Mastering Public Service Loan Forgiveness for Doctors

Mastering Public Service Loan Forgiveness for Doctors

In this episode of 'Retire Early, Retire Now,' host and certified financial planner Hunter Kelly dives deep into the specifics of Public Service Loan Forgiveness (PSLF) for high-income professionals such as doctors, attorneys, and other eligible professions. He discusses eligibility criteria, the types of loans that qualify, necessary repayment plans, and the importance of certification and documentation. Hunter also highlights the benefits of PSLF, including tax-free loan forgiveness and flexible payments during residency, while cautioning against common pitfalls such as neglecting certification and switching to non-qualifying repayment plans. The episode underscores the enormous financial impact PSLF can have, potentially forgiving hundreds of thousands of dollars in student debt, and provides actionable steps for professionals to enroll and stay on track. For personalized advice, listeners are encouraged to reach out to Hunter Kelly via his website.

00:00 Introduction to Public Service Loan Forgiveness (PSLF)

01:18 Understanding PSLF Eligibility

03:26 Qualifying Employers for PSLF

05:00 Making Qualified Payments

08:53 Benefits of PSLF for Doctors

10:52 How to Enroll in PSLF

13:11 Common Pitfalls to Avoid

15:18 Closing Thoughts and Final Advice

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Transcript

0:00

Welcome back to retire early retire. Now I'm your host hunter Kelly certified financial planner, and your guide to navigating. Financial challenges and opportunities for high-income professionals, especially physicians and attorneys. And today we're diving into a topic that can transform financial futures or many doctors. And that is public service loan forgiveness. Or P S L F if you're a doctor. Um, or you're going through medical school, you've probably heard of public service loan forgiveness, and we're going to dive deep in that today on a bunch of different areas on how to make sure that you're eligible, how to make those payments. What are the repayment plans that you should be on? Um, and how do I get my loans forgiven? Right. And so that's the value that I want to add today. So if you're getting to that point where you're ready to start making payments. On your student loans, uh, and you think you qualify or work for a qualifying employer? Uh, you're going to want to listen to this today, but before we jump in. I'm sure. You know, someone else that can benefit from this conversation as well. So share this with a friend. Uh, leave a five star review on your favorite podcast app. And don't forget to subscribe to my YouTube channel hunter Kelly CFP. And go ahead and like this video as well, but let's jump right into it. So. Uh, PSLF is one of the most valuable tools available to doctors. Uh, if you're working in a nonprofit or government setting, not only doctors, but other professions as well, teachers, sometimes attorneys, if they're working for the state, Uh, or local government, um, I'm doing different tasks like being prosecutors or whatever that may be public. Um, defender. And so it was designed to forgive remaining balances. Of federal student loans after you make 120 qualifying payments, those payments do not need to be consecutive. Uh, they can be broken up, but if you make those 10 years worth of payments and you're consistent, Uh, basically you're going to get whatever remaining balance is, uh, on that you're going to get it forgiven tax-free, which is, which is awesome. Right. And so, Um, what are, what loans are eligible for? Uh, public service loan forgiveness. And that is the first question that you need to answer because not all, uh, student loans are eligible for this particular program. And so how do we know? So direct loans only these include direct subsidize un-subsidized plus and consolidation loans. So if you have any other type of federal loans, like FL. E L or Perkins loans. Uh, you'll need to consolidate them into a direct consolidation loan. Uh, to qualify for the public service loan forgiveness plan. Uh, and so. This is why it's crucial. You got to check and figure out which loans you have, and you can do this by logging on to student aid.gov before proceeding. Uh, with consolidation, it's always good to double check with your loan servicer to ensure your loans will be eligible or are eligible. So, um, once you determine, Hey, I do have some loans that are eligible. Maybe it's the vast majority of your loans. Maybe it's all of your loans. Maybe it's a small portion, but whatever that case may be, you may have, um, some that are eligible. Uh, you're the next thing you'll want to do is check and make sure that you're working for a qualified employer. Um, so your employer may help with this, but if you're still unsure, you can always go to student aid.gov and check there as well. But generally they're a government organization, state, uh, federal or local, sometimes tribal government organism employers. Um, things of that nature. So this is where if you're an attorney, Uh, it may be valuable to hang around and be a public defender for awhile. And be with the prosecutor, whatever that may be too. To uh, qualify for this particular mold. Forgiveness plan. Uh, other organizations non-profits the employer must be a 5 0 1 C3. Organization. Um, and then sometimes, uh, you can get around that, but just make sure that they're a qualifying employer. Most soccer's qualify through hospital or healthcare systems that are nonprofit organizations, but to be safe, submit the employment