New Jersey Proposing Loan Forgiveness! Who Will Be Eligible?
September 17, 2013

We’re happy to write about another state program to help student loan borrowers – this time in New Jersey. Before we dig into the details, right away you should know this program is very limited – it’s only open to doctors. But since most doctors graduate owing big bucks, this is potentially a great program.

Medical school graduates and student loans

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According to the Association of American Medical Colleges (AAMC), nearly 99% of medical school graduates emerge with debt and 79% owe at least $100,000 by the time they’re done with their many years of schooling. 36% owe $200,000 or more and 17% of med school grads owe more than $250,000. That’s a lot of debt, but for those newly minted MDs willing to work in Jersey, they may get to walk away debt free! Even for those docs that qualify for Income Based Repayment, after they’re out of their residency programs, they’ll be paying out more than $2,000 per month in loan payments!

Details of the New Jersey plan:

The bill, S162, was recently approved by the Senate Education Committee and will now move forward to a full NJ Senate vote. If approved, the legislation would establish the “Physician Loan Redemption program” that would pay off loans for certain doctors that work at least 10 years in the state. Physicians must work in designated shortfall areas that are typically those of high need and lower economic resources. Doesn’t sound too bad, right? You’ll need to live in New Jersey, but it seems like you could do your residency there and then you’d be set to jump in.

Medical school and student loans

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Here are the eligibility guidelines in brief:

    • • Must be a resident of the state of New Jersey 
    • • Must be a graduate of a medical school approved by New Jersey’s State Board of Medical Examiners for purposes of licensure 
    • • Must receive a recommendation from your medical school approving participation in the program 
    • • Must have completed your residency 
    • • Must receive a recommendation from the director of your residency program approving participation in the program 
    • • Must agree to practice at an approved site and under the terms and condition of the program 
    • • Must serve for 10 years or more 
    • • Must provide care for patients unable to pay for treatment at a reduced rate or for free 
    • • Must not discriminate against low income patients when it comes to offering treatment 
    • • Must agree to provide services in accordance with Medicare guidelines  
    • • Must agree to a six month probationary period before receiving final acceptance in the program

Loan redemption payment details

What’s nice about this program is that it doesn’t look like you have to serve the whole 10 years before you begin receiving benefits (if we’re interpreting the legislation correctly). Instead, it works more like other government LRAPs that we’ve written about before where you benefit as you go.

Medical school debt cartoon

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Here are the repayment details:

    • • After one year of service, you receive 5% of your principal and interest 
    • • After two years of service, you receive another 5% of your principal and interest 
    • • After three years of service, you receive 10% of your principal and interest 
    • • Years four through nine offer the same benefit as year three 
    • • After your tenth year of service, you receive the final 20% of your principal and interest


There’s no such thing as a free lunch (or free student loan payments) so here’s the fine print you must be aware of before you pack your bags, MD license and head to the Jersey shore:

    • • You have to stay current and in good standing on your student loan payments (but you can use an affordable option like IBR) 
    • • There’s a chance that the program may suffer from a shortfall of funds (at least they wrote a contingency into the bill based on this notion) 
    • • If there aren’t enough funds, those closest to serving their full 10 years will be paid first; next in line will be those serving in the most at-need geographical area or at-need specialty; third will be those who lived in an under-served area prior to starting medical school 
    • • If you leave the program prior to completing your ten years of servitude, you’ll have to pay back 50% of the amount you’ve received under the program 
    • • If your loan forgiveness generates income tax consequences and there are program funds available, the program director is allowed to reimburse you for these (but won’t that create more of a tax liability?)
S162 sponsor Robert Singer

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Why this bill and why now?

We’re glad you asked. According to data from the New Jersey Council of Teaching Hospitals, the garden state is facing a major physician shortfall in the coming years. S162 sponsor Senator Robert Singer says, “The demand for doctors is increasing because of the growing population of seniors. With a growing demand for doctors and predicted shortage in many specialties in the next decade we have to act now to attract the best-trained physicians. It takes about seven years to train a physician so we need to begin now because as the baby boom generation begins to retire we need to ensure that we have enough doctors to care and provide for everyone’s medical well-being.”

We’re excited about states’ interest in addressing the student loan crisis and will continue to bring you news of these programs as they are announced. For now, no matter what your student loan status or how much you owe, sign up for’s free student loan management and optimization tool. Also read our blog for repayment strategies and dive into our new student loan help center for information and How To guides on a wide variety of topics!