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Educational Debt in Healthcare, Public Service Loan Forgiveness:
Financial implications and political outlook
Ben George and Justin Grischkan
UR Public Health Grand Rounds
September 15, 2017
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Outline -- Why is debt important to the healthcare workforce?
-- What is happening to debt trends over the past few decades?
-- What is Public Service Loan Forgiveness? Considerations?
-- What are the financial implications of Public Service Loan
Forgiveness (PSLF)?
-- Why is Public Service Loan Forgiveness (PSLF) different for
doctors? What are the costs?
-- Updates on proposed legislation to change Public Service
Loan Forgiveness…
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Debt has the potential to impact career choices…
According to a 2008 survey of college undergraduates:
• One-third said that student loans impacted their decision to choose a career
• 47 percent said their career pursuits were influenced by loan payments
• 40 percent took a job that provided higher pay, but less satisfaction, to pay off loans
In the medical literature:
• Primary care and work for the rural/underserved have lower return on investment
compared to (sub)specialty work and work in urban/well-served areas
• High educational debt deters some medical school graduates from choosing a career
in primary care
Source: Kahneman, Proceedings of the National Academy of Sciences, 2010; Weeks, et al, 2002, Acad Med; Philips, Fam Med, 2010; Phillips Ann Fam Med, 2014
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Debt also impacts lifestyle…
• Higher rates of burnout have been found among internal medicine residents with greater debt
• 38% of final year medical residents report that educational loan forgiveness/repayment are a “major concern” (2014)
• Increased financial concern is associated with poor health
Source: West, et al, JAMA, 2011; Turunan, et al, 2014, BMC Public Health, Merritt Hawkins Survey 2014
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Private Cost of Attendanceb
Private Educational Debt
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Public Cost of Attendance
Public Educational Debt
US $, Adjusted to 2013 dollarsa
Mean cost of attendance and educational debt is rising for medical students…
Source: AAMC Tuition and Fees Survey, AAMC Databook
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And for all graduate students with professional degrees…
Source: National Postsecondary Student Aid Study, 2004, 2008, 2012
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Physicians, dentists, and pharmacists are among the most indebted following graduation…
Primary Care Physician
Medical Specialty Physician
Surgical Specialty Physician
Dentist
Lawyer
Pharmacist
Veterinarian
Accountant
Journalist
Social Worker
Speech Pathologist
Engineer
Nurse
Teacher (K-12)
Median Debt at Graduation, US $ in Thousands (2013)
43
49
49
51
51
51
51
137
137
145
170
175
175
175
0 100 200
Healthcare Workers Non-Healthcare Workers Source: AAMC Questionnaire, NPSAS
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When comparing debt with 1st yr earnings, physicians have a more favorable outlook compared to other healthcare professionals…
0.57
0.64
0.66
0.70
0.80
0.80
0.92
0.95
1.00
1.22
1.29
1.47
1.53
0.00 1.00 2.00
Debt-to-Income Ratio, First Year Income : Graduating Debt (2013)
Veterinarian
Lawyer
Social Worker
Pharmacist
Primary Care Physician
Teacher (K-12)
Journalist
Speech Pathologist
Medical Specialty Physician
Surgical Specialty Physician
Accountant
Nurse
Engineer
Healthcare Workers Non-Healthcare Workers
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0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2000 2010 2013
No.
