Student Loan Forgiveness for Physical Therapists: How it Works

If you’re a physical therapist — or studying to become one — you may wonder what you should do about your student loans. Out of the thousands of loan forgiveness programs out there, is there one specifically for members of your field?

Physical therapists don’t have a loan forgiveness program just for them. But they can take advantage of federal and state programs to help with student loan forgiveness. Therapists who work full-time for certain government or nonprofit employers and use an income-driven repayment plan may be eligible for tax-free loan forgiveness with Public Service Loan Forgiveness (PSLF).

Other therapists may be eligible for state-specific programs that can eliminate tens of thousands in student loan debt. For example, the Allied Health Loan For Service Program offers up to $12,000 in loan forgiveness for borrowers who go to school in New Mexico.

Keep reading to learn more about student loan forgiveness options for physical therapists and physical therapy students.

Related: How to Apply for Student Loan Forgiveness

Physical therapists qualify for the Public Service Loan Forgiveness program (PSLF) if they spend 10 years working full-time for the government or nonprofit employer and make 120 qualifying payments under one of the four income-driven repayment plans (more on these later) toward a Direct Loan. Any non-Direct Loans must be consolidated into a Direct Consolidation Loan to get PSLF credit.

Related: How to Consolidate Student Loans for PSLF

After making 120 qualifying payments, you can apply for PSLF and get the remaining balance on your federal student loans forgiven. These payments need not be consecutive — you’ll still be eligible even if you switch careers for a time.

The application process is simple: submit the PSLF Employment Certification Form every year to let the federal government know you’re working for a qualified employer. Doing this can potentially lower your monthly payments while you work towards forgiveness. Completing this form ensures your employment and monthly payments count toward the 120 payments needed for forgiveness.

Learn More: When Did PSLF Start?

You can find more information on PSLF and how to apply using the PSLF Help Tool or at StudentAid.gov.

Income-driven repayment (IDR) plans are a great option for physical therapists who do not work full-time, don’t work for a qualified employer for PSLF forgiveness, or otherwise don’t meet the eligibility requirements for other education loan forgiveness programs. IDR Forgiveness writes off any remaining balance on an income-driven repayment plan after 20 to 25 years of payment.

Monthly payments are typically 10 to 20% of your discretionary income for these repayment programs. The U.S. Department of Education defines discretionary income as one’s gross, after-tax income for the year minus 150% of the poverty guidelines according to family size and state of residence.

Here are the four IDR repayment options and their terms:

• Pay As You Earn (PAYE): You pay 10% of your discretionary income each month for 20 years.

• Revised Pay As You Earn (REPAYE): You pay 10% of your discretionary income each month for 20 to 25 years, depending on whether your loans were used for undergrad or grad school.

• Income-Based Repayment (IBR): If your loans are taken out before July 1, 2014, you’ll pay 15% of your discretionary income for 25 years. You would pay 10% of your discretionary income for 20 years if your loans were taken out on or after July 1, 2014.

• Income-Contingent Repayment (ICR): You pay 20% of your discretionary income or what a fixed payment would be on a 12-year plan (the lower of the two) for 25 years.

Completing any one of these programs makes you eligible for IDR Forgiveness and the IDR Waiver, but it may leave you with a hefty tax bill, depending on what happens with the law.

Related: Student Loan Forgiveness for First Responders

Physical therapists with Perkins Loans may be eligible for Perkins Loan cancellation after five years of service. After this time, the student loans could be wiped out depending on the type of loan taken out, the date of the loan, and certain teacher qualifications.

Your school will determine your eligibility for forgiveness on your Perkins loans. With the school’s approval, you could have up to 15% of your loan balance forgiven for the first two years, 20% the following two, and the remaining 30% after the fifth year.

If you work in the Department of Veterans Affairs, you could be eligible for up to $200 thousand in student debt forgiveness through the Education Debt Reduction Program (EDRP). Here’s a list of EDRP physical therapy jobs. The program pays out over a five-year period and is open to all healthcare professionals.

Related: VA Student Loan Forgiveness

The Indian Health Service Loan Repayment Program provides up to $40 thousand in debt relief for medical professionals — including physical therapists (MS and DPT) — who commit to at least two years serving American Indian and Alaska Native communities.

For loan forgiveness on the state level, a good place to start is with the State Loan Repayment Program (SLRP). This program — which works with the Health Resources and Services Administration (HRSA) in each state — provides up to $50,000 a year towards education debt if they work in an HPSA for at least two years. Eligibility and specific benefits vary from state to state.

Physical therapists may also be eligible for forgiveness with the Faculty Loan Repayment Program. Those who commit to two years of service at a school for healthcare professionals can receive up to $40 thousand in forgiveness.

Some states have even created loan forgiveness programs specifically for student loan holders who worked and/or studied in the state. Here are three:

• New Mexico Allied Health Loan For Service Program: New Mexico residents of at least one year and who went to college or graduate school in the state may be eligible for up to $12,000 of loan forgiveness for each year of service up to four years. This program is for physical therapists still in school.

• Iowa Health Professional Recruitment Program: This program is specifically for physical therapists practicing in high-need areas of Iowa (defined as a city with a population under 26 thousand and that’s over 20 miles away from a city with 50 thousand people or more). Eligible participants will receive up to $12,500 per year for four years.

• Alaska SHARP Program: Physical therapists who have worked in an underserved area of Alaska for at least three years can receive $20,000 to $27,000 per year, depending on if they work full-time or part-time.

If you work or study in these states but are ineligible for federal forgiveness, these student loan forgiveness programs are a great option.

For more state-based programs, you can check out the databases by the Association of American Medical Colleges or the Rural Health Information Hub for PTs in rural areas.

There are no federal plans for complete private loan forgiveness.

Borrowers with private loans may want to refinance their loans to help with student debt. If you don’t have a lot of debt, don’t want to spend two decades managing student loan payments, and have a good income and credit score (or a cosigner who does), student loan refinancing might get you a better interest rate or lower your monthly payments. Use an online marketplace like Credible to find the best student loan refinance lenders, interest rates, and loan terms.

Related: Can Private Student Loans Be Forgiven?

In 2021, a bipartisan bill was introduced in the U.S. House of Representatives. to expand the National Health Service Corps (NHSC) loan repayment program to include physical therapists. The NHSC only provides $120 thousand in debt relief to certain healthcare providers like physicians, dentists, and nurses. If the Physical Therapist Workforce and Patient Access Act passed, however, physical therapists could also receive NHSC benefits.

Unfortunately, despite support from the American Physical Therapy Association (APTA), the bill has made little progress since its introduction.

Biden’s student loan forgiveness plan is on hold after several challenges in the state courts. While the plan would benefit many with student loan debt, including physical therapists, it is unclear when or if the applications will reopen.

There are many opportunities for physical therapists or students of physical therapy to forgive all or part of their student debt. The right program for you will depend on your career and personal finance goals and where you plan to work.

If you need help sorting through your loan forgiveness options as a physical therapist, give me a call.

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