Loan Forgiveness for 10 years of public sector work?

BobA · Apr 4, 2009

I just read about this in the General Residency forum. It's a program that will forgive federal loans after 10 years of payments under the income based repayment plan if one works in the public sector at least 30hrs/wk(including non-profits, gov, peace corps).

http://www.ibrinfo.org/what.vp.html

I am wondering what the working conditions of psychiatry jobs at non-profit or government (State hospital) are like and how they pay compared to private practice.

I guess I have an underlying assumption that most psych jobs are at non-profits and so most would qualify.

I have an inclination to work with severe persistent mental illness, anyway, and it seems like I might end up in a job that would allow me to qualify for the program. I was just wondering what people thought.

Doc Samson · Apr 4, 2009

Based on the inclusion criteria listed:

are employed by the federal government, a state government, local government, or tribal government (this includes the military and public schools and colleges);

Seems like working for a state university (regardless of scope of practice) would fit.

BobA · Apr 4, 2009

Doc Samson said:
Based on the inclusion criteria listed:

are employed by the federal government, a state government, local government, or tribal government (this includes the military and public schools and colleges);

Seems like working for a state university (regardless of scope of practice) would fit.

It seems like even an non-profit hospital would fit. Does anyone know more about this?

masterofmonkeys · Apr 4, 2009

Someone from the AAMC came and talked to us about this. They said our time in residency definitely counts (for me that's at least 5 and likely 6 years). And that academic hospitals definitely count. From reading on the web, the nonprofit thing is more up for debate.

And remember that even though a lot of private hospitals are nonprofit, they often are served by doctors groups which aren't themselves nonprofit. So you wouldn't necessarily be unless you were hospital employee.

For a person going into academic medicine, this deal sounds almsot too good to be true since you wouldn't even have to fully pay back your original principal, let alone interest.

For me the major issue is that you don't apply for this program until you've already spent 10 years doing public sector work. I do not want to have put in ten years on IBR only to find out 'oh hey, we were just joking.' And me saying 'wooh! thanks for all the interest accumulation'

Because if it weren't for this, I'd be doing the full 10 year repayment plan.

notdeadyet · Apr 4, 2009

Unless I'm reading this wrong, I'm pretty underwhelmed.

According to my read of the language, the Public Service Loan Forgiveness says that "The program will forgive remaining federal student loan debt after 10 years of eligible employment and qualifying payments." [emphasis mine]

I used their IBR calculator to find out what qualifying payments would be. I used the following parameters:

Married person making $40k/year (residency) with a wife making $30k/year (my wife's a teacher, god love her), $200K of student loans with an interest of 6.5%. Based on this, monthly payments are $600/month.

Then I did the same parameters with making $140k/year (attending) and the monthly payments went up to $1,850/month.

So based on my math, for the 10 years you need to pay into it, 4 as a resident and 6 as an attending, you're paying a total of $139K. And that total number rises considerably if you're planning on earning more than $140k/year. Also, when I plugged in $180k/year as an attending, the calculator said I didn't qualify for the program at all.

This program is a great thing for someone working as a social worker, but for physician salaries, it might give some savings, but it has diminishing value based on salary. And I'm extremely reluctant to do financial planning based on the hope that a program in place now will still be in place in 10 years time.

masterofmonkeys · Apr 4, 2009

notdeadyet said:
Unless I'm reading this wrong, I'm pretty underwhelmed.

According to my read of the language, the Public Service Loan Forgiveness says that "The program will forgive remaining federal student loan debt after 10 years of eligible employment and qualifying payments." [emphasis mine]

I used their IBR calculator to find out what qualifying payments would be. I used the following parameters:

Married person making $40k/year (residency) with a wife making $30k/year (my wife's a teacher, god love her), $200K of student loans with an interest of 6.5%. Based on this, monthly payments are $600/month.

You can file separately which'll reduce monthly payments.

Then I did the same parameters with making $140k/year (attending) and the monthly payments went up to $1,850/month.

