Working for a Private Medical Group? You May Still Qualify for Public Service Loan Forgiveness

A federal rule that took effect July 1, 2023, created an exception for certain contracted professionals who cannot be employed directly by a qualifying nonprofit because of state law.

This means you could potentially have your remaining federal student loans forgiven after 120 qualifying monthly payments, generally 10 years, and you may even receive credit for qualifying employment dating back years before the rule changed.

Why Does This Exception Exist?

Normally, PSLF requires you to work full-time for a qualifying government or nonprofit employer. Working for a private medical practice generally doesn't qualify, even if that practice provides services at a nonprofit hospital.

However, this created an unusual problem for physicians in states like California and Texas.

Both states have laws restricting the *Corporate Practice of Medicine*. These laws are intended to protect physicians' independent medical judgment by limiting the ability of corporations and certain other entities to employ physicians or control the practice of medicine.

In California, Business and Professions Code § 2400 generally prohibits corporations from practicing medicine, subject to specific exceptions.

As a result, many nonprofit hospitals contract with independent medical groups or professional corporations rather than employing physicians directly.

Imagine a radiologist who works full-time at a nonprofit hospital but receives a W-2 from a private radiology group organized as a C-corporation.

Before the rule change, that physician could be excluded from PSLF simply because of how state law required the employment relationship to be structured.

The Department of Education addressed this through a federal regulation effective July 1, 2023.

The exception allows certain contracted professionals to qualify when applicable state law prevents the nonprofit from directly employing someone to perform their services.

Importantly, this isn't limited to independent contractors receiving a 1099. A physician receiving a W-2 from a private C-corp, S-corp, partnership, or medical group can also qualify when the state-law exception applies.

Which States and Medical Professionals Qualify?

California and Texas are specifically identified in the Department of Education's rulemaking discussions, but the federal regulation isn't exclusively limited to those states or physicians.

Other medical professionals, including dentists and dental specialists, could potentially qualify if a comparable state-law restriction applies to their particular employment arrangement.

However, simply receiving a 1099, working for a private group, or providing services at a nonprofit hospital doesn't automatically qualify you.

The determining factor is whether state law prevents the nonprofit from employing someone directly in your position or to perform your services.

If the nonprofit could legally hire you but simply chooses to use contractors instead, this exception generally doesn't apply.

How to Get Credit Toward PSLF

The process is relatively straightforward once you've confirmed your employment arrangement qualifies. You can complete it electronically or use a manually signed form.

Step 1: Find the Right Person at the Nonprofit

Before completing the PSLF form, identify who at the nonprofit hospital is authorized to certify your employment.

For contracted physicians, I would start with the hospital's Medical Staff Services Office, Physician Relations department, or Chief Medical Officer's administration.

These departments may be better equipped than traditional HR to verify contracted physicians' service dates, medical staff appointments, and clinical work.

Explain that you're seeking PSLF certification under the federal exception for professionals who cannot be directly employed because of state law.

Confirm that the hospital recognizes your arrangement as qualifying and identify the person authorized to sign your certification.

This is worth doing first. Otherwise, you risk sending a certification request to someone in HR who doesn't recognize you as an employee and simply rejects it.

Step 2: Confirm Eligibility and Gather Information

You'll need:

• The qualifying nonprofit hospital's Employer Identification Number (EIN), which you should obtain directly from the hospital.
• The authorized official's name and email address.
• Your dates of service and average weekly hours.
• Supporting documentation, such as your medical group's contract, work schedules, or credentialing records.

You can verify the nonprofit using the PSLF Employer Search.

Special consideration for physicians working at multiple facilities

If you're a radiologist, anesthesiologist, emergency physician, or another specialist whose group covers multiple facilities, pay attention to how your hours are allocated.

PSLF generally requires an average of at least 30 hours per week in qualifying employment.

For example, if you work 20 hours per week providing services to a qualifying nonprofit hospital and another 15 hours at a for-profit outpatient surgery center, those additional 15 hours generally won't help you satisfy the PSLF requirement.

However, if you work 20 hours at one qualifying nonprofit hospital and 15 hours at another, you can generally combine those hours to satisfy the 30-hour requirement, assuming both arrangements qualify.

You can submit separate employment certifications for each qualifying nonprofit. Keep records showing which services and hours are attributable to each organization.

Step 3: Submit Your PSLF Certification

There are two options.

