A new federal rule opens the door for physicians in California and Texas to take advantage of student loan forgiveness, possibly bringing much-needed relief to those with cumbersome debt loads after repayments resumed last month. However, the timing is critical, as some doctors may need to consolidate their loans by December 31 to remain eligible.
Updated guidelines for the Public Service Loan Forgiveness Program (PSLF) took effect in July, expanding the number of potential borrowers who could have their federal student loan balances wiped clean after working full time in a government or nonprofit role and making 120 monthly loan payments.
But loan forgiveness also hinges on having the correct employment type and requires applicants to be a "direct hire" of the organization. State laws in California and Texas prohibit nonprofit hospitals and healthcare entities from directly hiring physicians — a loophole that has barred doctors in those locations from applying.
Both states' medical and hospital associations worked with the US Department of Education (DOE) to offer an exception. California and Texas physicians can now satisfy the employment type condition by having a written contract or medical staff privileges with a nonprofit hospital or facility, even if the physician is part of a for-profit sole proprietorship, partnership, or medical group.
Eligible loans cannot be in default and must have been received through the Direct Loan Program, which includes Parent PLUS loans. Doctors with non-qualifying student loans, such as Federal Family Education Loans, can become PSLF-eligible and have past time worked counted toward the requirements if they consolidate into a direct loan by December 31.
The California Medical Association (CMA) has an online guide to help doctors and employers navigate the new rules.
The change comes just in time because California and Texas need to expand their physician workforces by tens of thousands over the next decade. "This program will allow us to retain and recruit new physicians to our states to address our growing physician shortages and access to care challenges for the patients who need us most," Texas Medical Association president Rick W. Snyder II, MD, said in a statement.
Physicians should use the PSLF Help Tool to complete the forgiveness application, said Ashley Harrington, senior advisor at the DOE. During a free on-demand webinar hosted by CMA, she said the form has been streamlined and will ask applicants to list the nonprofit entity where they provide care, its employer identification number, the length of time worked there, and the average hours worked per week. The employer must sign to certify the physician's reported hours.
Ideally, physicians should submit a PSLF form annually or each time they change jobs, but they can also wait until the end of the 10 years to submit the form, said Harrington.
With the average medical education loan debt exceeding $200,000, CMA president Donaldo Hernandez, MD, said the rule will ensure low-income and minority students can consider medical careers.
California family medicine physician Ashley Paydar, DO, told Medscape Medical News that she has already applied for PSLF and found the process relatively easy. While she awaits final approval, she's planning for the future. "Loan forgiveness will allow me to do a fellowship and save for my children's college so they can pursue higher education without the debt," she said.
Still, employers have no legal obligation to certify physicians' hours, and many may express hesitation as they try to understand the new guidelines, said Long Do, JD, partner at Athene Law in San Francisco and speaker during the webinar. He urged physicians to have patience when working through the application process.
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