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Medical internships and residencies count toward public service loan forgiveness and can earn new doctors partial forgiveness of their federal student loans.
After medical school, medical school graduates typically spend four years in an internship and residency, sometimes with an additional year in a fellowship.
The time spent in an internship, residency and fellowship can count toward loan forgiveness if the borrower repays their student loans in an income-driven repayment plan in the Direct Loan program and the employer is a qualifying employer.
Most internships, residencies and fellowships are in a public or non-profit 501(c)(3) hospital, and therefore the employment is qualifying.
During an internship, residency and fellowship, the pay is low compared with the doctor’s debt. Usually, the salary is low enough for the monthly loan payment under an income-driven repayment plan to be lower than the standard repayment plan amount, earning the doctor some forgiveness during the internship, residency and fellowship.
Generally, the monthly payment will be lowest in pay-as-you-earn repayment (PAYE). If the borrower does not qualify for pay-as-you-earn repayment, either income-based repayment (IBR) or revised pay-as-you-earn repayment(REPAYE) will yield the lowest monthly payment, depending on whether the borrower is married and other factors. The choice of repayment plans will depend on the borrower’s specific circumstances.
Borrowers can switch among the various income-driven repayment plans as their situation changes.
After the internship, residency and fellowship are over, the doctor’s student monthly loan payment will increase if they start earning a typical six-figure income. Under the income-based repayment plan and pay-as-you-earn repayment plan, the monthly payment will be capped at the standard payment amount, effectively preserving the amount of loan forgiveness. Under the revised pay-as-you-earn repayment plan, the monthly payment will rise without limit, potentially reducing the amount of loan forgiveness.
If the doctor continues working for a public or non-profit hospital after the internship, residency and fellowship are over, they can preserve the loan forgiveness that they earned during the internship, residency and fellowship, thereby qualifying for some loan forgiveness after an additional 5-6 years. The amount of forgiveness can be significant, saving the new doctor a lot of money.
