9 Things I Learned When I Signed Up for Public Service Loan Forgiveness

As someone who graduated from medical school with 6-figure student loan debt, I’ve looked into several different loan forgiveness programs that will help repay what I owe. One of the most popular loan forgiveness programs is Public Service Loan Forgiveness (PSLF). Through PSLF, doctors can get hundreds of thousands of dollars in student loans forgiven, tax-free. Although this seems great, when I attempted to enroll in the program last year there were several shocking truths I became aware of quite quickly. Here are some things I learned after enrolling in PSLF: 

1. Not everyone who works for a nonprofit is eligible. In order to qualify for PSLF, you must work for a 501c nonprofit or government institution. Ironically, even if you do work for a non-profit, you still may not qualify. It all depends on your employment classification. If you are classified as an “independent contractor” at an academic institution who only has “hospital privileges” or gets 1099-income instead of W-2 income, then you are technically not a “employee” by that hospital. Thus, you likely don’t qualify for PSLF. If you’re unsure which category you fall in, check how you get paid.

2. You may have to bypass the grace period to start your qualifying payments. When you first graduate you will be automatically placed in a 6-month “grace period.” The good thing about being in this grace period is that you are not required to pay back your loans. The bad thing about the grace period is that this time does not qualify as one of the 120 monthly payments needed to get your loans forgiven. To my surprise, you can’t just waive this grace period to start your qualifying payments. When I contacted the Department of Education, I was told that the only way to bypass the grace period is to consolidate your loans. The consolidation can be done online, but it often takes weeks to process.

3. No digital signatures are allowed, you must sign the form by hand. As a millennial who doesn’t own a printer, I attempted to complete the PSLF employment certification form online and submit it with my digital signature. My application was rejected. In fact, I got a notice from FedLoans a few weeks later stating that my enrollment into the PSLF program was denied because I didn’t provide a “hand signature.” I’m not joking. I literally had to find a printer, fill out the form a second time, sign it by hand, then ask my boss to scan and fax it to them. A few weeks later they told me the application was approved.

4. The certification form takes weeks to process, so upload a copy to your online account. When I finally did get my loans consolidated and resubmit the form with my hand signature, it still took weeks to process. I called Fedloans to see how to expedite the process and was advised to upload the employment certification form to my online Fedloans account. As one can imagine, it takes days if not weeks for them to catch up on all the faxes they receive. Uploading the form directly to your account speeds up the process and they can make a decision faster than if you just fax in the form.

5. The “end date” on the form isn’t really an “end date.” Once I was accepted into PSLF, I received a notice indicating that I was only enrolled into the program for one month. The form showed a start date of 07/2019 and an end date 08/2019. I was confused and frustrated to say the least and promptly called Fedloans for an explanation. The representative assured me that I was still enrolled into the program. Apparently, the Fedloans employees need a way to process the form and then “close out the task.” The “end date” listed on the form isn’t an actual “end date.” It’s the date that your employer signed the form. Why they don’t simply call it a “processing date” or “employer verification date” is odd, but nevertheless, that’s what it says.

6. The payments they calculate may not be correct. A few weeks after notifying me that I was enrolled in the program, Fedloans sent me another notice estimating how many qualifying payments I had. The form listed zero. That wasn’t correct. Although I had just started residency 6 weeks ago, they should have at least recorded 1 payment, especially since I went through the process of consolidating my loans and waiving the grace period. When I called Fedloans to inquire about this issue, the representative said there was an error in updating my loan status from the consolidation but that it would be fixed soon. Ladies and gentlemen, double check your payments and count them yourself.

7. Your number of qualifying payments will not be updated in real time. Fedloans does not track your qualifying payments month to month. Instead, they check the number of payments you’ve made once a year when you re-submit the employment certification form. They then send you another notice with an arbitrary “end date” and update your account with the number of qualifying payments you’ve made up until that date.  Ironically enough, the PSLF program does not require you to re-submit the certification form each year, but doing so is the only way to make sure Fedloans is keeping track of your qualifying payments.

8. You must submit another certification form when you change employers. In order for Fedloans to ensure that you continue to qualify for the PSLF program, you must show proof. I highly recommended that you submit the enrollment certification form each year so they can better track your payments, but it is required that you submit this form each time you switch employers. You have to notify them about the change in your employment status so they can update things in their system and verify that you still qualify.  

9. It could take another 6 months for your loans to be forgiven after all 120 payments are made. Yep, you read that right, 6 months. Once you make the 120 monthly payments, you have to submit a different form called the “PSLF loan forgiveness form.” Unfortunately, it can take another 6 months after submitting the form before a person is notified that their loans have been forgiven or not. Because of this delay, you have the option to stop paying towards the balance of your student loans and go into “forbearance” while you wait to hear back on the status of your forgiveness. You can also just keep sending extra payments and hope for a refund at the end.

