Thank you, frontline healthcare workers!
You’ve seen the signs in your neighborhood. We all appreciate the great work that healthcare professionals have done for us during the COVID-19 pandemic.
That said, some tangible financial relief wouldn’t hurt. There are major changes to student loan forgiveness programs for healthcare workers that you need to know about for 2023.
Update on the PSLF Waiver Forgiveness Opportunity for Healthcare Workers
Members of Congress, including Rep. Carolyn Maloney (D-NY) have tried to pass the Frontline Health Workers Act to provide student loan forgiveness for front-line healthcare workers but to no avail.
The Department of Education issued a PSLF Waiver program on October 6, 2021, that helped many healthcare professionals get forgiveness years sooner or even completely wipe away all their loans. However, it expired on October 31, 2022. But all is not lost — the IDR Waiver offers many of the same benefits to healthcare workers, whether they’re pursuing PSLF or IDR forgiveness.
Here’s how it works:
- If you have more than 12 months of consecutive forbearance or more than 36 months of aggregate forbearance, you will receive credit for these months of paused payments towards PSLF and IDR forgiveness plans.
- You’ll get credit towards IDR and PSLF forgiveness for any repayment plan as well as payments and certain types of forbearance and deferment pre-consolidation.
- Economic hardship deferment and other types of deferment (except in-school deferment) before 2013 will count towards IDR forgiveness.
- Some borrowers with loans that did not benefit from the federal student loan pause need to take action before May 1, 2023 to qualify.
The good news is that medical professionals and healthcare workers already have access to some of the best student loan forgiveness programs out there, not just Public Service Loan Forgiveness. Some of these programs forgive loans, while others provide money to student loan borrowers in the form of a loan repayment program (LRP).
Let’s examine the more popular federal student loan programs for those who work on the frontlines and health professionals in general.
Public Service Loan Forgiveness Program (PSLF) for healthcare workers
PSLF is the broadest and best student loan forgiveness option for medical professionals. Here are its eligibility requirements:
- Federal Direct Loans are eligible (not FFEL loans or private student loans)
- You must work full-time for a qualifying employer (either a non-profit or government employer, like a hospital, academic institution, Veteran Affairs, etc). You can also work more than one part-time job totaling 30 hours or more per week.
- Make payments on an income-driven repayment plan (PAYE, REPAYE, IBR)
Once you reach 120 qualifying payments under the above criteria, you can apply for PSLF. If you qualify, your remaining student loan balance is forgiven, tax-free. In the meantime, we recommend completing employment certification form for the PSLF program.
This program has been managed by FedLoan Servicing, though that’s changing at the end of 2021.
Check out our Top 40 PSLF tips to optimize PSLF and make it even better.
Note that with all the changes to PSLF that are coming due to the Biden administration’s PSLF order, you need to be doubly sure you’re paying attention this year and next so that you get forgiveness as soon as you deserve to.
National Health Service Corps (NHSC) Loan Repayment Programs
NHSC Loan Repayment Programs are another great option. It’s working to get health care professionals to patients with limited access to health care, often in community health centers.
As an incentive, it offers three programs available. The programs are either two- or three-year commitments and provide $50,000 to $75,000 in loan repayment over the service term.
There are three types of NHSC loan repayment programs (LRPs) available:
- NHSC Loan Repayment Program
- NHSC Substance Use Disorder Workplace LRP
- NHSC Rural Community LRP
These LRPs are available to a wide range of healthcare profession disciplines including:
- Physicians (MD/DO)
- Nurse Practitioners (NP)
- Physician Assistants (PA)
- Certified Nurse Midwives (CNM)
- Health Service Psychologists (HSP)
- Licenced Clinical Social Workers (LCSW)
- Psychiatric Nurse Specialists (PNS)
- Marriage & Family Therapists (MFT)
- Licensed Professional Counselor (LPC)
This is a great program for healthcare workers looking to help people who can’t access or pay for quality care under the normal channels.
Side benefit: Many of these clinics are also PSLF-eligible employers if the LRP doesn’t pay off the student loan debt in full.
Nurse Corps Loan Repayment Program
The Nurse Corps LRP is a great program for nurses who are looking to provide primary medical care to underserved populations while also benefiting from major loan forgiveness in a short time.
It pays up to 85% of unpaid nursing education debt for registered nurses (RN), advanced practice registered nurses (APRN) such as nurse practitioners, and nurse faculty professionals.
