Written By Rob Bertman, CFA, CFP®
Becoming a doctor can be a long and costly road. If you’re a DO, chances are you have even more student debt than the average doctor. Osteopathic medical schools can be more expensive than allopathic programs.
Even though medical students often graduate with six-figure student debt, the good news is that there are many opportunities for osteopathic physician student loan forgiveness for federal student loans.
Osteopathic medicine career outlook
There are more than 100,000 doctors of osteopathy practicing medicine, triple the amount from 30 years ago. 57 percent are primary care physicians, according to the American Medical Association. Along with primary care, many other osteopaths are OB/GYNs, anesthesiologists, surgeons and psychiatrists.
Doctors are projected to experience steady growth over the next 10 years. According to the Bureau of Labor Statistics, the projected growth of physicians will be around the average for all professions.
Student loan forgiveness for doctors
The federal government and its agencies have created a number of student loan repayment programs to help pay for all, or a portion of, physician student debt in exchange for working in areas of need.
Some programs forgive all of your loans, some provide loan repayment up to a certain amount of student debt, and some offer payment assistance. Each program has different requirements, so be sure to check each program’s details, directly, to make sure you qualify.
Here are the student loan forgiveness programs that DOs should know about.
Public Service Loan Forgiveness (PSLF)
PSLF is one of the best loan forgiveness programs out there, because all remaining loans may be forgiven after making 120 qualifying payments.
About half of all doctors work in a hospital, in academia, or are employed by the government which means they could be eligible for PSLF if they meet all of the following requirements for 120 payments:
- Direct Federal Loans. Most federal loans that were taken out after 2010 are Direct Loans. Any loans before 2010 could be FFEL loans, which aren’t eligible for PSLF. The best way to check is to log in to studentaid.gov and look at the NSLDS. Any FFEL loans could be consolidated to become eligible for PSLF, but Direct Loans are already eligible.
- Under an Income-Driven Repayment Plan. These payment plans are based upon income, not the amount of student loan debt you owe. PAYE, REPAYE, IBR are examples of income-driven repayment. The Standard 10 Year Plan is also a qualifying plan, but the other options are better.
- Work at a qualifying employer. If you work full-time at a 501(c)3 — a.k.a. non-profit — organization or for the government at any level, that’s considered qualifying employment for PSLF.
Each of these boxes need to be checked in order to have a qualifying payment for PSLF. After reaching 120 monthly payments that qualify, the remaining loans are forgiven tax-free.
*Side note: These payments don’t have to be consecutive, just cumulative.
National Health Service Corp Loan Repayment Program (LRP)
Osteopathic physicians who want to work in urban, rural or tribal communities with limited access to care, might be eligible for loan repayment through the National Health Service Corp (NHSC).
Depending on the Health Profession Service Area score, this program provides either $30,000 to $50,000 per year for two years in loan repayment. After two years, the physician can re-apply for another two years of repayment assistance as long as they continue to work in underserved areas.
This benefit isn’t taxable and it can also work in conjunction with PSLF and other loan repayment programs.
National Institutes of Health (NIH) Loan Repayment Program
The NIH Loan Repayment Programs (NIH LRP) are “designed to attract and retain highly qualified health professionals into biomedical or biobehavioral research careers.”
These LRPs will pay $50,000 per year for qualified student debt, and are mainly medical research positions. Service can be done within the NIH (intramural) or outside the NIH (extramural).
Military student loan repayment programs for doctors
The United States military offers loan repayment under certain circumstances. Most of them are around $40,000 per year for a certain amount of years, and they often withhold taxes from the amount you get.
You’ll probably only want to join the military if you feel it’s a calling for you, because of the hard road and lower pay it offers compared to most doctors.
Each branch of the military has its own repayment programs.
The Army’s loan repayment programs include:
- Active Duty Health Professions Loan Repayment Program. Active duty doctors can receive $40,000 per year for up to three years.
- Healthcare Professions Loan Repayment (HPLR) Program. This is the same annual benefit as the one above, but you may receive up to $250,000 in total. It’s also available to people in the Army Reserve.
The Air Force has the on-and-off Health Professions Loan Repayment Program. Sometimes it’s offered and sometimes it’s not. The Air Force pays $40,000 per year toward your student loans for two years.
Be sure to check with a recruiter if you’re considering military service to see what kind of loan forgiveness programs are available.
By the way, PSLF is also an option if you plan on reaching 10 years and the other repayment programs don’t cover all of your debt.
Related: How to Navigate Military Student Loan Repayment with the SAVE Plan
Employer loan repayment programs
Certain employers, private practice and hospitals, may offer a loan repayment program (LRP) for physicians. These programs come in all shapes and sizes.
Honestly, these programs are often trying to do right by their employees, but sometimes it can backfire. For example, an osteopathic physician who’s planning to go for PSLF only needs to make their minimum payments. Sometimes an employer-sponsored LRP isn’t congruent with that long-term plan and can possibly get in the way.
For example, if the LRP offers a lot more than the minimum payments required to get PSLF, it could put the student loans in paid-ahead status. This status might mess up the months of credit you get toward PSLF.
The bottom line is that it’s important to understand your long-term approach to paying off your student loans. Design a strategy that incorporates your employer’s loan repayment strategy into the mix.
Taxable loan forgiveness
Doctors who work in a private practice also have the option to get loan forgiveness, but the forgiven amount is taxed.
A physician would have to select an income-driven repayment plan like PAYE, REPAYE, or IBR and make payments for a certain number of years until getting loan forgiveness. The timeline for forgiveness under PAYE is 20 years, and 25 years under REPAYE and IBR.
After making payments for 20 or 25 years, any remaining student debt is forgiven. However, the government will issue you a tax form called a 1099, saying that you have to add the forgiven balance to your tax return.
For example, if you earned $300,000 as a physician and you had $200,000 of loans forgiven, your income for the year would be $500,000, and you’d owe taxes on that extra $200,000 of income.
This “tax bomb” might sound scary, but it could be a less-expensive option than trying to pay back the loans in full, if you owe more in student loan debt than you make from your physician salary.
Saving the most money on osteopathic physician student debt
I’ve laid out a number of different osteopathic physician student loan forgiveness options and loan repayment programs.
But your situation is unique.
If you’re looking for help designing your optimal student loan repayment plan and want to understand your loan forgiveness options, we’re here to help.
Whether you’re married, single, working in private practice, at a hospital or another employer, there’s a custom plan for you that offers a clear path forward. There’s a lot of money at stake with six-figure student debt, if you’re on an inefficient plan.
We’re here to help you save as much money as possible and get you on a clear path to pay off your med school debt. Learn more about our student loan consult program.
Not sure what to do with your student loans?
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