The more you know about the suitability of federal programs versus what’s available in the private marketplace - and the more your hospital or group is willing to help - the better your success will be with candidates who carry high amounts of debt.
A physician’s options
The available options for the average physician today who has $250,000 of debt at roughly a 6.5% rate after four years of training are not as complex as they seem on the surface. Let me explain.
The average medical resident earns slightly more than $50,000 per year, and the average monthly payment on a 10-year standard plan at $250,000 in debt is around $2,800 per month.
For obvious reasons then, payment relief is needed during training. This relief often best comes in the form of a federal Income-Driven Repayment (IDR) plan, because onLy these plans offer reduced payments along with generous interest and forgiveness benefits versus the traditionally used options of forbearance and deferment.
Therefore, the "fork in the road" of repayment options is most often reached when a physician is transitioning to practice because until a physician determines that they no longer qualify for federal forgiveness and earns enough income to pay down debt more ambitiously, they shouldn’t be refinancing their loans to a private lender even if lower rates are available.
Position your benefits
Now, as a recruiter, you either represent a for-profit employer, a nonprofit Public Service Loan Forgiveness
(PSLF)-qualified employer, or in some cases, both.
For-profit employers do not qualify for PSLF. The best way to move the needle competitively, in this case, is by offering upfront or monthly student loan repayment as a benefit. Refinancing is almost always appropriate if available, but a borrower’s underwriting profile will ultimately dictate how competitive rates will be.
Nonprofit employers uniquely have the most generous federal program young physicians can leverage today: PSLF. This program provides a path to tax-free loan forgiveness for anyone directly employed by a federal, state or local government organization, or directly by a 501c(3) nonprofit. Many medical graduates begin pursuing this program at the onset of training, as their training years usually count as "public service" and the IDR plans make economic sense during that time anyway, as discussed earlier.
The PSLF "salary boost"
Not all nonprofit employees should be pursuing PSLF. If the payments required by an IDR would pay off all eligible federal loan debt in 10 years, there’s no benefit, and refinancing would still be appropriate.
A critical consideration is what we call the "PSLF Salary Boost." In a sample candidate analysis, we calculated that for the six years following a four-year training term, a nonprofit employment offer was worth an additional $72,000 per year in salary when the reduction in payments from PSLF was contemplated.
In a majority of projections, I run for graduates who qualify for the PSLF program, after 10 years of qualified employment including residency and fellowship), the amount paid is $150,000 or more Less than what they borrowed! Wouldn’t you like to know this when recruiting an eligible candidate? Doctors Without Quarters offers a free tool that recruiters and candidates can access to determine their boost. Learn more at dwoq.com/non-profit-hospitalemployers.html
Summary and resources
The rising cost of medical education guarantees that student loans will become an increasing concern for early-career physicians. To attract new candidates, hospitals and physician networks should access loan repayment resources to assist their candidates and ensure compensation plans are both prescriptive and competitive.
JASON DILORENZO (HELP@DWOQ.COM) IS THE EXECUTIVE DIRECTOR OF DOCTORS WITHOUT QUARTERS AND PSLFJOB.COM.