By Dr. Jim Dahle, WCI Founder
The Public Service Loan Forgiveness (PSLF) program is one of the best possible ways to manage federal loans. If you are eligible for this government program by virtue of your employment situation, you should almost surely take advantage. PSLF offers tax-free forgiveness of any remaining direct federal loans after 10 years of payments have been made.
Public Service Loan Forgiveness Requirements
Obtaining PSLF is not particularly complicated, but news stories continually show many people applying for it that do not meet the requirements. If your student loan management plan is obtaining PSLF, you should have these requirements down cold:
- Only direct federal loans are eligible
- Must be employed full-time (30+ hours/week) by a non-profit 501(c)(3) or governmental employer
- Must make 120 on-time (i.e. < 15 days late) monthly payments
- Payments must be made in an eligible program—usually an Income-Driven Repayment (IDR) program such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), or Income Contingent Repayment (ICR)
- Must fill out the annual employer certification forms and application correctly
Each of these bullet points represents a reason why people who thought they should get PSLF did not qualify to receive it. Your loans must qualify, your repayment program must qualify, and your employer must qualify. Payments do not have to be consecutive but they must be on-time.
After 120 eligible payments, you can qualify for 100% loan forgiveness. With the PSLF Program, it's frequently possible, especially if you have dependents, large debts, a long training period, and/or a low-paying job, to have the program pay more money than you borrowed!
Examples of Jobs Qualifying for PSLF
A significant percentage of physician jobs are qualifying employers for PSLF, including almost all resident, fellowship, and academic positions.
- Employee of a non-profit, tax-exempt 501(c)(3) organization (almost all university hospitals and many community hospitals)
- Military or Public Health Corps positions
- VA Employees
- Employee of a non-profit public health organization
This means you can't go into private practice, be self-employed, or work for a for-profit hospital or group. But there are still a lot of good physician jobs out there that would qualify. If I had a massive student loan burden and was considering IDR forgiveness, I would first try to go get a PSLF-qualifying job!
What Types of Loans Qualify for PSLF?
The program allows any remaining Direct Federal Loans to be forgiven once 120 qualifying on-time monthly payments have been made while directly employed by a qualifying employer. Direct Federal Loans include Stafford Loans, PLUS Loans, and Direct Consolidation Loans.
FFEL, Parent Plus, and Perkins Loans used to not qualify until they had been consolidated into a Direct Consolidation Loan. But in October 2021, the Department of Education began allowing those who had made payments via the FFEL and Perkins Loans (but not Parent Plus) to count those toward your 120 PSLF payments if (AND ONLY IF) you consolidate by Halloween 2022. This means FFEL borrowers will be eligible for PSLF earlier—sometimes years earlier—than they otherwise would be. Especially if they never got the memo that they needed to consolidate into a direct loan (unfortunately, if you have already received PSLF, there is no credit for FFEL loans that are already gone).
Private student loans do not qualify, including federal student loans once they have been refinanced with a private lender. Thus, it is critically important that you do not refinance your federal student loans until you know for sure you're not going for PSLF.
How Do I Apply for Public Service Loan Forgiveness?
- Fill out the PSLF employer certification form (aka the PSLF Form) each year
- Verify eligibility and qualifying payments each year with FedLoan Servicing (highly recommended, but not technically required)
Public Service Forgiveness Form
The PSLF Form should be filled out every time you change employers and at least once annually. Keep a copy. Technically, this form can be filled out retrospectively, but when so much money is on the line, it pays to be on top of all the details. Certify early and often!
The form is very easy to fill out. You fill out the first page:
And your employer fills out the second page:
Possession of years of forms certifying your participation in the program may also come in handy in the event the program changes and you wish to be grandfathered into the old terms or simply if those administering the program do not keep track of your forms as best they should. In fact, I would keep careful records of every qualifying payment I ever made, just in case.
How Do I Apply for PSLF?
It used to be that once you had made your 120 qualifying payments and filed your employer certification forms for all of the (10+) years you made payments, it was time to fill out another form, a PSLF Application. That form no longer exists. You simply need to submit enough annual certification forms (now simply called The PSLF Form) for years you made 120 qualifying payments and they're supposed to then inform you that you received it. I would follow-up with a phone call after sending in my final form, of course, just to make sure they got it and agree I qualify for it.
What Is Temporary Expanded PSLF?
Now you can even use the PSLF Form to apply for Temporary Expanded PSLF (TEPSLF). This is a potential workaround for people who were not actually in an approved payment plan such as the IDR programs. If the only reason your payments don't count is due to the payment program you were in, you really need to look into TEPSLF. You still have to meet all the other requirements (employed full-time by a non-profit, 120 on-time payments, etc.). The payments you do make, at least for the 12 months prior to getting TEPSLF, do have to be at least as large as what they would be under an IDR program.
Are People Really Getting PSLF?
Absolutely! People were a bit disheartened to not see gobs of people receiving it in 2017, 10 years after the program was put in place. But in reality, few really knew about PSLF until 2010-2011. When I have polled doctors going for PSLF in the past, there were very few expecting to receive forgiveness in 2018-2020, but increasing numbers in 2021 and large numbers beginning in 2022 and 2023. There is a Facebook Group dedicated to docs going for PSLF with 8450+ doctors in it and this was a poll done there at the beginning of 2020:
As you can see, there are very few people who have been forgiven so far in that group, but that's simply because they are nowhere near the 120 required payments. However, look at those lines of people who have 50-80 payments! By 2025 or so, every doc is going to know someone who has received PSLF. By 2030, it may be the majority of mid-career academic docs!
