The average cost of attending medical school in 2018-2019 is about $37,000 per year for in-state students and almost $61,000 for out-of-state attendees at public universities, according to the Association of American Medical Colleges. Graduates of public medical schools from the class of 2018 had an average debt of more than $188,000, and nearly half graduated with $200,000 or more in education debt, AAMC data show.
One option available for paying back federal student loans is Public Service Loan Forgiveness. To qualify for PSLF, you must work full time for a government agency or for certain types of nonprofit organizations, have federal direct loans, be on an income-driven repayment plan and make 120 qualifying payments, according to the U.S. Department of Education’s office of Federal Student Aid.
[Read: How You Can Requalify for Public Student Loan Forgiveness.]
Any loan amount forgiven under PSLF is not considered income for tax purposes; therefore, it is not taxable. This is not the case in other types of forgiveness programs offered by the federal government but is for those who qualify for PSLF.
PSLF can be very complicated and there are lots of misunderstandings about who might be eligible. Here are some common myths about Public Service Loan Forgiveness for physicians.
Your income will be too high to benefit from PSLF. Physicians make on average about $57,000 per year during residency. Overall, the average income for a physician at a general medical or surgical hospital was about $178,000 in 2017, according to the Bureau of Labor Statistics.
The truth is, some physicians work for many years before exiting residency. According to Medscape, a website that offers medical news to physicians and health care professionals, even six to eight years after medical school, physicians in residency are making, on average, $64,300.
It’s wise to begin repayment of student loans as soon as you enter residency if you plan to take advantage of the PSLF program. The monthly payment amount will be based on the physician’s monthly discretionary income and will take into account marital status and the number of children the person has.
Borrowers can use the PSLF help tool to determine if they may be eligible and steps to take to begin the process.
It will be too difficult to find an employer that qualifies. In order for a physician’s work to qualify for PSLF it must be for a government or nonprofit organization. Physicians should consider looking for jobs in a hospital. Many nonprofit community hospitals or government-run hospitals are 501(c)(3) corporations.
[Read: The Fate of Public Student Loan Forgiveness.]
According to the American Hospital Association, there are a total of 5,534 registered hospitals in the U.S. Of those, 2,849 are nongovernment nonprofit community hospitals, 956 are state or local government community hospitals and 209 are federal government hospitals. That’s a total of 4,014 hospitals, roughly 73 percent of hospitals, that would likely qualify under PSLF.
Doctors working in these hospitals who have federal student loans should seek more information to find out if they may qualify for PSLF. Working for a qualified organization is only one piece of the puzzle; making sure all the loans are federal direct loans and that the payment plan qualifies are also important.
The program is going to be shut down for current borrowers. Many physicians have given up on the idea of obtaining PSLF because of the student loan discussions happening in the current administration. Some have even begun to refinance and consolidate their loans, which automatically disqualifies them from the program.
U.S. Secretary of Education Betsy DeVos has stated she plans to end the PSLF program, so there is some uneasiness about its future. But any changes to the program will not apply to current borrowers on track for PSLF.
[Read: How the Trump Administration May Reform Student Loans.]
If you have been on an income-based repayment plan the whole time, never been late on a payment and paid the full amount due each month, those may count as qualifying payments. Any time you spent working for a nonprofit or approved occupation may count.
It’s important to submit the PSLF application form to the Department of Education to get started on the program. All payment and work history will be reviewed to determine how many actual payments count toward the 120 and determine how much longer is needed to meet the requirements for PSLF once the application is submitted.
This form should be submitted annually for certification of all payments. If you have been on an income-based repayment plan the whole time, never been late on a payment and paid the full amount due each month, those may count as qualifying payments. Any time you spent working for a nonprofit or approved occupation may count.
Since the future of the PSLF program is unknown, it’s important to take action if you believe you may qualify for student loan forgiveness through this program. Becoming a doctor is an honorable achievement, and the Student Loan Ranger wants to help you deal with the debt that comes from medical school as easily as possible.
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3 Myths About Public Service Loan Forgiveness for Physicians originally appeared on usnews.com
