Example 1: Dr. Trauma
Dr. Trauma is a PGY2 resident in General Surgery with plans of pursuing a Surgical Critical Care fellowship. It’s possible they add a research year into residency and/or tack on an Acute Care designation as a second year of fellowship.
They graduated undergrad in 2019 and medical school in 2024 with federal student loans from both institutions.
With a 6-8 year training path and employment likely with a major medical center as an attending, Dr. Trauma is hoping to pursue Public Service Loan Forgiveness (PSLF).
Having been put into the SAVE forbearance as an intern, Dr. Trauma is asking what steps they should take to get out of forbearance and on track for PSLF.
As a PGY2, they ideally act while still having a tax return on file from ½ year of medical school and ½ year of internship. This deflates their reported income to half their PGY salary.
Assuming they are a single tax-filer with PGY salary of $72K, their tax return may show an adjusted gross income of $36K.
By enrolling in Income-Based Repayment (IBR) using their M4/PGY1 tax return, they apply for and are approved with a $100/month payment which counts towards PSLF.
Had they waited until filing their PGY1/PGY2 tax return with $72K adjusted gross income, this same timeframe would be $400/month with no additional benefits towards PSLF, while actually being a few months behind by waiting.
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Example 2: Dr. Triage
A close friend from med school with the exact same loan situation and residency hospital is Dr. Triage, a PGY2 Emergency Medicine resident in a 3-year program.
Dr. Triage is similarly in the SAVE forbearance and asking about the best approach for managing their loans in residency, knowing they will be working for a private practice that staffs an emergency room in practice.
The first question is: what state do you plan to practice in? If the answer is California or Texas, they should consider the exact same steps as Dr. Trauma because those states base PSLF eligibility on whether your feet are physically within a not-for-profit institution whereas all other 48 states go based on who cuts the paycheck.
If they are practicing in any other state, the career path is not eligible for PSLF because they will have a for-profit employer.
In this case, Dr. Triage should actually consider staying in the SAVE forbearance for the next few months, budgeting for what their eventual monthly payment would be and doing something positive financially with those funds (elective payments towards loans, building savings, etc.). They can also consider filing a tax extension to continue having a M4/PGY1 tax return as the most recently filed until the extension deadline of 10/15.
The Department of Education has created the Repayment Assistance Plan (RAP) with the stated introduction date of July 2026. Similar to the previous SAVE plan, RAP forgives all the unpaid interest each month (as long as you make the minimum payment), helping keep the balance from growing during training.
Assuming $300K of loans at 6%, there is $1.5K/month of interest that is accruing.
If Dr. Triage enrolls in RAP in July-Sept using a PGY1/M4 tax return and is approved for $100/month payment, this means the $1.4K/month of unpaid interest is immediately waived, keeping the balance from ballooning. If they did not file an extension and are approved at a $400/month payment based on their PGY1/PGY2 tax return, this $1,100/month of unpaid interest is waived. Basically, this $300/month of additional payment by not developing a proper strategy is money-out-the-window.
These case studies are hypothetical and for illustrative purposes only. Individual cases will vary.
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Kyle Flynn, CSLP® is a consultant and financial advisor with Twin Oak Advisors who intimately understands the financial path and challenges facing early-career physicians and where loan repayment fits in with retirement planning, home-buying, disability insurance, and simply trying to survive training financially.
To schedule a no-obligation, introductory conversation with Kyle, use this link here.