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Public Service Loan Forgiveness? What's the consensus?

Dro133

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Am I better off paying off my loans as soon as possible or enrolling in the PSLF program once it's done? I have heard/read mixed things, a lot of doom and gloom, but wasn't sure what the status was in recent years.
The doom and gloom around the program was mostly due to the first wave of applicants, who were mostly denied for either not having the right type of loans to qualify for the program or not fulfilling all of the criteria (e.g. working for the right type of employer). By all accounts, if you're detail-oriented enough to make sure you're meeting all the criteria and submitting the necessary paperwork, it's a successful program. Head over to the PSLF subreddit for some success stories.

The important thing about PSLF is that you don't enroll in it, per se. If you're enrolled in one of the federal repayment programs, such as IBR, PAYE, or REPAYE, and you're working for an eligible employer (which most academic programs are) and making your minimum payments, then you're making payments that are eligible for PSLF.

If you don't know for a fact that you want to go into private practice as an attending, the smart choice is to keep your options open for PSLF. That means enrolling in the proper repayment program and doing the yearly employment certifications. Then once it's time to look for a job, you can decide based on your career goals whether it makes sense to go for PSLF or aggressively pay down your loans. You lose nothing by staying eligible for PSLF during your training, so it makes sense to keep your options open.

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bananafish94

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I'm definitely doing PSLF. It makes a lot of sense for me because I'm entering into a relatively long training period and if I do a fellowship at an academic center that's a 501c3 organization (which is pretty much all of them, I think?) I only have to make a couple more years of payments as an attending. It's by far the cheapest option for me. As long as you stay on top of the paperwork I don't see any major downsides. Some worry that the government could take it away but even if they did it's in the promissory note for our loans so we should all be grandfathered in.
 
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jhmmd

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Pertaining to being grandfathered in: It doesn't matter what's in writing. It comes down to what you would rather do at the end of the day...if you're all about volunteering your time I would pick PSLF, but it's a risky option, bottom line. So be careful. o_O
 

ciestar

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Pertaining to being grandfathered in: It doesn't matter what's in writing. It comes down to what you would rather do at the end of the day...if you're all about volunteering your time I would pick PSLF, but it's a risky option, bottom line. So be careful. o_O
Risky how? If it doesnt come through.. i just finish what i need to through PAYE and pay the tax on what’s left
 
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akinetopsia

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Pertaining to being grandfathered in: It doesn't matter what's in writing. It comes down to what you would rather do at the end of the day...if you're all about volunteering your time I would pick PSLF, but it's a risky option, bottom line. So be careful. o_O

Actually, it does matter that it's in writing. The MPN for borrowers includes PSLF. There are also a lot of lawyers out there who will likely be pursuing PSLF. It's unlikely that PSLF will go away for those who have already signed MPNs and have been "grandfathered" in even if an act of Congress removes PSLF from MPNs and as a repayment option. That would affect new borrowers. Regarding the lawyers going for PSLF: that's a potential class-action lawsuit if is abolished. I'm not sure picking a legal fight with a class of lawyers is worthwhile for the government on the basis of "the express loan terms; the implied contractual covenant of good faith and fair dealing; promissory estoppel; and unconscionability (Could the Benefits of the Public Service Loan Forgiveness Program Be Retroactively Curtailed? by Gregory S. Crespi :: SSRN)."
 
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akinetopsia

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I’ll take my financial advice from the CFAs and CFPs Ive talked to, thanks.

100%!

Yeah it's called personal finance for a reason. A lot of it depends on your debt-to-income ratio, and your specialty. Someone pursuing ortho with a low debt-to-income ratio is very different from someone pursuing pediatric infectious diseases with a very high debt-to-income ratio at the end of residency+fellowship.

Thankfully there are a lot of good financial podcasts out there too, including WCI & Financial Residency.
 