The first two years of service at either a critical shortage facility or an eligible nursing school could lead to a payment of 60% of outstanding qualifying loans. Then, the third year of service leads to the next 25% of repayment assistance.
Keep in mind that this benefit may be subject to taxes, but it’s still a great benefit.
National Institutes of Health (NIH) Loan Repayment Programs
The NIH wants to attract health professionals to research positions. To do this, it takes some of the student loan burdens off and makes it more attractive to work in this field.
NIH loan repayment programs (LRPs) pay up to $50,000 per year of a researcher’s qualified educational debt, whether it’s HHS debt, federal debt, and sometimes even private student loans.
Physicians, pharmacists, psychologists, dentists, nurses, physician assistants, and others are eligible. The qualifying employment can be extramural (outside of the NIH) or intramural (inside the NIH).
Indian Health Services Loan Repayment Program
If a medical professional would like to serve the Alaska Native or American Indian Communities, they can serve a two-year term for $40,000 of loan repayment through IHS.
After the two-year commitment, you can sign on for successive one-year terms for as long as you’d like.
Any healthcare professional can apply but it gives priority to providers within the service communities.
Perkins Loan Cancellation
The Department of Education has made certain healthcare professionals eligible for Federal Perkins Loan Cancellation after five years of qualifying full-time service. These are mainly nurses including:
- Registered Nurses (RN)
- Licensed Practical Nurses (LPN)
- Certified Nursing Assistants (CNA)
- Medical Assistants (MA)
- Advanced Practice Registered Nurse (APRN)
- Licensed Medical Technicians (LMT)
Most of the time, healthcare professionals don’t have a bunch of Perkins Loans, but every little bit of forgiveness helps.
If you don’t qualify for cancellation, note that you can include Perkins with a consolidation for the PSLF fix above.
Income-driven repayment plans & taxable student loan forgiveness for medical professionals
Even if you don’t qualify for any of the above programs, there’s another student loan repayment option available that offers taxable student loan forgiveness: income-driven repayment.
You may have heard of these IDRs, such as Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Based Repayment (IBR).
These loan repayment plans are best for student loan borrowers who owe more than 1.25x their income in student loans ($125,000+ in debt vs. $100,000 income). Income-driven repayment forgiveness is the most flexible repayment strategy available.
You can work part-time or full-time for any type of employer. Even if you’re out of a job, you can still stay on income-driven repayment. You can adjust your payments to $0 without having to go into forbearance, and even those $0 payments count toward the 20- to 25-year loan forgiveness.
The goal here is to keep monthly payments as low as possible and maximize the amount of loan forgiveness. That way, you have more money to put toward other financial goals like maxing out retirement plans, buying a house, etc.
The other benefit is that you keep the door open for PSLF if you end up working for a qualifying employer during a 120-month time frame.
Need Student Loan Help?
Student loan repayment can be complicated for medical and healthcare professionals. Often it’s not always the best option to get the lowest interest rate and pay it back in full. Sometimes, that can be a more expensive option because of the different ways to qualify for forgiveness and the loan repayment plans available.
When you add the complexity of your career path, how marriage affects student loan payments, and other financial goals, it can be tough to figure out a clear path on your own.
If you’re tired of spending hours doing confusing research and are looking to finally get a solid student loan strategy, schedule a six-figure student debt consult.
By the end, you’ll have a clear path ahead that’ll fit around your career and life goals rather than feeling like your decisions are dictated by your student loans.
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Is the NIH program taxable after forgiveness?
From the NIH website: Will I incur taxes on LRP payments? Yes, but each time NIH issues a payment to your lender, 39 percent of the payment amount is also sent to the IRS as a federal tax payment. An additional tax payment at the rate of 7.5% of the loan repayment amount is also made to cover social security and FICA taxes for intramural LRP awardees only.
As a physician I receive a base pay with additional “Z payment” four times a year. The combo of those Z payments is almost more then my base pay. Am I allowed to report just my base pay by providing one of those pay stubs for income recertification?
Thanks!
Hi Anthony, here is what our consultant Molly has to say: Accepting paystubs is up to your loan servicer’s discretion, but it’s a big risk to leave a large portion out to calculate your payment. Your reported income when you recertify is supposed to be an accurate representation of your income. “Lying” on your IDR recertification can carry hefty fines and prison time if caught. It’s best to maximize your pre-tax deductions and report your income accurately.