Medical students have a lot to learn before beginning their internships and residencies. Given the high level of student debt many med students take on to become physicians, one thing doctors-in-training usually learn about reasonably early in their medical school journey is the Public Service Loan Forgiveness (PSLF) Program.
According to the rules of the PSLF Program, after completing their residency, doctors who work full-time for a not-for-profit or public institution (many hospitals qualify under this definition) or in an under-served area with a high need for medical professionals for ten years can obtain loan forgiveness on the remaining balance of their federal student loans. Doctors must make qualifying payments on those loans every month during those ten years to qualify for loan forgiveness.
This can be pretty appealing to medical residents facing a heavy student loan debt load. The most significant advantage of the PSLF is, of course, the opportunity to wipe out the balance of one’s federal student loan debt after ten years. The biggest drawback: up to now, few people who applied for loan forgiveness under the PSLF (less than 5%) ever received it. The program rules were extensive, and the slightest slip-up would disqualify a borrower. (Note that as of publishing, the White House has continued to extend the moratorium on all public student loan payments through the end of August 2022).
The complaints were loud enough for Washington DC to act.
In October of 2021, the Biden Administration overhauled the PSLF Program, with changes to be implemented over the coming year. Thousands of borrowers are expected to become eligible for loan forgiveness without taking further action, and many others could potentially qualify if they certify additional periods of employment. The U.S. Department of Education estimates that over 550,000 borrowers will see an increase in the number of student loan payments that will count towards loan forgiveness. Many others will benefit by consolidating their federal loans into the Direct Loan program and applying for the PSLF.
If you are a medical resident and are considering the PSLF program, this is a better time than ever before to pursue this path. Here are the details:
A limited PSLF waiver allows all payments (excluding payments on private loans) to count toward PSLF, regardless of the loan program or payment plan. Borrowers will be able to count all payments made on loans from the Federal Family Education Loan (FFEL) Program or Perkins Loan Program. This also waives restrictions on the type of repayment plan and – a potential game-changer for many – the requirement that payments be made in the full amount on time. This does not mean that borrowers who have been delinquent in their loan payments for months are now in the clear, but it does mean that if you were a day late here and there, you would no longer be disqualified. Borrowers will have to submit a PSLF form; an application used to certify employment and evaluate a borrower for forgiveness, by October 31, 2022. Those who have FFEL, Perkins, or other non-Direct Loans will benefit from this limited waiver if they apply to consolidate into the Direct Loan program and submit a PSLF form by that date. Borrowers with FFEL Program loans, Federal Perkins loans, or any federal student loans that are not direct need to consolidate their loans into the Direct Loan program by Oct. 31, 2022, to qualify for the waiver. Under normal PSLF rules, consolidating restarts a borrower’s monthly payment count, but that rule is being suspended during the waiver period. Borrowers also need to submit proof of eligible employment with their application. For more information on consolidation, visit StudentAid.gov.
PSLF applications that were denied due to errors will be reviewed, giving borrowers the ability to have their PSLF determinations reconsidered. This will help identify and address servicing errors or other issues that have prevented borrowers from getting PSLF credit. If you feel your PSLF application was incorrectly denied, you may soon be able to have your payment record cleaned up.
The changes automatically provide credit toward PSLF for military service members and federal employees using federal data matches. The Department of Education will implement data matches next year to give these borrowers credit toward PSLF without an application. Although few MDs are in this category, we wanted to mention this as it may be relevant for friends and family members with student loan debt.
For more information, visit StudentAid.gov/PSLFWaiver. If you plan to apply for loan forgiveness under this program, be sure to include this as a discussion item the next time you talk with your financial advisor.
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