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echidna001

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The financial department at my school seemed very convinced that public service loan forgiveness is the best option for some people (lower income specialties, more time in residency/fellowship, want to work in academics). I voiced my concerns over this program disappearing or being denied forgiveness and they felt my concerns were unfounded. I was told the most likely "worst case scenario" would be a modification of the program that puts a cap on the amount of forgiveness given, but this wouldn't affect people who already borrowed. Getting rid of public service loan forgiveness altogether has been unpopular and hasn't passed in the past. I highly doubt cutting public service loan forgiveness would be favored after this pandemic. They also gave me very specific consolidation instructions to make sure all my loans are direct federal loans and with the right servicer (only one works with PSLF).

I HATE the idea of hanging onto loans for 10 years and making minimum monthly payments. My original major was in economics and watching interest accrue makes me cringe. But I'm trying to trust the numbers. I could either pay aggressively once I finish residency by continuing to live on $50,000 a year and pay > $250,000 but be done in 6-8 years total. Or, I could pay 10% of my income for 10 years and pay around $150,000 while being able to save for retirement and buy a house. At least we have 3 years of residency when we can't pay aggressively anyway to figure this out. Certainly doesn't hurt to get set up for PSLF and reassess in the future.
 
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mvenus929

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I would be careful with the idea that most academic physicians are employed by non-profit organizations, because it's less true than you might think. UVA, for instance, has a private group that employs and self-insures the attendings. Same for my residency program. Many EM docs are contracted to the hospital and paid by a for-profit entity.

So to answer your question--it depends. And you likely won't know how much it depends until you're finished with residency and/or fellowship. Though some residencies are at for-profit hospitals, so it may be an issue sooner than you think.
 

medschoolzombie

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I HATE the idea of hanging onto loans for 10 years and making minimum monthly payments. My original major was in economics and watching interest accrue makes me cringe. But I'm trying to trust the numbers. I could either pay aggressively once I finish residency by continuing to live on $50,000 a year and pay > $250,000 but be done in 6-8 years total. Or, I could pay 10% of my income for 10 years and pay around $150,000 while being able to save for retirement and buy a house. At least we have 3 years of residency when we can't pay aggressively anyway to figure this out. Certainly doesn't hurt to get set up for PSLF and reassess in the future.
The program is great for people who are ok with working for a hospital system for the next decade. Most private practice entities don’t qualify which is something a lot of people forget about

Also don’t forget that as a high income earner you have higher tax rates as well. Depending on your location and personal life, that could end up being a third of your income gone already. Then there’s malpractice insurance, retirement investments (which you should do) etc that all need to be accounted for. I’d say the frugal lifestyle could still net you over 100k a year towards the loans but life does get in the way
 
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PierreMD

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Oh
My
Goodness

How little do I have to put down? and how little can I pay a month? are sure paths to being broke Your whole life.

I’ll take my financial advice from the CFAs and CFPs Ive talked to, thanks.

I agree most of the time those 2 paths do lead straight to financial hell. But in this case, federal repayment can be mathematically favorable for people, even without PSLF, even in higher paying specialties. Just gotta do the math. That said, for people doing IDR without PSLF, there is the issues of not being disciplined enough to save up for the tax bomb and the potential psychological stress of being in debt for so long. Some people just hate debt and would benefit by living like a resident for a few more years and aggressively paying off debt. You certainly can't go wrong with aggressive repayment.

A word about financial advisors: the vast majority of personal finance is something we can do on our own. All the info we need is out available for free; we just gotta buckle down and learn. No one will look after your money like you will.
 
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ciestar

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In most cases, those 2 paths do lead straight to financial hell. But in this specific case, federal repayment can be mathematically favorable for people, even without PSLF.

That said, there is the issues of not being disciplined enough to save up for the tax bomb and the potential psychological stress of being in debt for so long. Some people just hate debt and would benefit by living like a resident for a few more years and aggressively paying off debt.

A word about financial advisors: the vast majority of personal finance is something we can do on our own. All the info we need is out available for free; we just gotta buckle down and learn. Believe me, no one will look after your money like you will.
Well, im married to one. Sooo, he also has a vested interest in all of this. I’ll be fine.
 
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PierreMD

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In all seriousness, we put away more than we spend, and the “tax bomb” funds have been put away for years now.

