suck it up buttercup””.
And to think compassion is supposed to be one of our strengths.
I am confused by Suck it Up Buttercup’s med school cost during the Carter Administration. I went to med school 10 years after Carter was out of office and I paid $12,350 in tuition a year and about $6,000 a year in living expenses. That’s a max of under 80k in debt. How does someone going to school 14 years before me rack up 200k in debt?
For reference my medical school today costs $36,524 tuition and $14,000 in living expenses. That’s $200,000 over 4 years. Maybe he didn’t do state school for college and medical school like I did. Anyway, would not wish that kind of debt on anyone. It leads to choices made to make more money rather than practicing medicine you love. Bad for you. Bad for the patients.
And one day (if not already) he will be the patient! This kind of comment (suck it up and if I did why shouldn’t you..) is short sighted and what I wish a lot of docs of yesteryear would understand.
A thoughtful blog post, thank you.
There is one other tax bill omission that impacts healthcare for many Americans. The new bill allows the ACA to revert back to a subsidy cliff in which earning one dollar of income over a threshold eliminated all healthcare subsidies. While this provision is unlikely to directly impact any physician’s own healthcare coverage, it will likely cause many other Americans with moderate incomes to opt out of acquiring coverage through the ACA. This has to impact physicians indirectly and likely in a negative way.
I’m not sure I realized that cliff ever went away. When did that happen?
It was suspended initially in 2021 via The American Rescue Plan Act and then extended via The Inflation Reduction Act in 2022.
These provisions were to expire at the end of 2025 if Congress and the President did nothing which is something that most administrations are particularly good at doing.
Thanks!
This is not an effect of the OBBBA, but the expiration of the previous acts referred to above. What it means is that there is an effective 100% tax bracket on the first $10,593 above the 400% of FPL income.
It could actually be higher than 100%, however, because if your income for 2026 was supposed to be right at the 400% level, and it turns out on April 15 when filing your taxes that you earned $1 more, you would have to return the entire $10,593 subsidy, meaning a $10,593 tax on only $1 of income.
What tax rate is that? It is 10,593%
Exactly!
🙂
There are definitely a few very weird places in the tax code and that is one of them. Hopefully it can be fixed.
For those of us who consolidated their multiple federal student loans from med school into one big consolidated federal loan before residency, do we know how loan origination dates work on consolidated federal loans? Is the loan origination date that of the consolidated loan (2019) or the original loan dates (2011-2018).
Thanks
Kody,
What matters is the original date you started borrowing (not the consolidation in your situation). In your case you started borrowing prior to July 1 2014, you would be considered an old borrower for the criteria for IBR. Therefore, your payment in IBR would be 15% of discretionary income. That may end up more expensive than RAP that is 10% of adjusted gross income.
Andrew SLA
Thanks for the reply. MOHELA has a 2019 “disbursement” date listed which got me thinking it might put me into New IBR. But your reasoning makes sense.
What a mess this is going to be. It might be time to liquidate that side fund and pay down as much of this loan as possible.
Kody,
Our normal advice is stay with IDR to PSLF or live like a resident and refi the loans.
Andrew SLA
So what if you had loans prior to 2014, but they were all paid off prior to July 2014 and then you went to Medical school in 2015. At least previously that made you a ‘new borrower’ for IBR, is that still the case?
Robert,
If you have a federal student loan borrowed prior to July 1 2014, you are eligible for old IBR not new IBR. You may want to look into PAYE (10% of disc income) rather than old IBR (15% of disc income).
Andrew SLA
I attended Brooklyn College-which was a super school- graduated in 1963. Total tuition ,fees, etc was $48 for the 4 years.
Graduated SUNY Downstate Medical School in 1967, with an MD degree.Tuition was about $750 per term after a $ 750 Scholar Incentive payment each term.
Yes, those are the numbers with no added zeros.
When College registration fee was raised from $4 per term to $12/term, there were demonstrations on campus complaining that this $8 is just the beginning of the end of free education in the US.
How were therse schools subsidized by the governments?Where are these dollars being spent now? Why? What can be done to lower these absurd tuition fees?
High tuition has lots of factors, including decreased government subsidy and frankly a much nicer experience. Dorms are luxurious now by comparison to prior decades. What can be done? Higher taxes I suppose at either the federal or state level, or mandates to spend less (which would presumably cause universities to offer a less luxurious experience).
Dr. Shaman,
I have no citation for this, but when you went to school federal, state and local government paid 70% of school costs and students paid 30%. Now the numbers are inverted and with the advent of student loan expansion under Clinton, universities have found all kinds of ways to make education a job creator for administrators.
And we can’t even unionize.
Really excited that being forced from PAYE into IBR is coming to increase my student loan burden by $300,000. Super awesome.
Dentist in Debt,
Yes, IDR forgiveness is definitely going to become a tougher pill to swallow with a minimum of 25 yrs of payments in IBR and 30 in RAP. I don’t love it as a repayment option since it’s so long and is at risk of changes every couple of years.
Andrew SLA
Yes, very frustrating they are changing the rules on people and not allowing grandfathering to keep those current plans in place. Had I known the rules were going to change I would have approached things differently 10+ years ago.
Agreed. There is some grandfathering but it’s only the programs that were created by Congress (aka IBR) and not those created by the exec branch (SAVE/REPAYE, PAYE, ICR).
Is Dentist in Debt referring to the fact that, under PAYE, he would have qualified for forgiveness after 20 years, but being placed into pre-2014 IBR means forgiveness only after 25 years?
Quinn,
Yep, that’s what it looks like.
Andrew SLA
So painful. I’m sorry this is happening to you.
Please share details. Were you going for IDR forgiveness with a massive student loan burden or something?
Yes, that’s the issue.
I’m 10 years into the 20 years of PAYE. Original loan balance was $480k at 7%. Income started around $200k. Income has increased so my current payments are around $2000 per month. My current loan balance is about $625k due to payments not even covering the interest.
