Medical school loan glossary.

Interest that has accumulated on your loan but hasn't yet been added to the principal.

Interest accrues daily on all federal student loans. If you're on an income-driven repayment plan and your payment doesn't cover the monthly interest charge, the unpaid interest accrues. Under older plans this could capitalize (add to principal); under SAVE, unpaid interest is waived for subsidized loans.

Your gross income minus above-the-line deductions. IDR payments are calculated from this figure.

AGI is the IRS figure used to calculate your IDR payments — not your gross income. Physicians can reduce AGI (and thus their IDR payments) through pre-tax retirement contributions (403b, 457b, HSA), student loan interest deductions, and other above-the-line deductions. This is one of the most powerful levers for residents on IDR.

The yearly process of verifying your income to recalculate IDR payments.

Every 12 months on an IDR plan, you must submit proof of income (tax returns or pay stubs) to recalculate your monthly payment. Missing the deadline causes your payment to reset to the standard 10-year amount — potentially thousands of dollars per month for an attending physician. Set a calendar reminder 60 days before your recertification date.

A federal program that can cancel loans if your school engaged in misconduct or fraud.

If your medical school made substantial misrepresentations that affected your decision to enroll — including misleading residency match rates, licensing pass rates, or program accreditation — you may be eligible for loan discharge. Primarily relevant for Caribbean medical school graduates and unaccredited programs.

When unpaid accrued interest is added to your loan principal, increasing the balance you owe interest on.

Capitalization is one of the most costly mechanics in student loan repayment. When interest capitalizes, it becomes part of your principal — and then accrues additional interest. Triggering events include leaving forbearance, leaving deferment, leaving IDR without qualifying for forgiveness, and (under old rules) missing recertification. SAVE plan significantly limits capitalization.

Combining multiple federal student loans into a single new loan with a weighted average interest rate.

Direct consolidation can make previously ineligible loans (like FFEL loans) eligible for PSLF. However, consolidation resets your PSLF payment count to zero — a critical consideration if you have FFEL loans and years of qualifying payments already made. Consolidation does not lower your interest rate (it averages them). Processing takes 30-90 days during which you typically enter forbearance.

A person who signs a private loan alongside the primary borrower and is equally responsible for repayment.

Federal loans never require a cosigner. Private medical school loans often do — especially for students without established credit or income. Cosigners bear the full legal obligation for the debt. Some private lenders offer cosigner release after a specified period of on-time payments and income verification.

Failure to repay a loan per the terms of the promissory note — typically after 270 days of missed payments.

Defaulting on federal student loans triggers severe consequences: damaged credit, wage garnishment (up to 15% of disposable income), tax refund seizure, and loss of future federal aid eligibility. Physicians rarely default due to high earning potential, but residents in financial hardship should use IDR or deferment — never ignore payments.

A temporary postponement of loan payments, granted for specific qualifying reasons.

Medical residency and fellowship are qualifying deferment periods. During deferment of subsidized loans, the federal government pays the interest. On unsubsidized loans, interest accrues during deferment and may capitalize when the deferment ends. Deferment counts toward PSLF only if you work for a qualifying employer and, if required, are in a qualifying repayment plan.

Federal loans for graduate and professional students, including medical students, with higher interest rates than Direct Unsubsidized Loans.

Graduate PLUS loans have no borrowing limit (up to the cost of attendance) but carry higher interest rates (currently around 8.05%). They require a credit check (no adverse credit history) and have an origination fee (~4.23%). Most medical students max out Direct Unsubsidized loans first (~$20,500/year) and use PLUS loans for the remainder.

Federal loans for graduate students, with a fixed interest rate and no subsidy on accrued interest.

For graduate/professional students, the annual limit is $20,500. Interest accrues from disbursement — including during school and grace periods. Most medical students borrow the full $20,500 per year in unsubsidized loans before taking any PLUS loans. These are eligible for all IDR plans and PSLF.

Your income above 225% of the federal poverty level — the number IDR payments are calculated from.

Most IDR plans calculate your payment as a percentage of discretionary income, defined as AGI minus 225% of the federal poverty guideline (for SAVE) or 150% (for IBR/PAYE). For a single PGY-1 making ~$65K, discretionary income might be ~$30K. Your payment is then 5-10% of that, annually — roughly $125-250/month. Knowing this formula is essential for understanding why IDR payments during residency can be very low.

