By Practice Integration Advisor Brian Roemke
Medical and dental professionals often graduate with a heavy financial burden, and recent legislation could make managing that debt even more complex. The One Big Beautiful Bill Act (OBBBA) introduced sweeping changes to federal student loan programs, impacting both current borrowers and those planning careers in health care. From reduced repayment options to stricter borrowing limits, these provisions could significantly alter how students and professionals pay loan debt.
A Reduction in Repayment Options for Professionals
As of July 1, 2028, income-driven repayment (IDR) plans are going to be phased out. This change will apply to borrowers who had loans disbursed prior to July 1, 2026. If you have a loan disbursed after that date, you are likely going to be limited to two repayment options. Option one is the standard repayment plan, which is a fixed monthly payment plan for a duration of 10 to 25 years. The second option is the repayment assistance plan (RAP). This option allows for repayment based on a percentage of your adjusted gross income (AGI) with forgiveness after 30 years. The percentage used to calculate the payment is 1% to 10% of your AGI.
Capping Out Loan Amounts for Students
The OBBBA will also impact how much a student and/or parent can borrow in federal loans to help pay for college. If you or your child are pursuing an advanced degree, new federal limits for graduate programs have been set at $20,500 per year with a $100,000 lifetime limit for most programs. With professional degrees, such as law and medicine, the limit is $50,000 per year and a $200,000 lifetime limit. In addition, Parent PLUS loans will be capped at $20,000 per year with a $65,000 lifetime limit per child. All federal loans combined will come with a lifetime limit of $257,000, not counting Parent PLUS loans.
In the past, PLUS loans were unlimited for tuition, so the changes made in the OBBBA will force new borrowers pursuing graduate or professional degrees to cover costs out of pocket or turn to private lenders to fund their education once they reach the new federal limits.
Updated Forgiveness Timelines
Loan forgiveness previously under the income-driven repayment will become more difficult to attain and have a longer timeline as it will require 30 years of qualifying payments to be made. Also, unemployment deferments and economic hardships are being eliminated, meaning borrowers could face penalties for missed payments.
The Impact of These New Provisions
If you are currently paying back your student loans that were disbursed prior to July 1, 2026, how could the OBBBA requirements impact you? For the time being, you will be able to continue with your current loan program, however, you will have to transition to the new system outlined in the OBBBA by 2028.
The federal student loan program for undergraduate degrees will remain largely the same. However the repayment options for loans taken out after July 1, 2026, will be impacted by the OBBBA, as outlined above. The biggest change to the federal student loan program will affect graduate and professional programs. The new federal borrowing limits for these types of programs will force students to pay more out-of-pocket for tuition or require them to explore other avenues for borrowing for tuition. In the past, Parent PLUS loans were able to be leveraged at higher amounts, but those have now been capped at $65,000 per student.
What Should You Do if You Are Exploring Dental or Medical School?
First, consider investigating undergraduate degree options that do not add unnecessarily to your student loan debt. Preserve the dollars under the new federal limits for your professional degree goal. Second, consider exploring all scholarship options through your school of acceptance and talk with the financial aid office about resources for your program, such as sponsorships and scholarships. Third, know your private loan options ahead of time. Vet the private loan companies to know what you can borrow and preferrable on a fixed rate.
Next Steps for Graduates
After completing a medical or dental school program, what do you do next? Once you have started employment in your new professional career, we recommend working with a trusted financial professional to review your options. Student loan refinancing after your career has begun can be an overwhelming process. The income you generate will be significant, so most IDR programs will not be a good, long-term solution. A financial professional can help you review your entire asset picture and analyze various repayment and consolidation options to help you select what works best for you.
Final Thoughts
The rush to pay off student loans is common, but your new professional career in the medical field will leave you with some good options to leverage your education, ease cash flow constraints, and keep you from losing out on wealth creation opportunities throughout your career.
About the author: Brian is a member of the Practice Integrated Wealth Management team, providing comprehensive financial planning services to help Focus Partners Wealth clients understand and achieve their financial goals. He is enthusiastic about working collaboratively to develop, implement, and monitor a plan that helps clients achieve their distinct objectives.
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