Read on… I will explain it all to you. For those of you who never heard of Clarissa, she was a character on a TV show called “Clarissa Explains it All”, from the 90s? or something, and I dunno much else about it except that the name of the show stuck in my mind for some reason. So today, allow me to be Clarissa…(although hopefully slightly less annoying.)
I will answer: (4 part series)
First off, what is the PSLF?
PSLF stands for Public Service Loan Forgiveness. It is a program started by the Federal government designed to incentivize people to choose jobs in public service roles by offering to forgive some of their student loan debt.
The idea is that in exchange for taking a lower-paying public service role, the government will reward you with student loan forgiveness.
Here’s How it Works:
-Applies to Federal Direct Loans only (Direct Subsidized, Direct Unsubsidized, Direct PLUS, & Direct Consolidation)
-Previously ineligible FFELP Loans (Stafford, Grad PLUS & FFELP Consolidated) and Perkins loans are NOW ELIGIBLE if you consolidate them into a Direct Consolidated Loan
-You work for a qualified employer (non-profit, 501(c)(3), or government institution)
-You make 120 student loan payments, while working for a qualified employer
-After 120 loan payments, the remainder of your debt is forgiven
So if you work for a non-profit or government healthcare entity for a minimum of 10 years, during which you pay 120 monthly student loan payments, then whatever you owe at the end of this period is forgiven.
This applies to many of us, because we work at these types of employers. Academic institutions typically qualify, so we can start paying towards the PSLF plan as residents.
Repayment can be income-based, so you can actually afford to do this as a resident.
So what are the downsides? In other words, why didn’t I jump on this hot tamale when I was a resident?
Well, back in the day when it was first introduced, (2007) PSLF seemed like kind of a gamble. The way we thought of it, you had to enter loan repayment as a resident, in order to maximize the number of years that you’d be at a qualified employer.
At the time, most of us put our loans on forbearance during residency. If you entered loan repayment as a resident, then you were taking a significant financial hit because even though you paid an income based student loan payment, it was still several hundred dollars each month, and if you ended up taking a job with a non-qualified employer after graduation, all that repayment would have been in vain, because you’d no longer be eligible to participate in PSLF.
Plus, word on the street was that not many people who applied for the PSLF actually got student loan forgiveness because of nit-picky rules in the program that messed them up— or glitches— or something. The program was poorly run. About 2% of the people who participated in it actually got loan forgiveness.
It seemed to make sense for interns with longer training programs, like neurosurgery, where they were training for 6 years, so they’d only have to stay at a QE for 4 more years after graduation to get forgiveness.
But for me, at the time, (2009) it didn’t seem like a good idea— I was a PGY-4, with only “a couple more years to go”… little did I know that I would actually be training for 6 more years (2 fellowships). Shoulda coulda woulda. Plus, I also had a low interest rate, so forbearance sounded good to me. (I did not yet know about capitalization…)
Kids nowadays have it different…
Nowadays, student loan interest rates are high enough that placing them on forbearance for 3-7+ years during residency is not a good idea. So, since you’re paying them off during residency anyway, might as well be enrolled in PSLF.
But, if like me, you missed the boat…
FAST FORWARD to the new PSLF changes!