If you work as a pharmacist at a not for profit hospital or community medical center and have student loans, you need to read this article. If that describes you, taking the right actions with your student loans could literally save you up to $100,000 or more. There are probably thousands of pharmacists around the country today working at hospitals who have never thought about how to optimize their pharmacy school loans around the Public Service Loan Forgiveness program (PSLF).
Hospital pharmacists with student loans could be paying a fraction of the cost for their education, but many have no idea how the program works. If you have already borrowed money for pharmacy school and are working at a not for profit hospital and plan to do so for the foreseeable future, I can probably help you save money with a flat fee student loan consult to evaluate your situation.
How Pharmacists at Not for Profit Employers Can Save Money on Pharmacy School Loans
First of all, I need to explain the PSLF program and what you need to know about it. There are three major income driven repayment plans you’d use to get a tax free forgiveness benefit after 10 years: REPAYE, PAYE, and IBR. After 10 years of payments on one of these plans, the remaining balance is forgiven tax free.
This PSLF federal loan forgiveness program applies to more than just pharmacists at hospitals, though that’s the most common case where it applies in the pharmacy world. The PSLF program helps out any pharmacist at a not for profit employer. That includes hospitals but also covers community medical centers, charities, and the like. The savings after 10 years of work are massive compared to paying everything back.
My Pharmacist Friend Helped Me Realize a Ton of Folks Don’t Know About PSLF
I realized how deep the awareness problem is when my good friend from college asked me to take a look at how he was managing his pharmacy school loans. I saw he was paying everything on the 10 year Standard repayment plan, yet he worked at a not for profit employer.
I asked him if he had heard of the PSLF program and how he could make lower payments based on his income and have the rest forgiven in 10 years, and he said he hadn’t heard. I calculated that he already had 3 years of payment credit towards this program, and he only needed another 7 more to qualify.
We switched his payments off of the 10 year Standard Plan that required payments of $1,500 a month to REPAYE, which limited his payments to about $600 a month after he contributes to his pre-tax retirement plan. He’s now on track to save about $100,000 on his pharmacy school loans.
How to Track Progress Towards Forgiveness
Once you find out about PSLF, how do you measure progress? What do you have to do to apply or let the government know you want this benefit? Unfortunately there’s no official application yet, but there is an official way to measure your progress. If you’re a hospital pharmacist, submit the PSLF employment certification form annually to find out how many payments you’ve made that qualify. Better yet, do it every 6 months. This is how you create a paper trail to prove your eligibility in 5-10 years when the official application comes out and you need to verify everything.
I would wager 80% of hospital pharmacists with student loans fail to track their progress towards the Public Service Loan Forgiveness program, which forgives their loans tax free over time.
Pharmacy Residents Need to Stop Using Forbearance and Deferment
Clients have told me that use of forbearance and deferment in pharmacy school residency programs is the norm. That’s a massive mistake that will add thousands in unnecessary interest and payments to your debt.
Doing a low paying residency is a great way to establish some credit towards PSLF. Whether it’s one or two years and followed up with some specialty training or not, paying on REPAYE, PAYE, or IBR during residency will allow you to pay almost nothing and get credit towards PSLF. That reduces your payments when you’re making a real income.
The only reason I can figure why pharmacy residents are using forbearance and deferment is because nobody has helped them come up with a custom student loan strategy. Please spread the word and stop this mistake.
Here’s an Example of How Big PSLF is for Hospital Pharmacists
If you want your own copy of the calculator I’m using below, you can get it here. Let’s assume Jessica and Shane graduate in the same year from pharmacy school in 2017. They both have $150,000 of school loans at a 7% interest rate. Jessica really knows her loan rules and optimizes her situation for PSLF with the REPAYE plan. Shane pays everything back on the 10 year standard repayment program. They start out at $100,000 a year salary, which grows with inflation over the 10 year period. Here are the results:
There You Have It: Hospital Pharmacists Frequently Make Six Figure Student Loan Mistakes
That chart above shows my point. Shane spends well over $100,000 more on his loans compared with Jessica. Did they receive a different educational value? Does Shane get a big medal for doing the traditional get out of debt route? Of course not. Jessica just saved a ton of money compared to Shane and had many thousands a year available for other things besides loans.
Yes we haven’t yet seen the waves of people receiving tax free loan forgiveness on PSLF, but it’s coming and it’s in the loan promissory notes. Congress will have a very difficult time changing the rules for folks who already have the student debt. Pharmacists who are currently practicing or are about to be are my target client group.
If you have been making payments on the IBR or the Standard plan, you’re likely paying more money than you should be on your pharmacy school loans. If you’re on REPAYE or PAYE, you could probably still save money by making sure you’re tracking your progress towards PSLF and reducing your adjusted gross income by contributing to your pre-tax retirement accounts.
Anyhow, now you know. If you have student loans and work as a hospital pharmacist (or any not for profit employer for that matter), make sure you set up your loans for the PSLF program. Your bank account will thank you.
I Can Help You Make a Plan for Pharmacy School Debt
My business model here at Student Loan Planner, LLC is helping graduate professionals conquer huge student loan balances with low cost, flat fee consultations.
I perform a holistic loan analysis with my proprietary simulation tool to see what your best available repayment options are (government, private refinancing, etc). If you are facing a six figure pharmacy student loan burden, I urge you to contact me.