Have you ever wondered, what the heck can I do about all this debt?
Is a debt forgiveness program right for me?
In this podcast, Dave reveals 9 incredibly important aspects that you need to know about the most popular debt forgiveness program, the Public Service Loan Forgiveness Program (PSLF).
He outlines who is eligible for this program, how much you have to work, and when you should start to apply.
If you are under a mountain a debt, make sure to check this out!
(Note: I outsource transcription efforts, please forgive in advance any grammatical errors. I just simply don’t have time to review it all)
Hey everyone this is Dave Denniston and welcome back to the next freedom formula for physicians Podcast. Well let`s do it.
Welcome to the freedom formula for physicians podcast with all about slashing your debt and taxes and creating a liberated lifestyle. And now, your host, with the love of fantasy books and funk and the hatred of running more than three miles; Dave Denniston.
Alright you guys I want to take a look today at the PSLF; the Public Service Loan Forgiveness program so you residents, fellows, medical students, even those of you that have made a transition in the practice, this episode is for you. If it`s not you, you definitely want to know this so you could help on the information. So today you guys I thought I would focus on PSLF; the Public Service Loan Forgiveness program and by far I get the most questions about this all the time as a matter of fact I had a couple of mums in medical school emailing me asking for help.
And they said well should we take the PSLF and go for debt forgiveness or we should refinance our loans? And we dedicated a lot of episodes to financing and there are more and more opportunities today to look at using PSLF but it might be getting less attractive. So let`s just first talk about where it has been.
Today`s episode is going to focus on that. We are going to do another episode on repay, the new version of PSLF. So anyhow you guys I guys I guess this is the most common debt forgiveness program, the ten years PSLF. This is sponsored by the federal government. And it can cover virtually any field of practice that is what is so cool about it. You can be an orthopedic surgeon, you could be optimologist, you could be a primary cader, it applies to everybody which if you read through my other stuff you will know that a lot of debt forgiveness programs are just specifically for primary care.
Now here is the deal with this; you don’t have to specify one specific loan because what’s so cool about this is once you refinance your loans you can cover all of them as soon as they’ve been staffed or perked into some other furtherly back program. And it`s if you guys are not currently taxable. Now this could change.
Now let me talk about this for a little bit; a lot of people are saying oh my God I could get taxed on this if I even get for three hundred thousand dollars of debt. You know am going to get taxed on 150k. and this is possible, absolutely, it is totally possible and I will tell you from my past experiences once your ground fathered in, meaning that you enroll in a program you are in usually what the federal government does is they change it for the next people. The future people and they talk about this all the time with Medicare and social security.
They don’t want to change it for people that are about to retire, that are grand fathered in. you see this with retirement plan, use to be with retirement plan called the KEYO plan and now people can use it if they were in it but new people they cannot use KEYO plans. So I believe this is going to be ground fathered and I believe because people have been paying into it there are going to honor that commitment but I could be wrong. So whatever you do if you look at PFEL debt forgiveness program you have to think about do I want to take that risk or not?
And I think in many cases it did. Well how does this work, what you have to do, you have to be employed four times for a public service organization. And you have to make a 120 on time full monthly payments. And that includes residency and fellowship you guys so think about this for a moment. This means that you could have all of your debt forgiven for just six or seven years out of residents or maybe only three or four out of fellowship.
Now know that if you have some FFEL or Parking’s loans that you want to consolidate them like I talked about earlier to take advantage of this program. Now here is the catch; qualifying employment is any employment with the federal state or local government agency or a nonprofit that has five or one c3 status. Can you even include nonprofits that are on 15c3?
So bottom line you guys you might even have friends or family that work for the government, friends or family that are teachers everybody not just physicians can qualify for a loan forgiveness. And especially as a Doc let me emphasize this for a moment if you are employed by a hospital, you have the nonprofit status, you are probably eligible for this program.
So make sure to be aware is the arm that you are working for at the hospital is it nonprofit or full profit. This scheme makes a match you guys some have for prof and figures so have to be careful and make sure you follow this. Now know your monthly payments they are substantially lower whiles you are in residency and fellowship. But once you get out of there they get a lot higher. But usually is like a year delayed because they have to look at your tax returns. So you guys the bottom line here is you want to enroll as soon as possible while you are in residency and fellowship.
If you are sitting here and you are listening to this podcast you`re in your fourth year of residency, you`re in your third year of residency and you are about to transition to practice this may not be a good fit for you. But if you are listening to this or you know someone as a medical student that`s a first year, second year resident, they should absolutely go for this. Now keep in mind that the whole process it takes one to three months to complete in order to refinance for your loans.
Now how does this all work? Alright so as you directly consolidate your loans you have to pick a repayment program. Ok, so there are four different main repayment programs over the last few years there have been income based repayment, IBR, we call it PER some people call it… another acronym that’s not in my head right now. There is also the income contention repayment program (ICR) and then there is the ten year standard repayment program.
Now we are going to talk next in the next podcast about IBR versus PER because in the past at least so far they’ve been requiring lower payments in residency in fellowship which can lead to greater debt forgiveness. ICR and the standard ten year repayment program are way higher you guys way higher so you want to ignore those. Now there is another requirement you guys that you have to do. In addition to having qualifying employment with your employer you also have to be considered full time. So what that means is if you are a female you are considering wanting to have some kids if you want to work part time this over the long term may not be a good fit for you.
However you can think about rather than just totally for baring on your loans and not going for a debt service program refinancing those puppies. Or sign up for IBR if you are not serious or don’t know exactly where you want to go. So this way at least you give yourself the option you could do it or not.
But keep in mind in order to get the debt programs you have to have a 120online payments, you have to borrow in full time which is a definition set by the hire of 30 hours a week or your employer. And also you guys the other big caveat here is the federal loan servicing company they are going to review an employer certification form so ideally every single year you guys and this is very easy to forget make sure to get it complete. Make sure that your employer signs off on it.
If this is the way you can get your debt forgiven that’s absolutely soon as possible when it is eligible. Alright so there is a lot of great stuff here and there is so much more that I want to share with you I definitely encourage you to check out my book the freedom formula for physicians at drfreedombook.com or you can check out the podcast website drfreedompodcast.com to snag a copy of five steps to get out of debt for physicians workbook. So there are two awesome resources that you guys are going to love.
Now on our next podcast next week when we look at the difference between IBR and PER and what you want to change and what you don’t want to change. And then a few weeks out we are going to look at the new revised version of PER and I am going to walk you guys through those difference. So there is a lot to look forward to a lot to cover definitely if you share this and we look forward to sharing from you soon. Have a good one.
Hey this is Dave Denniston I hope you liked today`s episode. If you did hey please do me a favor and go to iTunes and give this five star review. We have to get those reviews on up so more people can discover how to slash their debt and their taxes and create a liberated lifestyle. As a matter of fact each month I am giving out a price package to one of our viewers for the month. So make sure to go to iTunes right now and place your review. Thanks so much and I will talk to you next time.