Medical school debt? The latest news you need to know about student loan forgiveness
Key Takeaways
Despite the Supreme Court’s rejection of the Biden-Harris administration’s student debt cancellation plan in June 2023, there are still options available for physicians seeking medical school loan forgiveness.
The administration has announced a new income-driven repayment (IDR) plan called SAVE, which includes reducing monthly loan payments while preventing balances from growing due to unpaid interest.
With student loan payments set to resume after a 3-year pause, physicians can visit the federal student aid website to update their contact information and verify eligibility for payment plans, and visit websites like Student Loan Planner to calculate potential payments and savings.
In June 2023, the US Supreme Court struck down the Biden-Harris administration’s student loan forgiveness plan, leaving millions of borrowers who were anticipating debt relief searching for other alternatives.
Fortunately, plans that reduce borrower’s monthly loan payments and those that help alleviate missed-payment penalties are the White House’s answer to relieving physicians and other borrowers from some of their debt-related worries.[]
Perspective from the experts
To make sense of what this means for physicians with student loan debt, MDLinx spoke with two finance experts.
“If the Biden-Harris administration student forgiveness plan had been allowed to go through, most current medical students and residents would have received up to $20,000 in forgiveness on their loans,” says Julie Fresne, senior director of the Student Financial & Career Advising Services at the Association of American Medical Colleges (AAMC).
Although the plan was rejected, physicians do have other options when it comes to repaying student debt, according to Travis Hornsby, CFA, CFP, owner of Student Loan Planner in Chapel Hill, NC.
“Physicians and residents can either seek medical debt forgiveness or consider income-driven repayment (IDR) plans, such as the new SAVE program,” Hornsby tells MDLinx. SAVE, or Saving on a Valuable Education, reduces monthly loan payments, among other savings benefits.[]
Explore the SAVE Program
Hornsby, who launched Student Loan Planner in 2016 to help his wife and her friends tackle their medical school debt, says IDR plans are a popular option among residents and physicians who are just starting out, or those who are pursuing further training in an academic setting.
"IDR plans set monthly student loan payments at an affordable amount based on your income and family size."
— Travis Hornsby, CFA, CFP
“The Biden-Harris administration’s new SAVE plan replaces the existing Revised Pay as You Earn (REPAYE) plan and offers the lowest monthly payment of any IDR plan," he says.
Hornsby’s website also features a free student loan forgiveness REPAYE/SAVE calculator that compares old and new IDR plans and alternative repayment options. By inputting basic information such as family size, income, and interest rate of federal loan debt, borrowers can estimate monthly loan payments and determine what plan best meets their individual needs.[]
According to Fresne, the new SAVE loan repayment plan is the most generous repayment plan to date and will help many borrowers, including physicians.
"The SAVE plan can lower monthly payments and ensure a borrower’s loan balance will not grow due to unpaid interest."
— Julie Fresne, senior director, Student Financial & Career Advising Services at AAMC
Borrowers already enrolled in the REPAYE plan will automatically be enrolled in the SAVE plan. Those not enrolled in an IDR plan can apply at the Federal Student Aid site.
“Those who are enrolled in an IDR plan need to recertify their income each year in order to stay in the plan,” says Hornsby. “The key is knowing when to recertify. Borrowers might want to recertify early if their income has dropped, if their family size has grown, or if they determine another IDR offers more benefits.”
As recertification dates vary from one borrower to the next, it’s important to check with your loan servicer to determine when you need to recertify your IDR.
Eligibility for the new student loan forgiveness plan
On July 14, the Biden-Harris Administration announced a new plan to erase student loans for over 840,000 borrowers, for a total of $39 billion in relief.[] The forgiveness plan benefits those who are enrolled in an IDR and have accumulated 20 years or more of payments.
The US Department of Education says the loan forgiveness relief plan is aimed at fixing “historical inaccuracies” in the count of payments that qualify for debt relief under IDR plans.
The Department of Education is notifying eligible borrowers who qualify for student loan forgiveness.
Prepare to resume student loan payments
With payments and interest resuming in October 2023 on federal student loans, Fresne advises physicians to start budgeting now.
“Make sure your servicer and the Federal Student Aid [website] have your most up-to-date contact information, and watch for email or mail notifications from them,” she says. “Also, review your auto-debit enrollment or sign up for the first time on your servicer’s site. This ensures you make your payments on time, and may even result in a reduced interest rate.”
To help student loan borrowers who may be struggling to make payments, the Biden-Harris administration has announced a 12-month “on-ramp” repayment program.
Borrowers who miss a payment or are late on payments won’t be reported to credit bureaus, considered in default of their loans, or referred to collection agencies between October 1, 2023 to September 30, 2024, according to the White House briefing.
Consider the PSLF
According to Fresne, Public Service Loan Forgiveness (PSLF) offers significant financial benefits to individuals employed full time by nonprofit and government entities, including physicians.
“It’s a great way to serve, and in turn, have student loan debt forgiven,” she says. “The program allows borrowers to have their loan balances forgiven after 10 years of making payments while working for a not-for-profit, government, and other public service-oriented employers.”
The American Academy of Family Physicians also lists available loan forgiveness programs for physicians, including those offered by the government and the armed forces.[]
"Although medical school may be expensive, there are options available for financing your education."
— Julie Fresne, senior director, Student Financial & Career Advising Services at AAMC
“The keys to successful repayment include careful planning and budgeting, learning how to effectively manage debt, and learning about the various repayment options,” Fresne says.
For a list of resources on tips for paying for medical school and repaying student loans, visit the AAMC’s finance site. Hornsby says his Student Loan Planner podcast helps to demystify the process by offering insights into PSLF, IDRs, and more. Additionally, the Biden-Harris administration continues to announce new funds available to borrowers looking for student debt relief. Be sure to check the federal student aid website regularly for the latest updates.
What this means for you
Getting a handle on your medical school debt can feel overwhelming, especially following the Supreme Court's ruling against President Biden's original plan for student debt relief. However, new options exist to help relieve borrowers. These include the new SAVE plan, which aims to lower monthly payments while ensuring loan balances won’t increase due to unpaid interest; the expected erasure of some student loans for over 840,000 borrowers who are enrolled in an IDR and have made 20 years or more of payments; and a program to ensure borrowers who miss a payment or are late on payments won’t be penalized.