To be brutally honest, PSLF has a lot of inefficiencies. I’ve been enrolled in the program for a little over a year and have already had to call Fedloans half a dozen times. To say it’s a hassle is an understatement. Hopefully, it won’t be like this going forward. When all federal student loans were placed into forbearance during COVID, it took them a few months to catch up with processing but eventually they got my payments right without me having to call them every other day. Learning the ins and outs of this program and dealing with its quirks is a bit cumbersome, but the opportunity to get hundreds of thousands of student loans forgiven tax free is too good of a deal to pass up. Keep track of your payments and may the odds be ever in our favor.

The Best Student Loan Repayment Plans for Medical Students and Residents

If you have ever tried to learn about student loan repayment plans you might have felt overwhelmed and confused. Instead of spending days researching information like I did, I’ve created a summary of the different repayment plans in a question-and-answer format with some key takeaways for graduating med students and current residents. 

1. What is the Standard Repayment Plan and who should choose it?  

With the standard repayment plan, you will pay off your student loans in 10 years by making “fixed” monthly payments. This means you will pay the same amount each month regardless of how much money you make. The government will determine your monthly payment by adding all of your student loans (and the projected interest that will accumulate on them), dividing that number by 10 [years], and splitting the amount into fixed monthly payments. 

This is not the ideal plan for graduating med students and residents, especially those with around $200,000 in student loans. Unless you have very little money in student loans, the monthly payments required under this plan will be higher than you can afford on a resident salary. Unfortunately, you will be automatically enrolled into the standard repayment plan if you don’t select a different repayment plan.   

2. What is the Graduated Repayment Plan and who should choose it?

With the graduated repayment plan you will also pay off your loans in 10 years, but your monthly payments are not fixed. Instead, they will start out low, and increase every 2 years, until you have fully paid off your student loans in 10 years.

This is also not an ideal plan for graduating med students and residents. The payments under this plan will still be higher than most residents can afford. Don’t get me wrong, paying off your loans in 10 years instead of dragging it out over 25 years will save you money in interest. However, if you can afford the high payments under this plan and want to pay off your loans in a few years, you could save even more money by simply refinancing your loans with an outside company since they can offer you can even lower interest rate.  

3. What is the Extended Repayment Plan?

Through the extended repayment plan you will pay off your loans in 25 years by making fixed or graduated payments. This plan is for people who don’t qualify for an income driven plan and want to spread their loans out over 20-25 years. It is not ideal for medical students and residents since we qualify for income driven repayment plans during residency.

4. What are the income-driven repayment plans?

The Federal Department of Education understands that some people may have acquired a substantial amount of student loan debt that they may not be able to repay with their current salaries. Instead of handing you a monthly student loan bill that may be higher than your mortgage, these income-driven repayment plans base the size of your monthly student loan payments on your income.

Keep in mind that there are several different types of income-driven repayment plans and that the names may change over time. As of 2024, the 4 types are Pay-As-You-Earn (PAYE), Saving-on-a-Valuable-Education (SAVE) which replaced the Revised-Pay-As-You-Earn plan, Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR).

Most of these plans cap your student loan payment at 5-15% of your discretionary income. Your discretionary income is your income minus whatever the poverty line is for your family size. In other words, if your income is low, your student loan payment will be low. As your salary increases, the size of your student loan payment will increase. After 20-25 years (depending on the type of federal loans you have) your student loans will be forgiven. Keep in mind that many residents and attending physicians will qualify for public service loan forgiveness which forgives their student loans after only 10 years of payments.

5. Should you enroll in an income-driven repayment plan like Pay-As-You-Earn (PAYE) or Saving-on-A-Valuable-Education (SAVE)?

As graduating med students or residents, you should consider enrolling in SAVE, especially if you have at least tens of thousands of dollars in student loans. With the SAVE plan your student loan payment is never more than 10% of your discretionary income, which is ideal for residents trying to make ends meet on a $60K salary. The amount of your income-driven repayment is recalculated each year after you file your taxes.

Of note, if you file your taxes as a graduating med student with zero income, then there is a high possibility your student loan repayment your first year residency will be zero dollars. Having a student repayment of zero dollars will actually count towards one of your 10 years of required payments under the public service loan forgiveness program. If you don’t file your taxes and instead opt for a grace period (the default option) then that time will not count toward public service loan forgiveness.  

6. What are the advantages of the new Saving-on-A-Valuable-Education (SAVE) plan?

SAVE is the new plan that has replaced the old revised-pay-as-you-earn (REPAYE) plan. Although REPAYE and PAYE were similar, SAVE and PAYE are much different. In fact, many many people will benefit from being in the SAVE plan and the PAYE plan is being phased out.

