The New PSLF Math for Physicians After the OB3 Act

Most physicians used to be able to count on the Public Service Loan Forgiveness (PSLF) program to cover a large share of their medical school costs. All a physician needed to do was work a few years after training at a not-for-profit or government employer, and the loan balance would be forgiven after 10 total years of repayment on an income-driven repayment (IDR) plan.

After the passage of the One Big Beautiful Bill Act (OB3), the math of PSLF is now totally different. We’ll cover what current and future physicians need to know to pursue the PSLF program.

How PSLF works in 2026 and beyond for existing physicians

The math of PSLF for existing borrowers who are finished borrowing is actually fairly similar to the math of PSLF pre-OB3 passing.

The main difference is that there will be no more Pay As You Earn (PAYE) Plan or Income Contingent Repayment (ICR) Plan after mid-2027. 

After mid-2027, you’ll be choosing between two plans, and which plan to choose depends on when you first borrowed.

Borrowers who have not taken out any loans after July 2026 will be able to choose between the Income-Based Repayment (IBR) Plan and the Repayment Assistance Plan (RAP).

Generally, prospective PSLF borrowers with no loans before July 2014 would be better off on the newer version of IBR, which sets payments at 10% of your income.

If a borrower had loans from before July 2014, the choice is between the older version of IBR (which sets payments at 15% of income) and RAP (which uses 10% of income).

Here’s the key distinction between those two plans: IBR — both the old and new versions — comes with a payment cap, which is roughly 1% of your principal balance (that’s a good approximation of what the Standard Repayment Plan amount would be). RAP does not have a cap.

To see why this matters, consider an example. Say you’re a urologist earning $500,000 a year with $300,000 of student loans. On RAP, your payment would be about $4,000 a month (roughly 10% of income). On IBR, your payment would cap at about $3,000 a month — roughly the amount under the Standard Repayment Plan. Which would you rather pay? It’s clear that, for high earners especially, the cap with IBR can save you a significant amount each month.

The good news is this: physicians who are already pursuing PSLF are not expected to have too much difficulty getting it if they qualify, even after 2026.

How PSLF will work in 2026 and beyond for future physicians

Anyone who is not already enrolled in medical school before July 2026 will be subject to the new loan limits from the OB3 Act.

Those limits cap borrowing at $50,000 per year in federal student loans.

Consider the costs of many medical schools. Living costs are often $20,000 to $40,000 per year, depending on the metro area. Many medical students will need to borrow substantial amounts of private student loans to attend, especially at private universities.

Because of the high cost of medical school, most graduating medical students will have borrowed the maximum of $50,000 per year. Interest will have accumulated during school, so most graduating med students would be expected to owe around $230,000 in total.

So what would repayment actually look like under the new rules? Let’s walk through a scenario: a physician starts med school in fall 2026, does a four-year residency, and earns $300,000 per year as an attending.

Remember that RAP does not have a payment cap, unlike IBR. Another important detail is that RAP payments are based on your prior year’s tax return. That means physicians transitioning from residency to an attending salary will have artificially low payments for the first few years, because their reported income still reflects residency-level pay.

In the example below, the full payment based on their attending salary doesn’t hit until about five years after graduation.

Year	RAP Payment	Federal Student Loan Balance
2030	$10	$230,000
2031	$88	$229,940
2032	$408	$229,415
2033	$408	$228,815
2034	$1,667	$228,215
2035	$2,575	$221,908
2036	$2,652	$204,322
2037	$2,732	$184,755
2038	$2,814	$163,058
2039	$2,898	$139,076

The total payments made over a 10-year period sum to $195,022.

In contrast, refinancing and paying back $230,000 in student loans at a 4% interest rate over five years after finishing residency would cost about $254,000, including interest.

That means the value of PSLF in this scenario is about $60,000 ($254,000 – $195,000 = $59,000). Put differently, PSLF saves roughly $10,000 per year in after-tax income over six years as an attending, or about $15,000 to $20,000 in pre-tax income.

PSLF's lower value will pressure non-profit hospitals

If the value of PSLF as an attending at a non-profit hospital is only about $15,000 to $20,000 per year in pre-tax salary equivalent, that’s not going to tip the scales for many physicians weighing their options.

Here’s the problem for future non-profit hospital administrators: they’re currently able to hire young physicians on the cheap because these physicians greatly value the unlimited tax-free forgiveness that PSLF provides.

In the future, though, PSLF will be worth much less than the extra income that most physicians could make in private practice.

Another problem will be the incentive physicians have to reduce their hours from full-time to part-time. Anecdotally, many physicians with young children have mentioned they plan to cut back to part-time hours as soon as they’ve gotten PSLF.

Of course, some physicians prefer a non-profit, government or academic hospital environment. But the vastly diminished value of the PSLF program will not encourage any physician to choose that employment for financial reasons alone.

When will this labor market shock among physicians happen?

The good news for hospital systems is that med students can finish borrowing under Grad PLUS Loan rules if they enrolled before July 2026. That means graduating med students through the class of 2029 will still owe monster amounts of debt under the old rules, and they’ll still need to finish residency before evaluating attending positions.

When you add three to seven years of residency, that means the biggest labor market shock would occur when the class of 2030 finishes residency, likely in the early to late 2030s.

Of course, with a major change several years away, hospital leadership might simply hope that a future administration or Congress will amend the borrowing limits to allow supercharged PSLF to return.

PSLF for physicians is very valuable for now, but don’t overvalue it

For physicians owing a huge amount of med school debt, PSLF is an attractive way to make rapid progress toward a very positive net worth.

The problem, though, is that for many specialties, the value of PSLF might not be as large as anticipated when compared with other options like 20-year IBR forgiveness or refinancing.

If you currently have significant student loans from med school, reach out for a custom plan. We’d love to help cut through the complexity with all of the changing rules from the OB3 Act.