A new federal regulation opens up the opportunity for doctors in California and Texas to participate in the forgiveness of student loans, potentially bringing much-needed relief to those facing a high debt burden following the resumption of loan repayments last month. However, the timing is crucial, 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) went into effect in July, expanding the pool of potential borrowers whose federal student loan balances could be erased after working full-time in a state or nonprofit capacity and making 120 monthly loan payments.
However, loan forgiveness also depends on the correct type of employment and requires the applicant to be a „direct employee“ of the organization. State laws in California and Texas prohibit nonprofit hospitals and healthcare facilities from hiring doctors directly, creating a barrier for doctors at these locations to apply.
The doctor and hospital associations of both states worked with the US Department of Education (DOE) to provide an exception. Doctors in California and Texas can now fulfill the employment requirement by having a written contract or medical staff privileges with a nonprofit hospital or organization, even if the doctor is part of a for-profit sole proprietorship, partnership, or medical group.
Eligible loans must not be in default and must have been obtained through the Direct Loan program, which includes Parent PLUS loans. Doctors with non-qualified student loans, like Federal Family Education Loans, may be eligible for PSLF, and previous work hours will be credited towards the requirements if they are consolidated 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 at a crucial time as California and Texas will need to expand their physician workforce by tens of thousands in the next decade. „This program will allow us to keep and recruit new doctors in our states to address the growing physician shortage and access-to-care challenges for the patients who need us the most,“ said Dr. Rick W. Snyder II, President of the Texas Medical Association, in a statement.
Doctors should utilize the PSLF aid tool to complete the forgiveness application, said Ashley Harrington, a senior advisor at the DOE. During a free On-Demand Webinar hosted by the CMA, she said the form has been streamlined and will ask applicants to specify the nonprofit facility where they provide care, their employer ID number, the time worked there, and the average hours worked per year. The employer must certify the hours reported by the doctor with their signature.
Ideally, doctors should submit a PSLF form annually or with each job change, but they can also wait until the end of the 10 years to submit the form, Harrington said.
With the average medical school loan debt exceeding $200,000, CMA President Donaldo Hernandez, MD, said the rule will ensure that low-income students and minority candidates can consider a medical career.
California family physician Ashley Paydar, DO, told Medscape Medical News that she has already applied for PSLF and found the process relatively simple. While awaiting final approval, she is planning for the future. „With the loan forgiveness, I can complete a scholarship and save for my children’s college education so they can pursue higher education without debt,“ she said.
However, employers are not legally obligated to certify doctors‘ hours, and many may have concerns as they try to understand the new guidelines, said Long Do, JD, partner at Athene Law in San Francisco and a speaker during the webinar. He urged doctors to have patience when navigating the application process.
Steph Weber is a freelance journalist based in the Midwest focusing on healthcare and law.