SAVE has many perks like:

• You pay a smaller percentage of your discretionary income. Instead of paying 10%, you now will pay 5% to 10% depending on the percentage of undergraduate vs graduate/medical school loans you have. If you only have loans from undergrad you will pay 5%. If you only have loans from graduate school or medical school you will pay 10%. If you have a mix of both, you will pay between 5% to 10% depending on the ratio of undergrad to graduate school loans you have.

• The definition of discretionary income is different which allows you to pay less per month. Under the old REPAYE plan, the PAYE plan, and the IBR plan the amount you pay per month is your adjusted gross income (AGI) minus 150% of the poverty line for your state and family size. Under the new SAVE plan it is different. With SAVE you pay your AGI minus 225% of the poverty line for your state and family size. This difference allows more of your income to be protected from the student loan calculation resulting in a lower monthly payment. In other words paying 10% of your discretionary income in the SAVE plan will result in a lower monthly payment than paying 10% of your discretionary income in any other plan because the definition of discretionary income in the SAVE plan is different in a way that favors the borrower.

• No unpaid interest gets added to your loan balance. This means that any interest accruing on your loans that isn't covered by your monthly payment will be automatically forgiven. If you’re like most physicians who graduate medical school with around $200,000 in student loans, it’s very likely that your income-driven payments in residency will not even cover the interest that is accruing on your loans. Enrolling in the SAVE plan will prevent that unpaid interest from being added to your loan balance. For example, let's say your monthly payments over the year add up to $5,000 but you have $20,000 in interest being added to your loans each year. This means you have $20,000 in interest minus $5,000 in payments which leaves $15,000 in unpaid interest each year. Under most repayments plans, that unpaid interest would be added to your loan balance causing the amount you owe to increase. Under the SAVE plan, that is not the case. The $15,000 of unpaid interest that wasn't covered by your monthly payments will be automatically forgiven.

• You have the ability to exclude your spouse's income, if you file your taxes separately. Under the old REPAYE plan, you could not exclude your spouse's income when calculating your student loan payment. With the new SAVE plan, you can. As long as you and your spouse file your taxes "married filing separately" instead of "married filing jointly" you have the ability to exclude his/her income from consideration when determining your monthly student loan payment.

7. Who should consider enrolling in Pay-As-You-Earn (PAYE) or Income-Based-Repayment (IBR)?

The SAVE plan is the best option for most people. However, there are 2 advantages of PAYE and IBR that some people may benefit from.

1) The payment cap. PAYE and IBR will cap your payments at the standard 10-year repayment plan level even as your income rises. This means you will pay payments that are either 10% of your discretionary income OR...whatever your payment would be if you enrolled in standard 10-year repayment plan, whichever one is lowest. This may benefit some highly paid physicians who don't want to make payments based on their income and would rather make payments based off the standard 10-year repayment plan. The higher your salary and the lower your student loan balance the greater chance you may benefit from being in PAYE or IBR. Look on the federal website for their payment estimator to see whether PAYE or IBR could save you money.

2) An earlier timeline for IDR Forgiveness. The other advantage of PAYE or IBR is that you have a chance to get your student loans forgiven in 20 years instead of 25 years. Although some people enroll in other student loan forgiveness plans like Public Service Loan Forgiveness (PSLF) which will forgive their loans after making 10 years of qualifying payments, not everyone qualifies for that program. If you do not qualify for PSLF, you are still eligible for the default Income driven repayment forgiveness. With this program, your loans will be forgiven after making 20-25 years of qualifying payments. Everyone in the PAYE plan and many people in the IBR plan will have their loans forgiven in 20 years (instead of 25 years) under this default income driven repayment forgiveness program. Those enrolled in the SAVE plan will have to make 25 years of qualifying payments. There is no forgiveness in 20 years under the SAVE plan.

Of note, PAYE and IBR are very similar. Those who do not qualify for PAYE may want to consider the IBR plan. PAYE plan is being phased out over time. A person should consider PAYE or IBR if they are not going for PSLF and would benefit from making payments based on the standard 10-year repayment plan instead of making payments that are 10% to 15% of their discretionary income. Be aware that the PAYE plan is being phased out over the next couple years.

8. What the heck is Income Contingent Repayment (ICR) and who should enroll in that one?

Income contingent repayment (ICR) is a type of income-driven repayment plan for those with Parent PLUS loans. People with these loans are those who took out student loans on behalf of their kids to help their kids pay for college. My point? This plan is only for those who have Parent PLUS loans. If you aren't sure, check your loan type on the federal student loan website.   

9. Can you change from one student loan repayment plan to another?

Yes. Oftentimes people may choose one of the income-driven repayment plans after they graduate from school, but then change to another type of plan as their salary increases or their life circumstances change. For example, a recent graduate might choose to enroll in SAVE for a few years to enjoy the benefits of the government interest subsidy, then change into PAYE if their income skyrockets so that there is a cap to place on how high their payments can be. Switching was much more common when the old REPAYE plan was in place. Now that there is the new SAVE plan much fewer people need to switch plans but it is still possible.