of M
edic
al G
radu
ates
The number of medical student graduates with over $200,000 in education debt has surged since 2000…
Year
Source: Friedman, et al, JGIM, 2016
Number of Medical School Graduates by Educational Debt Level, 2000-2010
Debt
Compound Annual Growth Rate, %
2000-2010
$200,001 or more 24.8
$150,001 to $200,000 8.4
$100,000 to $150,000 -3.2
$50,001 to $100,000 -7.9
$1 to $50,000 -2.2
No Debt 0.04
Overall 1.1
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Updated estimates show that there is an increasing proportion of graduates without debt…
Source: Grischkan, et al, JAMA Internal Medicine, 2017
• The proportion of those with No Debt increased from 16% to 27% of graduates, 2010-2016
• However, average overall debt increased from approximately $160,000 to $180,000, 2010-2016
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A variety of loan forgiveness options exist, and have the potential to influence career paths…
• Public Service Loan Forgiveness (PSLF) program
• National Health Service Corps
• National Institutes of Health loan forgiveness
• Indian Health Services
• Other federal/state loan forgiveness programs
• Hospital or employer loan forgiveness
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The Introduction of Public Service Loan Forgiveness
• Created as part of the College Cost Reduction and Access Act of 2007 as a means for public sector and nonprofit enterprise employees to pursue educational loan
forgiveness. • Goal was to “redirects taxpayer subsidies away from student loan companies and
toward increased grant aid and improved benefits for borrowers” • Pell Grants increase
• Income Based Repayment (first income-driven repayment plan) • Interest rate cuts
• PSLF
• Beneficial for healthcare workers since ~75 % of US hospitals are non-profit or public entities…
Source: Friedman, et al, JGIM, 2016
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There are several considerations when choosing to pursue Public Service Loan Forgiveness (PSLF)… Considerations when choosing loan forgiveness programs Loan Forgiveness Amount Unlimited forgiveness amount
Qualifying Loans Federal Direct loans subject to fixed interest rates (unable to refinance at lower market rates)
Service Commitment Minimum of 120 qualifying monthly payments during qualifying employment (i.e., 10 years of payments)
Time to Debt Freedom Minimum 10 years of repayment until debt freedom
Employment Restrictions Non-profit 501(c)3, or public/federal/state institutions, including academic medical centers
Geographic Limitations No substantial limitations (based on non-profit employer location)
Application, eligibility, entry Apply at any time Any and all non-profit employees are eligible Noncompetitive entry
Taxation Exempt from federal and state taxation
Other benefits May be used in combination with income-driven repayment
Other limitations Political uncertainty regarding current policy
Source: George, et al, Neurology, 2016
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The large majority of graduate student loans are through the William D. Ford Federal Direct Loan Program…
Graduate Student Loans by Source, 2011
Billions of US Dollars
Federal Direct Loans
~95% of total
Source: Friedman, et al, JGIM, 2016
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PSLF can (and should) be used in combination with income-drive repayment plans…
Source: Friedman, et al, JGIM, 2016
- Partial financial hardship is when annual amount due on loans, as calculated under the standard repayment plan, exceeds 15% of borrower's discretionary income.
Pay As You Earn
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PSLF Basics
120 Qualifying Payments In Qualifying Repayment Plans
On Direct Loans
Apply for forgiveness Per IRS, forgiven amount
is not taxable income
…Optional Employment Certtification
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Public Service Loan Forgiveness (PSLF) is becoming increasing popular among US graduates…
Cumulative Optional PSLF Certifications
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No. of Medical Graduates
Graduation Year
Forgiveness Program
No. of Medical Graduates (%)
Compound Annual Growth
Rate, % 2010-2014 2010 2014
Other programb 579 (3.4) 592 (3.2) -1
National Health Service Corpsc 334 (2.0) 501 (2.7) 11
State program 489 (2.9) 717 (3.9) 10
Hospital program 584 (3.5) 862 (4.6) 10
Public Service Loan Forgiveness 1,784 (10.6) 4,558 25% 26
No Forgiveness Program Plans 13,066 (77.6) 11,389 (61.2)* -3
Total Graduates 16,836 (100) 18,619 (100) 3
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2010 2014
Medical school graduates are among those planning to use Public Service Loan Forgiveness (PSLF)…
By 2017, surveys show about ONE-THIRD of
medical graduates report plans to use PSLF
Source: AAMC Graduation Questionnaire data
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0
20
40
