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Why Public Service Loan Forgiveness (PSLF) is such a particular boon to indebted physicians. By Chris Malgieri, MD

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Eleven years ago, on a balmy late-spring day in Columbus Ohio, I entered my medical school lecture hall for a mandatory student loan information session presented by our financial aid officer. Joined by the rest of my class of soon-to-be graduates, we learned the basics about repayment – our rights, our responsibilities, our new financial burdens. It was on that day that I learned about Public Service Loan Forgiveness (PSLF) – a program that was life-changing for me and, hopefully, a few other classmates in that auditorium in May 2011.

Here are the key elements of the program, and why physicians stand to benefit the most:

• PSLF forgives the entire balance of student loans. Physicians traditionally have very high balances.
• Forgiveness occurs after just ten years. (Other programs such as Income-Based Repayment or Pay As You Earn forgive at 25 and 20 years, respectively.)
• PSLF is tax-free. Physicians, at the time of forgiveness, are in high tax brackets. And nobody, regardless of profession, wants to pay extra taxes.
• Income-Driven Payments are qualifying payments. Physicians can start making qualifying payments immediately as interns without breaking the bank. Payments can be as little as 10% of income above poverty line.

• Payments for many Income-Driven Payment plans are capped. Physicians are highly compensated after their post-graduate training. While salary will increase, payments will hit a ceiling. For plans such as IBR and Pay As You Earn, payments will not exceed what a standard payment on a 10 year plan would have been.
• “Public service” can be defined as employment by any 501c3 tax-exempt entity. Most hospitals/universities are 501c3, and many anesthesiologists are employed by them. If the EIN number on a W2 is from a non-profit, you qualify.
• PSLF is guaranteed in the promissory note attached to a federally backed student loan. Physicians love good documentation!

Too good to be true? I tempered my expectations as I walked out of the information session. There was no way that this program benefiting veritable one-percenters would last through the end of the year, let alone another decade to see us through forgiveness, I thought to myself. Either way, I certainly couldn’t afford any other repayment plan (aside from deferment). Beginning as an intern, I began to pay a small portion (roughly 10%) of my paycheck towards my loan (calculated on the prior year’s tax return).

About six months into my intern year, a friend forwarded me an article that describes the “Doctor’s Loophole” in PSLF. The article went step by step pointing out how doctors would benefit disproportionately from forgiveness. It even suggested measures to disqualify physicians. The jig was up, for sure. Right?

I thought it was only a matter of time before all major financial journals would pick up the story. 60 minutes would be next. No matter what, when doctors started receiving forgiveness, we would see a public outcry for the end of the program.

A decade later, after many physicians have earned forgiveness (myself included), there is still no public outrage. In fact, quite the opposite. Most stories have focused on the failures of PSLF to deliver what was promised. In fact, while policy changes specific to student loans have been somewhat hostile to physicians; PSLF has remained intact.

There has been a great deal of attention placed on the potential for the current president to forgive some or all of student loan balances across the country. Most experts agree that his ability to wipe clean a balance sheet is capped at $50,000 (and more realistically, $10,000). Plans to do this as an executive order could potentially exclude physicians. A recent Medscape article suggests that professionals making more than $125,000 would be ineligible, leaving most attending physicians out in the cold. The article also suggests that the president might specifically make physicians or lawyers ineligible.

On the other hand, PSLF has seen very favorable administrative changes in the past couple of years. “Payment pauses” which have persisted since the middle of March 2020 have all been counting towards qualifying time on PSLF. In addition to free payments, the current administration is directing the department of education to revise payment counters to include a host of previously ineligible situations:

• Time spent on administrative forbearance
• Time spent on deferral for periods of time greater than 12 continuous months (or 36 total)
• Time making ANY payment (even if it wasn’t previously in a “qualifying” plan)
• Any payment made before consolidation of a loan, which had previously been used to mark the beginning of repayment towards PSLF

There are a host of other improvements being made to PSLF, including a better payment-tracking system, faster turnover time on applications and a “Self Help” tool for borrowers. I would encourage you to check them out for yourself on studentaid.gov.

For the foreseeable future, the government is committed to honoring their promise to forgive loans after ten years in the PSLF program. The public scrutiny over medical student loan forgiveness has yet to materialize. Aside from a strictly private practice job, the only way a physician can ensure disqualification from this program is to refinance loans with a private lender. So proceed with caution!

While these avenues of loan forgiveness are still open, I again encourage all medical students and house staff to consider pursuing PSLF.

Christopher J. Malgieri, MD, is a pediatric anesthesiologist with Lifespan Physician Group and Vice Chair of Education for the Department of Anesthesiology at Brown University in Providence, RI. Dr. Malgieri completed his medical residency as chief resident at Emory University in Atlanta. He is a member of the Society of Pediatric Anesthesiologists and serves as President of the Rhode Island Society of Anesthesiologists.