Income-Driven Repayment (IDR) Plans
These are federal repayment plans that base a borrower’s monthly loan payment on discretionary income and household size information. They do not base monthly payment on a borrower’s debt.
Two of the current plans (IBR and PAYE) also require that the borrower exhibit a Partial Financial Hardship (PFH) to qualify to enter the plan. Eligibility qualifications and benefits for all IDR plans differ and not all borrowers will qualify for all plans. For a complete list of eligibility requirements, visit the Federal Student Aid website.
With the income-driven plans, either the Adjusted Gross Income (AGI) for the borrower’s household (as filed with the IRS) or Alternative Documentation of Income (ADI) forms must be submitted to the servicer(s) when entering the plan, and annually thereafter. Each year, as income for the household changes, so will the required monthly payment amount.
All IDR plans feature a loan forgiveness benefit. Loan forgiveness occurs after a required 20- or 25-year repayment term is satisfied (dependent upon the repayment plan). For more information on repayment plans, terms of repayment, and forgiveness benefits, review Guide to Money Management and Student Loans.
Public Service Loan Forgiveness (PSLF) Program
PSLF is a federal program that rewards borrowers for working in the non-profit sector. Borrowers must make payments to cover 120 separate monthly payments, while working full-time (30 hours or more per week) for a qualifying non-profit, 501(c)(3), military, or government organization. While many medical schools and teaching hospitals qualify, borrowers should complete the PSLF Form annually (or if they change employment) to confirm employer eligibility and to track qualifying payments.
After making the required payments on qualifying loans, and meeting the work requirements, borrowers can apply to have their outstanding federal student loan balance forgiven. You may also want to use the MedLoans® Organizer and Calculator tool to view potential loan forgiveness amounts.
Public Service Loan Forgiveness is ONLY available to borrowers who have federal Direct Loans. If existing federal student loans did not originate from Direct Loans, they can be converted into a Direct Loan by consolidating. For more information review this Direct Consolidation Loan fact sheet.
How does an IDR Plan and PSLF Work Together?
While in residency, if borrowers choose to make payments on their student loans, they may only be able to afford a low monthly payment through an income-driven repayment plan. These repayment plans are qualifying repayment plans for PSLF.
Additionally, to meet PSLF requirements, borrowers must be paid by a qualifying non-profit employer, meaning the entity paying the borrower is a qualifying, non-profit employer.
Once residency training is completed, a physician’s salary will increase, and the required monthly IDR payment will also increase. To compare specific repayment plans and determine the best plan for you, review FIRST’s Repayment Plans Compared chart, and talk with your loan servicer for more detailed information specific to your loan portfolio. To further determine if PSLF is an option for you, review this resource: Income-Driven Repayment Plans: Questions and Answers.
Loan forgiveness through the income-driven repayment plan takes 20- or 25- years; however, if meeting all the requirement for PSLF, and enrolling in an IDR plan, borrowers could benefit by receiving loan forgiveness in as few as 10-years.