The form you submit annually to verify that your employer qualifies for PSLF.

Replaced by the PSLF Form in the current system. You can submit via the PSLF Help Tool at studentaid.gov. Annual submission (or after each employer change) is strongly recommended — don't wait until you have all 120 payments. The form also verifies the number of qualifying payments you've made. MOHELA is the current PSLF servicer.

Income thresholds published annually by HHS, used to calculate IDR payments and program eligibility.

The FPL varies by family size and is updated every February. IDR plans use percentages of FPL to set the income protection amount in discretionary income calculations. A single borrower in 2025 has an FPL of ~$15,650 — meaning SAVE protects the first $35,213 (225% of FPL) from IDR payment calculations.

An older federal loan program (ended 2010) administered by private lenders — not automatically eligible for PSLF.

FFEL loans are NOT eligible for PSLF unless consolidated into a Direct Consolidation Loan. If you have FFEL loans from before 2010 and are pursuing PSLF, consolidating them (while being aware of the payment reset) may be necessary. FFEL loans are also not eligible for most current IDR plans. Important for older borrowers who may have loans from early years of a combined BS/MD program.

Temporary suspension or reduction of loan payments, with interest continuing to accrue on all loans.

Unlike deferment, interest accrues on ALL loans during forbearance — including subsidized loans. This accrued interest capitalizes when forbearance ends under most plans (SAVE waives unpaid interest). Forbearance payments do NOT count toward PSLF. Medical students in residency have used forbearance historically, but IDR plans are almost always more advantageous for PSLF-seekers.

Discharge of remaining student loan debt after meeting program requirements.

The three main pathways for physician loan forgiveness: (1) PSLF — 10 years at nonprofit/government employer; (2) IDR forgiveness — 20-25 years on an IDR plan; (3) State loan repayment programs (NHSC, etc.). PSLF forgiveness is currently tax-free. IDR forgiveness may be taxable as income in the year it's received — this is the "tax bomb."

The 6-month period after medical school graduation before loan repayment begins.

Most federal loans have a 6-month grace period after you drop below half-time enrollment. Interest accrues during this period on unsubsidized and PLUS loans. The grace period is a good time to choose a repayment plan and submit your first PSLF Employment Certification if you've started a qualifying residency.

An IDR plan capping payments at 10% of discretionary income for new borrowers, with forgiveness after 20 years.

IBR has two versions: "New IBR" (10% of discretionary income, 20-year forgiveness) for borrowers who first borrowed after July 1, 2014, and "Old IBR" (15%, 25-year forgiveness) for older borrowers. IBR protects income at 150% of FPL. Most residents prefer SAVE or PAYE for lower payments, but IBR remains a viable option.

The oldest IDR plan — less favorable than newer options but important for Parent PLUS loans after consolidation.

ICR caps payments at 20% of discretionary income (using 100% FPL protection) or the fixed 12-year amount, whichever is less. It's generally the least favorable IDR plan for borrowers. However, Parent PLUS loan borrowers who consolidate into a Direct Consolidation Loan can only access ICR — not SAVE, PAYE, or IBR — making it important for some families of medical students.

The family of federal repayment plans that tie monthly payments to income and family size, with forgiveness after 20-25 years.

The four IDR plans are SAVE, PAYE, IBR, and ICR. All calculate payments from discretionary income, all offer forgiveness after a set number of years, and all count toward PSLF. For most medical students and residents, IDR is the default repayment strategy — the question is which plan and whether PSLF or IDR forgiveness is the end goal.

A one-time federal program giving credit toward IDR forgiveness for past repayment periods and certain forbearance periods.

The IDR Account Adjustment (implemented 2023-2024) gave borrowers retroactive credit toward IDR forgiveness for time spent in repayment, deferment, and certain forbearance periods — even if the borrower wasn't on an IDR plan at the time. This moved some long-term borrowers much closer to IDR forgiveness.

The annual percentage rate charged on federal student loans — fixed at disbursement, set by Congress each year.

Federal student loan interest rates are fixed for the life of the loan and are set each June 1 based on the 10-year Treasury note yield plus a statutory add-on. Graduate Unsubsidized loans have historically ranged 5.5-7.5%; PLUS loans add ~3% more. Unlike mortgages, you cannot simply refinance federal loans to get a lower rate without losing federal protections.