Being forced off PAYE and into IBR means payments will be around $3000 per month if income stays similar. So, the extra 60 payments of IBR means an additional $180k in monthly payments, plus the extra $120k in a higher monthly payment for the remaining original 10 years adds up to an extra $300k in required payments.
I just feel stuck in the middle. Too far into the IDR to switch out of it with my ever increasing balance, and now hit with higher payments and a much higher total bill. Not cool.
How big is your debt bomb side account so far? How much of the $625K could it wipe out now if you just refinance and start paying it off LLAR style?
What is LLAR?
I have enough to wipe out the whole balance, but it would decimate my savings and get me basically back to square one. Not sure it’s worth it for that considering having to sell more than the $625k due to taxes and then have minimal assets remaining.
Live Like A Resident.
https://www.whitecoatinvestor.com/live-like-a-resident/
You basically send most of your earnings to your lender until your student loans are gone in 1-5 years.
Is your plan to invest on 6.8% (or whatever your student loans are at) leverage? Doesn’t seem that wise. You seem like a good person to spend an hour with Andrew, run the numbers, and decide whether to change your plan or not. But if it were me, I’d give serious consideration to just paying it off. It sounds like that’s an option for you which is wonderful to at least have. Many don’t.
I graduated and started PAYE– only to have interest increase my total debt… I didn’t trust jack and decided to repay 5K monthly and live within my means… SOOOOO glad I did. Debt free and no longer amid this disastrous mess. I would have been in “year 9” of a supposed 10 year repayment plan, only to be screwed. Borrow the least amount possible (someone has to stop this tuition scam!), repay while living poor, and run away free. So sad for everyone buried in this mess as well as future docs who will be struggling. Sooo glad I was doubtful and protected myself… especially after finding myself disabled for a few years with tons of unpredictable chronic medical issues.
Didn’t Trust Anyone,
Forgiveness isn’t always the answer. At times, following your instincts over the numbers can lead to better outcomes. Thanks for sharing your journey and congrats on becoming debt-free!
Andrew SLA
My understanding is that allowable 529 expenses on K-12 tuition etc will rise to $20,000 annually in 2026. For those of us in states that provide a tax deduction for 529 contributions, this is useful.
Unclear to me whether the $10,000 lifetime limit on using a 529 for student loan payments will increase.
Good catch and worth mentioning.
I don’t think there is a change with student loan payments using 529 money. Still $10K.
The final version of the bill that passed did not place any limits on specified service businesses for the PTET deduction. The House version had placed this limit but the Senate version which is what eventually passed did not. This is good news for the many private practice docs who use this workaround to deduct a large chunk of state taxes.
This is my understanding from the reading as well, Jim. You might want to make a correction to the blog post. PTET was left essentially unchanged, including for SSTB.
Good news for docs. Thanks for the correction. I knew it was going to be hard to get everything right in this blog post.
Was there also mention of changes in eliminating the back door Roth conversion given the new “trump accounts”?
Someone else asked me that too, but I haven’t seen anything to do with the BDR process in OBBB.
I was following the bill closely and was particularly interested in SALT. I own 4 properties and earn W-2 income in Illinois, a high property tax state with a 4.95% state income tax.
At various points in the process, there was going to be no SALT cap, or a very high SALT cap, or no SALT deduction at all. It was constantly changing. I was hooked.
I made the mistake of getting my hopes up that SALT was going to be a great boon for my family. In the end, SALT won’t have much impact for me at all.
The lesson I learned is that it was a waste of my mental energy to worry about what the government might or might not do.
I should have used that energy to work on my blog, help my clients, or engage with my kids. All better uses of my time and energy.
Thanks for a great summary.
Matt
Just wondering if anyone could clarify the SALT provision. For residents of high tax states eg: California would it be wrong of me to assume that I will now have $30,000 that I can deduct from my taxes instead of $10,000? Have I misunderstood this provision?
I don’t know all your details, but if you have $30,000 in SALT and an income (MFJ) under $500K, then yes, you’ve got another $20K deduction in addition to the $10K you had before.
Thank you for the great post outlining some of the big changes that this bill covers.
Question for Andrew – Was there any language in the bill that talked about how loan payments will be calculated if a married couple filing jointly chooses 2 different IDR plans? For example if I (family doc) am on modified (new) IBR going for PSLF and my wife (stay-at-home mom) is in RAP with plans to refinance once I get PSLF, how do we think that would get calculated?
Tyler,
No changes to how payments are calculated in IBR. In new IBR payments are 10% of discretionary income. In RAP they would be 10% of adjusted gross income (a little higher monthly). In order to calculate payments if you file jointly they would first calculate your household payment on either plan, then each of you gets a cut based on your % of the student loan balance. For example, suppose you owe $200k and your spouse owes $100k. If your household monthly payment in IBR was $3k p/mo, you would receive 2/3 of the payment, $2k. Your wife would be allocated the remaining 1/3 or $1k monthly. In reality, her payment would likely be slightly higher though since new IBR should be less monthly than RAP.
Andrew SLA
I very well could be misinformed, but I believe I read some initial reporting suggesting that the RAP would not proportionally weight payments for an MFJ couple who both have federal loans. So whereas current income-based plans divide a couple’s combined income-based payment based on proportional debt burden, RAP just demands 10% AGI. So in the example you responded to, Tyler would indeed pay 2/3 of their monthly repayment on IBR, but his wife would still pay the full 10% of their combined AGI.
If I’ve been misinformed, please feel free to correct, but RAP seems clearly worse for couples who both carry federal loans if this is true. A couple who are both on RAP – if I understand correctly – would essentially pay 20% of their joint AGI.
Do you have a source on this?
Any follow up information received?
Both partners paying 10% of the joint AGI just seems absurd. And infeasible.