60
80
100
120
140
160
25 50 75 100 125 150 175 200 225 250 0
500
1,000
1,500
2,000
2,500
1 2 3 4 5 6 7 8 9 10
Monthly Payments ($US) for a Primary Care Physician with Average Medical Student Debt
Post-Graduation Year
Assumed Debt
50k 100k 150k 200k 250k
Repayment 59k 107k 137k 137k 137k
Forgiveness 19k 48k 101k 192k 282k
Resident
Practicing Physician
Debt (thousands of $US)
Amount Repaid ($US)
Debt repayment and forgiveness for the average Primary Care Physician using PSLF…
Repayment and Forgiveness Scenarios Using Public Service Loan Forgiveness, 2013 Graduate
Debt Level at Maximum Repayment = $147,500
Source: Internally designed financial model
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0
20
40
60
80
100
120
140
160
25 50 75 100 125 150 175 200 225 250 0
500
1,000
1,500
2,000
2,500
1 2 3 4 5 6 7 8 9 10
Monthly Payments ($US) for a Surgical Specialist with Average Medical Student Debt
Assumed Debt
50k 100k 150k 200k 250k
Repayment 50k 77k 105k 132k 136k
Forgiveness 32k 87k 141k 196k 278k
Resident
Practicing Physician
Amount Repaid ($US)
Repayment and Forgiveness Scenarios Using Public Service Loan Forgiveness, 2013 Graduate
Debt Level at Maximum Repayment = $219,000
Post-Graduation Year Debt (thousands of $US)
Debt repayment and forgiveness for the average Surgical Specialty Physician using PSLF…
Source: Internally designed financial model
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Debt repayment and forgiveness for the average Surgical Specialty Physician using PSLF…
Pharmacist with Typical Income (108k in Year 1, 150k by Year 10)
Source: New America Foundation
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Loan Repayment and Forgiveness Amounts in Public Service Loan Forgiveness by Profession…
Amount Repaid in 10 Years, US $ in Thousands
Amount Forgiven in 10 Years, US $ in Thousands
33
47
47
57
58
62
65
82
117
119
121
135
137
161
0 100 200
Dentist
Primary Care Physician
Medical Specialty Physician
Pharmacist
Surgical Specialty Physician
Lawyer
Veterinarian
Engineer
Speech Pathologist
Nurse
Accountant
Journalist
Teacher (K-12)
Social Worker
Surgical Specialist Physician
Medical Specialist Physician
Primary Care Physician
Veterinarian
Lawyer
Dentist
Pharmacist
Social Worker
Journalist
Accountant
Teacher (K-12)
Nurse
Speech Pathologist
Engineer
9
11
18
18
31
49
91
110
112
140
147
149
168
0 100 200
0
Healthcare Workers Non-Healthcare Workers
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Loan Repayment Amount in Multiples of Annualized Lifetime Earnings
0
1
2
3
Loan Repayment Amounts Compared to Lifetime Earnings by Profession and Loan Repayment Program…
3X Annual Earnings
2X Annual Earnings
1X Annual Earnings
Extended 20-Year Loan Repaymenta
Standard 10-Year Loan Repaymentb
Public Service Loan Forgivenessc
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Amount paid by hypothetical borrower with PSLF, under a sample income-driven repayment plan vs. standard repayment plan…
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PSLF Borrowers Have High Debt Burdens
“PSLF is really a de facto loan
forgiveness program for
graduate students, who can borrow” higher
amounts
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The structure of PSLF and income based repayment incentivizes borrowers to maximize forgiveness
Year 1 Repayment
Debt at Graduation: $200,000
Internal Medicine Residency
Length of Training: 3 Years
Salary (Resident): $53,580
Salary (Attending): $160,000
Repayment Plan: Pay As You Earn: 10% of discretionary income
Household Size: 1
Interest Rate: 6.8%
Discretionary Income:
$35,590
Annual Debt Repayment: $3,559
Interest: $13,600
Cumulative Unpaid Interest: $10,041
Year 3 Repayment
Discretionary Income:
$43,064
Annual Debt Repayment: $4,306
Interest: $13,600
Cumulative Unpaid Interest: $29,020
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The structure of PSLF and income based repayment incentivizes borrowers to maximize forgiveness
Year 7 Repayment
Debt at Graduation: $200,000
Internal Medicine Residency
Length of Training: 3 Years
Salary (Resident): $53,580
Salary (Attending): $160,000
Repayment Plan: Pay As You Earn
Household Size: 1
Interest Rate: 6.8%
Discretionary Income:
$180,000
Annual Debt Repayment: $18,000
Interest: $13,600
Cumulative Unpaid Interest: $20,000
Cumulative Principal
Payment: 0
Overall
PSLF Loan
Repayment: $140,000
PSLF Forgiveness: $200,000
Ten Year Repayment Plan: $276,000
Twenty Year Income Based Repayment
Plan: $323,000
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Proposed changes to PSLF under the Obama Administration
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• In 2014, the Congressional Budget Office Estimated that the Obama
Administration’s proposal to cap the amount that could be forgiven under PSLF at $57,500 would save $265 million over 10 years (2015 to 2024)
• In 2016, the CBO revised this estimate to $6.7 billion.
