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Something you may be worrying about is how best to satisfy your student loan lenders while not living on ramen during your residency years. If you just graduated residency, many of you will be in your 6-month grace period-so this is the time to sort everything out before large payments come due. Most programs require application a few months before the grace period ends to account for processing time.


CAFP’s Three Top Tips for New Graduates with Student Loans:

Find Out Who Services Your Loans

Federal Loan Servicers
If you’re not sure who services your student loan, you can find out by logging onto the National Student Loan Data System External Link (NSLDS) or by calling the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243). To see a current list of Federal Student Aid servicers, you may also go to Student Aid on the Web External Link.

Private Loan Servicers
Another option you may have availed yourselves of are private student loans. If you applied for loans through an entity other than your medical school, such as a bank or credit union, you should contact them directly to get information on your repayment amount, deadlines, and whether they might reduce your interest payments if you have your payments directly debited each month from your bank account.


Find Out How Much You Owe
If you already know, good for you! Student loans can be confusing and often you may not know how much you actually owe. Today is the time to face the music and calculate it as well as determining which loan repayment options will be best for you. Now that you know who holds your loans, you can also find out the current payoff amounts as well as interest rates. The Association of American Medical Colleges has a great resource called the Medloans Organizater and Calculator that can help you with this step.


Figure Out Which Payment Plans are Right for You
Although the debt may seem overwhelming at first, there are a number of programs and payment plans to assist you in repaying your loans. Below are just some of the programs offered.

Income Based Repayment
Income Based Repayment (IBR) is a repayment plan for federal loans that restrict your monthly payment amount to an amount that is intended to be affordable--taking into account both income and family size. Best part? Under this program any remaining loans will be forgiven after 25 years and only 10 years for those who work in public service jobs such as non-profits. Most hospitals and community clinics qualify for the 10 year non-profit plan.

On a resident’s salary you are very likely to qualify for IBR during your residency years.

You must contact each of the servicers that service your loans to apply for IBR. Direct Loan borrowers can go to If you are unsure who holds your loans or who your loan servicer is, you can access the U.S. Department of Education’s National Student Loan Data System (NSLDS) website.


Public Service Loan Forgiveness
The Public Service Loan Forgiveness (PSLF) Program was established to encourage individuals to enter and continue in full-time public service employment by forgiving the remaining balance of their William D. Ford Federal Direct Loan Program loans after the borrower has made 120 qualifying monthly payments (beginning anytime after October 1, 2007) while employed full-time by a public service organization.


Expanded Tax Benefits to Physicians in HPSA
As part of a larger Administration announcement on efforts to strengthen the health care workforce, the Internal Revenue Service today announced that under the Affordable Care Act health care professionals who received student loan relief under state programs that reward those who work in underserved communities may qualify for refunds on their 2009 federal income tax returns as well as an annual tax cut going forward.

The Affordable Care Act included a change in the law, effective in 2009, that expands a tax exclusion for amounts received by health professionals under loan repayment and forgiveness programs. Prior to the new law, only amounts received under the National Health Service Corps Loan Repayment Program or certain state loan repayment programs eligible for funding under the Public Health Service Act qualified for a tax exclusion. 

The Affordable Care Act expands this tax exclusion to include any state loan repayment or loan forgiveness programs intended to increase the availability of health care services in underserved areas or health professional shortage areas and makes this exclusion retroactive to the 2009 tax year.

Health care professionals participating in these programs who have reported income from repaid or forgiven loan amounts on their 2009 returns, possibly after receiving a Form W-2, Wage and Tax Statement, or Form 1099, may be due refunds. Those who believe they qualify for this relief may want to consult their state loan program offices to determine whether the program is covered by the new law.

Health care professionals who have not yet filed for 2009 need not report eligible loan repayment or forgiveness amounts when they file. Those who have already filed may exclude eligible amounts by filing Form 1040X, Amended U.S. Individual Income Tax Return. This form can be downloaded from this website or obtained by calling the IRS toll-free at 1-800-TAX-FORM (1-800-829-3676). Individuals filing Form 1040X to claim this exclusion should write “Excluded student loan amount under 2010 Health Care Act” in the Explanation of Changes box.

Health care professionals may request an employer or other issuer to provide a Form W-2c, Corrected Wage and Tax Statement, or 1099 and may attach the corrected form to the Form 1040X. However, the Form 1040X may also be filed without attaching a corrected form.


National Health Service Corps
Have a lot of medical school debt? Interested in working in a Health Professional Shortage Area and ensuring that individuals receive the care they need? NHSC may be for you! This program allows primary care physicians working full-time at an approved National Health Service Corps site to receive $50,000 toward repayment of their health professions student loans for 2 years of service and can apply for additional support for extended service – as much as $145,000 for 5 years!  Applications are competitive so apply now and take advantage of this great opportunity.


Wondering how to pay for medical school? NHSC can help!
The National Health Service Corps also has a scholarship program! Although the deadline has passed for this year, it’s time to start thinking about applications for 2011-2012. The National Health Service Corps scholarship pays tuition, required fees, and some other education costs, tax free, for as many as four years. Education costs may include books, clinical supplies, laboratory expenses, instruments, two sets of uniforms and travel for one clinical rotation.Recipients also receive a monthly taxable stipend ($1,326 in 2010-2011)


Marriage “Penalty” reduced for Income Based Repayment Program as of July 1, 2010
Under changes made to the IBR regulations that will take effect July 1, 2010, married borrowers who file joint tax returns and who both have eligible student loan debt will have their individual IBR eligibility determined based on their joint income and the combined eligible loan debt of both spouses. For couples who are both physicians and/or both have significant student loan debt this may reduce your payment substantially.

For more information on the Income Based Repayment Program visit the student aid website.