Physicians Seek Options as Federal Loan Forgiveness Program Is Threatened

Physicians graduate with approximately $200,000 or more in medical school loan debt, which leads many new physicians to specialize in fields with higher incomes, find ways to earn extra income or sign up for the Public Service Loan Forgiveness Program.

“Student loan forgiveness programs take the stress away from having to figure out how to pay back a Mt. Everest-amount of money,” said Kyle Winkfield, managing partner of OWRS, a wealth management and retirement planning advisory firm in Washington, D.C. “They can also help you develop and hone skills in your specialty.”

Approximately one-third of the graduates from U.S. medical schools plan to use the Public Service Loan Forgiveness Program to reduce that debt. New physicians who expect to use the program more typically come from lower-income homes, receive fewer scholarships and graduate with greater debt, according to health policy experts from the Perelman School of Medicine at the University of Pennsylvania in Philadelphia, writing in Annals of Internal Medicine in August 2018.

Yet the Public Service Loan Forgiveness Program is under siege. Some government officials want to end it.

The U.S. House of Representatives has proposed borrowers after July 1, 2019, will be ineligible for the program. The legislation, the PROSPER Act, H.R. 4508, is unclear whether borrowers pursuing federal loans prior to that time will be grandfathered in.

Additionally, the Department of Education has retroactively reversed loan forgiveness certifications, according to the journal article. The department has said the “certifications are temporary and subject to final approval.”

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The Public Service Loan Forgiveness Program
“Public Service Loan Forgiveness provides a solution to physicians who graduate with an overwhelming amount of federal student loan debt,” said Jeremy Wine, student loan supervisor at Take Charge America, a national nonprofit credit counseling, student loan counseling and debt management agency headquartered in Phoenix.

How does this program work for new physicians?

“This forgiveness requires borrowers to make 120 income-driven repayments on direct federal student loans while working full-time, or 30 hours per week, for a nonprofit or government organization,” Wine said. “Public Service Loan Forgiveness guides students to use an income-driven repayment plan to repay their loans.”

The payment is based on income and family size, Wine explained.

“[The program] affords borrowers with hope in financial security and vitality,” Wine said. “A certified nonprofit student loan counselor can help borrowers determine if they qualify for Public Service Loan Forgiveness and will guide you through the enrollment process.”

Other debt forgiveness options
While the Public Service Loan Forgiveness Program is a popular choice to retire a medical student’s loan debt, other options exist.

The Association of American Medical Colleges currently lists 71 programs available to physicians for loan repayment, forgiveness or scholarships. The options include state and federal programs.

Wine reports other loan forgiveness programs for physicians include:

Some healthcare employers will also offer loan forgiveness options as part of a physician’s total compensation package.

Additional options for physicians with medical school debt 

Payoff strategies. Winkfield suggested trying to defer payment of medical school loans until the physician obtains a full-time salaried position. Then, once he or she starts paying off student loan debt, the borrower should determine discretionary income and take half that amount and use it to pay extra on the medical school loan with the shortest number of months to payoff. Meanwhile, make the minimum payments on any other loans

“I’ve found that getting rid of debt fast is always the more efficient approach,” Winkfield said. “After you’ve killed the first debt using this focused approach, snowball that new total payment to the next debt.”

Earning extra money with locum tenens. Picking up locum tenens shifts offers a way to increase income to more quickly pay off student loans. This method of medical moonlighting is becoming more common for new physicians in a variety of medical specialties.

Refinancing medical school loans could be another option. It offers a way to consolidate the debt and may result in a lower interest rate.

Laurel Road, an online lender and FDIC-insured bank headquartered in Darien, Connecticut, offers members of the American Medical Association an interest rate discount when they refinance student loan debt.

“Refinancing can relieve financial burden and generate significant savings,” said Alyssa Schaefer, chief marketing officer for Laurel Road.

Laurel Road’s program allows those who have matched with a residency or fellowship program to pay only $100 a month, while locking in a more favorable rate for future payments, Schaefer explained.

“The total amount of money saved over time as a result of refinancing is one of the largest benefits,” Schaefer said.

Additional resources:
Federal and State Loan Repayment Programs Database - AAMC 
State Loan Repayment Programs - HRSA 
Staff Care’s Resources for Residents, Fellows & Students 
Managing Medical School Debt with Locum Tenens Work 

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