ASCP Celebrates Victory in Student Loan Forgiveness Reform

Physicians and Laboratory Personnel May Benefit from the New Rules

The U.S. Department of Education (ED) has released its final regulations reforming federal student loan programs. ASCP is celebrating the development as a key victory, as ASCP has been calling on the federal government to expand student loan forgiveness and to address the high cost of student debt for the pathology and laboratory workforce. The rule, announced October 31, should be welcome news for pathologists and laboratory professionals with outstanding federal loan debt and may help aid medical laboratory recruitment and retention efforts. 

One of the key changes in the new rule is the long-awaited reforms to the Public Service Loan Forgiveness (PSLF) Program. Under the PSLF, healthcare professionals, including pathologists and laboratory professionals, may be eligible for loan forgiveness, provided they have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. Over the last two years, the Biden Administration has been working to address significant problems with the program that have blocked many applicants from obtaining loan forgiveness. The rule re-opens the door for those who did not previously succeed in securing benefits.

ED is also making a key change specifically to help healthcare professionals previously ineligible for PSLF; the Department is changing its definition of “an employee.”  Previously, federal student loan regulations did not recognize contractors as employees. This has been a problem for healthcare providers in states adhering to the corporate practice of medicine doctrine. States, like as California and Texas, bar hospitals, urgent care facilities, and other medical facilities from “employing” physicians and other healthcare providers to provide medical care. This has rendered many healthcare professionals ineligible for student loan forgiveness. According to the Biden Administration, this change means that “physicians in California and Texas, and anyone else affected by a similar set of restrictions, will [now] be eligible for PSLF benefits…”

ED’s changes to the PSLF program also includes important new changes that may allow borrowers to count certain payments toward eligibility that previously weren’t acceptable. For example, late payments will now be counted, as well as months when a borrower was in economic hardship deferment. In addition, the Department will now allow military personnel to count “months spent on active duty to count towards PSLF, even if the service member’s loans were on a deferment or forbearance rather than in active repayment.”

Another important change is that ED has eliminated compound interest calculations on loan balances except where required by statute. This will help reduce the amount of interest that can accrue on student debt. With student loan interest rates increasing at rates significantly higher than wage growth, this change may help prevent student debt from continuing to spiral out-of-control.

The rule also includes new consumer protections, such as prohibiting schools from mandating the use of certain contractual provisions regarding dispute resolution processes. 

ASCP encourages anyone with outstanding student loan debt to familiarize themselves with recent changes affecting the federal student loan programs. If you have questions about how these changes affect you, ASCP encourages you to contact the federal government’s student loan ombudsman at 877-557-2575. This office can assist borrows resolve discrepancies with loan balances and payments; identify options for resolving issues related to loan consolidation; identify loan repayment options, and more. While the rule does not go fully into effect until July 1, 2023, the Administration has already made numerous changes to these programs that could be beneficial before then.