Also, when the government reports things like “only 1% of those who applied received it”, they often fail to mention that the vast majority of those who applied didn't qualify for it and didn't even fill out the PSLF Forms correctly. It would be a real shame to see people bail out of going for PSLF after reading that statistic when it is so misleading. We have had numerous docs on The White Coat Investor Podcast and Milestones to Millionaire Podcast who have received PSLF. Here are a few examples:
- A Public Service Loan Forgiveness Success Story
- Pediatric Intensivist Gets PSLF with No Hassle
- Family Physician Receives PSLF
Here are a few examples off of Facebook:
So yes, emphatically yes, this program is real and real docs receive PSLF all the time. There is no reason you should think you could not receive it if you qualify.
How to Make Sure You Get Your Student Loans Forgiven Through PSLF
Let's review the requirements and my recommendations one more time:
- Enroll in a qualifying payment program
- Work full-time for a qualifying employer
- Make 120 ON-TIME monthly payments
- Keep careful records
- Certify early and often
Avoid errors and find helpful tips for receiving forgiveness by reading Don't Give Up on PSLF.
A typical physician with a typical medical school debt burden wouldn’t have any debt left to forgive after making 120 monthly payments under the standard 10-year repayment plan. The secret to actually receiving economic benefit under this program lies in enrolling in one of the other programs.
The Income-Driven Repayment (IDR) programs such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE) will all help you do this. PAYE and REPAYE have the lowest required payments—10 percent of discretionary income, which is defined as the difference between your income and 150 percent of the poverty line for your geographic area and family size. (Note that the payments have nothing to do with the amount or interest rate of your debt.)
During residency, REPAYE is often the best program to enroll in because it may actually waive up to 50% of the interest on your loan, lowering your effective interest rate.
PAYE is often a better program after residency because doctors usually no longer qualify for a REPAYE subsidy and unlike REPAYE, PAYE caps payments at the 10-year standard repayment plan amount. The amount left to be forgiven after 10 years of payments is often just the difference between what you would’ve paid under the standard repayment plan and what you did pay under an IDR plan, plus the effects of compound interest for a few years.
So, a typical medical student may graduate with $250,000 in debt, which grows to $300,000 during residency (IDR payments don’t even cover the interest on the debt). The borrower then pays it down to perhaps $150,000 as an attending, at which point the rest is forgiven. The more payments you make that are less than the standard payments (i.e. payments you make in residency and fellowship), the more debt that is left to be forgiven after 120 total payments.
Strategies for Maximizing the Amount Forgiven Through PSLF Program
Doctors use a few strategies to try to maximize the PSLF amount forgiven.
- Enroll in an IDR program and start making payments late in your fourth year of medical school—essentially increasing the percentage of payments you make while your income, and thus your payments, remain low.
- Complete a direct federal consolidation right after medical school graduation and opt-out of the 6 month grace period. This will allow you to start making IDR payments 3-4 months earlier. This means 3-4 more IDR payments as a resident vs a high-paid attending.
- Contribute to tax-deferred retirement accounts during residency, which further lowers your income and your required payments.
- If married to a high earner, it may be advantageous to file your taxes as “married filing separately” while enrolled in an IDR program. Even though this often increases your combined tax burden, it can significantly reduce your student loan payment in IBR and PAYE.
- Choose a longer training period, which can help maximize forgiveness. A physician who spends seven years in residency and fellowship may need to make full payments for only three years as an attending before receiving forgiveness.
Private student loans are never eligible for PSLF, and the best strategy for managing those usually involves refinancing to a lower rate as soon as possible (usually shortly after medical school graduation or as soon as you can receive an interest rate lower than the effective interest rate after REPAYE subsidy is applied) and paying them off early in your career. Several lenders allow very low payments during training, just like the federal IDR programs.
Caution!
Refinancing your federal direct loans can be a big mistake if you later end up working for a 501(c)(3) after residency graduation.
Another common error is putting your loans into forbearance or deferment during training, which prevents the accumulation of lower IDR payments that would later allow for significant forgiveness under PSLF. If you make IDR payments throughout residency and work full-time for a 501(c)(3) after residency, going for PSLF instead of refinancing the loans generally works out better mathematically than refinancing, even if the interest rate is higher. It is very difficult for me to think of a situation where forbearance or deferment is the right move for anyone, but it is especially terrible for someone who ends up qualifying for PSLF. It is a very expensive mistake and I am sick of informing doctors that they have made it. So please don't make it!
Is the PSLF Program Going Away?
Many students, residents, and attendings worry Congress will change the rules and take PSLF away. That is a significant risk—both the Obama Budget of 2013 and the Trump Budget of 2018 proposed doing away with the program as we know it. The Prosper Act (never passed) would have also caused significant changes to the federal loan programs if it had become law. However, in the past when federal student loan programs were changed, those currently in the program were usually grandfathered into the old program. Just having a student loan probably puts you into the program, but certainly having filled out at least one PSLF Form would put you in.
Some worry about the morality of not paying back borrowed money when you have the means to do so. My response? Hate the game, not the player. I see loan forgiveness no differently than using a tax-advantaged retirement savings account or taking the child tax credit. We have no duty to leave money on the table that we legally qualify for, even if we disagree with federal student loan policy.
Since PSLF was instituted in 2007, the first borrowers are now starting to receive forgiveness after making their 120 monthly payments. As the years go by, you’ll see more and more physicians receiving this federal benefit. Managing your student loans well will increase your financial security and allow you to take better care of your family and patients.