The elimination of student loan debt due to specific circumstances (death, disability, school closure, borrower defense).

Loan discharge differs from forgiveness in that it typically requires a qualifying event rather than a set number of payments. Discharge types include: Total and Permanent Disability (TPD) discharge, death discharge, school closure discharge, false certification discharge, and borrower defense discharge. All discharge events require formal application to your servicer.

Missouri Higher Education Loan Authority — the current servicer for PSLF and some other federal loans.

MOHELA became the exclusive PSLF servicer in 2022. If you're pursuing PSLF, your loans should be (or will be) serviced by MOHELA. Servicer errors around PSLF processing have been a significant source of frustration — always keep records of every payment and submission. If your loans were transferred to MOHELA and counts reset, you may be entitled to a correction.

A federal program that offers loan repayment to primary care clinicians who serve in underserved communities.

NHSC Loan Repayment Program offers up to $50,000 (2-year commitment) or $25,000 (half-time) for primary care physicians at NHSC-approved sites with a HPSA score of 14 or higher. This award is tax-exempt. Specialties qualifying include family medicine, internal medicine, pediatrics, OB/GYN, and psychiatry. Can be stacked with PSLF (service must be at a qualifying employer).

A one-time fee deducted from each federal loan disbursement, typically 1-4% of the loan amount.

Federal loan origination fees are deducted upfront — so if you borrow $20,500 in Direct Unsubsidized loans with a 1.057% fee, you receive ~$20,283 but owe $20,500. Direct Unsubsidized loans have ~1.057% fees; PLUS loans have ~4.228% fees. Private loans may have no origination fees, which is one of their few advantages for borrowers who won't use federal protections.

Federal loans taken by a parent in the parent's name to pay for a dependent student's education.

Parent PLUS loans are the parent's legal obligation — not the student's. They cannot be transferred to the student. They are only eligible for ICR (after consolidation) among IDR plans. Parents of medical students with large Parent PLUS balances face particularly limited options and should consider income-contingent repayment carefully.

An IDR plan for newer borrowers: 10% of discretionary income, 20-year forgiveness, 150% FPL protection.

PAYE offers some advantages over IBR: a 20-year forgiveness timeline (vs. 25 for old IBR), and the same 10% payment rate. It's only available to borrowers who had no outstanding loan balance before Oct 1, 2007, and received a Direct Loan disbursement on or after Oct 1, 2011. SAVE now generally offers even lower payments for most borrowers. Court challenges to SAVE in 2024-2025 renewed interest in PAYE.

A federal program that forgives remaining loan balances after 120 qualifying payments while working for a qualifying employer.

PSLF is the most powerful loan repayment tool for many physicians. Requirements: 10 years (120 payments) working full-time for a 501(c)(3) nonprofit, government, or tribal organization; making qualifying payments on a qualifying repayment plan (any IDR plan or the 10-year standard); having qualifying Direct Loans. The forgiven amount is currently tax-free. PSLF is most valuable when total debt exceeds expected income — making it especially powerful for primary care physicians at academic medical centers.

The annual (or more frequent) form submission that verifies your employer qualifies and counts your payments toward PSLF.

Submit the PSLF Form (formerly Employment Certification Form) via the PSLF Help Tool on studentaid.gov — ideally annually and every time you change employers. Early submission verifies employer eligibility before you commit to a 10-year path. Your count of qualifying payments is officially tracked by MOHELA.

An employer that makes your PSLF payments count: nonprofit 501(c)(3)s, government entities, and tribal organizations.

For physicians, qualifying employers typically include: academic medical centers, VA hospitals, public hospitals and health systems, community health centers (FQHCs), nonprofit hospital systems with 501(c)(3) status. Private practice and for-profit hospitals do NOT qualify. Always verify before accepting a position — employer type determines PSLF eligibility, not the nature of your work.

A monthly payment that counts toward the 120 needed for PSLF: made on a qualifying plan, while at a qualifying employer, on qualifying loans.

All three criteria must be met simultaneously: (1) employed full-time at a qualifying employer, (2) in a qualifying repayment plan (any IDR plan or 10-year standard — NOT graduated or extended), (3) on qualifying Direct Loans (not FFEL). Only one payment counts per month, even if you pay more. Payments during deferment or forbearance do NOT count, except during COVID forbearance which was granted special credit.

