We were fortunate to have Jan Miller, a student loan expert on our Physician Financial Success podcast, and he talked about whether the Public Service Loan Forgiveness Program was going to end. Watch this short clip from his very informative interview about student loans, IBR, the REPAY program and many other topics of interest to doctors.
Josh Mettle: Tell me what do you think that overriding intention is with Repay. I mean they made a pretty substantial change in direction here. What are they trying to accomplish? What’s the underlying desired end-result of this program?
Jan Miller: Right.
Josh Mettle: Do you have a gut feel for that?
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Jan Miller: Yes, so this is a fantastic question. I’m glad you asked it because I have a lot of clients and again I would tell you physicians ask this question very commonly, “Is the Public Service Loan Forgiveness program going to be even there in 10 years? Can I count on it?”
I’ve actually heard of residency programs advising their residents not to PSLF because it’s not going to be there, and that’s not true. That is inappropriate even to say, so, the Public Service Loan Forgiveness Program is going to be there for you if you’re in that program now. You’ll be grandfathered into that program almost certainly.
Now with the Repay Program and its new changes, actually kind of sheds some light. They kind of foreshadow where they’re going with these programs instead of getting rid of it or putting some sort of huge cap on the forgiveness and so forth. They are trying to make the program make more sense for both low-income and high-income earners that qualify for the program. For example, removing the cap, the cap only benefits high-income earners because if you hit the cap, that means your payment is and your income is high enough to pay the 10-year standard, so you should be able to afford your loan payment.
Josh Mettle: Right.
Jan Miller: The people who are benefiting from the cap were making incomes far greater than that threshold and still qualifying for the forgiveness based on their payments, the smaller payments made in internship or in years before. That’s one of the things they have been talking about with eliminating that benefit to borrowers who have that big income jump, taking away the cap and letting the income skyrocket with it. So if you make so much money, if you make $1 million a year, well then your payment under the program gets high enough to pay off the loan and you don’t take advantage or anything of the program. So I think that’s actually not a bad idea and it’s also kind of an example of a specific legislation designed to address that issue, which has been something of a concern with a lot of people of late.
The other thing, too, is that this program is brand-new. The Repay Program is going into effect in December and it is specifically designed around the Public Service Loan Forgiveness program, so there you go right there. The government is still putting together new programs that are specifically designed to work in conjunction with the Public Service Loan Forgiveness Program. That’s again a sign, an indication, a foreshadow that Public Service Loan Forgiveness is here to stay.
If the changes happen that aren’t as favorable to some clients in the future, those will only affect new borrowers who take out loans after the legislation goes into effect. And that’s because the Federal government, they grandfather everything. In fact, the reason for the Repay Program is because of the grandfathering. When Obama back in 2014 put through an executive order to allow the 15 percent IBR people to qualify for 10 percent, the 10 percent version, they could have really made this easy. They could have said, “Okay, effective December 15th, everybody who is on IBR now qualifies as Pay As You Earn get the 10 percent.” End of story. That would have saved them millions of dollars in changing the infrastructure around Repay and all this stuff. They just simply would have let everybody join it, but they couldn’t do that because Pay As You Earn is already a grandfathered part of regulations. They can’t change that because it’s already in place. Instead they had to create a brand-new program, which also allowed them to implement some of these new twists on the rules.
Long story long, that’s what I try to tell people the Repay Program is actually an indication, whether you qualify or not or can benefit from it or not, it’s indication that Public Service Loan Forgiveness is likely here to stay.
Josh Mettle: Yeah, I would agree. It sounds like the terms make pretty good sense, right? I mean the intention sounds like we understand that physicians and other medical professionals are going to bear these student loans and there’s a lot of responsibility that goes along with that and a lot of risks. We want to provide a safe atmosphere for them to enter into Repayment and work for public service facilities. If income does spike, then they want to recoup those student loans, but they want to make it so that they can still afford homes, and families, and other things. It seems fairly like a reasonable program to me.
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