- 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.
The ASA Committee on Young Physicians is pleased to present this monthly article series on personal finance. These articles are not written by hedge fund managers or real estate tycoons but by practicing physicians. Some have business degrees and some do not – but every contributor is an anesthesiologist who has some guidance to offer the rising generation of attending physicians. It is not the intention of the committee to offer definitive financial advice, but rather some pearls of wisdom to consider while developing a personal fiscal plan.