[Editor’s Note: Re-posted with permission from Ben White. It first appeared here. Ben’s book, Medical Student Loans: A Comprehensive Guide, is available for purchase or to read for free in your browser.]
Note that many organizations that offer repayment assistance are also government or non-profit work and thus also qualify for PSLF.
Some employers offer student loan repayment as a bonus package for new employees. In many cases, these payments are made directly to the servicer on your behalf and are considered a taxable benefit. This is great, and you should enjoy that perk unless said employer is also a non-profit 501(c)(3) organization and you are otherwise well-suited for PSLF. In this case, you’ll be paying taxes on money that would have been forgiven anyway. For example, a $20,000 loan repayment benefit costs $5,600 in taxes in the 28% bracket!
In the context of PSLF, a taxable student loan benefit is actually worse than nothing.
If this situation crops up during the negotiation/contact-signing phase, it behooves you to try to negotiate a change. If possible, try to get this money delivered to you instead of your servicer (then you can use it to make your IDR payments). Having them make it a retirement contribution would also be great if they don’t want to just give you cash. Some big organizations are inflexible and won’t/can’t do anything helpful for you. If you’re really set on PSLF and they won’t play ball, you should try to waive the benefit. But otherwise, make sure that the extra money doesn’t change the calculus. It’s possible that with the bonus you’ll be better off just trying to pay down the loans fast yourself instead of stretching over the 10-year span.
Under the Teacher Loan Forgiveness Program, if you teach full-time for five complete and consecutive academic years in a low-income school or educational service agency, and meet other qualifications, you may be eligible for forgiveness of up to $17,500 on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans.
Unfortunately, the $17,500 amount only applies to math, science, and special ed teachers. Other “highly qualified” teachers can receive only up to $5,000.
And, perhaps most importantly, any months used to earn Teacher Loan forgiveness cannot be double-counted for PSLF. So, don’t apply for it if you plan to keep working in that qualifying job for five more years and get the whole amount forgiven unless you’d end up paying more using IDR over the additional time period.
Perkins loans have their own separate discharge program, which can forgive a percentage of the loan for each year of qualifying employment doing things like:
- Volunteer in the Peace Corps or ACTION program (including VISTA)
- Teacher, Speech Language Pathologist, or Librarian working at a qualifying school
- Member of the U.S. armed forces (serving in an area of hostilities)
- Nurse or medical technician
- Law enforcement, firefighter, or corrections officer
- Head Start worker
- Child or family services worker
- Professional provider of early intervention services
Learn more here: https://studentaid.gov/manage-loans/forgiveness-cancellation/perkins
Local & State Programs
Many states have their own loan repayment programs, most of which are based on providing healthcare services in rural or high-need areas. Most are for physicians, but there are scattered offerings available to teachers, attorneys, nurses, veterinarians, and dentists.
These programs aren’t generally robust enough to change your plans, but if you’re considering working in a rural or semi-altruistic environment, make sure you google what you do to check your state’s offerings.
Government workers can earn up to a maximum of $10,000 per employee per calendar year up to a total of $60,000 as part of the Student Loan Repayment Program, which includes the VA and most other federal agencies. There is no application; this is something you discuss with your employer when you sign up for your job, and not all positions qualify.
Payments will only be made toward federal student loans, so do not refinance at least the appropriate fraction of your loans if you can utilize this benefit. If you leave before 3 years, you are also required to pay the extra dough back. For some borrowers, of course, the SLRP is enough to pay off everything.
Note that government work is also PSLF-eligible, which may be a better choice for Cadillac borrowers.
The VA also offers a poorly advertised Education Debt Reduction Program for healthcare providers that are deemed “hard to recruit and retain” of up to $120,000 ($24k/year).
NIH & NHSC
The National Institutes of Health (NIH) has programs that supply up to $35k per year for qualifying folks with fancy doctoral degrees. See https://www.lrp.nih.gov/eligibility-programs:
The repayment amount is equal to one-quarter of the total eligible educational debt, up to $35,000, for each year of the award. To receive the maximum amount of $70,000 for a two-year award, an applicant must have at least $140,000 in eligible educational debt at the contract start date.
The National Health Service Corps (NHSC) offers loan repayment up to $50k to doctors and dentists in exchange for a two-year commitment. See http://nhsc.hrsa.gov/loanrepayment/.
Both of these require competitive applications and acceptance is certainly not guaranteed.
Nurse Corps Loan Repayment Program
Covers outstanding nursing education debt for RNs or advanced practice nurses working in eligible nursing schools or critical shortage areas. Pays up to 60% of your loans for a two-year service agreement and 85% for three years. There is an annual submission deadline to apply, which was in February in 2017. Non-nursing debt is ineligible.
USDA Veterinary Medicine Loan Repayment Program (VMLRP)
The USDA pays veterinarians in designated shortage areas up to $25,000 for a period of up to 3 years.
Attorney Student Loan Repayment Program
The Department of Justice Attorney Student Loan Repayment Program doles out money to employed attorneys in exchange for at least a three-year commitment. It’s a maximum of $6,000/year totaling no more than $60,000 total. An application process takes place each year.
John R. Justice Student Loan Repayment Program
The John R. Justice Student Loan Repayment Program (JRJ) provides loan repayment assistance for state public defenders and state prosecutors who agree to remain employed as public defenders and prosecutors for at least three years.
Benefits are up to $10,000 per year totaling no more than $60,000.
On the downside, the state agencies administering the John R. Justice Grant Program “must ensure that funding for loan repayment is allocated equally between prosecutors and public defenders and must give priority to those eligible beneficiaries who have the least ability to repay their loans.” Whatever that means.
Military benefits are especially great if you were planning on serving your country anyway. There are obviously pros and cons to using the military to pay for your education that are far beyond the scope of this book.
There are military benefits used to directly pay for school as well as separate loan repayment programs (LRP) in each branch, including specialized repayment programs for doctors.
The Army’s Financial Assistance Program offers grants up to $45k per year along with a monthly stipend of at least $2,000 to army members during residency.
The Active Duty Health Professions Loan Repayment Program offers up to $120k ($40k over 3 years) towards repaying medical school loans for active duty doctors.
Health Professionals Special Pay offers up to $75k ($25k over 3 years) to both active duty physicians and doctors who are members of the U.S. Army Reserve who have completed a residency in a qualifying specialty.
The Navy’s Health Professions Loan Repayment Program (HPLRP) offers a yearly maximum payment of $40,000 directly to medical school loans, after federal income taxes that are typically about 25 percent. This is open to active duty medical students, residents, and attending physicians.
The Navy Financial Assistance Program offers up to $275k in assistance to medical residents ($45k/year) as well as a monthly stipend of at least $2,200 for four years.
The Navy also advertises sign-on bonuses to practicing physicians of $220k -$400k, depending on the physician’s specialty and experience.
The Air Force will pay for medical school through its Health Professions Scholarship Program.
For those joining later, the Air Force Financial Assistance Program offers grants up to $45k per year with a monthly stipend of $2,000.
Indian Health Services Loan Repayment Program
Working in an IHS facility for American Indians and Alaska Natives for two-year commitments can net $40k in medical school loan repayment.
Federal Loan Discharge
There are a handful of depressing ways to have your loans discharged (canceled)
- All of your loans are canceled in the event of death or total permanent disability (i.e. you cannot and will never be able to work)
- Bankruptcy is theoretically possible, but not really. If you can work, the bankruptcy court is not going to let you off the hook.
- Closed School (basically only for folks who could not complete their program because the school closed while they were enrolled)
- Loans were the result of identity theft
- False Loan Certification (the school lied to make you eligible for loans)