loan forgiveness

How to Pay Off Your Student Loans in Three Years or Less, Part 1


Student loan debt is quickly becoming the biggest financial burden of our generation. The national student loan debt is now an estimated $1.3 trillion dollars and is growing by the minute.


For most applicants, it is incredibly easy to get students loans. Nearly 39% of PA students anticipate borrowing more than $100,000 for their PA education, which does not include any undergraduate debt that they have already incurred.


Student loan debt has become so common in our culture that it somehow does not seem outrageous for a 25-year-old with no assets to take out tens of thousands of dollars for a career they might have in the future. If you have not yet taken out student loans for PA school, I encourage you to stop here. Turn back. Check out the recent post on How to Go to PA School Without Debt.


Pay Off PA School Loans in 3 Years or Less lBe a Physician Assistant

If you already have student loan debt and you are a PA or very near to being one, there is still hope, but it will require significant effort on your part.


Most people are unwilling to make the sacrifice that it takes to pay off loans quickly and will spend years paying off far more than they ever borrowed due to accumulated interest. I hope this post will inspire the few who are considering the wiser choice, those who are willing to trade short-term pain for long-term gain.


There are only a few ways to get rid of student loans: loan forgiveness programs, paying off the loans out of your income, or dying. We are going to focus on the first two.

Loan Forgiveness Programs

Loan forgiveness is a popular topic among entering PA students. In fact, the majority of new PA students consider working in underserved areas when entering PA school, perhaps with the motivation of recently borrowed student loan money looming over them.


However, most new-graduate PAs do not go into underserved areas or participate in loan forgiveness programs. Motivations may change through the course of PA school, but every PA student should at least be aware of the opportunities that exist for loan forgiveness.


Some programs are a better deal than others, with higher loan amounts forgiven or shorter service terms required. There are generally many positions available for loan forgiveness through these programs, but make sure you understand the details before counting on this route (or ruling it out) as a way to pay back your loans.


National Health Service Corps

The largest loan forgiveness program is administered through the National Health Service Corps (NHSC), profiled in a post last month. In exchange for 2 years of service in a high-need, underserved area, PAs are granted $50,000 in student loan repayment.


Both federal and private educational loans are eligible for forgiveness. Payment is free of federal income tax and payment is made at the beginning of service. Service may be extended after the first 2 years are completed for additional loan repayment assistance. Check out NHSC to learn more.


State Loan Repayment Program

The State Loan Repayment Program (SLRP) is a federally-funded program that provides cost-sharing grants to states and territories to help fund state educational loan repayment programs for primary care providers working underserved areas.


Not all states offer SLRPs, and the length of service commitment and amount of loan forgiveness varies by state. To learn more, contact the individual state repayment programs directly for eligibility and requirements.


Federal Perkins Loan Forgiveness

Perkins Loans are granted to undergraduate, graduate, and professional students with exceptional financial need. Perkins loans may be forgiven up to 100% over a 5-year period if you continue working as a full-time PA.


You apply for forgiveness by directly contacting the college or university who provided you the loan. (PAs qualify as a “nurse or medical technician providing health care services" under the program.)


I think 5 years is kind of pushing it in terms of waiting to be debt free. I would encourage you to be totally rid of your debt by that point. However, if the Perkins loan forgiveness is an option for you, you could save up the equivalent of the payoff amount on the side and be ready to pay off any balance immediately if you no longer qualify for forgiveness due to a position change.


Public Service Loan Forgiveness

The Public Service Loan Forgiveness is a newer program that forgives the remaining balance of select federal student loans when the borrower makes a total of 120 on-time payments. For those of you counting, that is 10 years of payments.


I have heard more than a few PA students and new PAs mention this as a potential option for paying off their large loans. People who work for government organizations at any level (federal, state, local, or tribal) or not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code (meaning most hospitals) are eligible.


For those of you willing to stick it out 10 years, make a perfect 120 on-time payments and possibly work in the same place for a decade, I’ve got bad news. You are going to pay the full amount of the loan without any balance remaining at the end to forgive, and you will be paying extra interest by letting your repayment drag out over 10 years.


Even if you participate in another federal repayment program that is income-based, with payments made over 240-300 months (20-25 YEARS!), you end up paying about the same amount out of pocket, and the “forgiveness” of the remaining balance is essentially the massive interest accrued over that time frame.


I ran the calculations with $50-100K in a variety of loans types and $60-80K in income with a several different interest rates, and none of them come out with a remaining balance to forgive. Go ahead and try it for yourself. If you were counting on this route, it is time for a new, more aggressive plan.


Continue to Part 2: Pay loans off aggressively with your income