Public Service Loan Forgiveness Program (PSLF): Can PSLF Provide Physicians and Other Medical Professionals an Option for Dealing with Mounting Student Loans?

Created under the College Cost Reduction and Access Act of 2007, the Public Service Loan Forgiveness Program (PSLF) may offer physicians and other health professionals working full time for public service organizations the opportunity to qualify for forgiveness on the balance of their Federal Direct Loans after 10 years of qualifying payments. While more detailed information is available on the Department of Education’s Federal Student Aid page, this blog seeks to outline some of the key requirements for physicians and other medical professionals considering a position that may allow them to apply for loan forgiveness under the PSLF Program.

How Does PSLF Work?

In order to apply for loan forgiveness under the program, the borrower must make 120 separate monthly payments after October 1, 2007 on the eligible Direct Loans for which forgiveness is requested. Each of the 120 payments must be made while the individual is employed full-time by a public service organization and must be for the full scheduled installment amount. The payments do not have to be consecutive but they must be made no later than 15 days after the scheduled due date. After 120 qualifying payments are made, the borrower may apply for forgiveness under the PSLF Program.

Eligible Loans

Only loans made under the federal Direct Loan Program are eligible for forgiveness under PSLF. (Click here for a list of the loans included in the Direct Loan Program). Other federal student loans may become eligible for forgiveness if they are consolidated into a Direct Consolidation Loan. It should be noted that in this case, only payments made on the eligible Direct Consolidation Loan (not earlier payments made on the underlying loans themselves) will be counted toward the required 120 payments for loan forgiveness.

Borrower Eligibility

In order to qualify for loan forgiveness under PSLF, the borrower must be employed full-time by a public service organization when making each of the required 120 qualifying loan payments, at the time he or she applies for loan forgiveness, and at the time the remaining balance is forgiven. It is important to note a few key definitions in the eligibility requirements. First, the borrower must be “employed full-time”, which is defined by the employer’s definition of full-time and for PSLF purposes, at least an annual average of 30 hours per week. The full-time employment calculation does not include time spent participating in religious instruction, worship services or any form of proselytizing. Note that multiple part-time positions held simultaneously may meet the full-time requirement.

Another key definition is in determining one’s eligibility is “public service organization”.  For physicians and other medical professionals a public service organization may include:

  • A government organization (including a federal, state, local or tribal organization, agency, or entity; a public child or family service agency; or a tribal college or university).
  • A not-for-profit, tax-exempt organization under section 501(c)(3) of the Internal Revenue Code.
  • A private, not-for-profit organization (that is not a labor union or partisan political organization) that provides one or more of the following services:
  • Emergency management
  • Military service
  • Public safety
  • Law enforcement
  • Public interest law services
  • Early childhood education (including licensed or regulated healthcare, Head Start, and state-funded pre-kindergarten)
  • Public service for individuals with disabilities and the elderly
  • Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in a health care practitioner occupations and health care support occupations.
  • Public education
  • Public library services
  • School library or other school-based services

Examples of public service organization employers for medical professionals may include not-for-profit hospitals or community clinics. The type or nature of one’s employment with a public service organization does not matter for PSLF eligibility purposes. It should be noted that serving in a full-time Ameri-Corps or Peace Corps position may also satisfy the public service organization requirement.

Loan Repayment Requirements

The 120 separate monthly payments must be made after October 1, 2007 and under one of the following Direct Loan Program repayment plans:

  • Income Based Repayment (IBR),
  • Pay As You Earn Plan, Income Contingent Repayment (ICR),
  • 10-year Standard Repayment Plan or
  • Any other Direct Loan Program repayment plan; but only payments that are at least equal to the monthly payment amount that would have been required under the 10-year Standard Repayment Plan may be counted toward the required 120 payments.

In general, only borrowers who are making reduced monthly payments through the IBR, Pay As You Earn, or ICR Repayment plans will have a remaining balance after making 120 payments on a loan. This is why it is important to understand the eligibility requirements when setting up your loan repayment plan. If you participate in the 10 year standard repayment plan you will have paid off your loans in the 10 year time period and not be eligible for the federal loan forgiveness program. Conversely, if you set up an alternative repayment program, interest will likely continue to accrue over the ten years and overall you may owe more money- and may or may not qualify for the loan forgiveness program at the end of the 10 years.

Tracking PSLF Eligibility

An Employment Certification form is available from the Department of Education to help individuals monitor their progress toward the 120 qualifying payments required to apply for loan forgiveness. The form is intended to help individuals obtain their employer’s certification of employment while they are still employed or shortly after leaving an organization, rather than having to obtain this certification when applying for forgiveness after the 120 payments. Use of this form and process is not required but allows the individual to progressively obtain confirmation of the qualifying employment and payment eligibility in order to track one’s progress towards reaching the PSLF requirements.

Practical Considerations

For physicians and other medical professionals planning to apply for loan forgiveness under the PSLF program, it is important to consider both the loan repayment option you select as well as the type of employer you choose to work for. Medical professionals are often presented with employment contracts at the start of a new position, and, in addition to understanding key contract provisions, it may be prudent to evaluate whether the particular employer will satisfy the requirements of a public service organization for purposes of PSLF. Making this evaluation up front and utilizing the Employment Certification process may assist physicians and other medical professionals in meeting the requirements for loan forgiveness under the PSLF program.



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