Proposed caps to the program date back to the Obama administration…
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Employment Certification is Optional
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”The Department of education tested
only one assumption for reasonableness, and did so at the
request of others….estimates may be based on unreasonable assumptions”
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Estimated Cumulative Cost of the Public Service Loan Forgiveness Program for Medical School Graduates, 2010-2016
In 2015, U.S. health care spending hit $3.2 trillion -Why would this matter?
*Graphic suppressed due to confidentiality
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LegendHPSA Score
1 - 13
14 - 17
18 and above
Non-HPSA
Health Professional Shortage Areas (HPSA) - Primary Care
Prepared by: Division of Data and Information ServicesOffice of Information TechnologyHealth Resources and Services Administration
Scale bar only applies to contiguous U.S.
American Samoa
Guam Republic of Palau U.S. Virgin Islands
U.S. Minor Islands
Marshall Islands
Federated States of Micronesia
Northern Mariana Islands
0 300150 Miles
Data Source: Please refer to data source page on Map Galleryhttps://datawarehouse.hrsa.gov/tools/mapgallery.aspx
Hawaii
Data as of 09/14/2017
HPSA Scores are developed for use by the National Health Service Corps to determine priorities for the assignment of clinicians.Scores range from 1 to 25 for primary care and mental health, 1 to 26 for dental health. The higher the score, the greater the priority.
Puerto Rico
Alaska
We have areas of Primary Care shortage in the U.S.
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We have areas of Primary Care shortage in the U.S.
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Growth in National Health Service Corps Loan Repayment Program Funding and Awards, 2000-2014
*Graphic suppressed due to confidentiality
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Intended Participation in Public Service Loan Forgiveness and the National Health Service Corps Among Medical School Graduates Family Medicine, 2010-2016
*Graphic suppressed due to confidentiality
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Distribution of For-Profit Hospitals in the U.S, 2015
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Standard Repayment Loophole in Qualifying Repayment Program
Graduate School Debt: $200,000
Standard Repayment Cap: $2,302 (monthly) $27,624 (annual)
Income 1: $150,000
Income 2: $200,000
Income 3: $400,000
Income 4: $700,000
$15,000
$20,000
$40,000
$70,000
10%
10%
6.9%
3.9%
The standard repayment amount serves as a repayment cap to
maximize forgiveness
10% Theoretical Annual Repayment
Repayment as % of income with cap
$27,624
$27,624
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Employment Certifications
REPEAT ANNUALLY FOR 10 YEARS
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PSLF Qualifying Employment
41
501(c)(3) not-for-profit organization Other not-for-profit organizations providing specific qualifying services
Any government organization
It matters where you work, not what you do…
41
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”With no warning and no
coherent explanation, the
Department then changed
its mind”
PSLF Ongoing Lawsuit
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Employment Certifications
“FedLoan Servicing's response to the employment certification form does not
reflect a final agency action on the borrower's qualifications
for PSLF."
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Employment Certifications are not binding
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Application for forgiveness has been released
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• Dieticians and nutritionists • Optometrists • Pharmacists • Physicians and surgeons • Physician Assistants • Podiatrists • Therapists (physical, occupational,
respiratory etc) • Registered Nurses • Nurse Practitioners
Application for forgiveness has been released
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Where do we go from here?
Program Critiques:
• PSLF does not incentivize conservative borrowing
• Schools may not have an incentive to control tuition costs
• May affect the health care workforce distribution
• Does this benefit society?
Future:
• President Trump has called for the elimination of the Public Service Loan Forgiveness
Program and replacement with a program that offers 15 year forgiveness for all borrowers
• US Department of Education lawsuit
• Senator Elizabeth Warren call for urgent guidance
• First borrowers eligible in October 2017
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Acknowledgements and Collaborators
• Ray Dorsey, MD, MBA (University of Rochester)
• David Asch, MD (University of Pennsylvania)
• Ari Friedman, MD (Beth Israel Deaconess Medical Center)
• Sarah Ackroyd, MD (Temple University)
• Matt St. John, MD (University of Rochester)
• David Matthew (AAMC)
• Jay Youngclaus (AAMC)
• BJ Revill (University of Rochester)
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Questions