Save Up a PSLF Side Fund
A good way to hedge legislative risk (or even career risk—such as you want to leave your 501(c)(3) job or work part-time for some reason) is to make large student loan payments as an attending that would allow you to pay off your loans within two to five years after residency completion, but make those payments to your own investing account. Then, if something happens to PSLF, you can simply take those funds and pay off the loans. If you do receive forgiveness, you can use that money to bolster your retirement nest egg or other savings goals. The idea behind a PSLF Side Fund is that if for some crazy reason Congress changes the law AND doesn't grandfather you in, the bureaucrats can't find record of all those payments you made, you take a non-qualifying job, or you cut back to part-time, you now have a pot of money you can instantly use to pay off your student loans. If PSLF does materialize, then you can use that money for a house down payment or add it to your retirement stash.
Do I Still Have to Live Like a Resident Even If I'm Going for PSLF?
Short answer: Yes. Long answer: Getting rid of your student loans quickly is only one of the purposes of the 2-5 year Live Like a Resident period. The other purposes include:
- Saving up a real emergency fund
- Paying off credit card and auto debts
- Saving up a down payment for your dream home
- Catching up to your college roommates with regard to retirement savings
- Learning the true limitations of the after-tax income of a physician
- Putting yourself on track to have financial freedom by mid-career that you can use to maximize career enjoyment and longevity
- Saving up a PSLF Side Fund, just in case something happens to PSLF or your career
So yes, you should still live at least somewhat like a resident for a little while after you finish your training, even if you're going for PSLF.
PSLF vs. Refinance
Many wonder if they should go for PSLF or refinance their student loans. It's really a pretty simple proposition.
- Private loan → Refinance
- If you work for a qualifying employer or think you might → Don't Refinance
- Debt to income ratio of 1.5+ and not working for a qualifying employer → Consider IDR Forgiveness and Get Advice. Or better yet, go get a job at a qualifying employer!
- Debt to income ratio of < 1.5 and not working for a qualifying employer → Refinance
It's really no more complicated than that.
To learn more about if refinancing or PSLF is right for you check out Refinance Student Loans and Pay Off or Go for PSLF?
If you do choose to refinance, please do so through our links. It helps support the site and gets you a much better deal than you would get going directly to the lenders.
Compare Refinancing Rates and Get Cash Back!
Hypothetical PSLF Situations
Many medical students with a high loan burden will use these programs (especially REPAYE/PAYE) to reduce payments during residency. You may be able to reduce your payments by hundreds or even thousands a month. But even these reduced payments count toward the 20-year mark for PAYE forgiveness, the 25-year mark for REPAYE forgiveness, and the 10-year mark for PSLF forgiveness.
If you will be training for a long time, such as a surgery residency with or without fellowship, or just about any specialty with an additional fellowship, you ought to give serious consideration toward trying to reduce your payments as much as possible using REPAYE or PAYE and then working for a PSLF-qualifying employer. Three to five years of slightly reduced pay is well worth having a couple hundred thousand dollars worth of loans forgiven. Many nonprofit positions pay just as well as private practice in many specialties.
If you will be in a relatively low-paying specialty, such as primary care or a pediatric subspecialty, and have a high loan burden, there's a good chance you'll be able to get significant loans forgiven and you would do well to work for a PSLF-qualifying employer if you can possibly get a job there. It may be worth the equivalent of an extra one, two, or even five years of after-tax salary!
When choosing residencies, fellowships, and your first job, an important consideration is whether your employer qualifies under the PSLF program. This may be the most important benefit on the table and is likely worth taking a lower salary.
Should You Take Out Extra Loans in Expectation of PSLF?
The moral hazard (an economic term, not a judgmental one) behind any forgiveness program is that its presence will cause people to do things they otherwise would not. Many people are now asking if they should take out the maximum debt possible during school since it is going to be forgiven anyway. I can see why they would be tempted to do so, but I think it is a mistake for a number of reasons:
#1 Bad Things Happen
Think of all the bad things that could happen over the next decade plus that would keep you from receiving PSLF. I'm not just talking about death and permanent disability (in which case federal loans are canceled, although that cancellation would be taxable). What if you don't match? What if you lose your job due to malpractice issues, fraud issues, discrimination issues, or due to an accusation of harassment?
#2 Life Changes
What if you get married and your spouse needs to live in a town where there is no PSLF qualifying job available to you? What if you want to go part-time to raise kids? What if you just hate being an academic?
#3 You Gave Your Word
When you signed your student loan promissory note, you stated that you would use the money only for school. So why are you borrowing more than you need for school? Honesty seems like an important attribute for a future physician. It is not only illegal but unethical to fraudulently stick the taxpayer with additional costs; that money could have been used to help someone else. Ethics also seem like an important attribute for a future physician. Here's the relevant section of the Master Promissory Note for federal loans:
#4 Legislative Risk
Remember the principle of easy come, easy go. The government can change this program at any time. What a shame it would be if you intentionally paid as little as possible in hopes of getting the loans forgiven, then the government changed the program or you lost your job or became disabled. While I think this is a very unlikely scenario, unlikely things do happen from time to time.
Best PSLF Scenario
Imagine a medical student who attended not only an expensive medical school but also an expensive undergraduate institution. Let's imagine this doc racked up a cool half-million in loans and is married to a stay-at-home spouse and has 4 kids. Our doc has decided to become a pediatric nephrologist. Without the IDR programs, this doctor would make payments of perhaps $3,800 a month. Instead, they pay $0 a month.