certification form, uh, annually to confirm that your employer qualifies, uh, This form is key allows you, uh, to verify your progress and eligibility as you go. So you don't want to wait until the end. And try to shove everything in there and, um, and maybe something is mixed up and you miss a bunch of payments, whatever that may be. So, uh, this is a great way to kind of keep track of everything. And we'll talk about. Um, documentation and things here in just a little bit. So the next thing. Uh, what counts as a qualified payment. So, you know, you have some loans that qualify for this program. You know, you're working for the employer, uh, that qualifies for this program. So ha what else? So. Not every payment you make, uh, toward, um, or not every payment you make will qualify, tore PSLF. So here's what you need to know. You need to be, uh, Most likely you need to be in some sort of income driven repayment plan, like the pay plan, the repay plan, the IVR plan. Um, The vast majority of the time, the standard repayment plans. Uh, will not qualify. You could get on a 10-year repayment plan, but then you would pay it off before, uh, Essentially the same time. Or before your loan be forgiven. So that doesn't make a lot of sense. Um, and then if you pick a standard. Repayment plan that is longer. And then a 10-year period, then your payment is not going to qualify because generally it won't be high enough. To meet the standard. Rules what they have. So basically you have to have a payment that is least, uh, equal to the S the 10-year standard repayment plan. So, uh, so that will not work. So you need to be on some sort of income driven repayment plan. Damos must be full and on time. So no partial payments or late payments or that payment will not count. So if you miss a month because, uh, you forget, or whatever the case may be, uh, that month will not count. So you'll have to add, you have to tack on another month. Um, and then, uh, partial as well. It would be the same thing. Payments germ deformant a deferment or forbearance do not count. So if you're in residency and you're still kind of deferring those loans until you get to a point where. Uh, you're an attending physician somewhere. Uh, those, uh, payments or deferment would not count towards your time toward, um, PSLF so, uh, let's see. Here. So essentially the good thing to do and most residents do is they will choose to get on an income driven repayment plan while they're in residency. Uh, one, because their income is much lower. They'll have a lower payment and then we'll start that clock toward those hundred and 20 payments. Right. Um, so that's that. Generally a good path to go is. Go ahead and get that thing. Turn on. Uh, S uh, if you're working in a qualified hospital, Um, and start making those payments. Uh, through that income driven repayment plan. Uh, those payments will be much lower and you could get 2, 3, 4 years worth of payments already. Uh, on the books before. You become an attending physician, um, and then your income jumps up and those payments jump up as well. So that's a good way to tack on a few, uh, easy years. Now the 120 payment rule. So you must make 120 qualifying repayment, uh, or qualifying payments, but they don't have to be consecutive. So if you leave the qualified hospital, go work somewhere else for a few years and then come back. You can always reapply or recertify yourself, start making those payments again. Um, and those will count toward your 120. So. Um, So they don't need to be consecutive. They just need to be paid and you have to be working full time. So payments need to be made while working full time for the qualify employer that is generally defined as 30 hours per week. Uh, or meeting your employer's definition of full-time. Um, flexibility is built in, but consistency is key to staying on track. So, um, stay at the, the hospital is. That is qualifying. Keep making those payments is your best bet. So benefits of PSLF for doctors. So what are the benefits? Why would we want to do this? Why would we want to potentially work at one employer for 10 years? Whatever the case may be, uh, just so that we can get. These loans forgiven. I could just pay them with my, um, my income that I'm making now. Yes, you certainly could do that. Um, but this loan forgiveness program can be a game changer for doctors with significant debt. So if you come out of medical school and you have two,$300,000 worth of student loan debt, Uh, this could be a potential opportunity to forgive. Uh, I large portion of those loans. So forgiveness is tax-free. Um, unlike other forgiveness programs. Once this is forgiven. There's no taxable income. Um, so other programs, let's say you had a hundred thousand dollars left that you got forgiven. Likely that would be taxable with other programs with this one. It is not. Uh, the flexible payments during residency. So if you're on those income driven replay payment plans, like you would be, if you're trying to apply for this program. Um, then your income or your payment is going to be much lower. Which. If your income is lower, you may not even be meeting, uh, the payment to the meet the interest. Right? So, um, your balance wouldn't necessarily be going down. Um, but you're still working toward those payments. So you may get, uh, four years of essentially free payments there. Um, while you're in residency. So. Um, If your debt is high. Again, this could be, this should be something that you could should consider. Even if you take a job that may pay you a little bit less at a qualified hospital, because you could get. Uh, hundreds