“Charitable donation deduction … This popular previous deduction is now back and permanent.”
… starting in *2026* (not 2025).
Thanks for the correction.
Wishful thinking here, but I hope this reckoning will finally motivate medical schools to actually provide personal finance courses and actual knowledge on debt repayment, budgeting, salary prospects, and maybe recommend making payments during residency to at least break even with interest, if possible. An exit interview at the end of the 4 years in school giving you an envelope telling you how much you owe, which is essentially all I received in 2015, is a gross failure to any medical student who is taking on a tremendous liability to pursue a medical degree. Maybe we can also talk about money a bit more in residency, and reimbursements, so graduating trainees can adjust expectations of the work required to break even on your salary, and ultimately have more realistic expectations for the lifestyle they can expect based on their specialty and debt burden. Maybe talking about money is actually a good thing, because on occasion, a given physician may actually want to succeed financially in life, in addition to taking care of patients and doing good for society.
Hedging your bets on student loan forgiveness has always been a risk, and the only true way to sleep well at night is to refinance your student loans when strategically possible to get the lowest possible interest rate, and just pay it off the old-fashioned way, by saving more than you spend. We can all feel sorry for ourselves and justify needing student loan forgiveness based on a higher cost of living area, lower paying specialty, having other personal financial burdens, etc., but it has become abundantly clear that society and our elected officials care less and less.
AP,
Agree on the education part. If medical schools had a designated financial curriculum, a big piece should be on student debt. Then there wouldn’t need to be student loan advisors like me! Or there would be less of a need. For now, the education on student loan management is important and because it changes so much it’s critical for someone to follow this and be able to assist docs as they tackle their debt.
Student loan forgiveness is always a risk, but you can create a side fund to offset it. And I work with plenty of docs who save (or will save) hundreds of thousands of dollars to pursue PSLF. Many use it just like a business owner will take the QBI deduction.
Andrew SLA
Andrew, you are absolutely right. I apologize if I gave you the impression that what you do is not important, it absolutely is, and I as a faithful reader of this blog for 9 years, have also benefited from its various pieces of advice. In a world where these rules are constantly changing, a resource like yours is invaluable. An unpopular viewpoint here may be that society generally feels that physicians live well, and most of them have enough money to own a home, retire and put their kids through college, and even though that may be more difficult for some doctors than others, it certainly does not put us in the same category as student loan debtors that make significantly less money than we do. It is not implausible to believe that in the coming years, there could very well be an income cap on who is eligible for PSLF, and nearly every physician may find themselves out of luck. The societal optics of white-collar professionals who drive decent cars, go on vacation, own homes, and have golf club membership’s, getting their student loans forgiven are not favorable, especially in a country that continues deficits pending with no end in sight. Many physicians of course need PSLF, and many other physicians / professionals who may not need it financially choose to take advantage of it anyway as a wealth building strategy, and both of those are completely fine – I would do the same if it worked for my situation. But the latter group can probably afford to just pay it off by cutting back elective spending – I know I did. I think the powers that be, know it too.
Well put. PSLF will become less common with the changes to borrowing caps and could face further phase outs in the future.
Andrew SLA
I’d prefer they put all that time and resources to actually LOWERING the cost of attendance. Information is more accessible than ever, education should be cheaper than ever. Most students use recorded lectures and resources that they pay extra for outside of school. 1st summer is off. 4th year is mostly a joke. There’s so much bloat in medical education. You could easily cut the cost in half. The biggest shocker to me from this article was 120k/year cost of attendance…
KP,
Yes, it’s absolutely nuts where tuition has gone over the last 20+ years. I work with young docs every day who are borrowing $120k p/yr at DO and carribean schools.
Andrew SLA
Yup. Met an incoming MS1 at a DO school in Utah this weekend anticipating borrowing $90K+ this year at 11%.
Well put!! When I attended a good private med school in the early Nineties the cost of 4 years was under $20K per year. Why is medical education so damn expensive, especially with more use of information technology? Also, what impact has federal underwriting of loans had on tuition inflation at the undergraduate and graduate levels? Someone please explain.
Lastly, I wholeheartedly support LLAR. Worked for me and my wife, and in general living below one’s means is a prudent decision.
James,
Starting in 2006 the feds implemented the direct plus grad program that allowed no cap on the amount of federal borrowing. This was part of the reason for the skyrocketing of tuition.
Andrew SLA
If the medical schools would take care of this, I could quit doing it. That would be nice. 🙂 I wouldn’t hold your breath though. I’ve been trying to get schools to do it for years and only a few have even tried.
Just imagine 17 million people kicked off of Medicaid most of who are hard working. 5% of the US population and how it will affect they’re lives and also the financial incomes of everyone in medicine. Instead a small tax on billionaires would pay for this and give millions healthier lives. That is the most important number in the Big Bad Bill.
Yup. I can already imagine. I used to live it prior to PPACA.
But taxing only billionaires probably doesn’t raise as much as you might think. There are only 813 of them.
Plus, you eventually run out of other people’s money, right?
1-Anyone commenting is free to loan students at their local medical school the money needed to attend. They won’t.
2- Universities will keep raising the prices so long as government keeps backstopping the loans to attend.
3- Most of the top flight
talent at medical schools and colleges comes from the upper economic classes anyway . Genetics? Private schools? Tiger parents? Who knows why?
This is the key to the whole mess. Especially #2.
I came in with a slightly different perspective having had a productive career before medical school, and having paid for my initial degrees without loans by working. When looking at medical schools, I looked at the true cost of attending. Three state schools, 2 had tuition over $30,000/year one at $9500 which rose to 12500 by the time I finished. The prestigious New England school, was even higher, but it was near where I grew up in northern NE. I painfully decided I could get a good education at any of these schools, and declined the expensive but prestigious diploma for the cheap school. Then worked a side job to minimize loans, and pay them off early. It could be done then. As an undergrad, there was a racket for deferring Fed loans: you got a 9 month deferral and interest stay back in the 70s if you were enrolled half time. A single course in the spring session was half time. Defer, make payments to your bank/broker and pay the 3 months with the proceeds, while allowing the principle to grow until you were tired of them and pay them off in one swoop..
