The Executive Suite: Med student loan forgiveness expands to California, Texas

A change in federal rules could lead to relief from medical school debt for some physicians in the two most populated states.

The U.S. Department of Education has expanded the Public Service Loan Forgiveness (PSLF) program to cover student loans for doctors in California and Texas. Among the 50 states, they have the largest populations – and are projected to have the largest physician shortages over the next 10 years.

The Texas Medical Association (TMA), Texas Hospital Association (THA), California Medical Association (CMA), and California Hospital Association (CHA) together advocated for the change. They represent more than 100,000 doctors, or about 10% of the nation’s physician workforce, and hundreds of hospitals.

“I am proud we were able to ensure a more diverse physician workforce in California and Texas by expanding access to medical student loan forgiveness,” CMA President Donaldo Hernandez, MD, said in a news release. “Our goal is to build a physician workforce to improve access to medical care for marginalized patients in underserved communities.”

TMA President Rick Snyder II, MD, agreed. TMA is the largest medical society in the United States, with more than 57,000 physician and medical student members.

"This program will allow us to retain and recruit new physicians to our states to address our growing physician shortages and access to care challenges for the patients who need us most,” TMA President Rick Snyder II, MD, said in a news release.

Need to act now

The situation is timely because physicians who want to apply must have a direct government loan or consolidate their med school loans by Dec. 31, 2023.

PSLF may apply if physicians have student loans and worked an average of 30 hours a week providing services in nonprofit hospitals, or in clinics or offices owned by a 1206(1) foundation, or another nonprofit entity. Physicians may qualify if they worked in a facility owned by a nonprofit, even if they worked for a for-profit sole proprietorship or partnership, or were employed by a for-profit medical group.

CMA has published an online guide, “Public Service Loan Forgiveness: What California and Texas Physicians and Hospitals Need to Know,” that spells out the rules involved. There is an online webinar that the medical societies and hospital associations sponsored, and a resource page, to publicize and explain the program.

The rule change could affect loans going back to 2007, the beginning of the PSLF program.

How it happened

The situation developed over a period of years due to rules from the Education Department, according to the organizations’ online guide for physicians and hospitals.

PSLF was intended to provide loan forgiveness for physicians who committed 10 years of full-time work, an average of 30 hours a week, in certain nonprofits.

In 2008, PSLF’s initial rules required physicians to be “directly employed” by the nonprofits, but laws of California and Texas prohibited some of those entities from employing physicians. “Thus, physicians providing care in these entities could not satisfy the requirements of the original PSLF regulations,” the guide said.

The federal Education Department changed the rules last year and it went into effect July 1 of this year. Since then, CMA has led the charge to publicize the changes.

Expanding patient care

While the issue may seem like an obscure legal loophole, the physician and hospital advocacy groups said it has real-world effects for doctors and patients.

Average med school debt has surpassed $200,000, so many students cannot afford to become physicians without loan forgiveness, Hernandez said in the guide.

“The rule will allow low-income, minority students to pursue careers in medicine and help our neediest, most marginalized patients in underserved communities,” he said.

“Because of the rule, access to care for our most vulnerable patients served by physicians and nonprofit community hospitals, children’s hospitals and rural hospitals will be protected,” Hernandez said. “As physicians and hospitals, we will be able to fully care for the patients who need us most.”

CMA, CHA, TMA and THA expressed their thanks to the U.S. Department of Education for willingness to address the issue.