Debt & Cash Management

Loan Forgiveness Eligibility Now Available For California and Texas Physicians


By Bill Martin, CFA

Published January 17, 2024

Due to a recent rule change by the US Department of Education, physicians in California and Texas are now able to apply for public service loan forgiveness (PSLF). Earned explains how this change opens up loan forgiveness options for physicians in these two states.

Qualifying Employers

Originally issued in 2008, the PSLF required physicians to be “directly employed” by non-profit organizations; however, state laws in California and Texas prohibited non-profit entities from directly employing physicians due to the Corporate Bar law.  As a result, Texan and Californian physicians were excluded from PSLF. 

With the efforts of California and Texas’ medical and hospital associations working in conjunction with the US Department of Education, physicians in these states can now satisfy the direct employment requirement under two scenarios, which according to the California Medical Association (CMA) include:

  1. “The physicians’ for-profit sole proprietorship, partnership, professional medical group or professional corporation has a written contract or written agreement to provide medical care in the non-profit; OR

  2. the physician individually has hospital medical staff privileges or other equivalent legal authorization to provide medical care at the nonprofit hospital, clinic, foundation, or organization.”

The CMA summarizes it as follows: “The key issue is the place of work and whether it is owned by a qualifying non-profit entity that is otherwise prohibited by state law from employing physicians.”

Physicians can check if their employer qualifies for PSLF here.  

Furthermore, the CMA states: “CA and TX physician borrowers should list the EIN of the nonprofit entity (hospital, clinic, 1206(l) foundation, or other facility) in which you are providing services, not the EIN of your direct employer (sole-proprietorship, partnership, medical group or professional corporation).”

Qualifying Loans

The extension to consolidate non-qualifying loans into a direct loan has been extended from December 31, 2023 to April 30, 2024.  

According to the CMA: “Only Direct Loan Program loans that are not in default are eligible for PSLF.”

  • If you have qualifying loans, then you do not need to consolidate your loans. 

  • If you do not have the correct qualifying loans (loans you received under the Federal Family Education Loan (FFEL) Program, the Federal Perkins Loan (Perkins Loan) Program, or any other student loan program), you should consider consolidating your loans into Department of Education government-held loans for Income-Driven Repayment account adjustments” by April 30, 2024.  The CMA states: “Because of the special one-time account adjustment being allowed by the department, borrowers who have commercially or federally held FFEL loans and who consolidate those loans into Direct Consolidation Loans” will also get PSLF credit under the account adjustment

  • See more details here

Understanding the complexities of the loan forgiveness programs can be confusing. If you want assistance, Earned can help you evaluate your options to determine what’s optimal for your financial plan. We might not see another opportunity like this for student loan borrowers for years to come, so it is important to assess your options now.

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