Loan Forgiveness: Are You Eligible?

Most physicians graduate with an average of $161,290 of medical school debt when entering their training, according to American Academy of Medical Colleges, which can take many people until they retire to pay it all off. For folks in lower paying specialties or working with employers who have a high supply and low demand for new attending positions where competitive compensation is not a big factor, these loans present an even bigger burden as it takes up a bigger percentage of the monthly budget.

The government saw that not only was this an issue, but it was a deterrent from working in underserved areas and pursuing careers that weren’t as high paying as some specialties.

For those who are/have done their training and are still working at non-profit, 501(C)(3) or government agencies, there may be some relief available to you after paying your loans for 10 years. This program is called Public Service Loan Forgiveness.

How to qualify:

• You must pay 120 on-time payments under the income-based repayment (IBR), income-contingent repayment (ICR) or the standard 10-year repayment program. Whatever is left after these 10 years is said to be forgiven.

• Your loans must be Direct Stafford, Direct Consolidated or Direct Grad Plus loans. Commercial lenders do not count. You are allowed to reconsolidate your old loan packages into this program to become eligible.

This program started in 2007 and the IBR program came out in 2009. So the first folks who will be eligible to receive some permanent relief will do so in 2017 and, more likely, in 2019.

The people who will benefit the most from this is those who pay under the IBR program while in training and then stomach the 10-year repayment schedule for the remaining one to seven years as an attending at a qualified agency.

If you think there is a chance that you may be eligible or will qualify for some forgiveness, they recently came out with an Employment Certification Form that is meant to document and certify past years of this program to start counting them. It is recommended that you re-submit this form annually.

A word of caution is that the unknown, like any government program out there, is if it will stay around. I would not foresee the government pulling the rug out from those who have documented that they are counting on this program with the Employment Certification Form, but it could discontinue it for newer applicants down the road.

Jon C. Ylinen is a Financial Advisor with North Star Resource Group and offers securities and investment advisory services through CRI Securities, LLC. and Securian Financial Services, Inc., members FINRA/SIPC. CRI Securities, LLC. is affiliated with Securian Financial Services, Inc. and North Star Resource Group. North Star Resource group is not affiliated with Securian Financial Services, Inc. The answers provided are general in nature and are not intended to be specific recommendations. Please consult a financial professional for specific advice in relation to your individual circumstances. This should not be considered as tax or legal advice. Please consult a tax or legal professional for information regarding your specific situation.

The information provided here is general in nature and is not intended as specific recommendations. Please consult a financial professional for specific advice in relation to your individual circumstances. (IR568057)/ DOFU: 10/12