So based on my math, for the 10 years you need to pay into it, 4 as a resident and 6 as an attending, you're paying a total of $139K. And that total number rises considerably if you're planning on earning more than $140k/year. Also, when I plugged in $180k/year as an attending, the calculator said I didn't qualify for the program at all.

You would have to pay the full amount if you made 180k but you would still qualify for loan forgiveness if your job qualified

This program is a great thing for someone working as a social worker, but for physician salaries, it might give some savings, but it has diminishing value based on salary.

True, but no matter how you slice it, with IBR during residency (and as an early attending) you end up paying a LOT less than you would if you did a 10 year payment in full plan.

The savings are significant, period. Most wouldn't even have to pay back their principal. When total amount paid is double or more the amount of loans we actually take out for most people, I consider that pretty significant.

Better for social workers? Yeah, but saving a 100k is hardly something to be sneezed at.

And I'm extremely reluctant to do financial planning based on the hope that a program in place now will still be in place in 10 years time.

To me this is the real issue. I do not want to deal with the extra accumulated interest from going IBR for several years if I end up not qualifying or if they take the program away.

notdeadyet · Apr 4, 2009

masterofmonkeys said:
You can file separately which'll reduce monthly payments.

Are you sure that matters? Filing status doesn't usually factor in for federal financial aid computations. Whether my wife and I file jointly has zero effect on FAFSA or other need-based programs. This looks need-based to me. I'd be surprised if filing status had any effect.

masterofmonkeys said:
True, but no matter how you slice it, with IBR during residency (and as an early attending) you end up paying a LOT less than you would if you did a 10 year payment in full plan.

By my math, it depends entirely on how much money you make. If you earn a good attending salary, it doesn't hold nearly as much value.

By the IBR calculations, everyone pays less during residency years. But by IBR calculations for attending salaries, you pay comparable rates (or even more, I haven't crunched the numbers). $1850/month is a fair size loan repayment for each month, and that's assuming earning $140k/year. Many attendings will make more than that.

masterofmonkeys said:
The savings are significant, period. Most wouldn't even have to pay back their principal.

If you're paying off $1850/month, you're not paying off just interest.

masterofmonkeys said:
Better for social workers? Yeah, but saving a 100k is hardly something to be sneezed at.

I saw a $28K savings for the numbers I used, and my numbers assumed higher than average debt and lower than average pay. Interest taken into account would bump the $28K savings up somewhat, but too terribly dramatically.

There might be situations where someone saves $100K, but they'd need to assume a huge student loan and very low pay for 10 years. If folks have a lower loan and higher paycheck, their savings is going to be even less than the $28K savings I calcualted.

This thing will be a godsend to some and a slight help to others.

masterofmonkeys said:
To me this is the real issue. I do not want to deal with the extra accumulated interest from going IBR for several years if I end up not qualifying or if they take the program away.

You and me both. And in the days of belt-tightening and the general publics movement of irritation with higher wage earners, this is exactly the sort of program that will have some loopholes closed.

Based on the way they're using numbers, I have a hunch this program was designed for folks who had to go through expensive training programs to get low paying jobs to help the less fortunate. I doubt it was intended to help folks who are anticipating $150K/year paychecks after graduation.

If there were rounds of budget cuts going, I'd anticipate this on the chopping block long before school lunches, and rightfully so. Medicine has a low student loan default rate, physicians have a low bankruptcy rate, and medical school applications have never been more competitive. We're hardly not exactly an industry in need of this lifeline.

masterofmonkeys · Apr 4, 2009

notdeadyet said:
Are you sure that matters? Filing status doesn't usually factor in for federal financial aid computations. Whether my wife and I file jointly has zero effect on FAFSA or other need-based programs. This looks need-based to me. I'd be surprised if filing status had any effect.

For the purposes of IBR it does. This is because if a married couple each had loans and filed as a househould. They would EACH have to pay 15% of household income back. Or 30% of household income.

Now obviously if you file separately you lose out on deductions etc. No idea how it ends up balancing out.

By my math, it depends entirely on how much money you make. If you earn a good attending salary, it doesn't hold nearly as much value.

