Loan Forgiveness

Guest blog by Michelle Rivers of The Pinwheel

Last week, I got the letter I’ve been waiting and hoping for. From the IRS. It is a notice that my clinic has been officially granted non-profit status. The Pinwheel is now a 501(c)(3). For the punks who work here, that means a path to student loan forgiveness. For the patients, my hope is that it means a strong, stable clinic with a long, long future.

I am writing as a card-carrying member of the “f*cked generation” of punks (h/t Nora Madden). We are the ones who went to school after federal student loan availability made it super-expensive, and before POCAtech restored sanity to acupuncture education (yay, first week of school!). Raise your hand if accumulating interest has driven your loan debt into the six figures; raise your hand if your payment on a ten-year schedule would be over a grand a month. Yep, that’s us.

The most popular options for dealing with those student loans, if you’re not making enough to lay out a grand a month, include a handful of repayment plans that give you a break on your monthly payment amount based on your income. What these all have in common is that the unpaid balance continues to accrue interest – it gets bigger, and bigger, and bigger…-, and at the end of the repayment term (10 or 25 years) the balance is forgiven, but it is a taxable benefit. If I were to continue on IBR and wait for that forgiveness at the end of 25 years, assuming my income is stable over that time, with accrued interest I would be looking at something like a $200K forgiveness-windfall to pay taxes on, right around the time I’ll be starting to think about retiring. I needed a better plan. Enter a federal program called Public Service Loan Forgiveness (PSLF).

PSLF is designed to encourage folks to work in public service jobs. These include working for the government, working in certain public health, education, and generally do-gooder organizations, and — working for any 501(c)(3). If you work full-time at one of these jobs and you make 120 on-time monthly payments under a qualifying plan (such as IBR) you can apply for loan forgiveness on the remaining balance, and that is a non-taxable benefit. Not having the forgiven balance taxed, and cutting the repayment term from 25 to 10 years are the two financial reasons I converted my clinic to a non-profit.

Filling out the application form (the 1023) was a round-peg-square-hole exercise from hell. As a social business that relies on patient payments as its sole source of revenue, we just don’t fit into a lot of the boxes on that form. So, there were some awkward spots in the application, for sure. “How much of your revenue comes from grants?” Uhm, none. The whole exercise was a real reminder of how we, as social business, are neither/nor. We are neither for-profits, in that we do not seek dividends, nor are we non-profits, in that we do not rely on grants or donations and redistribute wealth/resources in exactly the way they do. Here, again, is Yunus on social business:

“A Social business is a non-dividend company created to solve a social problem. Like an NGO, it has a social mission, but like a business, it generates its own revenues to cover its costs. While investors may recoup their investment, all further profits are reinvested into the same or other social businesses.

A Social business is a cause-driven business. It must be financially sustainable and mission-oriented. The company must achieve its social objective and at the same time cover all costs through a revenue model. The success of the business is not measured by the amount of profit made in a given period, but the impact of the business on people or the environment. Investments in social businesses purely support the accomplishment of a social objective, and an investor should desire no financial gain. In fact, in a social business, investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point. Examples of social objectives are: healthcare for the poor, housing for the poor, financial services for the poor, nutrition for malnourished children, safe drinking water, renewable energy, etc… In short, Social businesses are non-loss, non-dividend companies created to solve social or environmental problems.”

That part about investors/owners gradually recouping the money invested struck me as important, in my situation. My student loans are one of my investments in the clinic. All I’m hoping to do is to cover them, over ten years of working as a punk. My other investments include the time I put in to get the clinic running successfully for 22 months before I converted it. Just like any other clinic owner, I worked a lot of hours and took home minimal pay for quite a while. To have a nice, stable, decent-paying punk job for the next ten-plus years sounds like a great way to recoup that time investment.