Meanwhile, their debt burden is increasing at over $40K a year. So after residency, the student loan totals $625K. Enter fellowship. As a fellow, the salary is now $70K a year and so the doctor is now making payments of $310 a month, or a total of about $11K a year. Meanwhile, the debt load continues to increase. The doc now owes something like $750K. After fellowship, our doc obtains a job at a PSLF-qualifying employer which pays $180K a year.
The payments are now $1,055 a month (still reduced thanks to REPAYE). After four years of making those payments, paying a total of about $50K, the doc still owes about $685K, all of which will now be forgiven, tax-free.
Pretty sweet windfall. Fair? Probably not, but when have benefits from the government ever been fair? No wonder the rates on student loans have gotten so high when there are benefits like this attached to them.
Should YOU Go for Public Service Loan Forgiveness?
- If you work for a 501(c)(3) as an attending and have any sort of significant federal loan burden, you should go for PSLF.
- If you are not sure if you will work for a 501(c)(3) yet, don't do anything that would jeopardize your ability to get PSLF (like refinancing your federal loans).
If you still aren't sure whether you should refinance or go for PSLF, we recommend you hire Andrew Paulson at StudentLoanAdvice.com to help you run the numbers and make a decision.
If you are sure you should refinance, please do so through the links in the chart below. It helps support the site and gives you a better deal than you would otherwise get.
† Bonus includes cash rebates and value of free course. Borrowers who refinance more than $60,000 in student loans using the WCI links will be enrolled in The White Coat Investor’s flagship course, Fire Your Financial Advisor for free ($799 value). Borrowers will still receive the amazing cash rebates that WCI has negotiated with each lender. Offer valid for loan applications submitted from May 1, 2021 through March 15, 2024. Free course must be claimed within 90 days of loan disbursement. To claim free course enrollment, visit https://www.whitecoatinvestor.com/RefiBonus.
What do you think? Are you going for PSLF? Why or why not? Have you obtained it already? Tell us how it went! If you have not yet obtained it, how many payments do you have left until you get it? Comment below!
Do you think they will add an exception to the PSLF program to exclude doctors? I’m a premed having second thoughts about med school; with the increase in interest rates on stafford loans and the reimbursement rate cuts, the current debt levels don’t seem manageable.
The one saving grace in my mind is the thought that some of the debt will be forgiven. It would be horrible to be in the middle of it and find that they have changed the law and excluded docs…
Do you think this is likely to happen?
Here is one of the articles I found: https://www.whitecoatinvestor.com/public-service-loan-forgiveness/#comment-13615
Sorry for the clipboard typo, here it is: http://www.fastweb.com/nfs/fastweb/static/PDFs/Med_school_loan_forgiveness_loophole.pdf
I don’t know if it is likely, but I would treat it as possible! I wouldn’t plan on having any of your loans forgiven, and if you do have some portion of your loans forgiven I would count it as a bonus.
Med school is certainly more of a financial gamble than even a decade ago, but medicine is still a great career with many non-financial rewards. I’d just be very careful about how much debt I took out to do it, especially if interested in primary care.
Thanks for the link. I’ll try to give it more publicity than a link buried in the comment section is likely to get.
An additional comment, this is not a guarantee. I am in residency, I have been paying down my loan and I know I am in the program. However, I was told by the DL counselor over the phone that at the end of 10 years of paying the IBR, I will at that point be required to apply for loan forgiveness. When I asked if this is something that could be turned down, I was given an vague answer. Quite frankly, I believe that student loans is going to be the next financial bust in the country and there is no way the federal government will be able to forgive these loans. There will be too much debt and several other categories of students who will be defaulting on their debt, thus necessitating those of us with steady jobs to continue to contribute in order to avoid collapse of the system. This is, of course, just an opinion, but I wouldnt bet on it. I think it is better to assume you will repay the entirety of your debt and develop your financial plan based on this idea.
My partner and I both applied for the PSLF…and were denied. We meet all criteria for work, submitted all the correct paperwork, but ended up denied because we had both, prior to entering residency and at the advice of our med-school financial-aid offices, consolidated our loans.
I contacted the PSLF office and they agreed that my loans WERE the correct type of loans to meet criteria, but that when they were consolidated, they were “renamed” and somehow that renaming now makes them ineligible. WHAT?!?!!!! Apparently, the only way around this is to RE-consolidate, at today’s higher rates, and then resubmit. Add in the fact that it’s very difficult for any of us to stay at a single institution that long anymore, I am completely unconvinced that this program is anything but a sham with huge loopholes to keep us from ever getting relief despite our good faith and effort.
$250K in student loan debt prior to residency….$405K at residency graduation. No option to bankrupt. How is this not considered slavery / indentured servitude? Age at final student loan payment? 72……………………..
I just wanted to note that for those who are doing PSLF after 2007- all the loans must be “Direct Federal Loans” in order to qualify for the program. So as in the instance above, which is an absolutely unfair/horrible situation!, if you re-consolidate, then the clock starts all over with your 120 required payments with the new terms of the consolidated loans in order to qualify (so another 10 years at a non-profit place). I wish there was some relief from suffering and drowning in such an enormous amount of debt- especially when it has been a tough and trying road in medicine to begin with…we’ve all earned some relief!
So I was hoping for some advice on my situation- if anyone could help, I would be so GRATEFUL to you!
