To save you time, we have recapped below some key provisions of the latest Public Service Loan Forgiveness program dated 9/18/23. We encourage you to read the online information sheet from the California Medical Association for details. We also urge you to continue to check the most up-to-date version at cmadocs.org/pslf, as the CMA will add material as they receive it from the Department of Education.
Overview
The Public Service Loan Forgiveness (PSLF) program, which has been in place since 10/1/2007, allows an employee who works for a non-profit organization for 30 hours/week for 10 years—and also makes their student loan payments for 10 years—to receive loan forgiveness for the remaining unpaid balance after the 10 years of payments.
Under a new rule, physicians in California and Texas—who are prohibited by state law from being directly employed by a non-profit hospital, or clinic, or other healthcare entity that otherwise meets the requirements of a qualifying employer—may now qualify regardless of their employment status when either:
(1) the physician’s for-profit sole proprietorship, partnership, professional medical group, or professional corporation has a written contract or written agreement to provide medical care in the non-profit hospital, clinic, or other health care entity, or
(2) the physician individually has hospital medical staff privileges or other equivalent legal authorization to provide medical care at the non-profit hospital, clinic, or other health care entity.
For this new special allowance, payments back to October 2007 may qualify.
Qualifying and Eligibility
In order to qualify, a physician must meet all other eligibility requirements, including:
- Working (providing medical care or performing administrative services) for 30 hours/week in a hospital, clinic, or office owned or operated by a qualifying non-profit organization. (For a list of eligible employers, use the PSLF Help Tool. If your organization is not in the database, it’s best to keep checking. They’re constantly adding new employers and borrowers).
- Making 120 qualifying payments toward their student loan.
Qualifying Loans and Loan Consolidation Deadline
Crucial information updated 7/19/23 and 9/15/23.
- If a physician has qualifying loans, the physician does not need to consolidate their loans for PSLF.
- If a physician does not have the correct qualifying loans, they need to consolidate their loans by December 31, 2023, to be eligible for PSLF.
Purpose of the PSLF Program
The purpose of the PSLF program is to encourage public service and work for non-profit organizations, so the non-profit status is central to the PSLF program. Therefore, physicians who physically work in a hospital, clinic, or office owned by a non-profit organization 30 hours/week and make 120 qualifying payments will qualify regardless of who pays the physician or whether the non-profit organization employs them.
On September 15, 2023, the CMA released a new physician attestation form intended to provide reliable and accurate written information regarding the dates and hours a physician provided services for an eligible non-profit facility, clinic or other organization. This form is designed to enable the “authorized official” of the “qualifying employer” to complete and sign Section 5A of the PSLF Application.
Tax Implications
Important note: The debt cancellation income under the PSLF program is not subject to tax on either the Federal or California level.
QUESTIONS?
This recap was intended to highlight sections of the 16-page, September 18, 2023, CMA PLSF “What California Physicians Need to Know” Guide. The guide answers many questions about eligibility, qualifying employers, contractor work, and much more. It also has many links to forms and informational websites surrounding the topic of the PSLF on the Federal Student Aid website itself.
The PSLF program has at its core the intent to encourage public service and work in non-profit organizations. As a physician client, you are welcome to contact our offices with questions.
Please check frequently with the California Medical Association for updates, as will we.