That's fantastic! Sadly, most Americans do not save nearly enough, and physicians are not immune to this trend.

More on topic, I think it's pretty unlikely PSLF will be axed, and even less likely there wouldn't be a grandfathering. For those considering PSLF, you don't have to choose until you graduate residency and by then you'd know if your employer was gov/501c3 or not. If not, then you can choose to stick with IDR or refinance. If you do end up going for PSLF, just make sure to document all 120 payments and fill out the forms carefully.
 
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bananafish94

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People get so weird about PSLF and loan repayment. I understand that some people are really into the "FIRE" lifestyle and aggressive saving and paying everything down immediately. That's fine but one strategy isn't going to be the best fit for everyone. I'm doing PSLF because it aligns well with my professional goals and is also by far the cheapest plan. And I also like to buy a coffee at a coffee shop every once in awhile, sue me.
 
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mvenus929

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That said, there is the issues of not being disciplined enough to save up for the tax bomb and the potential psychological stress of being in debt for so long.

Just to clarify, there is no tax bomb with PSLF. Your loans are outright forgiven. However, if you hang on to your loans because you aren't working for a qualifying employer and pay under IBR/PAYE/REPAYE, etc, then the forgiveness after 20/25 years under those plans is taxable. If you're thinking about holding onto your loans for that long, you should refinance to at least get a better interest rate.
 
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PierreMD

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Just to clarify, there is no tax bomb with PSLF. Your loans are outright forgiven. However, if you hang on to your loans because you aren't working for a qualifying employer and pay under IBR/PAYE/REPAYE, etc, then the forgiveness after 20/25 years under those plans is taxable. If you're thinking about holding onto your loans for that long, you should refinance to at least get a better interest rate.

Yup. I was talking about federal repayment without PSLF. I'll edit to be more clear.
 

mehc012

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Just to clarify, there is no tax bomb with PSLF. Your loans are outright forgiven. However, if you hang on to your loans because you aren't working for a qualifying employer and pay under IBR/PAYE/REPAYE, etc, then the forgiveness after 20/25 years under those plans is taxable. If you're thinking about holding onto your loans for that long, you should refinance to at least get a better interest rate.
If you refinance, does it reset the 20yrs of qualifying payments for PAYE/IBR? Because my plan is PSLF, but I did the math and even if I end up going the PAYE route because I somehow eff up the PSLF reqs or they cancel it as everyone worries about, I still come out ahead with that route. Basically, there is enough drama around PSLF that I wanted to make sure to calculate the worst-case scenario if I make minimum payments anticipating PSLF and then get screwed out of it.
 

medstud56

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I'll have around 300k in loans from med school + UG. Plan to be a hospitalist in CA.
I'm planning on paying as aggressively as I can, while still saving for a downpayment/buying a condo eventually, but still enrolling in PSLF just in case I have some loans left to pay after 10 years (which , realistically, I may have)

I do think paying the minimum to maximize your forgiveness is pretty risky.
Some people on this forum seem to think you can pay off this amount in 4-5 years. Crunch the numbers, its MUCH easier said than done.
 

mehc012

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I'll have around 300k in loans from med school + UG. Plan to be a hospitalist in CA.
I'm planning on paying as aggressively as I can, while still saving for a downpayment/buying a condo eventually, but still enrolling in PSLF just in case I have some loans left to pay after 10 years (which , realistically, I may have)

I do think paying the minimum to maximize your forgiveness is pretty risky.
Some people on this forum seem to think you can pay off this amount in 4-5 years. Crunch the numbers, its MUCH easier said than done.
I'll have almost $400k just from med school alone. Residency is likely to be 7yrs, plus a prelim year because I didn't match, plus potentially a fellowship...
It'd almost be foolish of me NOT to try for PSLF. By the time I'm able to pay much more than the minimum, it'll be forgiveness time anyway.
 
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medstud56

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I'll have almost $400k just from med school alone. Residency is likely to be 7yrs, plus a prelim year because I didn't match, plus potentially a fellowship...
It'd almost be foolish of me NOT to try for PSLF. By the time I'm able to pay much more than the minimum, it'll be forgiveness time anyway.