Here’s the rub. Each of the schools today have roughly the same ginormous tuition or close enough that it doesn’t make a difference which one you matriculate.
As Robert Prince noted, when there’s easy money, they don’t care and the market doesn’t hurt them for taking it. It hurts us, the attendees. For a long time.
Most of us are grateful to be accepted to anywhere and we will pay. This gives the universities a free hand to take our money and spend it on who knows what, same with R01 research grants. It’s easy to get, and fairly easy to misspend it. Until that changes, we are stuck.
The description of the “Trump Accounts” is inaccurate. The final bill does not contain the provisions for taking some of it out at 18 and more after 25. That was in the earlier House version, but the final bill changed the provision to make Trump Accounts essentially a traditional IRA that can be contributed to without any need for the child to have taxable income. At 18, it then becomes a traditional IRA.
Take a look at SEC. 70204. TRUMP ACCOUNTS AND CONTRIBUTION PILOT PROGRAM in the text of the final bill here: https://www.congress.gov/bill/119th-congress/house-bill/1/text
Thanks for the clarification.
Still digesting this one. There’ll be a follow-up post on it and it is becoming more clear over the last few days since I wrote this exactly how these work.
The main things that caught my eye that seemed unmentioned here:
* The pease limitation is back, by effectively capping itemized deductions at 35%
* Charitable donations have a floor of 0.5% of AGI if you itemize
1. Good catch. I missed this.
Itemized deductions limitation: The bill permanently removes the Sec. 68 overall limitation on itemized deductions (known as the Pease limitation) and replaces it with a new overall limitation on the tax benefit of itemized deductions. The amount of itemized deductions otherwise allowable would be reduced by 2/37 of the lesser of (1) the amount of the itemized deductions or (2) the amount of the taxpayer’s taxable income that exceeds the start of the 37% tax rate bracket.
https://www.journalofaccountancy.com/news/2025/jun/tax-changes-in-senate-budget-reconciliation-bill/
So it’s not Pease, but it works pretty similarly. Bummer for me as we give a lot to charity. PTET gets around this thankfully.
The caps on student loan borrowing is probably the best thing in this bill for fixing the cost of education mess. People can complain, but it’s true. No more unlimited loans and “free money” to get any degree. That’s what caused education costs to spiral out of control.
I don’t see how private loans can bridge the gap. The thing that held the bubble together was IDR plans. Private banks will not offer IDR plans. You want to borrow an extra 300-400k, you will be on a standard payment plan just like with a car or house.
Expensive schools will hopefully be forced to either cut tuition or close down.
Hi Sam,
I hope you’re right. There’s going to be some significant pain for those starting med school next year and beyond though as this could take quite some time before it is reflected in the cost for a medical education. And, not sure what this is going to mean for the shortage of doctors we already have in the country.
Andrew SLA
I would also hope this would happen, but I’m strongly inclined to say it won’t. Medical schools will likely be able to maintain high cost of attendance without seeing a decrease in demand, mainly driven by a few student demographics:
1. Wealthy students who can simply afford it
2. Financially uneducated students/families who don’t grasp the subtleties of interest rate, repayment plan, etc. differences between private and public loans
3. Students who really just want to be a doctor even if the financial ROI isn’t great anymore
The unfortunate thing about this is that medicine will trend in the direction of something like social work, where most people agree it’s relatively important but it remains subpar as a career choice.
While I agree that there needs to be limits on borrowing to avoid “moral hazard,” the idea that this somehow motivates medical schools to lower tuition is wishful thinking and oversimplified.
The cost of educating a physician doesn’t suddenly become cheaper. If anything, the endowment tax for universities and reduction in Medicaid reimbursements makes it more challenging for institutions, public and private, to subsidize the cost of education, limits funding for research as well as capital improvement projects.
What this law does do is it shifts wealth- in the new tax provisions, in the accessibility of medical care, and in the accessibility to finance and pursue an education.
Again, I agree that there needs to be responsible limits on borrowing. As a first generation citizen, I came from a low-middle class family and borrowed money to finance nearly the full cost of my college and medical school education and am on the home stretch of paying it all back. I was naïve and ignorant, I didn’t have a good financial education. But I was also passionate about becoming a physician where the ends justified the means.
I still can’t decide if this is ultimately a good or bad provision, but what I can say is that under the current law, I would not be able to afford the cost of a secondary education and there are many like me who would be in the same situation.
Greenlight,
Would you have still pursued medicine knowing about these new rules? I feel like a lot of people made for medicine will still do it (or at least try) even with the new realities of these financial pressures. My brother, an opthamology resident, knew he wanted to be a doc when he was five and never had a real plan B. I do hope there will still be a path for those who want a career in medicine, even if they come from less means.
Andrew SLA
Andrew,
It’s a great question and tough one to answer. For context, I had over $400K in student loans and refinanced several times now for a 2.4% fixed interest rate (started with a mixed bag of federal and private loans ranging from around 4%-8+%). Only $60K left! I became financially literate via WCI and other resources about 5 years post-residency and now entering mid-career.
While I’ve developed other interests (real estate investment, entrepreneurship, and finance), I don’t know if I would ever be as fulfilled as I feel after a day of medicine… As the loans go down, the passion for medicine strengthens. But I’d be lying if I said the stress and anxiety of the loans do not weigh heavily on me and dominate almost every thought and decision I make. If I knew then what I know now and had only high interest loans to choose from, I’d be smarter about borrowing, would have been more proactive about becoming financially literate early, negotiated for a higher starting salary, and used every tip and trick at my disposal to minimize expenses and optimize income.
