Nurse Practitioners have student loan forgiveness options whether they work for a non-profit hospital, government or even a private practice.
We’ve worked with many of 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,
But our work is far from over. There are more than 248,000 nurse practitioners with around 26,000 graduating per year.
Many graduate with six-figure student loan debt and are trying to navigate all of the confusing 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 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
A 2017 survey from the American Association of Nurse Practitioners (AANP) showed that NP salaries are on the rise across the board (as is tuition as employers have moved from MSN to requiring the DNP).
60% of NPs work as Family Nurse Practitioners (FNP), 15% work with adults and the others are spread across many different areas of focus. (here’s the fact sheet from AANP). Because such a large percentage or FNPs, the average compensation for all NPs is centered around what FNPs make (around $105,000 per year).
But there is a wide range of salaries for NPs depending on area of focus according to Nurse Journal. For example, the average Pediatric NP makes about $97,000 per year while a Public Health NP might make $66,000. Emergency and Psychiatric NPs are 2 of the highest compensated specialties with average salaries in the $120,000-$130,000 range.
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.
The 3 best options for nurse practitioners to save money paying back their student loans – an overview
We’ve done more than 1,500 student loan consults and covering more than $400,000,000 in student loan debt. In our experience, we’ve found 3 overall approaches that save people the most money paying back their student loans.
1. Public Service Loan Forgiveness (PSLF)
This is one of the most powerful programs out there for nurse practitioners. It’s available for people who have “direct” student loans, work full-time for a non-profit or government employer, and have been paying on an income-driven repayment plan for 120 months (that don’t have to be consecutive by the way).
NPs would want to 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 aren’t eligible for PSLF and owe 1.5x their income in student loans or less (eg owe $120,000 or less and make $80,000), their best bet is to throw everything including the kitchen sink to pay off the debt 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 could be done in conjunction with other loan forgiveness programs like the NURSE Corp Loan Repayment Program.
3. Taxable loan forgiveness using an income-driven repayment plan
For households that owe more than 2x their income in student loans (eg. 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 income-driven repayment plan like PAYE or REPAYE for 20-25 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, save up for the “tax bomb”, and work towards other financial goals along the way.
Public Service Loan Forgiveness (PSLF) for nurse practitioners done right
Any NP who works for a non-profit hospital, a practice owned by a university or hospital or 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. 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 (eg “Direct Stafford Unsubsidized”). It’s important to check this out before going for PSLF, because this is a major cause of people who applied for PSLF not getting loan forgiveness.
How to tell if your loans are direct: The fastest way to find out if your loans are direct would be to login to the NSLDS website and see the breakdown of your federal loans.
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. Read more about that here.
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, REPAYE or 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. This can also be accomplished if you have 2 or more part-time jobs with qualifying employers totaling 30+ hours a week.
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 loan balance will go up over the 10 years, but that’s ok 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 even if this means your loan balance will grow. Typically, this is either PAYE or REPAYE since the payments are 10% of discretionary income. 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 plan 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 trying to keep their loan balance from growing. Any extra payment will be money that goes into the 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 (which don’t have to be consecutive by the way), you can apply to have your remaining loan balance forgiven tax-free.
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
This could end up being an amazing forgiveness program for NPs.
Those who get accepted into the NURSE Corp Loan Repayment Program (NCLPR) could be eligible for up to 60% loan forgiveness after 2 years of service. Plus, if they apply and are accepted for a 3 rd year, there’s an additional 25% loan forgiveness.
It’s definitely worth it for those who want to get out of debt quickly!
But getting into NCLRP is tough. In 2017, there were about 8,500 eligible applicants last year and just over 500 got awarded funds. That’s a 94% rejection rate (but a 6% acceptance rate for us “glass half full” people).
Applications have risen by 1,000 per year for the last two years while recipients have stayed relatively flat in the 500s.
Is it a sure thing to get accepted? Of course not.
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 beforehand could disqualify a nurse practitioner from getting the funds, and it’s not worth it to chance it. Definitely, check with the Health Resource & Service Administration (HRSA) before making the decision.
Afterwards, it’s most likely a “Heck yes!” Why?
In our experience, if the student loan debt would be less than 1.5x household income, then it would make 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 the 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?
Here are a few things to keep in mind before committing to refinancing:
1. In some cases, PSLF could still end up saving more money than refinancing, and once you refinance, PSLF is gone for good. It’s important to take a look at the projections before committing to refinancing.
2. 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.
3. 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 paying 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 in student loans.
This process is very similar to what we covered in the PSLF section:
1.Select an income-driven repayment plan that will keep your payments as low as possible.
2. Do what you can to lower your AGI by contributing to pre-tax retirement accounts and an HSA if you have one available.
3. Don’t make any extra payments toward your loan than what’s required. 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:
1.Payments span from 20-25 years.
2. 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.
In this example, let’s say that Rachel has $220,000 in 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 REPAYE 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.
|REPAYE (10% |
|IBR (15% |
REPAYE 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 REPAYE, 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 5.75% interest rate. That refi would lower her interest by more than 1% vs keeping them in the federal program. One 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…
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 would be 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 see such a large number owed in the future, but it’s actually fairly manageable when it’s broken down to a 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.
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.
I have laid out a general framework here, but your situation is unique.
With all the money at stake when we’re talking about paying back 6-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 paying back your loans and gain the clarity you need to feel in control.
I’ve worked with many NPs, and 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?