With the future of the Public Service Loan Forgiveness Program up in the air, it is important to look at the impact getting rid of the program will have on your future.
The Public Service Loan Forgiveness Program might not last through 2019. It's important to look at how losing this program will impact repaying your loans.
In 2007 the Bush Administration started the Public Service Loan Forgiveness Program (PSLF) that forgives federal debt for borrowers who made 120 payments, or 10 years of loan repayments, while employed at a nonprofit or public institution.
The program now looks like it will be going away by 2019 and it isn’t clear whether there will be a new program put in place, or if borrowers pursuing federal loans currently might still be grandfathered into the program.
This is concerning for dentists because as recent as 2017 a third of medical school graduates plan on using the program, according to a report from Penn Medicine News on a study from the Annals of Internal Medicine. Furthermore, dentists are in the top five of professions with the highest monthly debt-to-income ratio as over 10% of their monthly income goes towards debt repayment.
This forgiveness program could be a crucial part of a recent graduate’s plan, and now there’s a strong possibility it may not factor in it at all. It’s best to start preparing for repaying loans without the PSLF and readjust your future plans.
According to David A. Asch, MD, lead author of the PSLF commentary, the program is “structured to encourage borrowers to minimize current loan repayment to maximize eventual loan forgiveness.” However, the potential to have a recent graduate accumulate more debt as they delay paying off loans is dangerous.
When looking at your loan repayment plan after medical school you can create a plan based off of your income. These plans range from making payments equal to 10% of your discretionary income or under 20% of your discretionary income depending on your preference. Some of them would also be longer than the average 10-year repayment plan.
For more on different ways to repay your student loans: How to Dig Out of Student Loan Debt
If you based a separate financial plan for your future on using the PSLF then you will have to readjust it for how much of your income is a part of the income-based loan repayment plan you chose. Regardless, you will have less than the average interest rate of a 10-year loan repayment plan. You also get the extra reassurance that income-based repayment plans will not be replaced.
Part of the call to end PSLF is the unintended outcome of graduates with higher earning specialties, like oral surgeons, will end up responsible for less of their debt than those pursuing lower earning specialties. Higher earning specialties require more schooling and training than just dental school, which means taking out more loans to pursue it.
The PSLF will help you with your heavier student loans from more years at school the same way it helps with any other loans. Yet if it’s taken away you will be burdened with more debt than most graduates. Granted, specializations mean higher pay, but your income will be used to pay off your loans for a longer period of time.
However, you don’t have to get more specialization training right away. Find a mentor after dental school or reach out to a network of peers to find a different starting point than working in public services for ten years.
For more on taking a different path after graduation: Networking is Key for Dental Graduates
If working for a non-profit or public institution is your passion don’t feel threatened. While you might have to restructure your financial plan there are programs that will assist you as you pursue work in areas that lack access to dental care.
For instance, The National Health Service Corps Loan Repayment Program will issue $50,000 tax free in loan repayment for working two years full-time in rural, urban, or frontier communities in the US that don’t have the same access to care as the rest of the country.
This program can also be used as a guide to review individual state loan repayment programs as you plan where to live.
The PSLF may be the biggest loan repayment program available, but it is not the be all end all. If it is cancelled, state programs will still continue. Don’t be discouraged if your plan was to use the PSLF program for 10 years. With enough planning and researching you can find a program that fits your financial situation and helps with your student loans.
For more on other loan forgiveness programs: Dental School Loan Forgiveness Plans