Option A: Electronic Submission (Recommended)

• Log in to the PSLF Help Tool.
• Enter the qualifying nonprofit hospital's EIN, not the EIN of your private medical group, and complete the employment information under the applicable state-law contractor exception.
• Choose electronic signatures and enter the authorized hospital official's email address.
• The official receives a DocuSign request, reviews your employment information, and signs electronically.

Once signed, the completed form is automatically submitted to Federal Student Aid for processing.

Option B: Manual Signature

If the hospital prefers paper forms:

• Complete the PSLF Help Tool and select manual signatures.
• Download the pre-filled PDF from My Activity on StudentAid.gov.
• Sign the form and obtain the authorized nonprofit representative's signature.
• Upload the signed PDF through My Activity or follow the mail or fax instructions provided with the form.

Both methods are accepted, although electronic submission is generally easier.

Remember: The nonprofit hospital must certify your qualifying employment, not simply your private medical group.

Step 4: Verify Your PSLF Credit and Repayment Plan

After submission, log in to StudentAid.gov and check My Activity to monitor your certification status.

Once processed, review your qualifying payment count to make sure the appropriate employment periods were credited.

You'll also need to make sure your loans and repayment plan qualify for PSLF.

For most borrowers, this means having eligible federal Direct Loans and making payments under a qualifying Income-Driven Repayment (IDR) plan, such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), or the newer Repayment Assistance Plan (RAP), subject to each plan's eligibility rules.

The 10-year Standard Repayment Plan also qualifies, although borrowers who make all 120 payments on that plan will generally have no balance left to forgive.

Graduated, Extended, and Tiered Standard repayment plans generally don't qualify under their ordinary payment schedules. Certain exceptions and payment-count adjustments may apply, so historical payment periods should be reviewed individually.

Also, the SAVE plan ended in 2026, and PAYE and ICR are scheduled to end no later than July 1, 2028. Your available repayment options depend on your loan types and borrowing history.

It's a good practice to certify your employment annually, whenever your qualifying employment changes, and retain copies of your supporting documentation.

Can You Receive Credit for Previous Years?

Potentially, yes. And this may be the most valuable part of the rule for physicians who have worked at nonprofit hospitals for years.

Although the exception became effective July 1, 2023, qualifying employment periods before that date may also be certified.

For example, suppose you've worked through a private radiology group at the same nonprofit hospital since 2018.

If the arrangement qualifies under the state-law exception and your student loan history meets the PSLF requirements, you may be eligible for qualifying payment credit going back to 2018.

In some cases, eligible employment and payment history could extend back to October 1, 2007, when PSLF began.

However, qualifying employment is only one requirement. Your loan type, repayment plan, payment history, and other applicable rules determine which months ultimately count.

If you've been working under one of these arrangements for years, it's worth reviewing your entire employment and student loan history rather than assuming only payments after July 2023 qualify.

Is PSLF Forgiveness Taxable?

Here's another significant benefit.

Under current federal law, loans forgiven through PSLF are excluded from federal taxable income under Internal Revenue Code § 108(f)(1).

This treatment is different from certain forms of long-term IDR forgiveness, which may result in taxable income depending on the applicable law when the discharge occurs.

The federal tax exclusion for PSLF isn't dependent on the temporary student loan forgiveness tax provisions that expired at the end of 2025.

State tax treatment should be evaluated separately.

Don't Assume Your Private Employment Disqualifies You

For physicians working through private medical groups at nonprofit facilities in California or Texas, this exception could substantially change their student loan repayment strategy.

Someone who previously expected to repay several hundred thousand dollars of student loans over 20 or 25 years might discover that PSLF is a realistic option, potentially with years of qualifying payments already accumulated.

The key is determining whether your employment qualifies, documenting your hours and employment periods correctly, and making sure your student loan repayment strategy satisfies the remaining PSLF requirements.

If you're working at a nonprofit hospital through a private medical group, don't assume your student loans are ineligible for forgiveness just because your paycheck comes from a private company.

You may have an opportunity worth investigating.

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Sources and Additional Reading

• Federal Student Aid: Public Service Loan Forgiveness
• Federal Student Aid: PSLF Help Tool Instructions
• Federal Student Aid: PSLF Employer Certification Guidance
• Federal Student Aid: SAVE Plan and Repayment Options
• Federal Regulation: 34 CFR § 685.219
• Federal Register: PSLF Regulatory Changes
• Medical Board of California: Corporate Practice of Medicine
• Internal Revenue Service: Tax Treatment of PSLF Discharges