Written By Rob Bertman, CFA, CFP®
Nurse Practitioners have student loan forgiveness options whether they work for a nonprofit hospital, government healthcare facilities or even a private practice.
We’ve worked with many nurse practitioners here at Student Loan Planner® with average student debt around $155,000. Some of whom have total debt in the $200,000+ range. Nursing degrees don't come cheap!
But our work is far from over. There are more than 385,000 nurse practitioners licensed in the U.S., with around 36,000 graduating per year.
Many graduate with six-figure nursing school debt and are trying to navigate all of the confusing education loan forgiveness for nurse practitioners options.
Here’s where they can save the most money and get student loan forgiveness.
In this guide, we'll look at loan repayment assistance options. We’ll cover how NPs can get Public Service Loan Forgiveness (PSLF), NURSE Corp Loan Repayment Program (NCLRP) and taxable loan forgiveness to pay as little out of pocket as possible while becoming student debt free.
Nurse practitioner student loan repayment varies based on career path
Recent data from the American Association of Nurse Practitioners (AANP) shows that NP salaries are on the rise. Additionally, tuition continues to increase as employers have moved from MSN to requiring the DNP.
About 88% of NPs are certified in an area of primary care, with roughly 70% working as Family Nurse Practitioners (FNP), 9% working in primary care with geriatric adults, and the others are spread across many different areas of focus. The average compensation for all full-time nurse practitioners is around $113,000 per year (for median base salary in 2021).
But there is a wide range of salaries for NPs depending on the area of focus, according to 2020 data from Nurse Journal. For example, the average Pediatric NP makes about $100,000 per year, while a Geriatrics NP might make $115,000. Psychiatric NPs have the highest paying specialty, with average salaries around $138,000.
The bottom line is that a nurse practitioner’s career track, including both their salary and type of employer, will greatly affect loan repayment, as well as their loan forgiveness options.
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The 3 best options for nurse practitioners to save money paying back their student loans
We’ve done thousands of student loan consults, covering more than $3 billion in student loan debt. In our experience, we’ve found three overall approaches that save people the most money paying back their student loans.
1. Public Service Loan Forgiveness (PSLF)
The Public Service Loan Forgiveness program is one of the most powerful programs out there for nurse practitioners and other healthcare providers.
It’s available through the U.S. Department of Education and designed for people who have Federal Direct Loans and work full-time for a nonprofit or government employer. You must also make payments on an income-driven repayment (IDR) plan for 120 months.
NPs should keep their payments as low as possible, save on the side and stay on track for PSLF.
2. Aggressive repayment in combination with other available loan forgiveness programs
For NPs who don't meet the eligibility requirements for PSLF and owe 1.5x their income in student loans or less (e.g., owe $120,000 or less and make $80,000), their best bet is to throw everything, including the kitchen sink, at the debt to pay it off as quickly as possible.
The goal here is to pay as little interest as possible and eliminate the debt in 10 years or less. Hopefully, a lot less. This can be in conjunction with other loan forgiveness programs like the NURSE Corp Loan Repayment Program. This type of nursing student loan forgiveness program can help provide student loan repayment assistance.
3. Taxable loan forgiveness using an income-driven repayment plan
Households that owe more than 2x their income in student loans (e.g. NPs who owe $200,000 and earn $100,000 or less) and don’t meet the PSLF criteria could be best served by selecting an IDR plan like Pay As You Earn (PAYE) or Saving on a Valuable Education (SAVE) for 20 to 25 years. In the end, the remaining loan balance is forgiven, but taxes will be owed on the forgiven amount.
The idea here is to keep student loan payments as low as possible. In the meantime, save up for the “tax bomb” and work towards other financial goals along the way.
Public Service Loan Forgiveness for nurse practitioners done right
Any NP who works for a nonprofit hospital, a practice owned by a university or hospital, or a government employer could be eligible for PSLF. This could include nearly half of NPs.
