Income-Driven Repayment Plans and Public Service Loan Forgiveness (PSLF) Program

December 26, 2023

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Managing federal student loan payments during residency may be challenging, but income-driven repayment plans offer more manageable payment amounts that could also lead to forgiveness through the federal Public Service Loan Forgiveness (PSLF) program.

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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 payment on a borrower’s debt. 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 and review the Repayment Plans Compared chart.

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) 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 plan). For more information on repayment plans, terms of repayment, and forgiveness benefits, review the 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 qualifying monthly payments, while working full-time 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, the PSLF servicer will confirm the borrower’s eligibility and forgive the borrower’s remaining Direct Loan balance. To view potential loan forgiveness amounts, use the MedLoans™ Organizer and Calculator tool.

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 want to make manageable monthly loan payments, they may opt for an income-driven repayment plan. These repayment plans are qualifying repayment plans for PSLF.

To meet PSLF requirements, borrowers must be paid by a qualifying non-profit employer, meaning the entity paying the borrower must be a qualifying, non-profit employer.

Once residency training is complete, a physician’s salary will increase, and the required monthly IDR payment will also increase. If the borrower continues to work for a qualifying employer and meets all PSLF requirements, then their monthly payments will continue to count toward PSLF.

Loan forgiveness through the IDR plans can take 20 or 25 years; however, if you meet all the requirements for PSLF, you could benefit from non-taxable loan forgiveness in as few as 10 years. To determine if PSLF is an option for you, review this resource: Income-Driven Repayment Plans: Questions and Answers.

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