Loan Forgiveness for Doctors: A Changing Landscape

JULY 26, 2016
Jeannette Y. Wick, RPh, MBA, FASCP
debt, college, primary care, student debt, medical education, med school, loans, loan forgiveness, nonprofit medicine, government, medical school, debt forgiveness, More medical students than ever incur student debt to pay for their educations. Few people realize, however, the extent of that debt—the average medical school graduate is burdened by more than $175,000 in educational loans. While many medical students are liable to incur large debts, those who enter primary care fields will earn less and will experience more difficulty in paying back the loans. For example, the debt-to-income ratio for primary care physicians is double that of surgeons.
 
The federal government recognized the growing student debt problem, and Congress established the federal Public Service Loan Forgiveness (PSLF) program in the College Cost Reduction and Access Act of 2007. PSLF allows professional school graduates employed at a public or nonprofit organization to earn early debt forgiveness. Specifically, graduates must make 120 qualifying monthly payments (monthly payments made during residency count for most doctors). Many physicians qualify for PSLF, as approximately three-quarters of hospitals in the U.S. are public or non-profit organizations.
 
If a physician qualifies and uses the PSLF program, he or she could benefit substantially: the physician could repay $100,000 and have more than $200,000 in debt forgiven. However, the President’s 2017 budget proposed capping the amount of debt that’s forgiven at $57,500. The administration and Congress are concerned that PSLF will subsidize certain professional fields, e.g., medical, legal.
 
The Journal of General Internal Medicine has analyzed data from the Association of American Medical Colleges Graduation Questionnaire to understand the degree of medical school graduates’ participation in loan forgiveness programs. In 2014, almost 40% of medical school graduates intended to seek loan forgiveness and 62% of those applied for PSLF. Graduates in primary care, medical, and surgical specialties reported similar intentions to use PSLF.
 
Since 2010, participation in PSLF has increased 21.2% annually. The authors note that the proposed cap on debt forgiveness would significantly increase the debt obligation for physicians that intended to use the program.
 
The authors suggest alternatives to the proposed cap. For example, the government could restrict debt forgiveness to graduates entering under-served societal needs fields (such as geriatrics or primary care). Or, it could restrict debt forgiveness to physicians practicing in underserved medical practices, e.g., Federally Qualified Health Centers, Indian Health Service, Veterans Affairs Facilities, etc. A third solution: offer loan forgiveness based on the proportion of care provided to underserved populations, or based on employment in federally designated Health Professional Shortage Areas rather than private or nonprofit status.


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