How would an NP know if they’re eligible? These are the 3 primary criteria:
1. You have Direct Federal Student Loans.
Most people who borrowed after 2010 will have “direct” loans. The clue is that it will actually say “direct” or “DL” in the loan title (e.g., “Direct Stafford Unsubsidized”). It’s important to check this out before going for PSLF. This is a major cause of people who applied for PSLF not getting loan forgiveness.
The fastest way to find out if your loans are direct would be to log in to the NSLDS website. Then, view the breakdown of your federal loans and find your loan servicer.
Any loans that are FFEL loans and not direct are not eligible for PSLF and may require consolidation. Beware of consolidating already direct loans because consolidation wipes away any credit toward loan forgiveness (outside of the IDR Waiver).
P.S. It is FREE to consolidate your loans, so don’t pay anyone to do this for you!
2. You are on an income-driven repayment plan like PAYE, SAVE or Income-Based Repayment (IBR).
Here’s more information on the different income-driven repayment options available.
3. You work full-time for a non-profit or government employer.
You can also accomplish this if you have two or more part-time jobs with qualifying employers. However, they must total 30+ hours a week.
Read more about employment eligibility here.
How nurse practitioners can save even more money on PSLF
The ultimate goal when going for PSLF is to pay as little as possible and maximize loan forgiveness. This might mean your student loan balances will go up over the 10 years. But that’s okay if you go the distance on PSLF.
Here’s how to make sure you’re not spending too much money paying back your loans:
1. Select the repayment plan that requires the lowest monthly payment.
Choose the lowest payment IDR plan even if this means your loan balance will grow. Typically, this will be SAVE since payments are based on 5% to 10% of discretionary income, depending on whether you have graduate loans. But PAYE might be a better choice if you want a 20-year forgiveness timeline. Occasionally, the best plan could be IBR for nurse practitioners who are married and aren’t eligible for PAYE.
2. Lower adjusted gross income (AGI).
By maxing out pre-tax retirement plans and health savings accounts (HSA). If you have a spouse whose income is factored in to calculate your payment, they should max out pre-tax retirement plans as well. We don’t want you to make less money. But it’s best to do everything you can to maximize those deductions to AGI. (FYI, standard or itemized deductions come after AGI, so it will not reduce your student loan payment).
3. Do not make extra payments toward your loans.
This is a huge mistake that many make in trying to keep their loan balance from growing. Any extra payment will be money that goes into oblivion since any unpaid balance will get forgiven anyway.
Nurse practitioners would be better off saving aggressively on the side. That way, if you see PSLF to the end, you get to keep the extra money in your pocket instead of losing it forever because you threw it at your loans which were eventually forgiven. It also acts as a defense in case there is a change to the PSLF program or your career path. That way, you’ll have a chunk of money to throw at the loans if you need to.
After 120 qualifying monthly payments, you can apply to have your remaining loan balance forgiven tax-free. Note these payments don’t have to be consecutive.
We suggest filing the Employment Certification Form (ECF) at least once a year, then checking each loan to make sure that they received the credit toward PSLF that you applied for. For people who are a few years in but haven’t sent in their ECF yet, do it immediately so you can get an accurate count of credit toward PSLF.
For more information on PSLF, check out our top tips here.
NURSE Corp loan repayment program for nurse practitioners
The NURSE Corp Loan Repayment Program (NCLPR) can end up being an amazing forgiveness program for NPs, registered nurses, advanced practice registered nurses (APRNs) and nurse faculty members.
Those who are eligible can receive up to 60% loan forgiveness after a two-year commitment in a critical shortage facility (CSF) in a health professional shortage area (HPSA) or at an eligible school of nursing.
Plus, if they apply and are accepted for a third year of service, there’s an additional 25% loan forgiveness.
It’s definitely worth it for those who want to get out of debt quickly and are willing to work with a rural community or in other underserved areas.