Wow are you doing Neurosurgery?
I agree , in your situation that totally makes sense .
 
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PierreMD

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If you refinance, does it reset the 20yrs of qualifying payments for PAYE/IBR? Because my plan is PSLF, but I did the math and even if I end up going the PAYE route because I somehow eff up the PSLF reqs or they cancel it as everyone worries about, I still come out ahead with that route. Basically, there is enough drama around PSLF that I wanted to make sure to calculate the worst-case scenario if I make minimum payments anticipating PSLF and then get screwed out of it.

If you refinance, you are converting your federal loans into private ones. PSLF/IDR loan forgiveness are only available for federal IDR plans. IFAIK, if you switch between IDR plans (i.e. PAYE to REPAYE), you won't reset the qualifying payments, but your interest will capitalize.
 
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bananafish94

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If you refinance, does it reset the 20yrs of qualifying payments for PAYE/IBR? Because my plan is PSLF, but I did the math and even if I end up going the PAYE route because I somehow eff up the PSLF reqs or they cancel it as everyone worries about, I still come out ahead with that route. Basically, there is enough drama around PSLF that I wanted to make sure to calculate the worst-case scenario if I make minimum payments anticipating PSLF and then get screwed out of it.

As PierreMD mentioned, if you refinance, you're converting your federal loans to private ones, and you lose all the benefits of federal repayment plans, including the forgiveness. But, you often get a much lower interest rate, so it often makes sense to do. If you consolidate, you're making a new loan, and you lose all the qualifying payments for PSLF, but I'm not sure how that impacts the 20-25 year forgiveness.
 

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I would be careful with the idea that most academic physicians are employed by non-profit organizations, because it's less true than you might think. UVA, for instance, has a private group that employs and self-insures the attendings. Same for my residency program. Many EM docs are contracted to the hospital and paid by a for-profit entity.

So to answer your question--it depends. And you likely won't know how much it depends until you're finished with residency and/or fellowship. Though some residencies are at for-profit hospitals, so it may be an issue sooner than you think.
This got a lot of people I know. The structure of their contracts kept getting them, despite their best intentions.

The issue is that the program's definition of 'public service' is bizarre and legalistic. The university group contracted to cover the local for profit hospital's ward? Public servants, need loan forgiveness. The private group contracting to staff the public academic hospital? Greedy capitalists, on their own. Working 4 days per week, full time, at an academic group for 180K/year? Selfless public servant, worthy of our charity. Working for an academic group at 80% time, 4 days/week, 180K/year? Lazy mooch, needs no help. Staffing a non-profit hospital in Nevada? How noble of you, absolutely you need loan forgiveness. Step across the border and contract to staff non-profit hospital in CA, where direct employment of physicians by non-academic hospitals is illegal? Pay your own loans.
 
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NickNaylor

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I graduated medical school with about $150k in debt and made payments while in residency (rather than going into forbearance), which basically prevented interest from building up. I went into academia (started in August) and get $325k gross (mind you, this is working 6 days/week and a couple of nights until 11pm during the week after a full workday). My wife works and makes about $60-70k. I expect that I'll have my loans paid off in 12-15 months and decided to refinance with a private lender for a lower interest rate. In order to do this, I'm paying more than $8k/month to my loans, continuing to forgo a lot of material pleasures (though my wife and I still want for nothing), and being as smart as possible about spending. I still save about 20% of my income each month in retirement/brokerage accounts and have plenty to go around. I mention those things not to brag but to say that I've made choices with the primary goal of paying off my debt as soon as possible. Sure, it would be nice to work a "normal" work week, indulge in all of the things that I want and have been deferring for a long time, and coast on the IBR-determined repayments. But that means that I'll be in my 40s and still paying off these loans. No thanks. Plenty of my peers are taking that approach, and I wish them all the best, but they are going to be shackled to their debt for the foreseeable future with the expectation that it is going to be forgiven. What happens if it isn't for whatever reason? Oops. Enjoy your financial future for the next several years.

