Generally speaking, when you borrow money to attend medical school, you are expected to return the loan once you graduate. Student loans are famous for their unique disqualification from bankruptcy laws, meaning the debt is stuck with the borrower forever. However, some medical students will qualify for complete forgiveness of their school loans. Wouldn't it be wonderful to borrow $150k and not worry about how you were going to pay it back?
Forgiveness, cancellation, or discharge of a loan means that you are no longer required to repay your loan. But what are the differences between the three? If you’re no longer required to make payments on your medical school loans thanks to your specific role in medicine, that is called forgiveness or cancellation. If you’re no longer required to make payments on your debt due to other circumstances, such as a permanent disability, that is called discharge. Student loans are essential for most physicians to take out in order to pay for medical school. Thankfully, medical student loan forgiveness is available to certain individuals. For example, loan forgiveness may be available for physicians who work in underserved areas. This article will explore some of the most popular medical school loan forgiveness programs and how to apply.
The United States Department of Education offers a program called Public Service Loan Forgiveness that offers federal loan forgiveness for doctors that will erase any federal loan balance after the doctor makes payments for ten years while working at a nonprofit or government hospital. This program can be particularly beneficial if physicians complete their residence at a public hospital or nonprofit organization. That said, while the potential to have your medical school loans forgiven sounds appealing, the eligibility is very strict: By the end of June 2019, over 110,000 applications have been submitted for PSLF, but only 1,216 (or about 1.1%) have been approved. Moving on...
If PSLF doesn't work out for you because they don't seem to like forgiving loans for people who qualify, then you might want to turn to your state. Many states offer programs that help doctors pay some of their medical school loans when they practice in underserved or rural areas for a certain amount of time (minimum 2 years). The College Investor put together a comprehensive list of loan forgiveness programs by state. As you can see, some states like Tennessee and North Dakota offer no such programs, but Texas has nine! Here are a couple worth checking out:
- Nursing Student Loan Forgiveness Program (Florida)
- Regents Physician Loan Forgiveness (New York)
- Physician Education Repayment (Texas)
- Dentists Loan Forgiveness (California)
- Mental Health Professionals Loan Forgiveness (North Carolina)
The National Health Service Corps (NHSC) offers a scholarship program for students in their last year of medical school. All programs are intended to help physicians, or soon to be physicians, with the cost and debt they incur from pursuing a medical career. The NHSC offers as much as $50,000 toward student loans, tax-free, to physicians working for two or more years in an area with a shortage of health professionals. Physicians practicing psychiatry, family medicine, geriatrics, internal medicine, gynecology, or pediatrics can qualify for this program. Eligible medical professionals can submit an online application and include proof of student loan balance. You should know that priority is given to care providers who come from disadvantaged backgrounds and are likely to continue serving in health shortage areas after completing their service commitment.
Students to Service Medical School Loan Forgiveness (NHSC)
Students to Service is the name of another loan forgiveness and repayment program from the NHSC. This program offers fourth-year medical students as much as $120,000 in loan repayment if they agree to work full-time in an area with a shortage of health professionals for a minimum of three years. Medical specialties that qualify for Students to Service are practicing psychiatry, family medicine, geriatrics, internal medicine, gynecology, or pediatrics.
Substance Use Disorder Workforce Loan Repayment (NHSC)
This program offers doctors as much as $75,000 towards student loans if you work for three years or more in an approved program to treat substance abuse. Examples of approved programs include physicians with DATA 2000 waivers which them to prescribe narcotics for the treatment of opioid use disorders and physicians who work in opioid treatment programs, or are certified for substance use intervention. In other words, if you are a physician who works in a medical clinic that serves people with addiction, you are given priority in this program.
The National Institutes of Health (NIH) is the primary agency of the United States government responsible for public health research. The NIH conducts its own research and provides major biomedical research funding to non-NIH research facilities. The agency has 8 medical school loan forgiveness and repayment programs. Each one offers up to $35,000 annually for physicians working in bio-behavioral or biomedical careers. The programs target research doctors in specific fields, including pediatric, clinical, AIDS, infertility, and contraception. Note that if your medical school loan has been refinanced or if you consolidated your loans, you will not qualify for the NIH loan forgiveness programs.
This program offers doctors as much as $40,000 toward student loans if they agree to work for two or more years in areas serving Alaska Native or American Indian populations. This program can extend beyond the two years until your loans are completely paid if you qualify. If your medical school loan has been refinanced or if the loan was consolidated with any loan issued to another party, such as a spouse or parent, you will not qualify for this program. Although the loan repayment, in this case, is taxable, the program pitches in and pays a certain percentage.
Doctors that serve in the United States military can receive loan repayment and forgiveness benefits, depending on the military branch in which they operate. The U.S. Navy, for example, has a program that offers enlisted doctors as much as $40,000 annually for three years. Enlisted doctors should contact their particular branch for more details.
If you believe that you qualify for any of the loan forgiveness programs for doctors outlined in this article, you can take the following steps to take advantage of those programs:
You’ll want to determine whether your medical student loan qualifies for a loan forgiveness program. Some programs that offer student loan forgiveness for doctors only cover federal loans, while others include private medical school loans. Determine whether your loan is private or federal and eligible for any forgiveness programs you consider. Programs that offer forgiveness for physicians typically require that you work in underserved areas, in a public sector, or some other place where there is a shortage of health professionals. Ensure that the area you practice in qualifies by visiting the Health Resources & Service Administration.
Develop a Strategy for Loan Repayment
Depending on which loan forgiveness or repayment program you qualify for, you will want to take specific steps that will help you maximize how much medical student loan forgiveness you may receive.
- For programs offering federal loan forgiveness for doctors: Choose a federal income-driven loan repayment plan which will help reduce monthly loan payments while working toward program requirements, thus increasing the forgiven amount.
- For programs offering private loan forgiveness for doctors: Consider refinancing. Although the average med school debt typically exceeds $200,000, some programs will cap forgiveness below that figure. You can lower your interest and maximize how much principal will qualify for forgiveness by refinancing. Be sure to verify that the loan forgiveness program you consider allows you to refinance your loan.
Melissa is the owner and founder of College Money Tips. Formerly the editor at Benzinga Money, she has also written for Investopedia, The Balance and Personal Capital. Melissa writes fresh, thought-provoking content (with a touch of humor) about topics in personal finance, higher education, and travel.