Student Loan Forgiveness Options for Pharmacy Residents and Clinical Pharmacists

APRIL 12, 2016
At the forefront of the minds of many pharmacy residents and practicing pharmacists is the dreaded monthly student loan payment.
 
As of 2015, the average amount borrowed to finance a full pharmacy education was $149,320.1 Monthly payments for debt of this size can easily surpass $1400, even if the borrower refinances at a lower interest rate right after graduation.
 
Although most student pharmacists go on to practice in retail pharmacies where the median annual salary exceeds $120,000,2 many graduates will take residency positions in hospitals, clinics, and other nontraditional settings. The salaries in these alternative work environments after residency often don’t surpass $90,000, making the already hefty monthly loan payment an even bigger burden to bear.
 
Fortunately, many pharmacists looking to practice in clinical settings have unique options to deal with their high-debt burdens. While Pay As You Earn (PAYE), income-based repayment, and income-contingent repayment plans are frequently touted and worth investigating, many graduating pharmacists are unaware of the Public Service Loan Forgiveness (PSLF) program.
 
PSLF enables pharmacists working in nonprofit institutions (like many hospitals) to make payments on their student loan debt and have their remaining debt forgiven after 10 years. The deal is even sweeter for pharmacists who take on 1- or 2-year residencies at eligible institutions, because making loan payments during these years counts towards receiving forgiveness.
 
PSLF works like this3:
  • Borrowers must make 120 on-time payments (10 years of payments) under the PAYE, income-based repayment, income-contingent repayment, or the standard 10-year repayment program.
  • The remaining balance of the loan is forgiven at the end of the 120 payments.
  • Qualifying loans include Direct Stafford, Direct Consolidated, or Direct Grad PLUS loans, which the majority of student loans fall into.
What would this situation look like for a pharmacist working in a qualifying institution? If you’re an unmarried clinical pharmacist with no dependents and $150,000 in student loan debt making an annual income of $80,000, the potential payoffs under both a Standard Repayment Plan and a PAYE scenario would look like this:

Loan Type

Monthly Payment

Total Amount Paid

Projected Loan Forgiveness

Repayment Period

Standard

$1,483

$177,995

$0

120 Months

Pay As You Earn
(PAYE)

$518

$62,160

$199,120

120 Months


It’s clear that a clinical pharmacist working in an eligible institution over the course of 10 years will make out better than a retail pharmacist in terms of loan repayment. Although the income of the clinical pharmacist in this scenario is about one-third less than the average retail pharmacist’s, the loan payment is almost two-thirds less.
 
Although this can be a fantastic deal for the borrowing pharmacist, there’s an important caveat: notice that the projected loan forgiveness for PAYE in this scenario is actually greater than the amount of the loan itself. That’s because the $518 monthly payment is not sufficient to cover the interest on the loan, and so the loan actually increases over time.
 
Therefore, if there’s a possibility that the pharmacist decides to discontinue working at an eligible institution before 120 payments have been made, the loan amount due will actually be greater than what it was when the pharmacist first began making payments.
 
Finding the right repayment plan for student loans is an important process that shouldn’t be taken lightly. However, pharmacists need not feel pigeonholed into a particular career path by a huge monthly loan payment.
 
Depending on the circumstances, the student loan burden can be greatly ameliorated by programs made available by the federal government. A great place to start researching student loan payback plans is studentloans.gov, a government website equipped with calculators, FAQs, and information about your specific student loan circumstance.
 
If the above payment plan interests you, and you’re either about to begin a residency or are already working at a clinical institution, talk to your human resources department about whether your institution makes you eligible for the PSLF program.
 
References
1. American Association of Colleges of Pharmacy. Graduating student survey information and summary reports. Published July 2015. Accessed April 12, 2016.
2. Bureau of Labor Statistics. Occupational employment and wages, May 2015: pharmacists. Published May 2015. Accessed April 12, 2016.
3. Federal Student Aid. Public service loan forgiveness. Published 2016. Accessed April 12, 2016.

Austin Hewlett, PharmD-MBA Candidate
Austin Hewlett, PharmD-MBA Candidate
Austin Hewlett received his PharmD and MBA degrees from the University of Florida and also holds a BA in Economics from the University of North Florida. Austin has consulted with independent physician and pharmacy owners to help derive insights from their patient and transaction records. Austin currently consults in the physician, insurer, and PBM space.
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