I think making any big financial decisions with an expectation that PSLF is going to be there is a bad, bad idea, and I would advise anyone to make decisions with the assumption that these programs will not be in place. Intentionally making bad financial decisions (forbearing loans endlessly, making minimum payments, taking out ridiculous amounts of loans to go to a "top tier" school when cheaper options are available, etc.) with the expectation that the loans will be forgiven is setting you up for badness. If the program is there and you qualify for it, think of it as a bonus. Any other approach is unwise IMO.

There is a lot of doom and gloom about repaying loans, but the reality is that if you don't go nuts with unnecessary nonsense spending and make paying your debt off a priority - in addition to be willing to work harder than what might be expected - you will be able to pay off your loans. It may take a while, and it may suck to see all of that money disappear each month, but it is doable. The only way you will not be able to pay off your loans is if 1) you have a ridiculous amount of debt, 2) there are unusual circumstances in your life which are expensive, and/or 3) you make dumb choices with your spending.
 
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mehc012

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I graduated medical school with about $150k in debt and made payments while in residency (rather than going into forbearance), which basically prevented interest from building up. I went into academia (started in August) and get $325k gross (mind you, this is working 6 days/week and a couple of nights until 11pm during the week after a full workday). My wife works and makes about $60-70k. I expect that I'll have my loans paid off in 12-15 months and decided to refinance with a private lender for a lower interest rate. In order to do this, I'm paying more than $8k/month to my loans, continuing to forgo a lot of material pleasures (though my wife and I still want for nothing), and being as smart as possible about spending. I still save about 20% of my income each month in retirement/brokerage accounts and have plenty to go around. I mention those things not to brag but to say that I've made choices with the primary goal of paying off my debt as soon as possible. Sure, it would be nice to work a "normal" work week, indulge in all of the things that I want and have been deferring for a long time, and coast on the IBR-determined repayments. But that means that I'll be in my 40s and still paying off these loans. No thanks. Plenty of my peers are taking that approach, and I wish them all the best, but they are going to be shackled to their debt for the foreseeable future with the expectation that it is going to be forgiven. What happens if it isn't for whatever reason? Oops. Enjoy your financial future for the next several years.

I think making any big financial decisions with an expectation that PSLF is going to be there is a bad, bad idea, and I would advise anyone to make decisions with the assumption that these programs will not be in place. Intentionally making bad financial decisions (forbearing loans endlessly, making minimum payments, taking out ridiculous amounts of loans to go to a "top tier" school when cheaper options are available, etc.) with the expectation that the loans will be forgiven is setting you up for badness. If the program is there and you qualify for it, think of it as a bonus. Any other approach is unwise IMO.

There is a lot of doom and gloom about repaying loans, but the reality is that if you don't go nuts with unnecessary nonsense spending and make paying your debt off a priority - in addition to be willing to work harder than what might be expected - you will be able to pay off your loans. It may take a while, and it may suck to see all of that money disappear each month, but it is doable. The only way you will not be able to pay off your loans is if 1) you have a ridiculous amount of debt, 2) there are unusual circumstances in your life which are expensive, and/or 3) you make dumb choices with your spending.
That gets a lot harder when the debt is higher, though. I had zero debt from undergrad, but got into only one medical school, with very high tuition. Between that and a cost of living around $17-20k per year - which I don't consider outrageous - and interest accumulating during med school, I'm graduating with close to $400k. My residency will be 5-7yrs, and I intend to pursue fellowship afterwards. I also SOAPed, so I didn't even have the luxury of ranking based on finances. I now live in one of the most expensive cities in the country, and would have to pay $2k/mo to not accrue interest (the more you take out, the more PLUS loans you have at the higher interest rate, too). Doing that for 7-8yrs and then starting to pay off my loans IS possible...but it ends up costing more than making minimum payments for the entire 10yr PAYE repayment period and then paying the interest bomb. So making minimum PAYE payments is my lowest-cost long term strategy with PSLF off the table...and happens to conveniently qualify me for PSLF in 10yrs if it still exists, which would reduce the amount paid by so much that it would be stupid not to apply for it on the off chance that I get it.
 
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