Financial Resources for Early-Career Physicians

Student Debt

Free Money: How to Take Advantage of PSLF

Public Service Loan Forgiveness (PSLF) is free money! Here's how to know if you'll qualify, and how to take full advantage of its benefits.

Dan Cremons
April 2, 2023
6 min

There are few words that can have a greater impact on a young physician’s financial future than these 4:





…affectionately known within the medical community as P.S.L.F. Ever heard of it?! 

Uncle Sam often gets a bad rap for taking our money each tax season. But as quickly as Uncle Sam taketh, with a snap of his fingers and a wave of his PSLF wand, he also has the power to make your student loans vanish (after 120 qualified payments, that is). Indeed, the PSLF program is a major boon to physicians who qualify. It can wipe out the hundreds of thousands in debt you’ve taken on during your training years. 

My co-founder’s physician wife, for example, had 6-figures worth of student loans forgiven. Same with our third co-founder, who is a practicing Facial Plastic and Reconstructive Surgeon.

For physicians still in training, the sooner you can figure out whether you'll qualify for PSLF, the more informed decisions you'll be able to make about how to optimize your student loans now–and the more money you can potentially save over the long term. 

So in this article, I’ll walk through how to know if you’ll qualify for PSLF, how to make the most of its benefits, and how to avoid a few costly PSLF traps that early-career physicians can slip into.  


How do you determine if PSLF is a possibility for you? 

There are 4 basic qualification criteria for PSLF: 

☑ You must be working full-time at a qualifying non-profit, 501(c)(3), or governmental employer.

☑ Must be enrolled in an eligible repayment plan. (There are 4: IBR, ICR, PAYE, REPAYE, which we cover in another post.) 

☑ You must make 120 payments, which means you’ll become eligible for loan forgiveness after 10 years (assuming you've made consecutive monthly payments).

☑ Loan forgiveness only applies to federal student loans.

The key question here is: do you expect to be working in an academic, not-for-profit, or governmental setting after training? For some physicians, the answer may be obvious based on your specialty, as certain specialties will almost surely have you working in a qualifying institution. For others, like my Oncologist wife, it may be more difficult to predict–maybe even stressful to think about—whether you’ll be in academics or private practice in 5 - 10 years. 

No pressure, but the sooner you can figure out which direction you’re most likely to head, the clearer your student loan repayment strategy becomes. 

Keep in mind that payments made during a physician’s years in residency/fellowship will almost always count toward the 120 payments needed for PSLF. Nearly all residency/fellowships are 501(c)3 employers. This is huge. For those specialties requiring more years of training (like surgery), you’ll be halfway–or more–towards the needed 120 PSLF payments by the time you finish training. 

We have surgeon clients, for example, who after 7 years of training, opted to work another 3 years at an academic institution, qualified for PSLF and had their loans forgiven, and then went into private practice thereafter. 


If you’re on the PSLF path, here are 4 important considerations that will help ensure you’re able to take full advantage of the program: 

1. Do not refinance your student loans if you’re on the PSLF path. If you know or think you’ll be on the PSLF path, whatever you do: do NOT refinance your federal student loans. Most young physicians get student loan refinancing ads in the mail often. But doctor beware! Whatever loan terms private lenders may be offering, the reality is: the moment you privatize your government loans, you’ve knocked those loans out of PSLF eligibility. Remember: only federal loans qualify for PSLF. 

2. If you’re married, consider filing your taxes separately (instead of jointly).  If you’re on the PSLF path, you want to minimize your loan payments to maximize the amount that is one day forgiven. Under income-driven loan payment plans, your payment is based on your adjusted gross income (AGI). When you're married and filing taxes jointly, both your income and your spouse’s income factor into your household AGI. But for physicians on the PSLF track, the lower your AGI, the lower your loan payment; and the lower your loan payment now, the more debt that is ultimately forgiven through PSLF later. So, by choosing to file your taxes separately instead of jointly, it will remove your spouse’s income from your loan payment calculation. This is a very big thing.

Now, filing separately will oftentimes mean you and your spouse pay more in taxes now, but you'll usually make up for the slightly higher tax bill many times over by reducing your monthly loan payments, and maximizing the amount that’s forgiven via PSLF. But be sure to run through this with a tax professional like your CPA or accountant. We work hand-in-hand with a client's CPA or our own to analyze this on a case-by-case basis. 

3. Don’t forbear your loans if you’re on the PSLF path. Forbearance–which allows you to defer the payments on your loans until after residency–can seem appealing at first blush. But, if you recall, nearly every residency and fellowship is a 501(c)3 employer. Therefore loan payments made during training count towards the 120 payments needed to have your loans forgiven. Forbearing simply delays these payments from starting, and sacrifices payments that would otherwise have counted towards PSLF.

Here’s the kicker: under an income-driven payment plan, given your income will be low during the training years, your payments will likely be $0 (or close to it). And yes, a $0 payment still counts as a payment toward an income-driven payment plan!

4. Save into a pre-tax account to reduce loan payments. To reduce the loan payments you have to make now–and in doing so, increase the amount that will one day be forgiven under PSLF–consider saving into a 403(b), HSA, FSA, or another pre-tax account. This is usually most applicable for married couples where both spouses are earning an income since there needs to be some extra cash available to save during the training years.  

This is getting into the finer aspects of financial planning, but its worth noting here because it can help you to maximize the PSLF benefit AND reduce the amount of taxes you'll owe--a double-win. 

*  *  *  *  *

For physicians still in training, the sooner you can figure out whether you'll qualify for PSLF and home-in on the optimal repayment strategy for your situation, the less stress you’ll feel and the more financial confidence you’ll have as you turn the corner into the attending years. 

If you need help sorting out your student loans, and figuring out the right repayment strategy, you’re in luck: we keep a few windows open each week to help residents through this. Grab some time here

Important Note: This blog post is intended to provide general information and should not be considered as professional advice nor investment advice. Please consult with a qualified financial or insurance professional for personalized guidance based on your specific circumstances.

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