But getting into Nurse Corp LRP is tough. In 2021, there were 5,756 eligible new and continuation applicants. However, only 1,587 applicants received awards.
Is it a sure thing to get accepted? Of course not. But is it worth it to check it out? You betcha!
Should a nurse practitioner refinance if awarded money from NURSE Corp loan repayment program?
The short answer is yes. After all the money has been received, and the employment agreement has been fulfilled, but not before.
Refinancing with a private student loan lender beforehand could disqualify a nurse practitioner from getting the funds. So, it’s not worth it to chance it. Definitely, check with the Health Resource & Service Administration (HRSA) before making the decision.
Afterward, it’s most likely a “Heck yes!” Why?
In our experience, if the student loan debt is less than 1.5x household income, then it makes sense to explore refinancing if a nurse practitioner can secure a lower interest rate in the private market vs. their federal loan interest rate.
Most NPs would have less than 1.5x their income in student loans after NCLRP. An NP might start with $200,000 in loans and only owe $80,000 after being awarded even 60%.
If they were to stay on an income-driven plan making $100,000 in income, their payments would be high enough that they’d end up paying back the loan in full anyway.
When that’s the case, it’s best to get a lower rate if it’s out there and pay it back quickly to save on interest. Plus, wouldn’t it be nice to just finish it out and be student debt free?
Things to consider before refinancing
Here are a few things to keep in mind before committing to refinancing:
- In some cases, PSLF could still save more money than refinancing, and once you refinance, PSLF is no longer an option. It’s important to take a look at the projections before committing to refinancing.
- Check with the NCLRP to make sure it doesn’t affect your eligibility for the awarded money. The last thing you’d want would be to lose out and have to pay the money back. If it would affect it, then do not refinance.
- Can you afford the payment to become debt free in 10 years or less (hopefully more like 5)? If not, then don’t refinance.
Taxable student loan forgiveness for nurse practitioners using income-driven repayment
NPs still have a loan forgiveness option to pay back their student loans even if they aren’t eligible for PSLF or NCLRP.
This strategy works well for nurse practitioners who owe more than 2x their income on student loans.
This process is very similar to what we covered in the PSLF section:
- Select an income-driven repayment plan that will keep your payments as low as possible.
- Do what you can to lower your AGI by contributing to pre-tax retirement accounts and an HSA if you have one available.
- Don’t make any extra payments toward your loan than the minimum requirement. If you get the urge, save the money instead of throwing it at the loans.
The major differences between PSLF and taxable loan forgiveness are as follows:
- Payments span from 20 to 25 years.
- The number of loans forgiven will be treated as income in the year it’s forgiven, so you’ll end up owing taxes. We call this the “tax bomb.”
First, let’s explore why keeping student loan payments as low as possible and maximizing the amount forgiven makes sense.
Income-driven forgiveness example
Let’s say that Rachel has $220,000 in graduate student loans at 6.8%. She just started working at a private practice and is earning $80,000. She is projecting her income to increase at a normal 3% rate for her career.
She’s choosing between SAVE, where her payments would be based upon 10% of her income, or IBR, where her payments would be 15%. Both are 25-year programs with taxable loan forgiveness at the end. Let’s project that the forgiven balance will be taxed at 40% in the 25th year.
| Repayment plan | Payments | Forgiven balance | Taxes | Total cost | First monthly payment |
|---|---|---|---|---|---|
| REPAYE (10% of income) | $226,704 | $271,519 | $108,608 | $335,311 | $518 |
| IBR (15% of income) | $340,056 | $209,687 | $83,875 | $423,930 | $777 |
SAVE is the clear winner here and is projecting to save Rachel nearly $90,000 vs. IBR. The main reason is that she saves on her payments and only has to pay back the taxes on the extra accrued interest.
That extra accrued interest makes her loan balance higher on SAVE, but she’ll save so much more on her payments vs. IBR that even the extra taxes still make it financially worth it.
