Resident and fellow physicians paying back federal medical student loans will continue to see changes under the One Big Beautiful Bill Act of 2025 (OBBBA), which took effect this year. With the law dramatically changing the landscape for borrowing and repayment, and with physicians often graduating from medical school with $200,000 or more of medical student loan debt, it’s crucial to understand how it will affect you.
A recent webinar hosted by AMA preferred provider KeyBank aimed to help demystify the changes and help resident and fellow physicians create a loan repayment strategy that doesn’t overly burden them during training or in practice.
“This is a very complicated topic with a lot of different avenues, especially as it pertains to people working in the medical field,” said Joseph McGrath, a relationship manager at KeyBank Student Loan Solutions, in the webinar. “A lot of programs are changing. Certain repayment options that were available at some points are no longer available or are being tweaked in some way.”
KeyBank is one of the nation’s largest full-service banks, offering banking, lending and student loan solutions for physicians at every stage of their careers. When considering your financial plan for residency and beyond, KeyBank offers special AMA member rates on student-loan refinancing, home loans and practice financing. AMA members can schedule a free 30-minute session with a student loan expert to explore your student loan repayment or forgiveness options.
The importance of plan types
Under the OBBBA, federal medical student loans are capped, but mostly for students taking out loans starting on July 1, 2026, or later. Resident and fellow physicians who have already received their medical student loans will not have their disbursements changed. It is in repayment where they might see alterations.
Income-Driven Repayment (IDR) plans base monthly payments on a borrower’s income and family size. During the webinar, McGrath highlighted several major plan types:
- Pay As You Earn (PAYE): Generally caps payments at 10% of discretionary income, with forgiveness after 20 years.
- Income-Contingent Repayment (ICR): Requires the lesser of 20% of discretionary income or the amount you would pay on a fixed 12-year repayment plan, adjusted for income, with forgiveness after 25 years.
- Income-Based Repayment (IBR): Generally requires 10% or 15% of discretionary income, depending on when the borrower first took out loans, with forgiveness after 20 or 25 years.
- Repayment Assistance Plan (RAP): Uses a mathematical formula based on adjusted gross income to determine monthly payments over a 30-year repayment term.
For those who receive new federal loans on or after July 1, 2026, repayment options likely will be more limited, with RAP and a new standard repayment structure replacing several current options. Resident and fellow physicians who have begun repayment under older plans likely have different transition rules, so make sure you review what plan you are eligible for and the requisite timelines carefully.
If you already are using an IDR plan, it may make sense to stay in an eligible existing repayment plan, if that option is still available, particularly for physicians pursuing Public Service Loan Forgiveness (PSLF).
What is not changing
The repayment period for PSLF is still 10 years, and forgiveness through the program remains tax-free. Physicians who work for qualifying employers and who are pursuing Public Service Loan Forgiveness will see the same timeline.
If you are not pursuing PSLF, however, loan forgiveness through long-term IDR programs can sometimes result in tax liability.
“That’s something you’re going to need to prepare for over the course of your repayment journey,” McGrath said.
He added an important caveat, saying that some borrowers misunderstand the relationship between a Parent PLUS loan and the PSLF program. The qualifying employer for forgiveness in that scenario is not the child’s employer but that of the borrower, he said. Those loans can be refinanced in a child’s name, although that process could result in losing federal benefits and protections.
For resident and fellow physicians who plan to pursue PSLF, an eligible Income-Driven Repayment plan often will be the better fit because it can keep monthly payments lower during training.
Income-Driven Repayment and the standard repayment structures are both eligible for Public Service Loan Forgiveness, but McGrath said they do not recommend that people use anything other than IDR options. Otherwise, physicians could wind up paying back large amounts of loans that might have been forgiven.
“While it’s open, it’s not necessarily the wisest choice,” he said.
It’s crucial to verify, however, that the repayment option physicians are considering qualifies under current federal PSLF rules. For more information, McGrath suggested scheduling a student loan consultation.
“These consults are meant to be as educational as they are looking into what options are and what action items will be needed after the call,” he said. “At any point in your student loan journey, if you’re looking to have a discussion, we're happy to help.”