By the IBR calculations, everyone pays less during residency years. But by IBR calculations for attending salaries, you pay comparable rates (or even more, I haven't crunched the numbers). $1850/month is a fair size loan repayment for each month, and that's assuming earning $140k/year. Many attendings will make more than that.

Under IBR, once you start making too much, you pay what you would in a traditional 10 year repayment plan. But the point is for the 4 or more years of training you do, under IBR you will be paying a fraction of a 'full' payment. Followed by 6 or less years of paying in 'full'.

I saw a $28K savings for the numbers I used, and my numbers assumed higher than average debt and lower than average pay. Interest taken into account would bump the $28K savings up somewhat, but too terribly dramatically.

http://www.aamc.org/advocacy/library/educ/ccraaimpact.pdf

They had a better link somewhere but I can't find it now.

For 140k in loans, a 10 year repayment would result in paying 220k total.

As a resident, making an assumption of an average 50,000 income, you would be paying about 5500 a year for four years. Then the full 1800ish monthly payment or 22000ish for 6 years. Which brings me to a rough total of 154000. Significantly less than 220k.

Me, training for probably 6 years, I'll see even greater savings.

You and me both. And in the days of belt-tightening and the general publics movement of irritation with higher wage earners, this is exactly the sort of program that will have some loopholes closed.

Based on the way they're using numbers, I have a hunch this program was designed for folks who had to go through expensive training programs to get low paying jobs to help the less fortunate. I doubt it was intended to help folks who are anticipating $150K/year paychecks after graduation.

If there were rounds of budget cuts going, I'd anticipate this on the chopping block long before school lunches, and rightfully so. Medicine has a low student loan default rate, physicians have a low bankruptcy rate, and medical school applications have never been more competitive. We're hardly not exactly an industry in need of this lifeline.

Oh I agree. I hardly need this and was planning on doing standard repayment. That said, i wouldn't turn away from a good deal if I really thought it was the real deal.

I know some guys planning to do interventional cards and spine that are champing at the bit for this. 8 years of training, spend two years in academics, pay somewhere around 100k on 180k worth of loans, and then make half a mill a year after that.

Probably was not meant to help out people like that lol.

EDIT: here's the good link
http://www.aamc.org/programs/first/pha/repayment_examples.pdf

notdeadyet · Apr 4, 2009

masterofmonkeys said:
For the purposes of IBR it does.

Huh. Live and learn. It'll be interesting seeing how the tax implications weigh against the IBR stuff.

masterofmonkeys said:
Under IBR, once you start making too much, you pay what you would in a traditional 10 year repayment plan. But the point is for the 4 or more years of training you do, under IBR you will be paying a fraction of a 'full' payment. Followed by 6 or less years of paying in 'full'.

Ah, I see. So a way of looking at it for (ahem) those of us less than accountant-inclined is to see it as basically a plan where you pay significantly less during residency.

masterofmonkeys said:
Oh I agree. I hardly need this and was planning on doing standard repayment. That said, i wouldn't turn away from a good deal if I really thought it was the real deal.

Smart move. Do whatever you can to save as much money as you can then donate your savings to a better run charity than the U.S. government.

slants · Aug 22, 2009

http://www.aamc.org/programs/first/training/mdeconomics.htm

Watching this video pretty much sums it up.

j48seconds · Aug 23, 2009

the only thing left to mention is that currently, the government can tax u on your loan forgiveness amount.

masterofmonkeys · Aug 25, 2009

j48seconds said:
the only thing left to mention is that currently, the government can tax u on your loan forgiveness amount.

Yes, good call. This will reduce savings by about 40%. Or possibly a lot more, given the 'tax everyone who's productive' mentality currently being floated. You'll still save though. but you'll need to plan prudently to pay an extra 30 or50k in taxes one year. Could be a deal-breaker for some.

MedMan25 · Sep 14, 2010

masterofmonkeys said:
Yes, good call. This will reduce savings by about 40%. Or possibly a lot more, given the 'tax everyone who's productive' mentality currently being floated. You'll still save though. but you'll need to plan prudently to pay an extra 30 or50k in taxes one year. Could be a deal-breaker for some.