Replacing federal or private student loans with a new private loan — typically at a lower interest rate, but losing federal protections.

Refinancing can save physicians significant interest — often $50,000-$150,000 over the life of a loan — but permanently exits the federal system. This means: no PSLF eligibility, no IDR plans, no federal forgiveness programs, no income-driven payment caps if income drops. For high earners in private practice who are certain they won't pursue PSLF, refinancing often wins. For anyone with a path to PSLF, refinancing is usually a mistake.

The terms under which you repay your federal loans — choosing the right plan is one of the most important financial decisions of your career.

Federal repayment plan options: Standard (10-year), Graduated (10-year, increasing payments), Extended (up to 25 years), and income-driven plans (SAVE, PAYE, IBR, ICR). Only IDR plans and the standard 10-year plan qualify for PSLF. The repayment plan choice interacts with employer type and total debt to determine your optimal strategy.

Post-graduation clinical training period — typically 3-7 years — during which most physicians earn $60-90K and face the critical decision of which repayment strategy to pursue.

Residency is the highest-stakes financial period for physician borrowers. The decisions made here — IDR vs standard vs forbearance, PSLF vs refinancing — can mean a difference of $100,000-$300,000 over your career. Residents typically qualify for very low IDR payments (often $0-$300/month) while earning PSLF-qualifying payments at qualifying hospitals. Six months of forbearance to avoid choosing is often the most costly mistake.

The newest IDR plan — replaced REPAYE in 2023. Offers the lowest payments for most borrowers and waives unpaid interest.

SAVE calculates payments at 5% of discretionary income for undergraduate debt and 10% for graduate/professional debt (blended for most physician borrowers). It protects income at 225% FPL (vs. 150% for IBR/PAYE). Critically, SAVE waives unpaid interest monthly — if your payment is $200 but $400 in interest accrued, the extra $200 is forgiven, not capitalized. SAVE has faced legal challenges since 2024 and may be restructured.

The company that manages your loan account, processes payments, and handles enrollment in repayment plans.

Your loan servicer handles day-to-day loan management: processing payments, managing deferment/forbearance requests, enrolling you in repayment plans, and counting PSLF payments. MOHELA is the current PSLF servicer. Other servicers include Aidvantage, EdFinancial, Nelnet, and OSLA. Servicer errors are common — always keep your own records of every payment and submission.

How your spouse's income affects your IDR payment depends on whether you file taxes jointly or separately.

For IDR plans, spouses who file taxes jointly have their combined AGI used to calculate discretionary income. Filing separately (MFS) can dramatically lower IDR payments by excluding spousal income — but may cost more in taxes. For physician households with large debt loads, the MFS vs MFJ calculation is one of the highest-value financial decisions of the PSLF years.

The default 10-year repayment plan with fixed monthly payments — the only non-IDR plan that qualifies for PSLF.

Standard repayment pays off loans in exactly 10 years with equal monthly payments. For a $250K debt at 7%, that's ~$2,905/month. Standard repayment qualifies for PSLF (though if you're on standard for all 120 payments, your balance would be $0 at forgiveness anyway). It's the fastest debt elimination path and minimizes total interest paid — if your income can support the payments.

Federal loans where the government pays the interest during school, grace periods, and deferment.

Graduate and professional students (including medical students) are NOT eligible for new subsidized loans since the Budget Control Act of 2011. Only undergraduate students can borrow subsidized loans. However, some medical students may have subsidized loans from their undergraduate years — these have the most favorable terms.

The potential large tax bill when IDR-forgiven loan balances are counted as taxable income in the year of forgiveness.

Under current law, PSLF forgiveness is tax-free. IDR forgiveness (after 20-25 years) is taxable as ordinary income in the year of forgiveness. A physician who has $400K forgiven after 25 years of IDR could face a tax bill of $100K-$180K in that single year. Tax planning decades in advance (building a sinking fund, converting to Roth, timing forgiveness year) is essential for IDR-track borrowers.

Complete discharge of all federal student loans for borrowers who are totally and permanently disabled.

Physician-specific consideration: physicians who become disabled and lose their earning capacity can have all federal loans discharged. Documentation via SSA determination, VA determination, or physician certification. There is a 3-year monitoring period — if income exceeds the poverty threshold during this period, loans may be reinstated. Relevant to disability insurance planning for physicians.