Public service loan forgiveness got some bad press in the news in the past, but as a physician, I am still enrolled in it. Just in case you have some questions about the program, I’ve answered some common ones below:
1. What is Public Service Loan Forgiveness?
Public Service Loan Forgiveness (PSLF) is a government sponsored student loan forgiveness program. If you work in public service for a non-profit organization, academic institution, or government agency and make 10 years of on-time qualifying monthly payments towards your student loans, the government will “forgive” your remaining student loan balance.
This program was designed for public servants like teachers and police officers who have lots of student loan debt but may be unable to pay it off in a reasonable time, partly because the salary they receive working in public service is less than the salary they would have received in a different profession. The goal of the program is to allow people with a passion for public service to pursue careers in that field without saddling them with an eternal burden of student loans.
The great thing about this program is that many health care professionals qualify too. Before you roll your eyes, hear me out. Many doctors, such as myself, obtained an average of $200,000 in student loans during medical school. Then we entered residency where we were mandated to spend 3-7 years earning a government salary of around $60,000 while working 80 hours a week before we could make “the big bucks.” If we choose to continue working in an academic setting or for a nonprofit health system, we qualify for public service loan forgiveness as well.
2. Wait, isn’t it sketchy?
I’ll admit, there was some bad press about public service loan forgiveness (PSLF) in the past. During that time, people who thought they met the requirements were finally able to apply for loan forgiveness. Unfortunately, many people were not granted this forgiveness and hearing this news scared many people who were depending on this program.
Although this is less than ideal, there are several reasons why previous applicants were unable to get their loans forgiven. When the program first came out, the rules were vague. There was a lot of misinformation about how to enroll and many people who thought they qualified for the program did not actual qualify for it. Nowadays, the requirements for PSLF are much easier to understand. Now that people are more aware of how to properly enroll into the program, many people who have met the qualifications have gotten their student loans forgiven.
3. Is it wise to depend on this program?
A few years ago there were some proposals to eliminate PSLF, or potentially limit how much money can get forgiven through it. Many people got worried that the program would change and didn’t want to depend on it. Nowadays, most of that worry has gone away.
The department of education has made several changes to the program that 1) make the rules much easier to understand and 2) have expanded the number of people who qualify for forgiveness.
As of 2024, many many physicians and other professionals with $200,000 or $300,000 or more in student loans have gotten their debt completely forgiven with the PSLF program.
4. How do you qualify?
According to the website, you need to have direct federal student loans, work full-time in public service via a 501(c)(3) nonprofit or academic institution, and submit 10 years worth of on-time qualifying payments (i.e. Pay the full amount of your student loan repayment each month through one of the income-driven repayment plans).
5. How do you actually enroll?
Go to the student loan website, complete the PSLF form, and have your employer sign off on it. Your employer can submit it themselves once they sign it electronically, or you can upload the form yourself, if you have your employer sign the form on paper. Once you’ve submitted the form, the federal loan servicer “Mohela” will verify whether you submitted the paperwork correctly and confirm whether you qualify. Mohela is the official servicer of the PSLF program (they took over for the pervious company Fedloans). You must contact Mohela annually to verify all of your payments and re-submit the employer verification enrollment form so that they know you still work in public service for a qualifying organization. If you have a different loan servicer (such as Nelnet, Navient, Great Lakes, etc), your loan servicer will be switched to Mohela as soon as you enroll into Public Service Loan Forgiveness.
6. Do you need to protect yourself if something goes wrong?
I understand that going for PSLF is a risk. There is a chance that the government could change the rules of a program that allows relatively high earning doctors to avoid paying hundreds of thousands of dollars in student loans. If you’d like to protect yourself you can consider creating a “student loan investment side fund.”
Instead of using the money you’re saving in PSLF to buy a better car, a larger home, or have a wealthy “doctor” lifestyle, you can save that money. Specifically speaking, you can take money from each check and put it into a high-yield savings account or put money in an account that is invested in a combination of real estate deals, index mutual stock funds, and money market funds. That way, if PSLF changes in the next few years or for some reason you can’t get your loans forgiven, you will have created a nice nest egg of money that you can use to quickly pay off the rest of your student loans.
If the PSLF program stays the same, then you can keep on investing that money and use it to pay for your retirement or your kids’ college education.
Tell me, are you thinking of going for Public Service Loan Forgiveness too?