PSLF Medical School: How Physicians Can Get Credit During Residency

Medical students can leave school and start earning credit toward the Public Service Loan Forgiveness Program in the first year of their residency programs. By the time they finish their fellowship and become an attending physician, they could be on the doorstep of having their entire federal student loan debt forgiven.

The U.S. Department of Education promises student loan forgiveness to public servants after working for a qualified employer for 10 years. Medical students can start building PSLF credits during residency so long as they’re employed full-time by the government or a nonprofit organization.

Historically, many physicians failed to maximize this opportunity to get their medical school loans forgiven. They missed out on relief because they had the wrong type of loan or accepted a forbearance rather than making payments under one of the income-driven repayment plans. By the time many realized their mistake, they were an attending physician with an income that made their payments under an IDR Plan payments untenable. As a result, they often sought to grab a lower interest rate by refinancing their medical school debt with a private lender.*

Today, it’s harder for doctors and other health professionals to miss out on PSLF following changes made by the Education Department. This is because their federal loans are automatically eligible for the program. Additionally, starting next year, the Biden administration promises they’ll have access to a new payment plan that makes it easier to make their student loan payments while they’re on a training salary.

Keep reading to learn how PSLF works for physicians and other healthcare professionals.

Related: Medical Student Loan Forgiveness

* Those who refinanced had no way of knowing the White House would overhaul the PSLF Program during the pandemic and allow borrowers to get retroactive PSLF credit for the payments they made towards Federal Perkins Loans and Federal Family Education Loans and their time spent in long forbearances and deferments. Unfortunately, they can’t refinance their private student loans with the federal government. So those loans are no longer eligible for the PSLF Program.

Many physicians qualify for PSLF as soon as they start their medical residency. The key is to make sure you choose a training program where you’ll be employed directly by the government or nonprofit organization. Luckily, doing that is easily done. Most residencies and fellowships are at a public or 501(c)(3) nonprofit hospital.

Nearly 80% of 2020 medical school graduates planned to pursue Public Service Loan Forgiveness, according to the Association of American Medical Colleges.

Once you know that your program qualifies, head to StudentAid.gov and check to see if all of your federal loans are Direct Loans or Direct Grad PLUS Loans. If you started undergrad before 2017, there’s a chance you might have Perkins Loans or FFEL Loans. Those loans need to be consolidated into a Direct Consolidation Loan before the debt becomes eligible for PSLF. You can do that on the Federal Student Aid website.

Related: How to Consolidate Student Loans for PSLF

After you confirm that you have the right type of loan, you’ll need to contact your loan servicer to switch from the Standard Repayment Plan to an income-driven repayment plan. The Education Department offers four different types of IDR plans:

• Income-Based Repayment

• Income-Contingent Repayment

• Pay As You Earn

• Revised Pay As You Earn

The best plan for recent graduates, at least for now,* is usually the PAYE Plan. It gives you the lowest monthly payment, limits the amount of interest added to your loan balance, and lets you skip using your spouse’s income if you file taxes separately.

After you’ve changed plans, your final two steps are to complete the Employment Certification Form and start paying. The ECF form simply informs the Education Department that you work for a qualifying employer and are pursuing PSLF. You can submit this form any time, even years after starting residency.

The department writes off your remaining balance tax-free after you’ve made 120 qualifying payments — i.e., pay the full amount due on time. Depending on your training path, it’s possible you can be more than halfway there before you even enter your first year as an attending.

* The Education Department is working on a new plan that’ll cut payments in half and stop interest from accruing as quickly. But that plan won’t be available until next July at the earliest.

For years, the PSLF Program didn’t deliver public servants the debt relief it promised. People worked for years only to find out they didn’t meet the program’s complex requirements and had to start over.

Following years of public outcry demanding change, the White House used powers granted to it during the pandemic to fix the program. Last October, it created a temporary waiver that gave borrowers credit for a broad category of payments that were previously excluded, including those that were late, for less than the full amount due, or made under the wrong repayment plan, or toward non-qualifying loans. The department also credited them for time spent in long-term forbearances and deferments.

The Limited PSLF Waiver ended on Halloween. The Education Department is still processing applications. So far, more than 200 thousand borrowers have been approved for over $14 billion in forgiveness.

As it continues to plow through those applications, the department is also implementing another one-time waiver that will benefit physicians still working at the Veterans Administration, nonprofit hospitals, etc. today. The IDR Waiver & Account Adjustment will increase borrowers’ progress towards PSLF by counting their time spent in a forbearance that lasted at least 12 straight months. It will also credit those who spent 36 or more months cumulatively in forbearance.

Physicians with FFEL Loans can take advantage of this new waiver by consolidating their loans into a Direct Consolidation Loan before May 1, 2023.

Learn More: Do FFEL Loans Qualify for PSLF?

Unfortunately, there isn’t a database of all the hospitals that count as qualifying employers for PSLF, but you can easily determine your hospital’s eligibility by checking whether it is a federal, state, local, or tribal entity or if it’s a 501(c)(3) nonprofit organization — which many private hospitals are. You can use the IRS Nonprofit Search Tool to check whether your employer is listed. If you have your employer’s Employment Identification Number, you can also use the PSLF Help Tool to check its eligibility.

Related: First Responder Student Loan Forgiveness During Covid

If you’re just starting your residency or fellowship, qualifying for PSLF today is comparatively easier. And if you’re already an attending physician, you may be able to get PSLF credit for the years spent in training.

Want help saving money on your student loans from medical school? Schedule a time to talk with me. I’ll work with you to find a student loan repayment plan and forgiveness strategy best suited to your needs and budget. I’ve helped thousands of borrowers like you tackle over a billion dollars in student debt. Let me help you next.

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