of thousands of dollars, uh, potentially forgiven. Uh, if you kind of play this game, right, right. Um, and so. So how do I enroll? So what are the steps? So I know, I know the benefits of why I would want to do it. I have a lot of student loans I'm coming out of medical school. I'm going to be working. Uh, about at a residency and a qualifying hospital, whatever that may be. Um, how do I start to get enrolled? So if you're considering PSLF. Here's how you get started. So confirm obviously your employer submit the, uh, PSLF. Uh, employee certification form or ECF annually, and any time your job changes. So let's say you're at a qualifying hospital. You change. Uh, hospitals to another qualifying. You want to, uh, submit the certification form, uh, so that the federal government knows choose the right repayment plan. So, um, we won't get into detail on which one. Uh, or why you would take one over the other. Uh, it depends a lot on if you're married. If you, what your income is. Um, things of that nature. Lots of different factors. And maybe that we can get into that into another podcast, but you're going to want to choose an income driven repayment plan. Uh, whether that's the pay plan, the repay plan or IBR. And again, depending on your situation, one may be better than the other. Uh, consolidate if necessary. So if you have one of those, uh, loans, like a Perkins loans that does not qualify for this. Uh, loan forgiveness, consolidate them into a direct consolidation loan. Uh, track your progress, use the, uh, Publix all. Public service loan, forgiveness, help tool. On the federal aid of federal student loan aid website. To track your progress. The last thing would be, uh, be patient and be persistent, keep detailed records. And this is where I really want to, uh, stop and talk about keep records. Right? Keep your, W2's keep your pay stubs. Uh, Uh, low them into a file somewhere that, you know, you can get to at all times. Um, because when you go to get your forgiveness, the last thing you want is under kick back and say, Hey. The couple of these payments don't count or whatever amount of payments don't count. Uh, you don't have that evidence so that there's no surprises at the end of the road. Uh, when you go to try to apply for forgiveness. So, uh, what are some common pitfalls, uh, to this particular loan program? So while it's incredibly valuable. Uh, it's easy to make mistakes, so we want to be. Extremely detailed. So the first thing is, uh, that I see people do or it's common. Uh, they just don't submit their employee employment certification regularly. So we want to make sure. Uh, that we're doing that. And if you don't certify your employment, you're at loose. Uh, you're at risk for losing. Uh, progress toward your forgiveness, um, switching to a non-qualifying repayment plan. So, uh, you may be on an income driven repayment plan and maybe you forget or whatever. Uh, and you move to a standard repayment plan that doesn't count. Um, then you may be losing out on those payments. So. Uh, keeping track of your repayment plan. Uh, Oftentimes, uh, Not as much in the last. In the recent years because of interest rates being much higher. Um, but uh, people refinancing to a private lender, uh, once you refinance, so private lender, you lose all ability to have, um, These, these federal loan. Um, forgiveness programs. So especially with the public service loan forgiveness plan. So, uh, make sure that you stay within the government confines and your, uh, income driven repayment plans, things of that nature do not refinance to a private lender. Uh, assuming all non-profits are, uh, qualify. Not all of them. Uh, profits qualify for a PSLF. So you want to just make sure that you get on to student aid.gov and verify. That. Uh, potential new employer that you're looking at, uh, qualifies for student loan forgiveness. Uh, a little diligence, a little bit of detail attention to do you tell here can go a long way into, uh, ensuring that your loans are forgiven. So. Closing thoughts. Uh, PSLF is one of the most powerful tools available to doctors and other types of high income earning professions. Uh, and so managing your shoot at loan debt. Uh, Is key here maximize the benefit. You need to have a clear plan, a consistent tracking. And be patient for those willing to stick with it. The rewards can be life-changing. Obviously, if you have a hundred thousand dollars worth of student loans, forgiven. Ah, that's a big deal as a lot of money. Right. Um, and so. This will allow you to focus on building wealth. It'll accelerate your ability to build wealth and achieving your long-term goals. Um, because having to pay off two,$300,000 worth of student loan debt. I can put a dent in that ability to build wealth. So if you're unsure about your, uh, standing or eligibility for public service, public service, loan forgiveness. Or want personalized advice, please reach out to me on my website, Palm valley, wm.com. You can schedule a call. We can kind of talk through. Uh, what you're going through and, and, uh, see if we can help. Uh, so if you know someone that could benefit from this episode, go ahead and share it with them. Uh, there are a lot of people that can benefit from it. And so again, just a little bit attention to detail, a little bit of ice can get their student loans forgiven as well. So together we can have more doctors. Take control of their financial future. And that's what I want to do here on retire early retire now. So thank you for listening. Uh, don't forget to subscribe the labor review and a. We'll see you in the next one.