Changes to student loans are coming in 2026 and 2028. Some have already been enacted with the “Big ‘Beautiful’ Bill,” and others are being negotiated. Takeaway #1: Public Service Loan Forgiveness (PSLF) for medical students and physicians is intact.
PSLF incentivizes public service by making a commitment – work in public service while paying your loans for ten years, and any remaining principal and interest will be forgiven with no federal tax penalty, and in most cases, no state penalty.
Details are key. You must have the right loan type (federal Direct loans). Make payments on the lowest monthly cost Income Driven Repayment plan (IDR). Work at a qualifying 501(c)(3) nonprofit or government entity. Complete paperwork along the way to stay on track.
For PSLF, time saved is money saved. The biggest benefit of PSLF for physicians comes from participating correctly from your first day of residency, when your salary is lower.
A student loan expert and student loan-aware financial advisor can help you minimize student loan payments and your time in repayment, and ensure you’re meeting the requirements, amplifying your benefit.
Takeaway #2: Medical students and residents have two major changes to prepare for:
The amount of federal student loans you can borrow will be capped starting July 1, 2026. Professional programs will be capped at $50,000/year with a lifetime limit of $200,000. Graduate school loans will be capped at $20,500/year and a lifetime limit of $100,000. In addition, GradPLUS loans will be eliminated.
Why it matters: This may force some to take out private student loans. Private loans cannot be forgiven under PSLF, lack basic federal protections and access to affordable repayment plans, and have interest rates as high as 18% or more.
ACTION: Use every means to reduce your living expenses while in medical school – live like a grad student! For the first few years after school, continue this strategy – pay the amount required by your IDR on your federal loans and pay extra to your private student loans to pay them off in your first five years.
Income-Driven Repayment Plans are changing. Existing repayment plans will be phased out from 2026-2028, new ones introduced, and others will get more expensive. If you borrow any federal loans after July 1, 2026, your only IDR options will be “old” IBR and RAP. If all your federal loans were borrowed before July 1, 2026, you may have additional options, at least until July 1, 2028, when the ICR, PAYE, and “new” IBR plans are fully eliminated.
A new IDR, Repayment Assistance program (RAP), will be offered starting July 1, 2026. RAP requires payments between 1% and 10% of Adjusted Gross Income, with a minimum monthly payment of $10. If you have children, the payment may be reduced by up to $50/month. RAP may be good for lower incomes, but payments are not capped and can be expensive as income increases.
IDR options for federal Direct loans if you borrow any federal loans after July 1, 2026:
If all your federal loans are from before July 1, 2026, enroll in the lowest monthly cost option from the expanded choices below by July 1, 2026. Before July 1, 2028, update your plan to either RAP or “old” IBR.
The current Standard repayment plan, which offers fixed monthly payments, will be changed July 1, 2026, from a 10-year to a 10 to 25 years repayment term, depending on loan balance. It is still unclear if the new Standard repayment plan is a PSLF-eligible plan. If it is, it may be wise to choose it when it is cheaper than the alternatives.
10 years for loans <$25,000
15 years for loans $25,000 to $50,000
20 years for loans $50,000 to $100,000
25 years for loans >$100,000
ACTIONS FOR STUDENTS:
File your taxes in your final year of school, even if you don’t have much income, so your first residency year is based on the income from this tax return, resulting in extremely low payments your first year, perhaps even $0.
Check your employer’s PSLF eligibility using StudentAid.gov PSLF Help Tool.
A few months before residency, determine if consolidation of all your loans into a single federal Direct loan could save you time, and therefore money, in repayment. This can be beneficial if you have a gap in time in your education, or if you are in a grace period that will overlap with your residency.Do not refinance, which makes your loans private and ineligible for PSLF. If consolidation will help you, do it 3 months before your residency starts, and check the box to skip the delay.
ACTIONS FOR RESIDENTS:
Make sure you filed your taxes in your final school year so your payments on an IDR will be as low as possible.
Be in repayment status from your first day. If your loans are in deferment, forbearance, or grace period, ask your loan servicer to remove it, and get into repayment on an IDR right away to take advantage of your lowest-ever payments for PSLF. If they are in grace period, you canconsolidate to get out of it early.
If you are on the RAP plan for payments, keep in mind the income tiers and minimize your AGI to get into the lowest possible tier.
In your final year, wait as long as possible to file your taxes, which can include filing a tax extension - to keep your payment as low as possible.
ACTIONS DURING/POST-RESIDENCY TO MINIMIZE PSLF PAYMENTS:
Invest in your future while minimizing your AGI on your taxes to minimize your student loan payments. Consider increasing tax-deductible retirement, HSA, and FSA contributions, using the Aptus Tax Efficient Waterfall method.
Compare your IDR options each year and be prepared to switch between them to minimize payments – especially as you advance.
For married borrowers, filing taxes separately can be beneficial, especially if the other spouse doesn’t have federal loans of their own or their income is about equal to or higher than yours.
If your income decreases from the prior year’s AGI on your tax return, ask to have your IDR payment recalculated immediately. This includes if you take a few months off for any reason. Avoid forbearance/deferment.
Correctly calculate your family size for IDRs using the more generous rules for student loans.
Remember, a student loan-aware financial planner and student loan expert can help you minimize time and money in repayment, often for just the cost of one or two student loan payments and save you tens of thousands or hundreds of thousands of dollars!
At Aptus Financial, we believe every resident deserves a financial plan before they get out of training. Aptus is an advice-only financial planning company dedicated to financial planning for residents and early-career physicians. Our delayed payment option makes comprehensive planning accessible for residents. Learn more here: https://www.aptusfinancial.com/