Is Public Service Loan Forgiveness Too Good to Be True?


The program that promised to reduce doctors’ student debt is falling short

The median cost of attending a four-year public medical school is more than $240,000. Private medical school fees can exceed $340,000, according to the Association of American Medical Colleges (AAMC). Most medical students rely heavily on financial aid to fund their education. The median education debt for new med school grads is $180,000, with 14 percent of graduates starting their residency owing $300,000 or more.

What if there was a way to have those whopping student loans forgiven? The government’s Public Service Loan Forgiveness (PSLF) program sounded like the answer to many new doctors’ prayers. But it seems like it might be too good to be true.

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What counts as ‘qualifying’

PSLF is complicated. According to the AAMC website, “The program provides forgiveness for the remaining balance (principal and interest) on eligible Direct Loans after the borrower completes 120 on-time, qualifying monthly payments (made after October 1, 2007) while working in a qualifying public service position.” The website details which loans are eligible, and spells out the other requirements.

PSLF’s “qualifying public service employment” requirement disqualifies the approximately 70 percent of doctors who work in the private sector.

So what counts as “qualifying public service employment” for doctors? This may include work at qualifying medical schools and teaching hospitals, employment with AmeriCorps or Peace Corps, military service, public health, public safety, and other types of employment in 501(c)(3) non-profit organizations, government organizations, and/or other not-for-profit organizations that provide certain types of qualifying public service, explains the AAMC. For more details, visit the Federal Student Aid website.

The employment requirement alone disqualifies the roughly 70 percent of doctors who work in the private sector, according to Scott Snider, a Florida-based financial planner who created the Physician’s Guide to Public Service Loan Forgiveness.

Why you should understand PSLF anyway

In September, the Department of Education reported that it had rejected more than 99 percent of all PSLF applications submitted through the end of June. Of the approximately 30,000 applications reviewed, just under 300 were approved, and only 96 people actually completed the process of having their loans forgiven.

Even though 99 percent of PSLF applications have been rejected, understanding the program can give you leverage when negotiating jobs and salary.

So why bother, if the process is so laborious and such a long shot? Well, for one thing, understanding PSLF helps you evaluate your career options—whether to work at a private vs. non-profit hospital, for instance—and may also give you leverage when it comes to negotiating salary and bonuses, according to Snider.

“It is especially important to evaluate your debt savings vs. compensation offers before you become an attending and agree to sign the dotted line. Doing so gives you negotiating power and either maximizes your gross income and bonuses or reduces your overall debt burden,” he wrote.

He adds that the more you owe, the more of a difference PSLF makes. So if you’re among those that owe $300,000 or more, it may make sense to explore PSLF.

How reducing medical student debt helps health care

Unfortunately, the high cost of medical school and the resulting debt has an impact on the public and the U.S. health care system overall. Health care spending has now reached $3.3 trillion annually, reports CMS, and the growing primary-care doctor shortage is well documented.

A bigger problem than medical students choosing more lucrative specialties over primary care because of debt concerns is that “the prospect of piling up debt deters students of modest means from even considering medical school,” wrote Arthur L. Kellermann, M.D., and Aaron Saguil, M.D., on the Health Affairs blog.

And this trend  has an impact on diversity, say the authors. We’ve written before about why diversity matters in health care. Minority populations in the U.S. are rapidly increasing, and minority doctors tend to be the ones who treat minority patients. A national survey revealed that although black physicians make up only four percent of the physician workforce, they care for more than 20 percent of black patients in the U.S., reported the journal Health Affairs. There are also benefits to practices that recruit and employ minority staff.

For more on this topic, see Why Diversity Matters in Your Practice.

Dr. Kellermann and Dr. Saguil are the Dean and Associate Dean, respectively, for recruitment and admissions at the Hébert School of Medicine at the Uniformed Services University of the Health Sciences, in Bethesda, Md., the only medical school in the U.S. that offers a tuition-free education in exchange for national service. They believe that the solution to many of health care’s issues lies in reducing medical student debt.

They wrote, “Expanding the number and range of national service scholarships would not only enable more students of modest means to become doctors; it could improve Americans’ access to care, reduce health care costs, and help more families pursue the American Dream.”

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