National Health Service Corps Demands Additional Flexibility for Participants due to Center Closures in Pandemic-era

The National Health Service Corps is a federal program with a mandate to improve access to healthcare in underserved areas. The program provides incentives to physicians—and other medical workers including dentists, nurse practitioners, and physician assistants—to work in designated Health Professional Shortage Areas (HPSA) in exchange for scholarship or loan repayment funds.

There are three programs specific to physicians: 

1. Federal Scholarship Program: Full-time students who are U.S. citizens and complete a primary care residency are eligible to receive a scholarship for tuition and school-related expenses as well as a (taxable) stipend. For each year of scholarship, students are expected to serve a year working as a physician at an HPSA; there is a minimum of two-years full time service (or four years part-time) with a maximum of four years of scholarship. 

2. Federal Loan Repayment Program: If employed by NHSC-approved sites, primary care physicians can apply to receive loan repayment, including loans for tuition and living expenses for both their medical school and undergraduate education. Within this program, there are three tracks: general, substance-abuse workforce, and rural community. 

3. State Loan Repayment Programs: A state-tailored version of the program, with modifications on program eligibility and service requirements based on specific state-wide needs. 

The programs are competitive, with about ten percent of applicants receiving federal scholarships and entry into the loan repayment programs. However, medical students should carefully consider the contractual agreements when committing to the program. The Student Doctor Network describes the pros and cons of the program. The pros, of course, come in the form of loan repayment and scholarship, which for medical school, can provide a significant sum. The cons, however, are in the restrictive nature of the program. For physicians, scholarship recipients are locked into primary care and fellowships within primary care, which can be limited. Participants also need to be open to relocation throughout the United States, as the NHSC has the final approval on placement. This can be particularly onerous for medical providers with family responsibilities or ties to a specific geographic location. Finally, there are significant financial consequences for breaking the contract.  

The pandemic magnified the restrictive nature of the program and need for participant adaptability. Last week, the Wall Street Journal ran an article profiling several program participants who experienced center closures and resulting job loss. Upon losing their positions, they had 90 days to find a new job; in the cases profiled, the participants needed to relocate in order to find a qualifying placement and when they were unable to do so, they described significant consequences. They had to repay the money they’d received. And those who violated their contracts were charged heavy monetary fines. In one case, a dental hygienist owed a fee that was more than five times the original loan repayment. In all of the cases, the participants described obstacles that made it difficult, if not impossible, to find a qualifying role to continue their service, as well as the financial devastation that would come from repaying the loans with the penalty. 

So, is it worth it? The Student Doctor Network says, “It depends. Once you’re a physician there will be many opportunities to pay off your debt. You can choose a better paid position or find one that offers loan repayment. How committed are you to public service? To primary care? How expensive is your medical school? Like many programs with financial incentives, it is important to believe in the mission before you sign the dotted line.”

Student Loan Forgiveness Receives New Attention Under the Biden Administration

Debt is top of mind for graduate students. A Bloomberg Businessweek survey found that among 2018 graduates of prestigious MBA programs, almost half had borrowed at least $100,000 to finance the degree. The American Medical Association has long advocated for legislative action intended to ease the burden of debt on medical providers, and the American Bar Association released a report in 2020 detailing the negative impact of student debt on young lawyers’ mental health and calling for greater legislative advocacy on students’ behalf.

Late last week, when President Biden signed into law a covid relief package, he also removed a critical impediment to enacting broad-based student debt forgiveness. The bill contains a provision that allows any loan cancellation acquired between December 31, 2020 and January 1, 2026 to be excluded from taxable income. Previously, debt forgiveness (including Public Service Loan Forgiveness) was treated as additional income and taxed as such, with few exceptions. This update ensures that recipients of student debt relief are not left with large tax liabilities and are also not thrust into new tax brackets, with associated implications, due to debt cancellation.  

The counting of debt forgiveness dollars towards taxable income was a primary obstacle to broad student loan forgiveness programs. With the update now signed into law, Congressional Democrats led by Elizabeth Warren and Chuck Schumer, as well as 17 state attorneys general and consumer rights advocates are calling on President Biden to take executive action to cancel $50,000 in federal student debt per borrower. Despite this pressure, the President does not support loan forgiveness at this amount for every borrower, which he directly expressed in a CNN Town Hall last month, as it would aid people who attended elite schools or obtained professional graduate degrees and have strong repayment prospects. The Biden Administration has noted that cancelling student loans above $10,000 should be dependent on the type of loan and current income of the recipient. The President does, however, support $10,000 in blanket, federal student loan forgiveness, and he has urged Congress to legislate this action. Legislative action, he argues, will make it harder to undo. Meanwhile, he has ordered a Department of Justice review to clarify if he has the authority to cancel student loan debt via executive action. This review will be done with the White House Domestic Policy Cancel, who will also consider the best way to target loan cancellation.

While the loan forgiveness policies under consideration would not directly benefit borrowers with private or commercially held student loans, those borrowers could still benefit from the tax relief provision included in the covid relief bill. Marketwatch notes that it may help borrowers benefit from current loan relief options provided by public or private lenders as a response to the pandemic.

In an interview on student debt with the AMA, Alex Macielak, who works in student-loan refinancing, urged students to pay attention to the political discourse, “There’s a new administration. Student-loan debt is a hot topic, ... There’s been talk about forgiving loans for some people. However, how much, who would be eligible, and other important details are still in doubt. So, monitor the legislation and debate, because student loans are consistently evolving.”