It’s no secret that most doctors graduate from medical school with mountains of student loan debt. $183,000 on average in fact, according to the AAMC. And while its easy to assume that you’ll make plenty of money to repay student loans once you become an attending physician, there are many forgiveness and repayment assistance options available to help.
This handbook is a comprehensive review of student loan forgiveness options available to doctors. Even if you expect to have the capacity to repay your loans, forgiveness and repayment assistance can help you get there faster, with less pressure on your bank account.
Public Service Loan Forgiveness
Many doctors these days are pursuing public service loan forgiveness (PSLF). And for good reason. By working at a qualified employer for 10 years, PSLF forgives your federal loans – tax free. Only federal direct loans qualify for PSLF though. FFEL, Perkins, and private loans do not. For this reason, if you’re considering PSLF make sure you consolidate any FFEL or Perkins loans right after you graduate, since federal consolidation loans do qualify for the program. Private loans are simply not an option.
The common misconception about PSLF is that it only applies to teachers or social workers. It’s actually far wider reaching, and depends only on who you work for – not what type of work you do. You can qualify for PSLF by working full time (at least 30 hours per week) at:
- Any government organization at the federal, state, or local level
- Non-profit organizations that qualify for tax exempt treatment under 501(c)(3)
- Other types of non-profit organizations that provide certain types of public services
For doctors, this means that work in a tax-exempt hospital or medical school will likely qualify. To find out, you can submit an Employment Certification Form with the Department of Education. Rather than working for ten years and hoping your employment qualifies for forgiveness, the DoE will verify your status with this form. The form requires the signature of someone familiar with your service record. Since tracking down the signatures of old bosses can be a major pain, best practices are to submit it every few years or whenever you change employers.
Technically you’ll need to make 120 qualifying monthly payments while working at a qualified employer in order to receive PSLF. A qualifying payment is one made under an income driven repayment plan. The standard 10-year repayment option does qualify for PSLF, but after making 120 payments there wouldn’t be anything left to forgive.
If you’re interested in PSLF, run the numbers on the various income driven repayment options and find the one where you pay the very least out of pocket over the next ten years. Once you make the 120 qualifying payments, you’ll need to submit a an official PSLF application in order to receive forgiveness.
The Doctor’s Loophole
The combination of PSLF and several of the income driven repayment options creates a nice “loophole” for doctors. Pay As You Earn (PAYE) and Income Based Repayment (IBR) calculate your minimum monthly payments based on a percentage of your discretionary income. Residents earning around $55,000 per year with $183,000 in debt from med school certainly qualify.
The catch with PAYE and IBR is that there’s cap on monthly payments. Even though your income will jump significantly as an attending, your monthly payments will never be more than what they would have been under the standard 10-year repayment plan when you entered the program.