Many medical professional’s struggle with the mountains of debt obtained on their journey to become a doctor. As they get closer to having the official title of MD next to their name, many begin to look for a way out. It was reported in 2014 by the Association of American Medical Colleges that the average indebted graduates in the class of 2104 carried $176,348 in loans, a staggering number for the cost of becoming a doctor. Many physicians consider the fact they will earn a six-figure income, but during residency the average income ranges from $40,000 to $50,000. That means the interest on their mountain of debt is equal to a paycheck. Fortunately, recent medical school graduates can help minimize the crushing debt by pursuing a student loan forgiveness program.
National Health Service Corps (NHSC)
The National Health Service Corps (NHSC) can provide up to a $50,000 to repay your health profession student loan in exchange for a two year commitment to a NHSC site in a high-need, underserved area. After completing your initial service commitment, you can apply to extend your service and receive additional loan repayment assistance. Each service option has a number of factors to consider including Full-Time vs Half-Time Clinical Practice and score of the Health Professional Shortage Area (HPSA). The 2015 Application and Program Guidance can tell you more to help understand the program.
The benefits of loan forgiveness go even further beyond the opportunity to receive loan forgiveness including furthering your education, training, and networking opportunities along with becoming a part of a community of providers that desire to care for underserved patients.
Public Service Loan Forgiveness Program (PSLF)
The PSLF Program is intended to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers.
According to EducatedRisk.org in Obama’s 2015 Budget Proposals for Student Loans , Public Service Loan Forgiveness currently allows a loan forgiveness of $57,500 because the 120 qualifying payments have only been in effect since October 1, 2007, the first forgiveness of loan balances will not be granted until October 2017.
The U.S. Navy Health Professions Loan Repayment Program (HPLRP) provides and incentive to new accessions and current active duty medical personnel to enter the Navy and receive payment of professional education loans. The maximum yearly loan repayment is $40,000 minus approximately 25% federal income taxes taken out prior to lender repayment.
State Repayment Programs
Many state specific programs are available. A good place to check the medical loan repayment and forgiveness programs available in your area is through the AAMC database. Here are a couple examples of state specific programs and what each entails:
Arizona Loan Repayment Program
The Arizona Loan Repayment Program: a new law just recently expands the legislation to make $65,000 available for a 2-year commitment from physicians. Many of the state programs have a tie into federally designated HPSA areas, but more information is available on each website.
Kansas State Loan Repayment Program
According to the Kansas State Loan Repayment Program Overview and Requirements the health care professional may receive up to $25,000 per year of contract towards the repayment of outstanding education debt according to each recipient’s profession. After completion of the initial two-year service obligation, health care providers may apply to extend their contracts in one-year increments.
Do the Math Before Signing on the Dotted Line
As you take a look at each possibility for the loan forgiveness programs that are available to you, it’s best to consider what options would best fit your needs and wants in a profession and living environment.
It also pays to do the math on your student loans and the amount of money you will be making and applying towards your student loan debt. If your medical loans add up to $400,000, then receiving a $25,000 forgiveness credit and $75,000 salary would lose out to a $200,000 salary with no loan forgiveness because the numbers don’t add up. The loan forgiveness program would generate a combined $100,000 each year and the regular salary alone would contribute $200,000 or double what you would be able to apply to your loan, before taxes. Don’t leap into a forgiveness program because it sounds appealing. Remember to do what makes the most sense to your personal situation.