Income-driven repayment vs. refinancing
Now let’s examine why a nurse practitioner would choose taxable loan forgiveness rather than paying off their student loans in full.
Let’s say that Rachel was deciding between PAYE (20 years of payments based upon 10% of her income) vs. refinancing to a 20-year loan with a 5.75% interest rate. That refi would lower her interest by more than 1% compared to the federal program.
On a $220,000 loan balance, we’re talking about $2,200 per year in interest.
On the surface, it seems like that extra interest savings of $44,000 ($2,200 a year for 20 years) would be enough to give up PAYE and just pay back the loan in full, but…
| Repayment plan | Payments | Forgiven balance | Taxes | Total cost | First monthly payment |
|---|---|---|---|---|---|
| PAYE (20 years) | $167,080 | $316,920 | $126,768 | $293,848 | $518 |
| Refinance (20 years) | $379,946 | N/A | N/A | $379,946 | $1,545 |
It doesn’t, not by a long shot.
PAYE is still the clear winner. Both PAYE and refinancing would have her debt free in 20 years, but paying off her loans in full by refinancing is projected to cost her $84,000 more out-of-pocket than going with PAYE.
That means that refinancing down to 3.75% for 20 years would make it a wash. The problem is that interest rates for a 20-year unsecured loan would be well above that.
The other thing to consider is that Rachel’s required loan payment would be much higher, which makes affording a house and reaching her other financial goals much more challenging. PAYE would allow her to keep her payments low and save the extra money that would otherwise go to student loan payments.
The bottom line is that loan forgiveness, even when it’s taxable, could still a great benefit for those not eligible for PSLF.
What about saving for the tax bomb on income-driven repayment?
Nurse practitioners should be saving up for the tax bomb on top of their student loan payments if they’re going for taxable loan forgiveness. It can seem daunting to owe a large number in the future. But it’s actually fairly manageable when you look at monthly savings.
Let’s just say that Rachel is saving in an investment account that is projected to earn 5% a year for the next 20 years.
| Repayment plan | Payments | Forgiven balance | Taxes | Total cost | First monthly payment | Savings |
|---|---|---|---|---|---|---|
| PAYE (20 years) | $167,080 | $316,920 | $126,768 | $293,848 | $518 | $339 |
If she put equal monthly payments of $339 per month into that account, it is projected to grow to the $126.768 in 20 years when the tax bomb would be due.
Saving up for the tax bomb over the years would also save Rachel money because her money would be working for her, too.
The taxes owed is projected to be $126,000. But if she saves $339 per month for 240 months (20 years), she only has to save $81,360 total. The other $45,000 doesn’t come out of her pocket. It comes from investment growth.
That means she’d spend $45,000 less paying the tax bomb than if she had tried to put together the money last minute when she gets the tax bill in 20 years.
It may seem counterintuitive, but taxable loan forgiveness using an income-driven plan where your loans actually grow could end up saving money compared to refinancing and paying off the loans in full.
Plus, it allows NPs to save and invest for other financial goals.
How nurse practitioners can save the most money with student loan forgiveness programs
Nurse practitioners have many options for loan forgiveness no matter what career track they choose. Depending on where you live, you might have access to state loan repayment programs. Alternatively, you might be eligible for the National Health Service Corps loan repayment program, which has various NHSC opportunities for medical and mental health nurse specialists.
This is a general framework for how to deal with nurse education debt, but each borrowers' situation is unique.
With all the money at stake when we’re talking about paying back six-figure student loan debt, it could make sense for an expert to review your specific situation, including family size, career path, household income, etc.
By the end of a consult with us, you’ll understand the path that will save you the most money by paying back your loans and gain the clarity you need to feel in control.
I’ve worked with many nurse practitioners and health care professionals. I’d love to help you finally feel confident about how you’re handling your student loans.
Will you implement any of these ways to save money as a nurse practitioner?
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