Listen to the full conversation on episode 12 of our Financial Clarity for Doctors podcast
The typical doctor graduates medical school with over $200,000 of medical school loans and that student loan balance will likely increase to over $250,000 before the completion of residency as interest accrues. If you’re a physician or other medical professional you’ve likely heard of the PSLF program or the Public Service Loan Forgiveness program. Navigating student loan debt is an integral part of financial planning for physicians, especially in the early stages of their career. However, when it comes to the actual steps one must take to qualify for the PSLF program it seems like people are less informed.
Our goal is to change that and help you become knowledgeable about what you need to do to potentially qualify for public service loan forgiveness.
The U.S. Department of Education defines PSLF as a program that forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
The word “qualifying” is used 3 times in their definition. They also specify the type of loans that “qualify.”
That’s the key…make sure you’re on track to qualify (soon to be your favorite word). So what do you need to do? Here are the steps:
Type of Medical School Loans – Direct Loans
Only Direct Loans are eligible for PSLF. How do you know if you have Direct Loans? Luckily, to make it obvious, the word “Direct” will be in the title.
If you’re unsure about the title of your loans, log into your loan servicer’s website and check the title of each loan. Another option is to visit the National Student Loan Data System (NSLDS – http://nslds.ed.gov) which offers a centralized location for loan recipients to view or inquire about their loans.
If all or some of your medical school student loans are not Direct Loans those will not be forgiven unless you take the necessary action to make them eligible for forgiveness. To do so, you’ll need to consolidate your non-Direct Loans into a “Direct Consolidation Loan.” You can apply for a Direct Consolidation Loan online at no cost by going to www.studentloans.gov.
*Please note, if you have both Direct Loans and non-Direct loans you should be cautious when thinking about consolidating to a Direct Consolidation Loan. You will lose credit for any qualifying payments you’ve previously made towards the PSLF program on your Direct Loans if you consolidate them with non-Direct loans. In many circumstances, you’ll only want to consolidate to a Direct Consolidation Loan with only your non-Direct loans.
Employer – Non-Profit
You must work full-time for a qualifying employer to be eligible for PSLF. What is considered full-time? How do you know if your employer qualifies?
In general, full-time employment is considered working at least 30 hours per week or if you meet your employer’s definition of full-time – whichever is greater. If you have multiple qualifying employers, you may meet the full-time employment requirement if you work at least 30 hours per week on average.
The Department of Education lists the following organizations as qualifying employment for PSLF:
• Any level of government organization (federal, state, local, or tribal)
• Non-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
• Other types of non-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, if their primary purpose is to provide certain types of qualifying public services
Basically, you need to work for a government or non-profit institution. To be sure your employer qualifies for PSLF, you need to submit the PSLF Employment Certification Form each year of your employment whether you stay at one employer, work for multiple employers, or change employers periodically. If you’ve missed filing the form for a previous employer or for previous years at your current employer, you can file now and receive credit retroactively for qualifying employment – assuming you have met the other requirements.
Follow the instructions on the Employment Certification Form for where to send the completed form.
*The below is taken directly from the Employment Certification Form instructions
The above requirements are what we see most commonly missed by individuals hoping to qualify for medical school loan forgiveness. Beyond confirming all your medical school loans (and possibly undergraduate) are Direct loans and filing the Employment Certification Form each year, the other steps to qualify are relatively straight forward.
Loan Servicer – FedLoan Servicing
Your loan servicer must be FedLoan Servicing to qualify for PSLF. What if your servicer is not FedLoan Servicing? You need to submit the Employment Certification Form (see above) to transfer your loans to FedLoan Servicing.
During this transfer process be sure to stay on top of everything. We recommend contacting FedLoan Servicing once per week until they’ve been able to confirm your loan information has been received and that you’re officially on track for the PSLF program.
There is a section on MyFedLoan.org where you can track how many qualifying payments you’ve made under PSLF. Be sure to check back annually to confirm the number of qualifying payments they have listed for you matches the actual number of payments you’ve made. It generally updates after they process your most recent PSLF Employment Certification Form. If there’s a discrepancy in the number then you’ve likely missed a step or there is missing information on your PSLF Employment Certification Form. We recommend rectifying any errors as soon as possible.
Repayment Plan – IBR/PAYE/RePAYE/Standard 10-year
Only payments made on one of the income-driven repayment plans or the Standard 10-year repayment plan qualify for PSLF.
Once you’ve ensured your loans are Direct loans and you’re working for a qualifying institution your monthly payments on the qualifying repayment plans should begin accruing towards the 120 required payment mark.
If you’re curious which repayment option makes the most sense for your situation, we recommend consulting both your financial advisor and your loan servicer.
For most individuals hoping to qualify for the Public Service Loan Forgiveness (PSLF) program, they carry a significant amount of debt. It is of utmost importance to ensure you’re taking the necessary steps mentioned above to make sure you’re on track for forgiveness.
If you don’t, you could end up with a very disappointing surprise when you go to apply for PSLF. If we’re jumping through all the hoops to qualify for medical school student loan forgiveness, we want to make sure we’re doing it right!
Again, the U.S. Department of Education defines PSLF as a program that forgives the remaining balance on your Direct Student Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
Here’s a quick breakdown:
1. Your loans must be Direct loans.
2. You must work for a qualifying employer – government or non-profit. You can confirm your employer qualifies by filing the Employment Certification Form each year.
3. Your servicer must be FedLoan Servicing.
4. You must be on a qualifying repayment plan – IBR/PAYE/RePAYE or 10-year Standard.
5. You must make 120 monthly payments.
After all of that, the final step is to apply for medical school loan forgiveness. Here’s a link to the Public Service Loan Forgiveness application:
Need help figuring out how to manage your student loans? Schedule a no-cost consultation with one of our financial advisors by filling out the form below!