How does Public Service Loan Forgiveness work, and who still qualifies?

Public Service Loan Forgiveness (PSLF) cancels the remaining balance on a borrower's federal Direct Loans after 120 qualifying monthly payments made while working full time for a government or nonprofit employer. The forgiven balance is not taxed federally.

Median education debt for the medical school class of 2025 was $215,000, according to the Association of American Medical Colleges (AAMC).

The program's requirements are set out at 34 CFR 685.219. Four things have to be true in the same month for that month to count toward the 120.

What counts as a qualifying payment

The regulation requires a payment on eligible Direct Loans, made under a qualifying repayment plan, at the full scheduled amount, while employed full time by a qualifying employer at some point during that month. Full time means an average of at least 30 hours a week across the period being certified.

Federal Family Education Loan Program and Perkins loans earn nothing unless they are first consolidated into a Direct Loan. Private loans never qualify, and refinancing federal debt with a private lender ends PSLF eligibility permanently.

The 120 payments do not have to run consecutively. A physician can leave a nonprofit system for private practice, bank no credit for three years, go back and resume the count where it stopped.

The employer test

Eligibility follows the organization that issues the W-2. The regulation counts federal, state, local and tribal government entities, 501(c)(3) organizations, and certain other nonprofits that devote most of their full-time staff to public service work, a category the regulation defines to include physicians, nurses and other health care practitioners.

For-profit employers are out. That includes the for-profit physician groups and staffing companies that contract into nonprofit hospitals, an arrangement common in emergency medicine, anesthesiology, radiology and hospital medicine. A physician can work a decade inside a qualifying hospital and earn no credit for any of it, because the staffing company signs the checks.

The regulation's definition of "employee" also reaches a contracted worker in a position that, under applicable state law, cannot be filled by a direct employee of the qualifying employer. Corporate practice of medicine doctrines in California and Texas bar most nonprofit hospitals from employing physicians directly, so physicians in those states contract through professional corporations or medical groups. The nonprofit facility's employer identification number (EIN) goes on the certification form, not the medical group's.

Federal Student Aid's employer search returns an answer on a specific EIN. The answer can change when a group is acquired, which is a reason to check again after an ownership change rather than only before a hire.

Residency and fellowship

Nothing in the regulation carves out trainees. Payments made during residency and fellowship count on the same terms as payments made as an attending, so the clock can start in intern year at a teaching hospital that qualifies.

Income-driven payments are set by income, so the ones made during training are the smallest a physician will ever make. Five years of training at qualifying employers, paying the whole way, puts a physician at roughly half of the 120 before the first attending paycheck.

A House proposal in 2025 would have stopped residency years from counting for students who borrowed that year or later. It did not become law.

Which repayment plans earn credit

The qualifying-plan list changed on July 1, 2026. The regulation counts income-driven repayment plans, the 10-year standard plan, Income-Contingent Repayment (ICR) for payments received on or before June 30, 2028, and the Repayment Assistance Plan (RAP). It also counts any other plan, except the alternative repayment plan, if the monthly payment is at least what the 10-year standard plan would have charged.

RAP came out of the One Big Beautiful Bill Act and opened July 1, 2026. It calculates payments from full adjusted gross income instead of discretionary income: $10 a month at $10,000 of AGI or below, then a rate that starts at 1% and rises a percentage point for each additional $10,000 of income, capping at 10% above $100,000, less $50 a month per dependent. The 30-year forgiveness horizon attached to RAP applies to borrowers who are not pursuing PSLF. Public service borrowers still finish at 120 payments.

The new Tiered Standard plan is not named on that list. Its payments count only through the catch-all clause, which requires a monthly payment at least equal to the 10-year standard amount. On the 20- and 25-year terms the plan assigns to large balances, that threshold is not met. Saving on a Valuable Education (SAVE) borrowers who do not pick a plan can be moved into Tiered Standard, and a new attending auto-enrolled there at a nonprofit hospital could be making payments that earn no credit.