Half my loans are FFEL and half are Direct with over 380K (that’s just the loans itself, not including capitalized interest) in medical school loan debt (ONLY MEDICAL SCHOOL!!!- I didn’t have any other debt before this)– my options are: 1) Do IBR and then try to tackle/pay off the high interest loans first while moonlighting or as a new attending in 4 years after residency (which are mostly the FFEL loans)…and not even consider the IBR forgiveness of 25 years (by that time I will have either paid off my loans or accumulated lots of interest that will be taxed when it’s forgiven). OR 2)consolidate all of my FFEL loans and then try to do PSLF, without a guarantee that the program will still be around in 10 years, also not sure if i’ll be working in a non-profit hospital…..and if i’m not, then the consolidated loans end up accumulating MUCH MORE interest than if I didn’t consolidate. 3) any other ideas that I have not yet explored…I just don’t see a way out of this massive debt!
Awesome website, I wish I had found this 5 years ago…
I am in my first year as new attending, working for a non-profit organization and receiving loan repayment from National Health Service Corps. In spite of the generous award, it would take me 8-9 years of service to have all my debt taken care of (assuming that the current schedule of repayment stays the same). Can I qualify for PSFL after just 7 years of work (and my 3 of residency) if I am also receiving loan repayment from NHSC, or would this be a form of “double dipping”?
That’s a great question. I’m not positive, but I’ve done a fair bit of reading on this and I haven’t seen anything about not being able to get PSLF if you are with the NHSC. Someone else had the same question it appears:
http://askheatherjarvis.com/forums/viewthread/2694/#942
My understanding is that you CAN double dip as I don’t see anything prohibiting it. But I don’t know how much you’ll have left in loans by the time you’ve made payments for 10 years and NHSC has been making payments for a few years. The loans might be paid off by then. Remember that each payment from NHSC only counts as one payments (not 12).
In med school now on a military “scholarship” but I still have to take out loans to support my family. Going to keep them as low as possible but in the end I will still have a good amount of debt from undergrad and school combined. So ya, hoping that this program stays around. Interest kills.
http://www.edcentral.org/obama-administration-announces-major-reforms-income-based-repayment/
Apparently PSLF was too good to be true.
I just heard about this today too. It’s just a budget request at this point (essentially a proposal) but it limits your forgiveness to $57K, which, if actually implemented, COMPLETELY changes the PSLF decision (and ruins an upcoming post I had, as well as my book, some old posts, and what I’ve told people in the past at speaking engagements.) Of course, to be fair, I always said this was a serious risk with PSLF. Looks like people are just going to have to live like a resident until those loans are gone.
I have completed the IBR loan repayment for the past 2 years while in residency. Both times I have been told that I did not meet the minimum income for need of repayment. I was then told that even though my monthly payment was $0.00 that these months would count toward repayment.
Is this really true?
Yes.
So because of your article in ACEP now, and this blog (which I have found highly valuable on investment issues) I looked into this extensively. In residency, you can enter a repayment plan, such as IBR, ICR-A, or Pay as you earn to start paying back your loans at a salary adjusted rate. these payment plans are the ones that end up being eligible for public service loan forgiveness, so it makes sense to enter one of these plans in residency, if you want your loans forgiven after 10 years of public work (i.e. if you are planning on doing a fellowship, working in academics etc).
It makes little sense to enter these payment plans after you graduate because unless you are a single pediatrician you will likely repay your loans before they would be forgiven with normal emergency physician (even academic) salaries on the eligible payment plans (I tried). If anyone making > $200,000 has successfully enrolled in IBR, ICR, or pay as you earn, please let me know how, but based on my attempts, this is likely not an option for most of us.
If you are considering Public Service Loan Forgiveness, here are some resources:
http://www.myfedloan.org/manage-account/loan-forgiveness-discharge-programs/loan-forgiveness.shtml
use these people to consolidate your federal loans and track your PSLF status
This lady is an expert on PSLF, her blog is invaluable, I saw you already mentioned her above:
http://askheatherjarvis.com/
Steps for PSLF per heather:
1. verify your employer qualifies for PSLF
https://studentaid.ed.gov/sites/default/files/public-service-employment-certification-form.pdf
2. Right loan: federal direct loans only
3. Right payment plan: Income Based Repayment (IBR), Income-Contingent Repayment (ICR-A), Pay as you earn
4. Make 120 qualifying payments, that’s ten years of once a month
5. Keep your records, income documentation, family size verification, and employment certification, and the application for forgiveness
Good summary. I agree, there is no point in entering IBR/PSLF as an attending. You need to do it upon medical school graduation.
Would appreciate an update to the repayment topics with respect to:
1. Status of the PSLF limit (the $57.5k thing) – I believe this did not make it through Congress.
2. PAYE as an alternative to IBR/PSLF; those who borrowed before 2007 are now eligible.
3. FORGIVEAGEDDON!!! We are on the hook for taxes on forgiven loan amounts, most likely up at the 50% level. I don’t know if the forgiven amounts are ordinary income, cap gains or what. This becomes another budget item: savings for taxes on loan forgiveness.
1. You’re right, it’s not law.
2. PAYE is better than IBR. Like IBR, PAYE is used with PSLF.
3. PAYE forgiveness is taxable, PSLF is not.
On the Employment Certification for PSLF (https://studentaid.ed.gov/sites/default/files/public-service-employment-certification-form.pdf)
It says under definitions-> qualifying employment
” A public service organization is:
…
• A private organization (that is not a labor union or a partisan political organization) that provides at least one of the following public services:
…
• public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner
occupations and health support occupations, as such terms are defined by the Bureau of Labor Statistics), ”
“health care practitioner” as defined by the Bureau of Labor Statistics includes physicians
http://www.bls.gov/oes/current/oes290000.htm
According to the form, physicians employed by a private group would still qualify for PSLF (as long as it was non union and non partisan which shouldn’t be an issue), unless I’m missing something?