So TLDR, I’d probably still do it. I feel for those who don’t have a strong financial upbringing. Not to take anything away from anyone else, but there’s so much at stake riding on your success or failure as a person from less means. This is why it’s so important to spread the WCI message and seek counsel from SLA. Thanks for the question and for what y’all do!
Now you see the motivation behind WCI. Imagine that instead of borrowing with all those high interest loans, you literally volunteered to go to war to pay for medical school then found out you came out behind financially for that decision.
WCI,
What a tough pill to swallow… Thank you for your service and humbled that your experience helped so many of us set, reach, and exceed our financial goals… I once was lost, but now am found, was blind but now I see!
Many thanks!
It wasn’t all bad. In fact the bad only slightly outweighed the good. But it was definitely among the big financial mistakes I made early on.
It may have been a mistake when you did it, but for almost every DO student who does it now, it will likely be a good financial decision.
As long as people do it primarily for the right reason (desire to serve) it’ll work out fine whether they come out ahead or behind financially. I suspect that was only my third reason. First was financial/fear of debt (which didn’t work out) followed by adventure (which really didn’t happen given my station and deployments) and then followed by desire to serve.
Could a large medical practice split into an MCO and a medical practice, shifting much of the income to the MCO?
The purpose of this would first and foremost be to facilitate an ESOP to allow employee ownership by both physicians and administrative and support staff.
And would an MCO be eligible for PTET and QBI deductions without the limits applied to SSBs, as the MCO is an administrative entity and not directly an SSB?
Ziggy,
I wrote about this idea as part of my post discussing private equity in dentistry in the section about mid-career dentists. https://www.whitecoatinvestor.com/dso-private-equity-dentistry/
The part I believe that is relevant to your question is copied below.
•••••••••••
There is also a tax-planning strategy that can motivate practice owners to set up a DSO to support just their own practice. Many dentists do not benefit from the Qualified Business Income (QBI) deduction, aka the section 199A deduction, which is available to owners of pass-through entities (i.e., sole proprietorships, LLCs, S Corps) because their taxable income is too high for the deduction and/or because dentistry is considered a “specified service trade or business” (SSTOB) and not a “qualified trade or business” (QTOB). Experienced readers will recall that only a QTOB qualifies for the QBI deduction when taxable income exceeds the limits ($197,300 for singles and $394,600 for joint filers in 2025).
Even though the clinical practice of dentistry is considered a SSTOB, the administrative services provided by a DSO (owned by the dentist) are not. A DSO is a QTOB, or at least it can be argued to be such.
Thus, the owner of a fairly large/successful practice may consider “carving out” the non-clinical portion of their practice and setting up a DSO as a pass-through entity (i.e. LLC). The practice would then contract with the new DSO and pay them as high a fee as is reasonably justifiable to perform administrative duties for the clinical practice.
Given that the QBI deduction is the lesser of either 20% of the DSO’s income or 50% of the W-2 wages, the DSO will need to pay its employees W-2 income. Any employee of the dental practice not providing clinical services is hired by and paid by the DSO on a W-2.
This gets very complicated very quickly, so if you are considering this, work closely with your tax professional. My point is that the QBI deduction has been a motivating factor for some to give birth to their own DSO.
Thanks Tyler. My thought is that the MSO could allow both the PTET and the QBI deductions without limits, and I am in a high tax state.
The profit of the large practice is around 5M per year, so that these deductions would be quite substantial. It would be worth it to set up the MSO because that would allow the ESOP to be formed, would allow the PTET deduction without limitation, and would also allow the QBI deduction, making it well worth the extra complexity and cost. But I am just a doctor, not a CPA or tax attorney, trying to think through the new rules to determine if this strategy makes sense.
One of the most confusing aspects for me is how this will impact folks like myself who are currently in med school, have borrowed loans pre-2026 transition date, and will need to take out loans after the transition. Though I will have access to Grad-PLUS throughout my time in school, will “new loans” be eligible for IBR in the way that my previous loans were, or will I be forced into RAP regardless? Honestly, given the language of the bill, I’m not entirely sure this is something that the writers thought through because the details of the grandfathering phase are not very well fleshed out.
I think you get three more years before your loan amounts are capped. But I don’t think you’re going to be eligible for IBR at all. That’s my understanding. We’ll see if Andrew confirms.
LR,
WCI is right. You’ll get three more years of borrowing at the old standard (up to cost of attendance borrowing). Then once you graduate from school the only IDR plan available to you is RAP.
Andrew SLA
Does anyone know the specific SALT phase out? All I have seen is that it ‘begins” to phase out at $500,000 AGI. Are their levels with higher AGI?
The phaseout maxes out at $10K in SALT. I didn’t memorize how much income it takes to phaseout completely, but I’m sure we can figure it out….
Maybe not. I just read through 6 articles on it and didn’t find the answer. I guess we’ll have to dive into the legislation itself to get that answer.
I think your take on the provider tax is missing some important context. Despite the name, the tax is not levied on all “providers”. It is levied on hospitals, HMOs, nursing homes, etc. As I understand it, those tax revenues are then used to fund the state portion of medicaid. The state portion is then matched by federal government at 50-83%.
Hospitals, etc. mostly pay the tax, which then gets multiplied by 50+% and dumped back to them in the form of Medicaid.
https://www.aha.org/fact-sheets/2025-02-07-fact-sheet-medicaid-provider-taxes
Thanks for the clarification.
I think one of the other challenges we’ll see with private student loan debt is that while your in forbearance during medical school, it becomes time to pay the bill once you hit residency. IDK how a resident on $60-80k a year who will already be paying 6%-8-% on RAP on the Federal Loan portion is going to be expected to make significant loan payments on the private loans. I know some private loan providers have “$100” payments while in residency/fellowship but with private loan interest rates, that principal is going to balloon out of control.
