4 Looming Student Loan Forgiveness Threats for Doctors and Medical Professionals

Republican lawmakers in Congress are evaluating potentially deep cuts and other changes to federal student loan programs as part of a broader effort to reduce federal spending to help offset the costs of extending massive tax cuts, a key GOP priority. Republican leaders want to use the budget reconciliation process – which would allow legislation to pass via simple, party-line majorities in the House and Senate, which Republicans narrowly control – to enact sweeping changes to federal spending and taxation.

Earlier this month, House Republicans released a budget blueprint, the first step to move forward with a reconciliation bill. The blueprint calls for $330 billion in deficit reduction for education-related programs, although no specifics were provided as the blueprint is simply an initial outline; lawmakers must then identity specific programs they want to cut or reduce. Meanwhile, the Trump administration is taking unilateral steps to try to identify and slash federal spending and reduce the federal workforce.

Taken together, these efforts may have very real and significant impacts for federal student loan borrowers. In some cases, this could result in millions of borrowers being cut off from critical student loan forgiveness and repayment programs. And borrowers who work in the healthcare field — particularly doctors, nurses, and other medical professionals — may be particularly hard hit. Here’s a breakdown.

Repeal of SAVE Plan Could Effectively Block Student Loan Forgiveness for Some Medical Providers

The SAVE plan is squarely in the crosshairs of Republican lawmakers seeking to slash federal student loan relief programs. The program was launched by President Biden in 2023 and was a central pillar of the prior administration’s efforts to make student loan repayment more affordable. But the program is currently tied up in a legal challenge brought by a coalition of Republican-led states, and millions of borrowers who enrolled in SAVE are now stuck in limbo. Last week, the 8^th Circuit Court of Appeals extended a preliminary injunction blocking the program and strongly suggested that the SAVE plan will ultimately get struck down.

But rather than waiting on a final court ruling, House Republicans are considering repealing the SAVE plan legislatively in the reconciliation bill. If SAVE is eliminated, borrowers would likely have to enroll in a different IDR plan to continue pursuing student loan forgiveness through IDR or Public Service Loan Forgiveness (PSLF), which provides for complete loan forgiveness in as little as 10 years for those who commit to working in the nonprofit or public sectors. PSLF requires that borrowers repay their student loans under either a 10-year Standard plan or an IDR plan.

Repealing the SAVE plan could have devastating effects for certain medical providers. Not only are other IDR plans more expensive (resulting in higher payments), but two of the alternative plans – Income-Based Repayment (IBR) and Pay As You Earn (PAYE) – have a partial financial hardship requirement. That means borrowers can only enroll in IBR or PAYE if their calculated monthly payment under the plans would be less than what they would need to pay on a 10-year Standard plan based on their loan balance and interest rate. Borrowers who have had relatively manageable monthly payments under SAVE due to the program’s more generous repayment formula, and those who haven’t had to recertify their income in years due to Covid-era flexibilities, may simply not be able to enroll in the IBR and PAYE plans if their income is now too high to qualify.

This may be a particularly acute problem for doctors who spent years in residency and fellowships with low incomes while pursuing loan forgiveness through PSLF. If they can’t enroll in a different IDR plan to complete the remaining portion of their 10-year PSLF service obligation, they may not be able to receive any loan forgiveness. ICR could be an option for some of these borrowers if they cannot qualify for IBR or PAYE, but ICR may be prohibitively expensive. And while ICR is a qualifying repayment plan for PSLF, the 8^th Circuit extended a block on student loan forgiveness under ICR at the end of the 25-year term in last week’s ruling.

Republican lawmakers are also considering repealing all of the other IDR plans, as well (including IBR, PAYE, and ICR). However, according to a House Budget Committee memo obtained by Politico, this would only apply for loans originated after June 30, 2024.

Proposed Tax Code Changes for Hospitals Could Impact Student Loan Forgiveness Eligibility

Another major Republican proposal would fundamentally change how certain hospitals are taxed. This could have profound impacts for health professionals who are pursuing student loan forgiveness through PSLF.

“Eliminate Nonprofit Status for Hospitals,” reads the House Budget Committee memo outlining proposals to cut spending and raise revenue to offset the costs of tax cuts. “More than half of all income by 501(c)(3) nonprofits is generated by nonprofit hospitals and healthcare firms. This option would tax hospitals as ordinary for profit businesses,” resulting in $260 billion in savings over 10 years.”

Eliminating the nonprofit status for hospitals and other healthcare facilities, and taxing them as for-profit entities, would effectively cut off student loan forgiveness for millions of healthcare professionals who are pursuing PSLF. And there would be little recourse. While typically, borrowers would be grandfathered into a program when major changes are made to eligibility rules, that wouldn’t apply here, because the proposed change wouldn’t be to the PSLF program directly. But the practical impacts could be just as devastating; while borrowers wouldn’t necessarily lose the PSLF credit they already earned, it may be difficult to continue pursuing PSLF if there aren’t many – or any – qualifying nonprofit employers in the field.

Other Changes to Tax Code Could Impact Student Loan Borrowers in Healthcare

Republican lawmakers are also considering a broad array of other changes to the tax code that could raise costs on student loan borrowers working in healthcare. Chief among them is treating fellowship income as taxable.

“Qualified scholarships and fellowships are generally excluded from taxable income if used for tuition and related expenses,” says the House Budget Committee memo. “This option would make all scholarship and fellowship income taxable, increasing revenue by $54 billion over 10 years.”

Taxing fellowship income could directly impact new doctors. Coupled with the elimination of the SAVE plan, this could cause new doctors and other medical professionals to see a dramatic increase in costs that could make pursuing valuable fellowship experience prohibitively expensive. Republicans are also considering other tax measures that could similarly raise costs, including ending in-school interest subsidies for federal student loans and eliminating the student loan interest tax deduction.

Funding Freeze for NIH Grants Could Impact Student Loan Borrowers Working in Research Fields

Meanwhile, student loan borrowers working in medical research fields are already feeling the impacts of the Trump administration’s freeze on grants provided by the National Institutes of Health (NIH) and other federal programs. NIH provides billions of dollars per years in funding for various medical research programs.

A legal challenge filed against the Trump administration led to a court order that put the funding freeze on pause. But according to recent reporting by various outlets, grant funding is still effectively frozen, potentially imperiling some research projects. And some academic institutions are already beginning to announce hiring freezes, including at medical schools. Layoffs could follow if the funding pause continues.