By Maggie Van Dyke, contributing writer for the Journal of ASPR
One of the first questions Bruce Guyant, FASPR, hears from physician recruits, particularly those finishing up their graduate medical education, is: “What’s your student loan repayment program?”
As the cost of college and medical school continues to rise, so does the level of student debt. “Repaying student loans is on the minds of a lot of residents and fellows,” says Guyant, regional director of physician recruiting, LifePoint Health-Western Group.
According to the annual Association of American Medical Colleges survey, the median amount of education debt was $195,000 among 2017 medical school graduates, compared to $175,000 in 2013. And many physicians owe much more, with about 11 percent having debt exceeding $300,000.
“That’s more than most houses in this country cost,” says Christy Ricks, FASPR, physician recruiter senior consultant, Banner Health. “As in-house recruiters, we can help physicians navigate the options for managing their debt and help relieve some of that burden and worry.”
However, identifying the best student debt approach can be challenging and confusing. “Right now, there are a lot of silos and fragmentation,” says Guyant. “There is no real silver bullet that is available for every physician. So it takes diligence to determine what’s available and what will work.”
For in-house recruitment professionals looking to offer physicians assistance with student loan debt, here are five strategies:
Know your organization’s HPSA score — and government-funded repayment options
Government-funded student loan repayment options are available for primary care physicians and psychiatrists who work for organizations or in communities experiencing shortages of these healthcare professionals.
“My advice is to know your HPSA score, especially if you recruit for rural, inner-city, or other underserved areas,” says Ricks.
HPSA — or Health Professional Shortage Area — scores are calculated annually by the Health Resources and Services Administration (HRSA) and posted on the federal agency’s website. Scores range from 0 to 25, with higher scores indicating greater clinician shortages. Some types of healthcare organizations, such as rural health clinics and Indian Health Service Clinics, automatically receive high HPSA scores. In calculating the scores for other organizations, HRSA considers a community’s poverty level, providers-to-population ratio, travel time to the nearest source of care, and other factors.
The federal government’s National Health Services Corps (NHSC) offers clinicians up to $50,000 in loan repayment if they agree to work for two years at sites with high HPSA scores. If physicians extend their service past two years, they can obtain additional loan repayment assistance.
In addition, many states offer loan repayment programs, typically for primary care physicians working at organizations with qualifying HRSA scores. Recruiters can check with their state office of rural health or primary care for specifics. For instance, Nebraska offers a 50 percent match of any loan repayment amount that physicians obtain from their employers.
For recruiters who need to fill physician positions in underserved areas, these government loan repayment programs can be used to attract qualified candidates. However, recruiters need to pursue these candidates early and often, says Julia Terhune, assistant director rural community health, Michigan State University College of Human Medicine. “You need to start building relationships when physicians are in medical school or in residency. Find out what they’re looking to do with their career and what they actually want, whether that’s loan repayment or flexible hours. That’s going to show them that your healthcare organization actually cares about them.”
Understand PSLF and income-driven repayment plans
A popular student debt option is Public Student Loan Forgiveness (PSLF). This federal program can help many physicians gain significant debt relief in exchange for working for a nonprofit or public organization that is designated as a tax-exempt 501(c)(3) entity by the Internal Revenue Service (IRS). After a physician works at a nonprofit for 10 years while simultaneously making 120 monthly loan payments, the government will forgive the rest of that physician’s college debt. An analysis by Doctors Without Quarters suggests that primary care physicians will typically see about 40 percent of their student loan debt forgiven through PSLF.
To participate in PSLF, physicians must be enrolled in an income-driven repayment program, which adjusts the monthly loan payment based on the physician’s current income and cost of living. These income-adjusted plans allow physicians to start paying back their loans during their residencies and fellowships when their incomes are constrained.
“If you talk to doctors who went to school 10-plus years ago, they would say, ‘I didn’t pay anything on my student loans during my residency because I couldn’t afford it’,” says Jason DiLorenzo, founder and executive director, Doctors Without Quarters. “But now that couldn’t be worse advice. Today, residents and fellows should be using an income-driven plan, making modest payments.”
DiLorenzo points to several common misconceptions about the PSLF. One is that only primary care physicians who work in rural or underserved areas are eligible for PSLF. But that applies to the National Health Services Corps, not PSLF. Any specialists working for any type of nonprofit can apply to PSLF as long as they meet the loan repayment requirements.
Another misconception is that PSLF is always a financially advantageous option for physicians. However, DiLorenzo stresses that the benefit can vary dramatically depending on a physician’s circumstances, including his or her debt level and household income. One rule of thumb: “In general, the less debt, the less valuable public service loan forgiveness is,” says DiLorenzo. “And the higher the debt, the more compelling this option would be.”
The Trump administration has said that it may eliminate the PSLF program. However, if that occurs, DeLorenzo is hopeful that borrowers who are signed up for the program will be grandfathered until their loan agreements are fulfilled.
Consider offering loan repayment as part of employment offers
Like many for-profit healthcare organizations, LifePoint Health offers physician recruits educational loan repayment as part of employment agreements. “The program is intended to support new physicians who are beginning their careers, as well as help relieve some financial pressure on practicing physicians who have large educational loans,” says Guyant.
The specific repayment amount varies across LifePoint’s 72 hospitals, as well as among physician recruits. LifePoint pays a monthly amount on the loan for an agreed-on number of years, and the physician agrees to practice full-time with LifePoint until the end of that repayment period. Because the IRS considers loan payments from employers as income, physicians need to pay taxes on the payment amount.
Employer-sponsored loan repayment has also become standard practice among rural healthcare organizations. “It has become an expectation in areas that are hard to recruit for,” says Ricks. Banner Health even shares loan repayment details in job advertisements for rural physicians: $100,000 over a five-year period.
Banner Health, which is a nonprofit system, offers this same loan repayment offer to all medical students, residents, and fellows training at the health system’s two medical schools or academic medical centers. “We consider this the right thing to do in terms of retaining our students and residents,” Ricks says. “It’s pennies in the bucket compared to what we pay to educate them.”
To reduce its financial risks, Banner Health pays a lump sum of $20,000 directly to the providers at the end of each year. If the physician quits before the end of the five-year commitment period, then the health system has only paid a portion of the $100,000 and does not have to seek repayment from the physician.
Nonprofit organizations need to careful when offering loan repayment to physicians who are also enrolled in the government’s PSLF program. That’s because employer-sponsored loan repayment can compromise the debt forgiveness benefit the physicians would receive from PSLF, says DiLorenzo. “It’s a bad strategy to put down money on debt that is in line to potentially be forgiven. Instead put that money in the physician’s retirement account or in an interest-accruing account.”
Connect physicians to refinancing options
If a physician took out loans with high interest rates, he or she may be able to save significant sums over time by refinancing to a lower rate. Some healthcare organizations may have relationships with local banks or private lenders that are willing to help physicians refinance. If not, many national companies offer these services, including CommonBond, SoFi, LendKey, and Link Capital.
“Many graduates can save $50,000 over the life of their loans by reducing the interest rate in the private marketplace,” DiLorenzo says.
Help physicians help themselves
Because the best approach to student loan repayment varies from one physician to the next, Banner Health is providing physician recruits with one-on-one counseling from a student loan consulting company. “Physicians are very smart, but they don’t typically get the type of financial training in school they need to handle their loan debt. So we put them in touch with programs that can help them find the best option.”