Sure, for physicians employed in public health. Your own private practice doesn’t qualify as a public health organization.
I’m currently enrolled in PSLF program through FedLoan Servicing. I just wanted to tell you guys 3 crucial mistakes I made resulting in thousands of dollars lost.
1. Consolidate your subsidized and unsubsidized government loans prior to starting residency and enroll into PSLF asap. (I found out about this program about 6 months into intern year, and it took another 2 months for the consolidation and enrollment process for the PSLF to finalize, which resulted in almost 8-9 months of payment period loss through IBR.)
2. Although subsidized and subsidized student loans by the government gives you a 6 month grace period when starting residency, start paying towards the 120 payments right away while your salary is low.
3. If your wife/partner is pregnant, the fetus counts as a dependent. I only thought to increase my family size to 3 after the baby was born, but I could have done this 9 months prior!
The fetus counts? WTH? Interesting.
I’ve also been told by some docs that they weren’t permitted to make IBR/PAYE payments during the grace period.
This is cut and pasted directly from Income-Driven Repayment Plan Request Form (with expiration date 11/30/2015):
“Family size includes you, your spouse, and your children (including unborn children who will be born during the year for which you certify your family size), if the children will receive more than half their support from you.”
Do you have to accept the grace period? I didn’t think you were forced to, but I’m not 100% sure.
So fetuses don’t count UNLESS they’ll be born this year.
You cannot waive the grace period for the Federal Direct Subsidized/Unsubsidized Loan Program, but you can for the Federal Direct Graduate PLUS. This is addressed by consolidation.
Hi Sergio,
A direct federal consolidation would allow you to opt out of the grace period for all federal direct loans. Not just Grad PLUS ones. Example: Graduate in May, 6 month grace period immediately kicks in (payments to begin in November), June start residency, complete direct federal consolidation on all federal loans and opt to begin repayment immediately (usually takes 1-2 months for loan servicer to process), begin repayment in August (instead of November).
Why do you have to consolidate unsubsidized and subsidized loans? I thought the distinction was that PSLF covers directs loans and anything other than that should be consolidated?
In the context of med/dental school most direct loans are unsubsidized now. Subsidized max out at about $8500/yr last I checked, and the balance of direct loans are unsub. (Med school tuition+fees is $30k to $60k per year, not counting living costs.)
If the borrower has federal loans that aren’t direct loans, such as Perkins or FFEL, they have to be consolidated into a federal direct consolidation.
Any mixing/consolidation of private/federal loans nixes eligibility for the federal repayment programs and PSLF.
But if the subsidized and unsubsidized loans are direct loans, why would you have to consolidate them?
you don’t have to consolidate sub/unsub together.
i got confused at “anything other than that” and assumed you were talking about mixing private/fed. my bad.
Need some advice.
$350,000 in loans (7.1% interest rate–I had to take direct loans as I was out-of-state in med school)
$175,000 loans- wife (physician) (~5-6% avg interest rate)
I’m an EM grad doing a fellowship in CCM followed by a fellowship in palliative care. My wife is a peds chief and doing a fellowship in allergy immunology over the next 2 years. We will both have 6 years of IBR at the end of our fellowships. Assuming we both make ~ 300,000ish/year (+/- depending on the type of practice we decide to have)
Will we still be eligible for IBR and loan forgiveness? Or where can we find out if we will be eligible?
I would be looking only at 501(c)3 jobs after your fellowships if I were you and make sure you’re making IBR/PAYE payments now.
I recently had my accountant look into if we should file MFJ vs. MFS this year with IBR in mind for next year when I start as an attending. He told me that I won’t be able to qualify for IBR because my salary will be too high to qualify…but I had others tell me differently. Is this true? (I’ll be making about $230k but have $230k in educational debt as well….so really I would think there is still a ‘financial hardship’ there…Does anyone know anything about this?
The MFJ vs MFS is an issue in residency, not afterward. You’re almost surely going to be making full payments as an attending given your salary of $230K and your debt of $230K. The point of MFS as a resident is to make even smaller IBR/PAYE payments to allow for more forgiveness later. Is your new job even a 501(c)3?
Hello Everyone,
I have been researching on the best way to repay my loans and came across your article which was very insightful.
I’m a fourth year medical student who just matched into a pediatric program in California. My program is a non-profit 501(c) organization and most likely is a qualified PSLF employer. I don’t have much experiences or knowledge about the whole loan repayment thing so any advice is appreciated:
I plan on doing the IBR/PAYE and apply for the PSLF program.
I am single and have 204k in student debt. I don’t have any other debts and live a pretty low-maintenance but comfortable life. The plan is to apply for PSLF as soon as I finished medical school (during my grace period). If qualified, IBR/PAYE payments made in residency (3 yrs) and fellowship (another 3 years) would count towards the 120 payments. For the remaining 4 years after fellowship, I plan to work for a 501(c) organization with the hope that after the 120 payments (10 years..) all my loans will be forgiven.
Do you guys think this is a good approach or is this too risky?
Thank you in advance for your inputs!
It’s a great approach. The risks are that you don’t want to work for a 501(c)3 and that the government changes the program. The way to minimize those is to save up enough to pay off your loans on the side, then if forgiveness doesn’t materialize, you take that side fund and pay off the debt. If it doesn’t materialize, you’ve got a great start on a nest egg.