Currently the forgiven amount is tax-free

SomeDoc · Apr 8, 2013

Any ideas on what annual salaries one can expect from the public sector? around 150k?

SomeDoc · Apr 8, 2013

masterofmonkeys said:
I know some guys planning to do interventional cards and spine that are champing at the bit for this. 8 years of training, spend two years in academics, pay somewhere around 100k on 180k worth of loans, and then make half a mill a year after that.

I would say that it is a fair use of the system. Residents and fellows provide valuable services to their respective communities, and to healthcare organizations (who benefit from cheap resident labor), and work under the supervision of attendings, assuring that quality standards are met. It's not entirely alien a concept to think that the services (psych, cards, IM, or what have you) provided at teaching hospitals surpass the quality seen at some privately owned community hospitals, staffed purely by attendings.

BobA · Apr 8, 2013

SomeDoc said:
Any ideas on what annual salaries one can expect from the public sector? around 150k?

Just for psychiatry this can vary wildly from some low-ball academic places that pay 90K to some good VA jobs that pay >200K.

mkeguy · Apr 10, 2013

you have to assume this program will be around in ten years, which i dont. it wasnt intended for doctors and id rather pay it off myself early and not risk being left holding the bag. the doctors who really stand to benefit from this are surgeons who spend seven years in IBR and then pay three years of minimums.

SomeDoc · Apr 10, 2013

mkeguy said:
you have to assume this program will be around in ten years, which i dont. it wasnt intended for doctors and id rather pay it off myself early and not risk being left holding the bag. the doctors who really stand to benefit from this are surgeons who spend seven years in IBR and then pay three years of minimums.

I agree, that's the scary part of this program- there's no guarantee.

Doctor Bagel · Apr 11, 2013

mkeguy said:
you have to assume this program will be around in ten years, which i dont. it wasnt intended for doctors and id rather pay it off myself early and not risk being left holding the bag. the doctors who really stand to benefit from this are surgeons who spend seven years in IBR and then pay three years of minimums.

That really is a question. To date, though, it's survived longer than many at SDN anticipated, and the risk of participating in the program is fairly small for most of us who probably wouldn't already be paying huge payments on our debt. I had been doing the income-based repayment but think I'm going to switch to forbearance because I'm hoping I'll be in private practice before this ten year period ends. I think psychiatrists are the one group of physicians where individual private practices remain a viable option, while most other physicians by default are going to work for a non-profit hospital, making this a little less beneficial for a lot of us.

notdeadyet · Apr 11, 2013

Doctor Bagel said:
That really is a question. To date, though, it's survived longer than many at SDN anticipated,

I doubt anyone on SDN anticipated there being an uproar about it just yet. Wait until docs making $200K/year start wiping out $200K in student loans. That's when the cautious among us expect this program to go on the chopping block.

Doctor Bagel · Apr 11, 2013

notdeadyet said:
I doubt anyone on SDN anticipated there being an uproar about it just yet. Wait until docs making $200K/year start wiping out $200K in student loans. That's when the cautious among us expect this program to go on the chopping block.

Still, though, the risk of participating in pretty small, and the payoff could be huge. If I weren't interested in doing work that I can't do for a bigger system, I'd stick with the program. And uproar only happens if someone hears about it -- we could slide under the radar. 😉

notdeadyet · Apr 11, 2013

Doctor Bagel said:
Still, though, the risk of participating in pretty small, and the payoff could be huge.

I agree. I'm doing IBR regardless because it makes sense financially as I potentially have other loan repayment options; for a lot of residents, IBR is just a way to not live purely on ramen and the like. I think the big decision point for me is whether or not the PSLF will affect my career path in terms of who I will work for or what kind of work I will do. I doubt it, but I'm more interested in public psychiatry anyway so it's pretty moot.

Interesting days ahead regardless...

Loan Forgiveness for 10 years of public sector work?

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