As a med school applicant in the current cycle starting in 2026, I don’t think we’re going to see schools reduce tuition and COA for another 3-4 years. Reducing tuition for the class of 2030 while Class of 29,28,27 still have access to “unlimited funding” via PLUS loans would not be a smart financial decision. I think schools are going to step up to the plate with private loan partnership or an increase in institutional loans.
Future Med Student,
When you are in residency you can enroll into RAP and your payments are $10 p/mo for your first year or two of residency. Private loans currently have resident options where you pay $0-$100 p/mo. Payments will be doable during training. However, the balances will grow very quickly on your private loans. RAP will curb interest growth so your balance won’t go any higher on your federal loans as long as you stay in repayment.
Agreed on the COA. It’s going to take time for changes in tuition to take effect. Or if some schools will go under. I think more private lenders will step up to the plate and schools may get more creative with loan programs.
Andrew SLA
If I have a prior masters degree (completed in 2022) that I utilized Direct Unsubsidized Loans for and Grad PLUS loans – how will this impact the $200k lifetime borrowing limit for professional education?
If I took out ~$35,000 in Direct Grad Unsub Loans for my masters, should I expect that to reduce my borrowing limit from $200k to $165k? (Are previous Grad Plus loans held against this limit?)
If I previously had Direct Grad Unsub Loans and paid them off in full or are still making payments, how does that impact the $200k borrowing limit?
Future Med Student,
If you are not in a program this year then when you start next year you will be subject to 200k cap for medical school. The usual cap on unsub stafford loans is 224k for med school. I believe they would deduct the 35k you’ve already borrowed from your loan limit of 224k. Leaving you with eligibility up to 189k (just under the 200k new borrowing cap).
Andrew SLA
Can existing borrowers in SAVE just wait for three years before switching into another plan? Are there clear consequences of not doing anything, or is it still uncertain? Thank you.
Jamesd,
No one totally knows the answer on this yet, but I’d suspect SAVE is not around for three more years. And, I just saw that as of August 1st interest will be resuming for those in SAVE. SAVE isn’t helping people soon with interest accrual starting up and no progress towards paying loans down or accumulating credit for loan forgiveness.
Many are holding out hope for the PSLF buyback program (backlog of 18-24 months on application) to have the SAVE forbearance months count towards PSLF. But that program has not worked out well at all.
Bottom line, if you’re in SAVE, you should be looking to get out of it for another repayment plan.
PSLF = applying for IBR/PAYE/ICR
Not PSLF eligible = apply for private refinancing
Andrew SLA
Thank you, Andrew.
Just to be clear, for existing SAVE borrowers going for PSLF, the only two options are RAP and IBR, right?
Jamesd,
For the next three years you have access to IBR, PAYE and ICR. On July 1 2026, RAP will open. Then by July 1 2028, you’ll need to be on IBR or RAP.
Andrew SLA
Andrew, I am one year out from PSLF (assuming a buyback for SAVE forbearance). Other than the delay in processing, is there reason to think that the SAVE forbearance won’t count toward buyback? Everything I am reading suggests that the Trump administration is not fighting this particular issue.
I’m hesitant to switch to another plan with just one year left due to, as you said, holding out hope for the buyback to count.
I have same question and concern as JT. My income (and spouses) has also increased significantly so don’t want to get locked into higher payments sooner than I need to.
JT,
Buyback is delayed 18-24 months right now. I personally wouldn’t wait on it. Moreover, interest is now starting again for SAVE. I’d rather be done with my loans then potentially postpone forgiveness. If you prefer to wait then that’s fine. You just may have to end up waiting another year or two for buyback to go through. I don’t think it’s worth the gamble at this point.
Andrew SLA
I submitted a change in plan request from SAVE to IBR back in February (was able to use my 2023 taxes as my 2024 taxes has a significant t increase in salary) and still have not heard back. When speaking with the servicer (Mohela) they stated they have a significant backlog and I am still in SAVE forbearance but they acknowledged they have my application pending for processing. I have little faith in the buy back program longevity by the time I am eligible for 120 payments as I am about a little over halfway done with qualified payments for PSLF. Should I submit a new form with 2024 taxes in hopes to get back on payment tracking for PSLF or stay the course?
Neal,
Ug this is a tough one. If you are hellbent on not postponing PSLF then apply for IBR/PAYE now. If you’re okay waiting a little more, then don’t apply to switch out of it.
Side note, buyback has been a disaster thus far. I’m telling everyone to not rely on it all.
Andrew SLA
Didn’t all students legally enter into a contract back when REPAYE was a thing. It’s right in the MPA note. They can’t just change rules left and right as they please. Could argue in court we were mislead into taking out the debt etc….seems like legally buyback will need to stay for PSLA or there will be litigation….although yes dysfunctional like everything else is.
Hi Dan,
This topic has been discussed on here and the podcast, but the government generally goes about two ways to create loan policy. Congress and the Executive Branch. When Congress creates programs, such as IBR and PSLF (passed back in 07), it is very difficult to eliminate unless there is bipartisan support to modify it. However, even if there are changes to PSLF, those already in it are likely to be grandfathered in. There isn’t any bipartisan support right now on student loan matters. Look at the BBB, all those in DC voted along party lines.
PAYE, ICR, SAVE/REPAYE, RAP and Buyback are all examples of programs created by the Executive. These programs have less staying power and can be shuttered if one party holds a majority in Washington (e.g. BBB). This means in 3.5 years we could have a new presidency and a political shift and they could try to rollout all sorts of regulations of their own.
Unfortunately, federal programs are tricky and riddled with nuances. It’s a big reason why SLA exists to help docs and other high earners navigate this system optimally.
