Federal court challenges have put President Biden’s loan forgiveness plan on hold. The fate of the plan is uncertain.
Some medical students and residents may have benefitted from loan forgiveness, which offered relief from the rising cost of medical education.
Physicians can familiarize themselves with these developments to plan how they will handle their student loan debt.
Doctors who anticipated getting student loan debt relief from President Biden’s forgiveness plan may have reasons to lose hope. Brewing legal disputes could ultimately scuttle the proposal.
How this political drama will pan out is anyone’s guess, but it helps to understand what has happened (and what may happen) so that physicians and other healthcare professionals can make informed decisions about student loan debt management.
What happened to student loan debt relief?
As of this writing, the most recent legal setback, which stalled the program on November 14, 2022, was actually one of several. The timeline is as follows:
October 21, 2022: The 8th US Circuit Court of Appeals halted the program to weigh arguments from Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina—Republican-led states that were trying to stop loan forgiveness, as reported by Associated Press. The panel of three judges were all Republicans—two appointed by President Trump and one by President George W. Bush.
At the center of this case (and the November 10, 2022, case in Texas, described below) was the Higher Education Relief Opportunities for Students Act of 2003 (known as the HEROES Act), according to Associated Press. Passed after the 9/11 attacks, the HEROES Act gave the Secretary of Education the authority to modify federal loan terms during times of national emergency or war.
The Biden administration has contended that the COVID-19 pandemic was justification for loan forgiveness under the HEROES Act.
Missouri argued that the financial fallout from loan forgiveness would damage the state’s Higher Education Loan Authority. The court’s ruling said that loan forgiveness would “prevent or delay” the state from funding its public universities and colleges.
November 10, 2022: A US District Court Judge in Texas blocked the plan from proceeding, although it was already under review by the Federal Appeals Court in St. Louis, as reported by Associated Press. The judge, a Trump appointee, said that the program amounted to an end-run on Congress, which has sole power to create legislation. Ultimately, the judge ruled that the plan would require authorization by Congress.
November 14, 2022: The 8th US Circuit Court of Appeals panel in St. Louis granted a preliminary injunction to stop the program while legal proceedings continue, freezing the program until the legal disputes are resolved.Related: Half of physicians under 50 still have student loan debt, survey finds
What will happen next to student loan debt relief?
The ultimate fate of student loan debt relief is unknowable— but certain legal moves are nearly inevitable.
It’s likely that the 8th Circuit Court along with the 5th Circuit Court, which covers Texas, will rule on each case. But both of these courts are dominated by conservatives, so it’s likely that they won’t be siding with the Biden administration.
With the 8th Circuit Court’s injunction in place, it’s possible that the case lands on the docket of the US Supreme Court. And the Biden administration has indicated a willingness to appeal the Texas ruling as well. Whoever loses that appeal could end up before the Supreme Court, too.
Both cases would need to be weighed by the Federal Court of Appeals, which would determine whether the cases advance to the Supreme Court.
Until there’s a final decision, applications are on pause for student loan forgiveness.
What does this mean for doctors?
Biden’s plan, unveiled in August 2022, called for up to $20,000 in debt cancellation for people holding Pell Grants backed by federally issued loans from the Department of Education, as detailed in a White House fact sheet.
Non-Pell Grant recipients were eligible for up to $10,000 in debt cancellation. This presented complications for physicians, as this relief is reserved for people who earn less than $125,000 per year. For married couples, the cap is $250,000 per year.
Those caps likely leave out many physicians. According to a report published by Merritt Hawkins, in 2022, the lowest-earning starting salaries by specialty were:
Family Medicine: $251,000
Internal Medicine: $255,000
However, residents and medical students stood to potentially benefit from the program. Those graduating in 2022 have a mean medical education debt of $205,037 and a median debt of $200,000. The average medical resident will earn $64,200 the same year. If the plan was to escape the legal morass, these residents might get some relief.
A potential complication
Public Service Loan Forgiveness (PSLF) could further complicate matters. Eligible doctors pursuing PSLF are required to be in an income-driven repayment program and make 120 qualifying payments while in that program. That means many of these doctors would be making payments after receiving their first attending salary, which likely would render them ineligible for Biden’s loan forgiveness plan.
In other words, should Biden’s loan forgiveness plan survive the legal challenges, doctors will need to decide what repayment strategy makes the most sense for them. The answer to that question will likely depend on their salary, their partner’s salary (if applicable), their earning potential, and their practice setting (for-profit or not-for-profit).
Ultimately, the final decision on the Biden plan may amount to one fewer debt-relief option for financially burdened physicians.
Meanwhile, medical school becomes more expensive each year. The average annual tuition cost has risen by nearly $1,500 each year since 2013. Tomorrow’s doctors may just have to hope medical schools forgo tuition, following New York University’s example.
What this means for you
Unfortunately for doctors who were pursuing Biden’s loan forgiveness plan, the outcome has become a wait-and-see scenario. Meanwhile, the price of medical education continues to climb. However, PSLF may be an option for doctors who meet all of its qualifications. Physicians may want to research the program, determine their eligibility, and see if PSLF makes the most financial sense for their situation.