Public Student Loan Forgiveness

[pdouk76]

Hello all,

I'm going to be matriculating into med school this fall and am looking at having just north of 200k in loans by the time that I graduate. I've recently been looking into loan forgiveness, specifically the PSLF which kicks in after 10 years of payments. This looks like a pretty good deal, seeing as to my understanding most hospitals and residencies would fall under this program.. Is that for the most part correct?

Also, payments are made on an income based level so if I did residency and a fellowship, I would be looking at having low monthly payments for nearly the entirety of those 10 years. Is this a good plan going forward? I know President Obama proposed capping the forgiven amount at around 58k, but nothing has yet been set in stone. If anything, I'd hope to be 'grandfathered' into the program by the time I became a PGY1.

Alternatively, I could take out a loan from my university which would have a lower interest rate and with interest that does accrue until I graduate from medical school. However, this loan would not be eligible under the PSLF program. This is why I'm looking at the PSLF as a great way to get a substantial chunk of my debt written off without being taxed on it as well. What do you all think about this and the PSLF in general?

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[SciencePlus]

My school's financial aid office believes that the law will change sometime shortly after summer 2017 once the first group of physicians (and JDs, and PhDs, and ARNPs, etc.) begin claiming the PSLF. Once the press begins publishing that "doctors and lawyers are receiving $100k's free from the government", legislation changing the program is likely to be passed real quickly. Maybe congress will elect for a dollar cap? Maybe the time horizon will be changed to 20 years? Maybe years in residency will be excluded? No one knows how this will change.

I've searched the webz pretty hard looking for any legit legal opinions on the 'grandfathered' aspect. Nothing reputable found. I would guess that the government wrote the original legislation in a way that allows them to modify the program after-the-fact.

Assuming you are grandfathered in on that first loan disbursement, that still leaves 3 years potentially under the new rules if the PSLF structure indeed changes in 2017.

Lower interest rates and no interest accumulation during medical school? I'd take that in a heart beat as long as there still exists the option of IBR during residency.

 

[Mansamusa]

I've searched the webz pretty hard looking for any legit legal opinions on the 'grandfathered' aspect. Nothing reputable found. I would guess that the government wrote the original legislation in a way that allows them to modify the program after-the-fact.
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They did. Our contract specifies that we will pay in accordance to the terms set in the Higher Education Act. The Higher Education Act can get changed whenever the gov't wants and that changes our terms to whatever they desire

OP, I would bet everything I own that PSLF total loan forgiveness will not exist for us as it does now. I would have $600K forgiven. The amount that I pay into the program would be less than what I took out, which would make the whole loan system unsustainable

 

[mvenus929]

First, it Public Service Loan Foregiveness. Not "student".

Second, a lot fewer jobs qualify than you probably think. Currently, residency and fellowship does apply because you are paid by the medical,school or hospital directly. But a lot of physicians in academic centers are not hospital employees... They are contracted from a physicians group to provide services to the hospital, and are actually often paid by a for profit group. That's how the attendings at both my Med school and my residency were paid for the most part.

Third, there are any number of ways they could change the program and still fall within the terms set out by the MPN you sign. The easiest would be to change the definition of a qualifying employer. I wouldn't count on it being around when your loans would be forgiven.

 

[Mansamusa]

First, it Public Service Loan Foregiveness. Not "student".

Second, a lot fewer jobs qualify than you probably think. Currently, residency and fellowship does apply because you are paid by the medical,school or hospital directly. But a lot of physicians in academic centers are not hospital employees... They are contracted from a physicians group to provide services to the hospital, and are actually often paid by a for profit group. That's how the attendings at both my Med school and my residency were paid for the most part.

Third, there are any number of ways they could change the program and still fall within the terms set out by the MPN you sign. The easiest would be to change the definition of a qualifying employer. I wouldn't count on it being around when your loans would be forgiven.

The more expensive schools I interviewed at had the financial aid director talk to us about PSLF and how it means we can take out however much we want and it'll all be forgiven in the end anyways. I wanted to slap them in the face for straight up lying to students who may not know better....but that might have messed up my chances of being accepted.

 

[Redtwogreen]

Super late to the party here @pdouk76 but I'm guessing by now you are a couple of years into med school, which gives you a little more time to think through some of the govts loan forgiveness programs. We (we're a lawyer and a dentist now) have a lot of friends that have gone the IBR or PSLF route and a lot of friends that have gone the "live poor and pay those suckers off asap" route. We are in the latter group, and we have about $550k of combined student loans. If you can really commit to 10 years to qualify for PSLF, its not a bad option. It is a little scary to think that the first people who signed up for the program still won't have their loans forgiven until next year. And like what was mentioned above, I'm sure everyone and their dog is going to be FREAKING out when they hear about docs and lawyers getting hundreds of thousands forgiven. Another thing we considered was our own earning potential. 10 years is a long time. You can make a lot of money in private practice (non govt work). When we crunched our own numbers we figured out that we could pay off our loans faster than the govt could forgive them and we trust ourselves much more than we trust the govt.
As for the university loan, if you are even slightly convinced that you are going to go PSLF I wouldn't do it, and then if you change your mind as you are graduating you can always refinance your loans and get much lower interest rates than govt loans (think like 2.9%-5.5% instead of 6.8%-7.9%) On the other hand, if your school is offering interest rates lower than 5%, maybe you just take the gamble and go for it.