Andrew SLA
Hi Andrew,
I’m a cardiology fellow just starting my last year of training with plans to go into private practice next summer. Up until now, I have been in the REPAYE –> SAVE and have been very lucky to have no payments / no interest throughout my time in training due to COVID-related postponements to income re-certification. With interest starting back on Aug 1, do you think it makes more sense to ride out interest accrual with my $0 payments in PAYE until RAP becomes available? Or should I just refinance now?
Cardsfellow,
You could actually benefit a little from RAP your first year as an attending since you could enroll into it by using your final full year as a fellow tax return. You would need to file an extension on taxes next year. Not sure how much it would save you but it could subsidize a little bit of interest. I’d probably just stay in the SAVE plan until they kick you out, pay some interest, RAP for a year and then refi.
Andrew SLA
Does anyone know what the SALT phase-out past 500k specifically looks like? It looks like there is no clear info, right? I think I saw somewhere a “30% reduction” quoted but not sure what that means specifically. This is certainly impactful for higher income physicians in high income tax states with higher property taxes.
I found this graph helpful but it was referring to the House bill, not the final version. I am not sure how this part of the bill changed when it went to the Senate, but the description on this website uses the same language “a 30% reduction” as the final bill, best I can tell.
https://bipartisanpolicy.org/blog/how-would-the-2025-house-tax-bill-change-the-salt-deduction/
It looks like the deduction drops precipitously above $500k.
Thanks, that’s very helpful! So it looks like it drops by 30% for every 40k (or so) above 500k and is gone by 600k. Ouch.
A steep drop indeed. My wife and I are close to this AGI most years, and I wondered if there could be situations where it would be better to do married filing separately?
I think it’s $250k for MFS, not $500K. So no, MFS isn’t going to help. It usually doesn’t in most things.
Excellent article! Very intriguing and helpful.
Andrew, questions for you:
As you stated starting July 1, 2028, 3 options are available for existing borrowers:
-Standard Repayment,
-Repayment Assistance Plan (RAP) or
-Modified Income Based Repayment (IBR)
What are the options for a resident graduating medical school this year and starting residency? It sounds like RAP wont be available until 2026, and SAVE is being discontinued. If RAP is your intended plan, what do you think is a good plan until RAP becomes available? I am assuming IBR is a solid option in the meantime? What are your thoughts?
JoshuaW,
PAYE, IBR or ICR for those graduating now.
RAP will become available next year.
I would pick whichever repayment plan is the lowest monthly payment in the meantime. It will be between PAYE vs IBR. I’d suspect you didn’t borrow prior to July 1 2014, and you’d be eligible for new IBR that is the same payment as PAYE. A year from now you could reassess and apply for RAP if you want the interest subsidy.
Andrew SLA
Hello,
How will PSLF change? I am currently on track to have 60/120 payments for forgiveness. Will forgiveness still be honored ? I have also recently changed from a SAVE plan to IBR – is the modified IBR the same as the current IBR plan will I have to change again to another IBR or is it best to wait until I have to submit recertification. Thank you
PSLF didn’t change. Sounds like you can do IBR for 3 more years, then RAP for a couple more and get it.
PCP in Debt,
Doesn’t really change PSLF for you. It will change for those starting borrowing fall 2026. PSLF will become less of a factor for loan repayment for that crop of doctors.
Andrew SLA
Andrew,
Thank you for your help! Will borrowers that will achieve PSLF this year or next year have the amount forgiven taxed as income with respect to the new changes? Thanks
No, PSLF is still tax-free.
We are not seeing any adjustment to the undergrad limits (the original 50,000 text from the House Bill did not remain in the Senate version).
I believe the limits remain 57,500 for undergrad. The grad (100k) and professional (200k) are now on top of whatever amount the student borrowed as an undergrad.
The also mirrors the fact that there is a new lifetime limit (all loan types) of 257,500:
“LIFETIME MAXIMUM AGGREGATE AMOUNT FOR ALL STUDENTS.—Subject to paragraph (8) and notwithstanding any
provision of this part or part B, beginning on July 1, 2026,
the maximum aggregate amount of loans made, insured, or
guaranteed under this title that a student may borrow (other
than a Federal Direct PLUS loan, or loan under section 428B,
made to the student as a parent borrower on behalf of a
dependent student) shall be $257,500, without regard to any
amounts repaid, forgiven, canceled, or otherwise discharged
on any such loan.”
Hi Thomas,
Thanks for pointing this out. Applicable for those who are borrowing now. Not as applicable for those starting in fall 2026 or later.
Andrew SLA
To be clear, today and in the future, there is no 50,000 undergrad aggregate limit.
Today:
Undergrad (Dependent): 31,000
Undergrad (Independent): 57,500
Grad (including prior undergrad loans): 138,500
Certain Health Programs (including prior undergrad/grad loans): 224,000
As of July 2026:
Undergrad (Dependent): 31,000
Undergrad (Independent): 57,500
Grad (excluding undergrad): 100,000
Professional (excluding undergrad): 200,000
There was no adjustment in OBBBA for undergrad limits, other than introducing loan proration for students attending less than full time, and new Parent PLUS loan limits.
Thomas,
Thanks will update.
The issue with undergrad is low federal borrowing limits of ~$10,000 p/ yr. For a lot of universities, that’s going to be a significant shortfall. Hopefully the student has some 529 money or they will need to resort to private loans or parent plus loans.
Andrew SLA
The biggest challenge for medical students regarding costs for education lies with the medical institution. Medical schools should reduce their fees so that the cost is less burdensome for the student and does not pass the cost to tax-payers. I paid for all of my student loans myself. It is not right or okay that I contribute any of my income to pay off the students debt for someone else. That assistance in loan debt reduction needs to come from the school reducing their fees. It is not okay that medical institutions have become left wing activists. There are solid 50%, if not more of physicians who feel the way I do. Medical schools should be neutral and non-biased so that those of us who are conservative have a voice that is considered and represented.
Andrew I saw that you sent this out recently and I have a couple of questions:
“Now with interest being turned on, many borrowers may need to take action to move out of SAVE soon.
