February __, 2016
The Honorable John B. King, Jr.
Acting Secretary
U.S. Department of Education
400 Maryland Avenue, SW
Washington, DC 20202
Dear Acting Secretary King:
We are writing to express our concern and to seek your assistance in remedying an unintended consequence of the Department’s regulations implementing the federal Public Service Loan Forgiveness (PSLF) program. The PSLF program is an important program that encourages individuals to pursue careers in public service and improves access to health care. However, unless changed, the Department’s regulations from 2008 will deprive physicians who treat patients in nonprofit community hospitals in California from receiving student loan forgiveness for no reason other than they cannot be directly employed by certain hospitals under California state law. Their counterparts in 49 other states do not face this regulatory hurdle and in view of the unfairness of this situation, we encourage you to undertake whatever regulatory change is needed to solve this problem.
Pursuant to the Department’s interpretation of the College Cost Reduction Act of 2007 (CCRAA) and its 2008 regulations implementing the PSLF, independent contractors are not considered eligible for loan forgiveness under the PSLF program. This creates a problem for physicians in California who are essentially required to be independent contractors based on a state law called the “bar on the corporate practice of medicine.” This law prohibits private nonprofit hospitals from employing physicians directly, and is a restriction enacted many years ago as part of the statutory licensing regime for physicians.
We are concerned that the narrowly drafted regulations disqualify current and future physicians treating patients at nonprofit California health care facilities from loan forgiveness. Not only will this burden physicians with student loan debt, but it will hurt physician recruiting for California communities with nonprofit hospitals, especially community hospitals in underserved communities.
A number of California health care organizations recently wrote your agency to urge the issuance of clarifying guidance based on the text of the CCRAA, which makes loan forgiveness available to a borrower who “is employed in a public service job at the time of such forgiveness” and defines a “public service job” as “a full-time job in…public health.” These organizations noted that the statute does not distinguish on its face between someone hired directly as an employee or as an independent contractor; it is the agency’s regulations that appear to have drawn that distinction.
We are hopeful that you will agree that Congress did not intend to single out California physicians who treat patients at nonprofit facilities for disparate and unique treatment, and that a narrow interpretation of the CCRAA statute places California at a severe disadvantage in recruiting new physicians. We urge you to take any actions necessary to ensure that where a state law prohibits a direct employment relationship with a health care entity that is otherwise a qualified public service organization, a Ford Direct Loan borrower that meets the other requirements will nonetheless qualify for the PSLF.
Those of us who voted for the legislation never contemplated that California physicians would be excluded from the program. We believe Congress intended all qualifying physicians in a public service job to be eligible for the program and look forward to working with you to correct this urgent problem.
Thank you for consideration of this request.
Sincerely,