Are Physicians Eligible for Student Loan Forgiveness?

Are physicians eligible for student loan forgiveness? In my mind, there are three main ways that a physician can have their loan forgiven or at least a portion of their loan forgiven. The first would be if the employer simply agrees to pay a certain amount directly to the physician’s loan provider. The second would be if they’re part of the public service loan forgiveness program which is where they work for a federal entity for a period, generally out of training. And then third would be if there’s state program. Not every state provides a loan forgiveness program, but many of the states do. And normally, it would be in rural areas that are hard to recruit to and the state would then pay or forgive a certain amount of whatever their loan was, if the physician stays in the area practicing their specialty for a set amount of time.

Let’s just take each one individually and go through some of the things you need to think about. First, it would be with the hospital or hospital network. You are very rarely going to see any kind of loan forgiveness if you are joining a private physician-owned practice, it just simply does not happen. If you do enter loan forgiveness with a hospital or hospital network, it’s usually situated like this: they’ll say, we will pay this amount to your loan provider directly. And then as long as you stay employed with us, then there’s no repayment. And there’s a couple of ways of, I guess, situating it. The first would be if they just give a lump sum upfront. Normally, the loan forgiveness would be somewhere between 50,000 to 150,000, and then if they give a lump sum upfront, then it would be forgiven over time.

Meaning, if they give you $150,000 for loan forgiveness, and then you leave after six months, well, you’re going to have to pay back a large portion of it. It’s usually tied to the term of the agreement, sometimes beyond it if it’s a significant amount of money. Let’s say you have a three-year initial term, then they would state maybe for every month that you’re there 1/36 of the loan that the upfront money we gave you would be forgiven. That’s a normal way of doing it. Another would be, let’s just say it’s $50,000 stretched out over the term and it’ll just state every month, we’ll pay directly whatever the 1/36 of 50,000 is to your loan provider. That’s good in the fact that a physician wouldn’t ever have to repay anything which is annoying. Other blogs of interest include:

And there are some tax implications as well. So, those are kind of the two main ways of doing it. If you’re with a hospital network, they’ll just pay you a big sum of money upfront, then you use that to pay off a portion of your loan or they’ll just pay a certain set amount over time. Sometimes, if let’s just say, they were going to pay you 150,000, they may do 50,000 at the end of each year of the initial term of the contract. So, after year one, they’d pay 50,000 to the loan provider, after year two. That’s another way of avoiding having to pay anything back. And I would suggest doing it that way. The next one would be with the public service loan forgiveness program. Briefly, this is if you become employed through the federal government and then stay employed for 10 years is the amount then they will completely forgive your student loan.

The downside to that is you’re usually going to make less, so your compensation is going to be below market. So, you may need to do a cost analysis of, alright, well, if I’m making $50,000 less a year over the course of 10 years, could I have just taken a normal position, made more, and then paid it off in the end? Depends upon the situation, but that’s kind of the thinking that you need to go through is alright, which one ultimately would I make more money or have the forgiven faster? And then last, as I said before if there’s a state program. Some states will provide, once again, usually somewhere between 50,000 to 150,000 and they would just state that if the physician was working within a certain area for a period, they would have whatever set amount forgiven.

It’s rare that loan forgiveness is provided. It’s not a common thing. And as I said before, if you’re joining a private physician-owned group, it’s exceedingly rare that you would get any kind of loan forgiveness at all. Obviously, it’s a great perk to a job. I know plenty of my physicians that I assist will then seek out those jobs in the first couple of years, get through the initial three-year term, get a bunch of their loans forgiven, and then move on to whatever city that they ultimately want to end up in. That’s a smart way of doing it. So yes, physicians are eligible for loan forgiveness. It generally will not be the entire sum. It will be a decent portion of it. But if you kind of look for those specific jobs, you certainly can find opportunities for that.