It’s no secret that education is expensive, especially for physicians, dentists and veterinarians. Based on national averages, physicians graduate with about $241,600 in debt, dentists with $292,169, and veterinarians with $183,302.

Public Service Loan Forgiveness is an option for getting rid of this substantial debt, but there are benefits and drawbacks of this program. If you are considering taking advantage of PSLF, understanding these factors will better prepare you for what is ahead.

What is Public Service Loan Forgiveness?

The PSLF program offers forgiveness of qualified federal student loans based on 120 payments while employed full time at a 501(c)(3) non-profit or government employer. This can be a great option for those in significant educational debt, especially those already considering public service employment.

Requirements of Public Service Loan Forgiveness

The majority of PSLF applications are rejected. This is not because the Department of Education is denying those who earned forgiveness but because those applying do not meet the requirements. 

To be sure you obtain PSLF, follow these requirements:*

• be employed full time by a U.S. federal, state, local, or tribal government or not-for-profit organization (federal service includes U.S. military service)
• have Direct Loans (or consolidate other federal student loans into a Direct Loan)
• repay your loans under an income-driven repayment plan
• make 120 qualifying payments (does not have to be consecutive)

*Some of these requirements have been changed through October 31, 2022 due to the COVID-19 pandemic. For the time being, borrowers are eligible for PSLF on FFEL or Perkins loans, despite late payments, and more. Be sure to consider how these changes may benefit your pursuit of forgiveness.

Benefits of Public Service Loan Forgiveness for doctors

Reap significant financial benefits. The financial benefits of PSLF are the most significant advantage, especially for those with high educational debt levels. PSLF can erase a majority of your initial debt balance tax-free. It is hard to overstate how financially beneficial this could be for those federal student loan borrowers who plan on working full-time at a qualifying employer. This forgiveness can allow you to achieve other financial goals faster. 

Get a head start in residency. Many residency programs are 501(c)(3) organizations which allow physicians to start making qualified payments as soon as residency starts. Through income-driven repayment, residents can make low monthly payments during their years in training. Depending on your family size and income, you may even qualify for 0$ monthly payments while in training. By the time you begin independent practice, you will only have a few more years to fulfill the requirements.

To increase the number of qualifying payments you accrue in residency, start planning your final year of medical school. All student loans are put into an automated 6-month deferment following graduation, however you can call your loan servicer and decline this deferment. This means you can add the first 6 months of your residency as $0, or nearly $0, monthly qualifying payments.

An easy choice for 501(c)(3) employees. For those already planning to work for a non-profit or government entity, participating in the PSLF program is an easy decision. Employment by these organizations doesn’t have to be 10 years consecutively, simply 120 months cumulatively. It should also be noted that you can apply for PSLF and get credit for qualifying payments retroactively.

Drawbacks of Public Service Loan Forgiveness for doctors

Limited employment options. As previously mentioned, those eligible for PSLF have to work full-time for a non-profit or government employer. This can be especially limited for the fields and specialties that are typically private practice-based or aren’t commonly found in non-profits. It can also be limiting for those who are choosing to practice only part-time. Consider how your desired or chosen specialty will affect your eligibility.

Private loans aren’t eligible. Typically, only direct federal loans qualify for PSLF*. This means private loans or loans refinanced with a private lender cannot be forgiven. Be completely sure you do not want to pursue PSLF before you refinance your loans as you cannot later qualify for this program after you have refinanced with a private company.

*Except during the PSLF waiver period until October 31, 2022

Federal Loan Servicers can be difficult to deal with. As with many government programs, working with the program’s servicers can be tedious and there have been numerous complaints about the administration of PSLF. You will have to complete annual forms and be sure your payment count is being tallied correctly. You will want to keep meticulous records because even a single month of extra payment unnecessarily could cost thousands of dollars.

Give up higher income. Non-profit and government jobs often pay less than private practice employers. Paired with the 10-year time commitment, you may benefit more by taking a higher income and paying the loans yourself. Use available tools or discuss with a financial planner who understands doctors and PSLF in order to determine what is best for your personal and professional needs.

Making your final decision

Deciding on something that could have such a profound impact on your financial future is not easy. Research your options thoroughly before deciding which option is right for you.

If you decide against PSLF and you are looking to refinance your loans as you work to repay them, Panacea Financial, as a doctor-specific lender, understands your financial needs and is here to help!

Panacea Financial, a division of Primis. Member FDIC.