In November, the Department of Education announced new student loan regulation changes that will allow thousands of attending physicians to qualify for student loan forgiveness. The revised regulations will make it possible for those practicing in California and Texas to qualify, which wipes out federal student loans for those working in the government and nonprofit sectors.
What is PSLF?
Public Service Loan Forgiveness was enacted by Congress in 2007 to provide student debt relief to the millions of workers in the public service industry. The premise was simple: Those working full-time for government or tribal agencies, nonprofits, or other select public service organizations would see their federal loans erased after ten years of service. Implementation, on the other hand, was a trickier matter, as defining which types of jobs would qualify and what counts as “full time,” and tracking the thousands of excited applicants’ work histories became a major headache for the Department of Education and loan servicers.
Further, the program requires applicants make 120 “qualifying payments” toward their student loan balances over those ten years. Many might believe – if you’re still having to make payments on these loans anyway – the struggle for PSLF isn’t worth the effort. What those naysayers might not realize, is the savings can be huge, and qualifying and applying for PSLF is getting easier all the time.
Saving Big on Student Loans Payments
School is expensive; medical school is outrageous. Other than maybe a house, medical school is often the largest investment a physician will make in their life, and the sticker shock can be a deterrent to many med school hopefuls.
However, doctors often work in nonprofit institutions – which includes most hospitals and health networks across our country – enabling them to take advantage of the PSLF program. By applying for one of the income-driven repayment plans offered by the Department of Education, borrowers can reduce their monthly loan payments to as little as $0.
For higher earners, such as physicians, this number is greater but still less than the standard repayment options. Further, your loans are forgiven after ten years, eliminating the possibility that repayment could stretch out, saving on the potentially tens or hundreds of thousands of dollars left on your balance.
New Regulations Mean PSLF for More Physicians
Many physicians have historically been ineligible for PSLF because they work as independent contractors rather than employees, but that’s about to change for the residents of two states.
Physicians in California and Texas are forbidden, by state law, from serving as employees at hospitals; they must, instead, be hired as contractors. While this previously disqualified them for PSLF, new regulations (starting July 1, 2023) from the Department of Education would allow nonprofit hospitals “to certify employment for a contractor if that individual is providing services that by State law cannot be filled or provided by an employee of that organization.” This means that many physicians in California and Texas will be able to apply for PSLF, and—if they’ve been making payments for ten years while working in a nonprofit hospital or health care system—they could potentially receive forgiveness. We are anxious to see how these new regulations will be implemented.
How to Apply for PSLF?
If you’re a physician in California or Texas and want to take advantage of these new regulations surrounding student loan forgiveness, here’s our advice: Get some help. The PSLF program has, unfortunately, gotten a lot of bad press because of its complexity and private loan servicers’ tendency to make mistakes. While these problems don’t always cost borrowers money, they certainly can waste their time and pile on the stress.
For a compass on the journey to wipe out your student debt, we suggest teaming up with our partners at Navigate Student Loans. They have an established track record of guiding physicians to PSLF, including hundreds of millions of dollars in student loans forgiven. In just a free 15-minute appointment, they can tell you exactly how much money you can expect to spend and save on your student loans until they’re forgiven, giving you peace of mind and confidence that you’re on the right track.