Deferments and forbearances that normally earn PSLF credit, among them economic hardship, military service and cancer treatment, stop counting during any month a borrower is enrolled in RAP. The regulation excludes those same months from the additional-payment route that would otherwise recover them, so they cannot be bought back later at any price.

Income-Based Repayment (IBR) stays open indefinitely to borrowers whose loans were disbursed before July 1, 2026. Any new federal loan disbursed on or after that date restricts a borrower to RAP or Tiered Standard, and because all of a borrower's loans sit on a single plan, new borrowing can pull older loans off IBR. SAVE ended under a court order on March 10, 2026; payments made under it still count, months in its administrative forbearance do not.

The employer rule the courts threw out

The Department of Education published a rule on Oct. 31, 2025 letting the secretary disqualify employers found to have a "substantial illegal purpose," carrying out a March 2025 executive order. The department estimated fewer than 10 employers a year would be disqualified.

Two federal courts vacated it on June 30, 2026, the day before it was to take effect. Judge Myong J. Joun of the U.S. District Court for the District of Massachusetts held that the rule exceeded the department's statutory authority, was arbitrary and capricious and violated the First Amendment. The district court in Washington granted summary judgment to nonprofit plaintiffs in a parallel case the same day. Both courts vacated the rule rather than pausing it, which leaves the older qualifying-employer definition governing.

The Justice Department appealed both rulings on Aug. 27, 2026, sending National Council of Nonprofits v. McMahon to the First Circuit and Robert F. Kennedy Center for Justice and Human Rights v. McMahon to the D.C. Circuit. Briefing runs into late 2026. No stay had been sought as of the filing date, and payment counts are unaffected while the appeals proceed.

A physician who looks up the regulation will still find the vacated language in it. Voiding a rule in court and striking the words from the Code of Federal Regulations are separate steps, and the second has not happened.

Certifying employment

Payment counts are assembled from certified employment periods. A physician who certifies once, after 10 years, is asking a servicer to validate a decade of employment across several hospitals and at least one servicer transition.

Federal Student Aid recommends submitting the form annually and after any change of employer.

Buyback, and what it costs now

Months spent in a deferment or forbearance that did not count can be converted by paying what an income-driven payment would have been during those months.

Roughly 88,000 buyback requests were pending as of April 30, 2026, the most recent figure in the department's court-ordered filings, and the department estimated 18,000 to 19,000 of those were duplicates. April was the first month decisions outran new requests, at a 96% approval rate.

The price changed on March 31, 2026, when the department stopped using the SAVE formula to calculate buyback amounts for SAVE forbearance months and moved to the IBR, Pay As You Earn (PAYE) and ICR formulas, which run higher. The change was not accompanied by a Federal Register notice. Buyback is also a creature of regulation rather than statute, which means it can be narrowed again without Congress.

Taxes

PSLF forgiveness is excluded from federal gross income under Section 108(f)(1) of the Internal Revenue Code, the provision covering debt discharged in exchange for working a set period in a qualifying profession.

The American Rescue Plan Act provision that made nearly all student loan forgiveness tax-free lapsed Dec. 31, 2025. Forgiveness at the end of an income-driven plan is federally taxable again for discharges in 2026 and later. PSLF sits in a different section of the code and was not affected by the lapse. State treatment varies and does not always follow the federal rule.

What changes for the next class of borrowers

Grad PLUS closed to new borrowers on July 1, 2026. Professional-degree borrowing is now capped at $50,000 a year and $200,000 in aggregate, inside a $257,500 lifetime federal limit. The AAMC puts the median four-year cost of attendance for the class of 2026 at $297,745 at public medical schools and $408,150 at private ones.

A Panacea Financial survey of 269 doctor-customers found 53% would not choose medicine again, or were unsure, under the $200,000 cap, and 46% said they do not fully understand their own repayment, forgiveness or refinancing options.

Private loans covering the gap above those caps are not eligible for PSLF, which leaves part of the balance outside the program no matter who signs the W-2.