The PSLF Basics
Public Service Loan Forgiveness (PSLF) forgives the remaining balance on your Direct Loans after you've made 120 qualifying payments while working full-time for a qualifying employer. For many physicians, PSLF has been a cornerstone of their student loan strategy — and for good reason. With loan balances routinely exceeding $200,000, the forgiveness amount can be substantial.
But PSLF has a strict requirement that many physicians overlook when considering the locum transition: you must be employed by a qualifying employer. Independent contractors — including most locum physicians working as 1099 earners — do not qualify.
What Changes When You Go 1099
The moment you leave qualifying employment, your PSLF payment clock stops. Payments made as a 1099 earner don't count toward the 120-payment requirement, even if you continue making payments on an income-driven repayment plan.
This doesn't mean PSLF is off the table forever. If you return to qualifying employment, your previous qualifying payments still count. But the gap period doesn't — and depending on how close you were to 120 payments, the financial impact of leaving can be significant.
The Math You Need to Do Before Transitioning
Before making the move to locum practice, every physician with federal student loans should run the numbers on three scenarios:
Scenario 1: Stay employed and complete PSLF. Calculate the total cost of remaining payments plus the opportunity cost of lower income until forgiveness is reached.
Scenario 2: Transition to locum and pursue aggressive repayment. Calculate the total cost of accelerated payoff using higher locum income, accounting for the tax deduction on student loan interest and the higher income available for repayment.
Scenario 3: Transition to locum and continue IDR payments. Calculate the total cost of continued income-driven payments without PSLF, including the tax liability on any forgiven amount after 20-25 years (non-PSLF forgiveness is taxable income).
Why This Decision Can't Be Made in Isolation
The student loan decision is entangled with your tax strategy (loan interest deductions, entity structure), your wealth-building strategy (capital allocated to loans vs. investments), and your income trajectory (locum earning potential vs. employed salary). Making this decision without considering all four dimensions almost always leads to a suboptimal outcome.
This is exactly the kind of decision that benefits from coordinated advice — where your student loan advisor, tax advisor, and wealth advisor evaluate the options together rather than in isolation.