Hi,
I am an emergency medicine physician. I work at a non-profit hospital but our emergency medicine group is CEP. I am not technically an employee of the non-profit hospital, but I am a member of the medical staff. Does this count toward PSLF?
Thanks!
Nope, sorry.
So just to be certain, unless you’re working at a VA or in academics, any physician in a state that prohibits the corporate practice of medicine (CA, TX etc…) will likely employed by a group and not a 501c3 hospital, and therefore out of luck with regard to PSLF? I was afraid to lose out on 3 years worth of PSLF eligible repayments by consolidating, in exchange for a lower monthly payment. Since I plan to stay in CA, I guess it was pointless anyway. After meeting with “professional” financial counselors and online loan counseling during school, it took a google search and your blog to figure this out. thank you.
It’s possible to find a 501(c)3 hospital that directly employs docs and isn’t military/VA/academic. But there aren’t any in my city/specialty. Other specialties yes.
Hello WCI,
I am so glad to have your book and now this website. I just graduated med school with 300k of federal loan debt and am in my intern year. I am currently in the PAYE program since I am unsure of what to do with my student loans. In the future I could see myself wanting to enter the PSLF program, although I can’t commit to that or possibly trying to find a part time position or less so I can focus on my family goals. I recently made 40k in the sale of the house I was living in during medical school, and part of me wants to apply it to student loans. But with the lure of PAYE and/or PSLF, the thought of getting some of my loans forgiven is enticing– especially because I anticipate I won’t work to my full earning potential. Although, thoughts of PAYE or PSLF changing creates some anxiety. My husband and I make 110k/ year gross which can be used to further pay down student loans. Any thoughts for those considering working part time or retiring in the near future would be greatly appreciated.
You can hedge your bets by saving up the money in a side investment account. If PSLF doesn’t work out, you take the investment account and apply it to the balance. If it does, you have a nice kicker for your retirement nest egg.
However, you have to work “full-time” at a 501(c)3 to get PSLF. You’ve got at least 10 years of “full-time” work ahead of you if you want forgiveness. But I suspect you’ve got at least 5-7 even if you refinance and pay off very aggressively, no? It’s going to be very tough to pay off $300K of debt with only $100K of income.
Hi WCI,
Thank you very much for your website — it’s been a wonderful resource! I was hoping I could ask for your advice on the following:
My husband and I have $195K in medical school loans at around 5.15% and 6.5% currently, and we are on a 10-year payment plan. He is currently an intern at a 5-year residency program that qualifies as a 501(c). After residency, he’d likely made around $190K. I’ll be making around $90K starting in 2 years.
In order to benefit from PSLR, we’d likely have to consolidate our loans, switch to a 30-year payment plan at 6.8% interest, and pay the minimum possible each month over the course of 120 monthly payments (which I believe means paying almost nothing towards the principal in order for PSLR to be the most beneficial). Payments would start “counting” towards the 120 qualified payments during his second year of residency.
If the rest of the dept is forgiven through PSLR after 10 years, my calculations suggest that we’d pay around $132K total and have the rest forgiven.
This sounds great, but I was wondering how having such a large debt and paying off the minimum each month without making payments towards the principal would affect our ability to get better rates on future mortgages? Specifically, would banks use the following information: 1) we have a lot of debt already, and 2) we are paying off very little of it each month, to determine that we would only qualify for a mortgage with a very high interest rate? Do you think the rates we would get on a mortgage be different if we were paying down our med school debt as quickly as possible? Might there be any other such negative side effects of paying so little towards our debt because of PSLR?
Any thoughts would be greatly appreciated.
Sincerely,
Jessica
Most of the doctor mortgage lenders only look at your payment due under IBR/PAYE/RePAYE. Of course, after residency, you’l be making “full payments” so that will affect how large of a mortgage you can get. But unless you’re trying to buy more house than I recommend you buy, it shouldn’t be an issue. It’s possible that paying down the student loans rapidly could make it harder to get a mortgage if you don’t have any cash on hand at all, but again a minor, easily correctable issue with a $280K income.
How sure are you that BOTH of you will be working for a 501(c)3 for the whole ten years? Also, why do you have to consolidate loans in order to get PSLF, especially at a higher rate? Are the lower rate loans not Federal Direct loans or something?
Hi WCI,
Thank you so much for your reply! That is so helpful. (And fortunately neither of us wants a big house!)
I hadn’t thought about my own job…it probably won’t be at a 501(c)3 for all 10 years. Would that matter if the loans are all technically my husband’s from medical school? I don’t have any student loans myself.
We don’t have to consolidate the loans, but according to Grate Lakes Edu Corp (our current lender), under our current payment plan we’d pay about $2,200 per month after his residency, whereas if we consolidated we’d pay about $1,300 per month after residency. If that is true, then if we didn’t consolidate we’d end up paying about $171K over the course of 10 years prior to loan repayment, which seems like it would be less beneficial. Does that sounds correct to you?
Here is another possibility (and I’m wondering if you had any thoughts on this): our other option is to refinance our loans with a family member so that our interest rate is only 2% per year, with a min payment of $500.00 per month towards the capital. Would you have any thoughts about this option?
Would you do PSLR or refinance so that our debt is at 2% yearly interest? My hesitation with refinancing to 2% is that doing so means that we’d be paying the full $195K (whereas it seems like we’d pay less if we did PSLR.)
Thank you!
