[Today’s post is from Future Proof MD, a radiology resident/future IR fellow who lives and works in Florida. Student loans are front and center on the minds of most medical students, residents, and young attendings, and the PSLF program allows qualifying physicians to potentially receive large amounts of loan forgiveness from the government. In this post, FPMD discusses some of the myths regarding the PSLF program. This post previously ran on FPMD’s blog in August 2017. -WSP]
Since the very beginning of FPMD, I’ve been recommending all graduating medical students to consider signing onto Public Service Loan Forgiveness (PSLF) if their residency training institution qualifies. PSLF was literally the first post on FPMD. Despite the uncertainty regarding the future of PSLF, the program remains an attractive option for past and current grads. Yet I still get resistance from some students for reasons I will discuss below. Let’s address each of these commonly held “alternative facts”. Fortunately, the “facts” can be easily found at the Department of Education’s publically available website on PSLF.
Alternative Fact – “If I end up having loans forgiven at the end of PSLF, I have to pay income tax on the forgiven amount.”
Fact – No. According to the Internal Revenue Service (IRS), student loan amounts forgiven under PSLF are not considered income for tax purposes. For more information, check with the IRS or a tax advisor. (Source: Public Service Loan Forgiveness: Questions and Answers for Federal Student Loan Borrowers).
Alternative Fact – “I don’t want to be stuck working for a public service employer if I change my mind in the future.”
Fact – PSLF is not an obligatory program. If you choose to leave your PSLF-qualifying employer for a non-qualifying employer, then your monthly payments will not count toward the 120 required payments for PSLF. In short – you are not stuck, but you do give up the benefit of loan forgiveness if you choose to work for a non-qualifying employer. Seems fair.
Alternative Fact – “It would be near impossible to find a job that qualifies for PSLF when I’m done with training.”
Fact – According to the American Hospital Association (AHA), there are a total of 5,564 registered hospitals in the US. Of which, 2,845 are Nongovernment Not-for-Profit Community Hospitals; 983 are State and Local Government Community Hospitals; and 212 are Federal Government Hospitals. That means greater than 72% of all hospitals in the US would be qualifying employers under the PSLF. Of course, not everyone will choose to become a hospital employee and your particular employment situation may vary, but I would not be overly worried about your employment prospects.
Alternative Fact – “I am almost done with my residency, there is no point in signing up for PSLF now.”
Fact – A PSLF-qualifying monthly payment is a payment that you make
- after October 1, 2007;
- under a qualifying repayment plan;
- for the full amount due as shown on your bill;
- no later than 15 days after your due date; and
- while you are employed full-time by a qualifying employer.
What this means is that Fedloans will examine your PSLF Employment Certification Forms (ECFs) and count all of your qualifying payments retroactively dating back to 10/1/2007.
What do you think? Are you in the PSLF program? Are there any other myths you’ve heard about the PSLF program?
Relevant post topic. I think people are often surprised to see that almost 75% of hospitals are 501(c)3 organizations that qualify for PSLF.
The biggest “myth” I hear is this… “I don’t think that the government is going to follow through on their promise when my time comes, and so it’s not worth it!”
The answer to this isn’t that the government might go back on their promise. That might happen. The myth is that it isn’t worth it. I have an entire post written on if you can trust PSLF, because I hear this so often. There is a plan you can put into place to deal with this problem (have a little trust, put the difference between a private Refi and PSLF payment into a taxable account in case it doesn’t work out, etc).
P.S. I like the combination team here between WSP and FPMD!
TPP
Thanks for the tips. In the right setting, PSLF is a great tool.
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