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Student Loan Repayment
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In 2010, Congress passed the Health Care and Education Reconciliation Act (P.L. 111-152), which includes several student loan changes championed by President Obama. The Higher Education Opportunity Act of 2008 (HEOA, P.L. 110-315) and the College Cost Reduction and Access Act of 2007 (CCRAA, P.L. 110-84), represent the first comprehensive Higher Education Act (HEA) reauthorization since 1998. Among other changes, these laws created a new student loan repayment system and eliminated the Economic Hardship Deferment. Forbearance is not affected by these laws.
Sample repayment scenarios for the average medical student are available on the AAMC's Medical Education Debt Fact Card.
Loan repayment options for medical students include Standard, Extended, Graduated, Income-Based Repayment (IBR) / Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), and Income-Sensitive Repayment. Additional information about these terms of these plans is available on the AAMC FIRST website.
Income-Based Repayment (IBR) / Pay As You Earn (PAYE): IBR and PAYE help ensure that any career path is affordable by allowing medical residents and physicians to cap monthly student loan payments at either 15 percent or 10 percent of their discretionary income. With an average 2014 first year resident stipend of $51,250, the monthly PAYE payment is $290 to $340 compared to a Standard 10-year repayment of $2,700 to $3,300 a month. After 25 years of IBR or 20 years of PAYE, remaining federal educational debt is forgiven.
Multiple presidential executive orders have instructed the Department of Education to expand IBR and PAYE to more borrowers. At the same time, the president's budget has proposed curtailing the programs for graduate and professional students.
Public Service Loan Forgiveness (PSLF): As the nation faces physician workforce shortages, PSLF is important to recruit new doctors to public service in non-profit settings. Authorized under the CCRAA, physicians will be eligible for PSLF after 10 years of loan repayment while practicing in a "public service" job. The definition of "public service" includes 501(c)(3) non-profit organizations, faculty in "high-needs areas (as determined by the Secretary of Education), and service at private organizations providing "public health" or "emergency management" services. HEAO clarifies the definition of public health to include "full-time professionals engaged in health care practitioner occupations and health care support occupations, as such terms are defined by the Bureau of Labor Statistics."
The president's budget has proposed capping PSLF at the undergraduate loan limit of $57,500.
Loan Forgiveness for Service in Areas of National Need: Note - Congress has yet to appropriate funding for this program. As such, the Department of Education has not implemented the program, and it is not available for student loan repayment.
HEOA authorizes a new loan forgiveness program for service in areas of national need. Under this program, "public sector employees" and "medical specialists" would be eligible for up to $10,000 in loan forgiveness over 5 years. Public sector employment includes "full-time professionals engaged in health care practitioner occupations and health care support occupations." Medical specialists are defined as residents that have been accepted to, or currently participate in, an ACGME-accredited graduate medical education training program or fellowship that requires more than 5 years of total graduate medical training and has fewer U.S. medical school graduate applicants nationwide than the total number of positions available under these programs or fellowships. CCRAA prohibits participants in the loan forgiveness program for service in areas of national need from receiving additional repayments for the same service under PSLF.
Forbearance: Medical residents who do not wish to begin repaying their loans during training have the option of going into forbearance. Under forbearance, no payments are required; however, interest continues to accrue and the federal government no longer pays interest on the subsidized portion of a borrower's loans. In addition, interest may be capitalized under forbearance, making this a more expensive option for borrowers. Under a special provision passed in 1993 (when the two-year internship residency deferment was eliminated) borrowers are able to forbear their federal loans throughout the duration of their ACGME-accredited residency program, regardless of the length of the program.
Matthew Shick, J.D.
Senior Legislative Analyst, Government Relations
Telephone: 202- 828-0525
For non-legislative questions contact AAMC FIRST:
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