Jessica
I’ll be honest. You’ve got me confused as to your personal situation. I’m not really clear what your loans are, how much they are, which if them are eligible for IBR/PAYE/RePAYE/PSLF, or what these “consolidation” options are.
If all the loans are his, and all of them are federal, direct loans eligible for PSLF, then it only matters who his full-time employer is. It sounds to me like you might benefit from hiring a specialist in this stuff to get some personalized, official financial advice. I’d recommend Jan here: http://www.student-loan-consultant.com/
As far as a family member loan issue, obviously the rate is really good and that’s a great option if you plan to pay the loans back. But if you’re going for PSLF, you’ll almost surely be better off in RePAYE and PSLF (but run the numbers yourself.) Personally, I’d be pretty hesitant to get int hat much debt to any family member. Thanksgiving dinner doesn’t taste as good when you owe money to someone across the table. The lender will always be wondering why you’re spending money on something else when you owe him money. If you want to refinance and pay off the debt, I’d just go with a standard lender, which means DRB/Link Capital during residency. But you’ll probably be better off in RePAYE for 3 years, then refinancing.
Hello,
I am an emergency medicine physician first year out (graduated 7-8 months ago). Been working at a non-profit hospital in New York since then, which enables me to continue being enrolled in PSLF.
I am looking for jobs in Southern California. I already know two of the bigger physician groups, CEP and Kaiser, do not qualify for PSLF. As far as you know, do any hospital emergency departments in California (outside of VA/Government/Academics) qualify? Or are they all contracted out to physician groups that would no longer make them qualify.
Thought I’d try asking before cold-calling 20 or so hospitals.
Thanks
I don’t know of any. I’m sorry.
First time posting, loved the book and general advice here!
I have a specific question about my finances as tax time roles around:
I have $350,000 dollars in loans and $50,000 in uncapitalized interest at 7% that I consolidated after med school in an IRB plan with about 25 eligible payments made (FedLoan screwed up this number and I am currently contesting this with them). We have very little living expenses most of which are for entertainment and could be cut.
I am in my last year of residency, looking at at $245 salary next year, my current salary is about 50,000 after near max 403b contributions. My wife is a teacher at about 60,000 take home. She is also pregnant with our first child.
We do married filing separately to lower overall payments with the hopes to have more forgiven, which was best in initial projections, but I have little to no faith in PLSF panning out, and if I let the debt continue to grow it will be in the millions by the time dept of education says “sorry, we forgot to fund it.”
We have 50,000 in an emergency fund, I have a taxable vanguard around 35,000, and a few thousand here and there in other brick and mortar banks. I plan to have us do backdoor roths beginning next year, and consider a 529NY.
My general plan was to do one more year of IRB on my resident salary, pay off the interest before it consolidates in a lump, and pay things down as aggressively as I can convince my wife. But, I have been starting to think that filing jointly this year would allow the benefit of deductions of paying off student loan interest, and the sooner that I reduce the interest rate on the loans by refinancing with SoFI or a similar carrier, the better things will be, and that currently we would be able to handle the increase in monthly payments without a problem.
I would appreciate any advice or guidance on the plan, I am new and self taught the little I know.
First, this advice assumes you definitely are not going for PSLF. That may not be the right move for you, but it sounds like that’s the decision you’ve made, so I’ll assume that’s a done deal.
So you might as well refinance. There are four companies that will refinance you without an attending contract. Details here:
https://www.whitecoatinvestor.com/new-student-loan-refinancing-options-for-residents/
When you become an attending, you can do it again.
I wouldn’t worry so much about the uncapitalized interest, it’s a big of a boogey man as discussed here.
https://www.whitecoatinvestor.com/quit-worrying-about-capitalizing-interest/
It makes very little sense to me for a resident to have a $50K emergency fund while carrying 7% interest loans. I think I’d cut that emergency fund dramatically. Maybe down to just $10K and put the rest toward the loans. That would almost wipe out the uncapitalized interest.
I might even liquidate the taxable account and the other bank accounts and put them toward the loans too. I certainly wouldn’t start saving for my unborn kid’s education before paying off my own.
No sense in doing MFS if you’re not going to do PSLF. Might as well get the benefits of filing MFJ.
Your debt to income ratio is pretty high, around 1.5X. You’ll need to make a few sacrifices to get that paid off in less than 5 years after residency. But if you pay $75K in taxes, live on $60K, and put $30K toward retirement each year, you should be able to put $80K a year toward it. Combined with what you have now, you should be able to be debt-free within 4 years.
Good luck, you have some work ahead of you but there is definitely light at the end of the tunnel.
one of the links for Q&A is stale
sorry if this is addressed above – I read in fine print on one site – if you refi the clock resets
Is this true?
With falling rates I ditched Navient for SoFi – hope that didn’t blow my chnaces
Applying anyway to see what they say – residency ended in 2009 so I’m pretty close to 120 payments
If you Refi the clock goes away completely. You can’t get PSLF on refinanced loans such as those available from SoFi. Sorry. You’re 9 years out of residency and from your other posts making a killing in real estate. Just pay off the loans. Or drag them out and invest instead. Whatever you like. But you’re not going to get PSLF for them.
Thanks WCI
Yup – been doing quite well..
SoFi saved me quite a bit – I have 2.78% in a 5 year (97k left to pay off)
I recommend other look them up – they have career and financial coaches too – it was free and they are very helpful
Writing another offer now on a 2 family that will pay me 12+% cash on cash
As always – thanks for what you do
JustSayin