Will this Public Service Loan Forgiveness Plan Work?

[araytb]

tl;dr - I just want to see if my understanding of the public service loan forgiveness program is correct and my plan on utilizing it is feasible.

Situation:

• I owe about $160K in federal loans.
• My government hospital job pays about $100K. The salary is pretty stable in my field with low potential for income going above $125K.
• I really like my job and I wouldn't mind staying here.
  • Employee (and patient) satisfaction is extremely high. Turnover is low.
  • This hospital has been historically very well endowed (that's what she said) and it's number one in the world for a special branch of medicine.
  • The pay is pretty equal to the private hospital industry.
• Apparently, I likely qualify for income based repayment (IBR) and I'd pay about $850/month based on my estimated AGI, which won't likely change more than 25K in 10 years.
• Public Service Loan Forgiveness (PSLF):
  • If I work for any government or non-profit for 10 years full time while making the above monthly payments, the rest of my student loans are forgiven tax free.
    • Since most hospitals are non-profit, I don't think I'd have a problem meeting the requirements if I ever want to branch out elsewhere.
  • After 10 years, I'd have paid $102K and the rest would be forgiven.

Let me know your thoughts about my plan if it's correct and feasible. My biggest concern is if the loan forgiveness program will still be in place 10 years from now.

BTW, please keep any judgmental political/ethical views at a minimum. Chances are, if you're b***hing about something political here, I probably already agree but that's not going to stop me from taking advantage of the system if I qualify. And yes, I have no soul.

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[RangerBob]

Personally I'm not banking on PSLF still being around in 10 years, but I have the advantage that I can will be doing IBR anyway until I finish residency in 2017, which is when the first group of people will be eligible for loan forgiveness through the program. I figure by the end of 2017 or 2018 we'll know if the program will be sticking around, disappear, or have any big changes.

Like you, I also plan to take advantage of the program if it sticks around. I think your plan sounds good, but the one thing I would consider is "hedging your bets" and considering paying more than the minimum monthly payment in the event PSLF disappears, so that you won't be stuck with a ton of interest + principle to pay. Making extra payments on the principle (you actually have to specify that when you make an extra payment, otherwise it just extends your next payment due-date) doesn't affect eligibility for forgiveness. If PSLF sticks around, it does mean you spent more than you had to. But then if it disappears, it saves you from ballooning interest/principle.

Two other things I'd like to point out:
1) You may know this already, but if you pursue PSLF, make sure that you consolidate your loans into the direct loan program. Older federal loans (which I assume you have since you're an attending) were usually FFELP and while most of those have been sold to the Dept of Ed, they are not direct loans, and only direct loans can be forgiven through PSLF. All you have to do is apply for a federal direct consolidation loan.
2) I wouldn't personally count on most hospitals being non-profits as a back-up--in many/perhaps most cases the physicians are contracted physicians' groups (for-profit). The academic hospital I trained at was non-profit, which meant the residents qualified for PSLF through their time there as they were paid by the hospital/health system. However, the physicians were employed by a physicians foundation and apparently not eligible, despite working at a non-profit hospital. Whoever signs your paycheck is the key.

 

[araytb]

Hey RangerBob,

Thanks for your thoughts. Really informative stuff. We'll see what what happens in 2017-18. Not sure if I'll "hedge my bets" but it'd probably be a good idea. I just learned I actually qualify for PAYE (about $650/month), which is even lower than the IBR. If the PSLF doesn't work out, I was thinking plan B could be the 20 year forgiveness on the PAYE. And if I go that route, I'm not limited to non-profits. Even with the PAYE 20 year forgiveness, I'd still pay about $156K vs the $160K I currently owe, which doesn't sound too shabby. However, the thought of that much debt hanging over your head for 20 years can be scary.

It's a good thing you pointed out the Direct Loan Program. I'll have to check on that or everything would have been a waste!

I checked with HR and I would definitely fall under the non-profit category (I'm actually pharmacy not medicine). They even filled out that preliminary employment certification form for me (https://studentaid.ed.gov/sites/default/files/public-service-employment-certification-form.pdf). It still has to be approved by Fedloan Servicing but I'm pretty confident.