PSLF, Taxable Forgiveness, or Private Refinance

November 9, 2023 | Robbie Morris

Robbie Morris, CSLP®
Robbie Morris, CSLP®
Hey! I'm Robbie, the founder of Roots Financial Planning, a fee-only, fiduciary advisor located in San Antonio, TX working virtually with dentists across the United States. When I'm not helping dentists live their best life, you can find me making pizza, swimming, or skiing.

There are several paths a dentist can take when repaying their student loans. However, everyone has a completely unique situation that must be considered. In this post, we will look at these repayment options and consider who would be a good fit for each one.

Debt to Income Ratio

First, it is important to know what your debt-to-income ratio is. This value helps to determine which path might get you to the best financial outcome (paying as little as possible over the course of repayment). Your debt-to-income ratio is not the definitive number that determines which path you should take; however, it is a great starting point.

Your debt-to-income ratio is your student loan balance divided by your gross income. For example, if your student loan balance is $500,000 and your gross income is $100,000 then your debt-to-income ratio is 5. If your student loan balance is $360,000 and your gross income is $160,000 then your debt-to-income ratio is 2.25.

Public Service Loan Forgiveness (PSLF)

PSLF is tax-free forgiveness granted after certain requirements are met. You must make 120 on time payments (10 years of monthly payments). The payments must be made on an IDR repayment plan (IBR, PAYE, REPAYE, SAVE, or ICR). While making these payments you must be employed at a 501(c)3, non-profit, or government employer. For dentists, the most common qualifying employers are non-profit hospitals, veteran’s affairs hospitals, and dental schools.

Is PSLF right for you?

The first thing to consider is whether you will be working for 10 years in a qualifying job. If you plan to work in private practice then this will not be an option for you. If you know you’ll spend at least 10 years at a qualifying employer and have a debt-to-income ratio above 1.5, then PSFL might be right for you.

Another scenario in which PSLF might come into play is when you have a longer residency. Most residencies and fellowships qualify as a PSLF eligible job. Perhaps you chose the OMFS specialty and have a long residency of 6 years. You could follow that up with a few more years in public service and get your loans forgiven fairly quickly. The one caveat to this is you would need to enter into an IDR plan during residency rather than pursing in-school deferment. Though your payments would likely be small since residencies generally do not pay very much.

Taxable Forgiveness

Taxable forgiveness is granted after making 20-25 years of qualifying payments on any of the IDR plans. There are no additional employment requirements to be eligible. At the end of the repayment term, the remaining balance is cancelled and added to your income for tax purposes. This means you will owe more in tax that year even though you didn’t make more money to cover them.

Is taxable forgiveness right for you?

Taxable forgiveness will likely be the best financial strategy for you if you have a debt-to-income ratio of 1.5 or greater. Pursuing taxable forgiveness also creates more cash flow flexibility early in your career. Your payments on an IDR plan will likely be much lower than the Standard 10-year plan. This extra money you are saving can be used to do more beneficial things like buying a dental practice, putting a down payment on a home, or even starting a family.

The taxable forgiveness path also encourages pre-tax saving for retirement. This is most common in a 401(k) at your dental office or a health savings account (HSA). The pre-tax savings will lower your Adjusted Gross Income (AGI) which in turn lowers your required student loan payments.

The main goal of taxable forgiveness is to pay as little as possible over time and have a large amount cancelled at the end of the repayment term. Under optimal circumstances, your payments plus the cancellation tax could end up being less than paying the loans in full. As of October 2023, there will still be extra taxes due upon forgiveness, so you will need to start saving additional funds for that potentially large tax burden down the road.

Private Refinancing

When you refinance your federal student loans into private loans you are issued a brand-new loan with a new repayment period and lower interest rate at a private lender. Refinancing should not be considered if you can’t acquire a lower interest rate.

Is private refinancing right for you?

If your debt-to-income ratio is 1.5 or lower, private refinancing is likely the most financially optimal path for you. If your debt-to-income ratio is this low and you were to try and go for taxable forgiveness, you would likely end up paying the loan off before any forgiveness is achieved. You might even end up paying more over time due to interest if using the IBR or PAYE plan. Once you have refinanced to a lower interest rate, the goal is to pay the loan off as soon as possible so that you pay as little as possible over the course of repayment.

The biggest consideration with private refinancing is that once you leave the federal system, there is no going back. You must be sure this is the direction you want to pursue before committing to it.

This guide only looks at the most financially optimal repayment plan based on a few factors. There are many other things to consider when pursing the repayment path that is right for you. If this is something you need help analyzing we would be happy to help you look at your unique loan situation.


If you plan to work in a qualifying, public service job for at least 10 years and your debt-to-income ratio is 1.5 or greater. PSLF might be right for you.

If you plan to work in private practice, have a debt-to-income ratio of 1.5 or greater, and you don't mind paying as little as possible on your loans for 20-25 years. Taxable forgiveness might be right for you.

If your debt-to-income ratio is less than 1.5 or you can't stand the thought of paying off your loans over a 20-25 year period. Private refinancing might be right for you.