Public Service Loan Forgiveness for Doctors

Many professionals incur significant amounts of student loan debt. The average loan debt for my medical school was $133,000 this year, which actually seems low. I incurred approximately $190,000 of loan debt that I eventually paid off. I fortunately went into a career in medicine where I have relative job stability and earn potential, unlike many poor graduate students without funding who enter a career in art restoration.

One viable option for repayment includes the Public Service Loan Forgiveness Program (PSLF). Under PSLF, your loans are forgiven after 120 payments as long as you are working for a qualified public organization. These organizations include government facilities, non-profit organizations, and certain not-for-profit facilities. Many hospitals are considered non-profit entities.

Why is PSLF a good deal?

 

While 120 monthly payments seems like an eternity, most of our training occurs in non-profit hospitals. What this means is that if you are financially savvy early in your career, you can strategically select a residency that qualifies for PSLF. Since many of us inadvertently spend a good 5-7 years of our youth in some form of residency and fellowship, you might as well consider saving some money in the process.

Take, for instance, someone who wants to be an electrophysiologist. This route typically includes three years of internal medicine residency, three years of cardiology fellowship, and another year of fellowship. That’s right. Seven years to put in a pacemaker! If you do all of your training at a qualified non-profit institution, you only have three more years of minimum payment before your student loans are forgiven by Uncle Sam! You’d have to consider truly how much debt you’d be saving by going through PSLF rather than paying it off outright. In this case, how much you’d owe depends on really how much you are capable of earning during your first three years after fellowship.

For most doctors, this depends whether you remain in academics or join a private group. In our hypothetical electrophysiologist who spent seven years training at a non-profit institution, the following may be how her income plays out afterward:

Academic Cardiologist Private Group Cardiologist Academic for 3 years, then private
Year 1 $325,000 $300,000 $325,000
Year 2 $325,000 $400,000 $325,000
Year 3 $325,000 $425,000 $325,000
Year 4 $325,000 $450,000 $300,000
Year 5 $325,000 $600,000 $400,000
Total $1,625,000 $2,175,000 $1,675,000

From a strictly financial perspective, a private practice doctor will earn more money than an academic doctor. However, PSLF may be a great financial move if you definitely will go into academic medicine. It will work even better if you have a high amount of student loan debt.

Doctors whose income falls in the low six-figures regardless of academic or private practice situation would benefit from PSLF.  If you’re stuck with the same income no matter what institution you work for, you might as well work in one that offers you the potential to forgive your loan debt.

Why PSLF doesn’t work for many doctors

 

PSLF can fall apart in a few key scenarios:

  1. If your residency is relatively short, like in family medicine or emergency medicine (EM). This case is most egregious in EM, where residency can be as short as three years, and starting income can fall in the $300’s the first year on the job in private practice. If you need twelve years of minimal payments at a non-profit institution and your residency is only three, you have to remain in a similar environment for at least 9 years. In these 9 years, you potentially forgo large amounts of income. This added income could have been used to help repay your student loans earlier.
  2. If you are entering a high income specialty, PSLF loses its advantage. In most cases, you should be able to repay your student loans entirely within the first five years after you start your career. It won’t come automatically, but you can live like a resident initially so that you become debt-free sooner.
  3. If the government gets rid of PSLF, you are screwed. There is no initial enrollment process that “locks” you into the program when you are repaying your loans. Going a decade with the possibility of losing this advantage is a risk you’d have to live with.

In my case, I was not even aware of PSLF when I finished medical school. I hustled during my residency to repay my loans and eliminated them after my first year on the job. Had I known about it, I’m still not sure if I would have gone through the process. Ten years is a long time to give the government to change the laws against your favor.

Do you plan to or have already had PSLF forgive your student loans?

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