Pursuing PSLF? Switch into another repayment plan such as IBR, PAYE or ICR. Now is a good time to calculate your monthly payment in those programs.
Not pursuing PSLF? You should look into refinancing your loans to a lower interest rate”.
Here are my questions:
I am in the SAVE plan and I’ve made around 70 qualifying payments out of 120 for PSLF. Should I switch to a different plan now or wait until summer of 2026 (even though some interest will accrue)? I’ve been making an attending income for a couple of years, but because of COVID and the SAVE lawsuits I’ve never yet had to make a student loan payment as an attending. Earlier this year MOHELA told me that I won’t need to recertify my income until August 2026. Every time I check Mohela it says $0 is due (for example I checked it today and it said for July 2025 the amount due is $0.00). I’ve been using the money saved to overpay on my mortgage (which is the same interest rate as my student loans). I also have some money saved up to attempt PSLF buyback later. If I switch now, that means I start making those large monthly payments an entire year sooner. What are the advantages of switching now? What are the advantages of waiting? Which would you choose if you were in my shoes?
H,
If I were you I’d go back into repayment now. I’d apply out of SAVE into IBR or PAYE. It’s highly likely that since millions of people haven’t certified income since COVID when you are kicked out of SAVE for another IDR plan you’ll need to present current income anyways.
The advantages of switching now
-Starting up your clock again for PSLF
-Not postponing forgiveness
-Don’t have to rely on PSLF buyback
The advantages of waiting
-Potentially having lower payments over your 10 years
-More money in savings, other financial obligations
-Maybe they treat these months like COVID and give credit towards forgiveness with forbearances
The disadvantages of switching now
-Higher payments right away
-Likely pay a little more over your 10 years
-Less money you can allocate elsewhere
The disadvantages of not switching now
-Holding out hope for PSLF buyback that is delayed 18-24 months
-Postponing PSLF
You can certainly take a wait and see approach, but I’d prefer to get my forgiveness out of the way sooner rather than later.
Andrew SLA
I have 115 out of 120 since August 2024.
My monthly payments were calculated based on income from 2019, so the monthly payments were (prior to getting put into forbearance) about $650.
So with the months of forbearance since August 2024, with loan buy back, I would meet my 120 payments.
I had applied for the loan buy back in March 2025.
I have been holding out for the loan buy back because:
1. Based on my understanding, the loan buy back amount would be based on the monthly payments I was make at the time the loans went into forbearance, ie $650ish/month or about $3250.
vs
2. Applying for PAYE, likely having loan payments go up to probably $2500/month, which would increase the amount paid to about $12500, or $9250 more.
Is my understanding of point #1 correct? Will the loan buy back will be calculated based on my monthly payment of $650? Or will the Feds require me to re-certify my current income prior to calculating the loan buy back?
I am basically betting on my loan buy back being processed prior to the courts killing SAVE completely and forcing everyone to move off SAVE to something else.
I am also mildly hoping that the Feds will just automatically move me to IBR or RAP or whatever, if it takes that long for loan buy back to process, without me having to re-certify; which is what happened when Biden’s administration automatically moved me from my previous payment plan (cannot remember what it was) to SAVE. This may have a solid shmaybe chance when the course kills SAVE the courts will simply force the Feds to auto move people to RAP.
I can imagine Trump’s administration moving people standard just to make people pay more, but the courts may be nice enough to move people to RAP automatically.
Sorry. That was a tangent.
In summary, I am banking that loan buy back will be based on my previous loan payment amount of ~$650/m instead being forced to re-certify prior to loan buy back calculation, lead to increase to ~$2500/m.
Hopefully, someone can let me know if I have the correct understanding of the situation.
Thank you!
Oh So Close,
1.) Your buyback amount should be whatever you would have been paying during the buyback period. In practice, I’ve seen this miscalculated and wouldn’t be suprised if it was a monthly rate of 2,500 that you would be paying if you’ve certified. Seems the gov’t is getting their money either way with buyback or just going back into repayment until your 120.
2.) I don’t think there is anyway they are not going to require borrowers to recertify with current income when exiting SAVE (by choice or being compelled). They understand there are borrowers who have income certification prior to the COVID years.
3.) If you’re okay waiting, then you can take a wait and see approach. If I were you, I would be back in repayment to not further prolong my forgiveness. Even if it means I’ll pay a little bit more.
I just saw a latest statistic in June for buyback. As of June 30, 2025 there are 65,448 buyback requests pending. During June 2025, the Dept of Ed processed 2,224 applications. That’s currently a 29 month backlog. Maybe you’re at the front or middle of the line, but this could still be quite a long waiting game.
Andrew SLA
1. Acknowledge.
2. Yeah. You are likely correct.
3. I think it is a waiting game no matter what because I do see PSLF approval happening quickly either. And with the education department being nuked, it’s probably only going to get worse.
The difference is do I pay more while waiting or pay less while waiting.
I have enough to meet 120 through loan buyback as per the requirement to even apply for loan buy back.
So, I can wait out the loan buyback process and pay nothing extra.
Or I certify to the new income bracket, pay an extra $10k to $12k total to Uncle Sam, then request a new count with the 5 months of payment to get PSLF approve. Then I would have to wait probably 2 years as well for that to eventually get approved. The only difference is I paid Uncle Sam more than I need to.
I suppose the biggest risk is if Trump’s administration just sinks loan buyback all together, then I would just be waiting for nothing.
Oh So Close,
PSLF approvals are moving faster than ever, thanks to the streamlined electronic verification on the FSA website and enhanced automation. Once you’ve made 120 qualifying payments, approval typically takes just 2-4 months, not two years, to receive official notice and see your loan balance cleared. For many, this quicker path is preferable to waiting on the two-year buyback process, even if they pay a little more than they would with buyback.
Andrew SLA