When I wrote that 1023 application, I had you, my fellow punks, in mind. I wrote it carefully, intentionally, in a generic way so that any POCA LOC clinic could copy what I’ve done, and be able to provide the path to loan forgiveness. The IRS wants to know that you’re doing something good in the world, and I leaned heavily on the LOC guidelines to help explain what we’re up to, how it fills an unmet need for an underserved population, and how it’s different from capitalist, extractive businesses. I wrote it into our bylaws to require LOC compliance. So, anyone running a POCA LOC clinic should have a good shot at getting non-profit status. We are starting an apprentice-training program here at The Pinwheel this fall, and I think that would have looked good to the IRS, but when I wrote the application 17 months ago, I left it out. For one, it was pure dreaming at that point, and for another, I wanted any POCA clinic to be able to replicate our application, if we were successful. There were some complicated parts, like the part about converting an existing for-profit business, that needed a lot of explaining. The fact that we provide healthcare services also made for some awkward spots in the application: “Do you provide emergency room services? If not, please explain”

There’s a lot to consider if you’re thinking about this route. I am no longer the owner of my clinic. I can never turn around and sell it. I report to a Board of directors, who could (technically) fire me. I had to incorporate the clinic, get a new EIN, a new bank account, and a new credit card merchant account. I sold my entire herbal pharmacy to the new entity for a buck. I donated all my dusty recliners, paper towel dispensers, everything. I paid $850. I sent 67 pages of documentation. I waited 17 months.

I hope it all plays out as I’ve imagined. I hope the PSLF program works as promised. I hope we can build a crew of awesome punks who are committed for 10-plus years. I hope to build a stronger and stronger board of folks who are as passionate about doing CA right as I am. For me, as the former owner, I hope it means a long-term exit strategy that will leave our community with a strong clinic that is not vulnerable to any changes in my life circumstances. And I hope that my investment and risk in this conversion process opens a path for other f*cked generation punks to have some relief from those student loans, over time.

P.S. I'll be available to chat about this at POCAfest, Saturday, before dinner.

Author: lisafer

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  1. And *this* is why I deeply love POCA. The innovation, the sharing, the sheer genius. Thank you, Michelle, for blazing a path that is sure to be well-worn by those of us who are in the F*d Generation.

  2. Freaking great! Thanks Michelle. I am currently writing up the 1023 for our new educational venture, and it is quickly becoming a 4-letter word (4-number number? 🙂 Hearing of your perseverance is super helpful. AND a reminder that there are clever ways to get shit done!

  3. Very impressive Michelle! Congratulations!! I received forgiveness for the last little bit of my student loan ( actually my undergrad degree) by applying as a health care worker in an under served area. There was a federal program that would slice a little bit off the loan each month… I’m sure it was designed for doctors and nurses, but there was nothing that said an Lic Ac couldn’t apply. It was long ago, and I can’t quote the details or suggest where to look for it, but there is a chance it still exists, and could benefit Punks in communities that are considered medically “under served”.

  4. As a member of the f-ed generation, this has been on my mind lately, and it’s amazing to read of someone who is actually making this idea a reality! What I had been mulling over though, was to make some kind of non-profit entity that could encompass all POCA clinics, so that punks could move between clinics and still benefit from the continuity of 10 years at a non-profit. So much can happen in 10 years, after all. Congrats Michelle on taking the leap!

  5. Yes, seriously, thank you. This is beyond good news. I am heading in this direction so I look forward to seeing how your brilliant mind navigated the mine field.

  6. For years I’ve been telling people to forget about trying to make their clinics into nonprofits. I didn’t think this would work. I am very, very happy to be wrong.

    I think it’s worth talking about what’s different now in 2014 than it was back in 2005 when WCA made an attempt at this. Obviously the IRS has changed; we were told it was virtually impossible to convert a medical for-profit into a medical non-profit. Squeezing a square peg into a round hole isn’t easy, but clearly it’s possible. Yay!

    Also, there is a much more significant pay off in the form of loan forgiveness. Nobody has actually had their loans forgiven via this route yet — it will happen for the first time in 2017. And then we’ll all have more information, which will be good.

    More important than the IRS and the loan forgiveness programs, though, what’s different now is us. POCA. We have collectively proven that we can create and manage complex organizational structures. In years past, I got the sense that most of the people who were asking me about making their clinics into nonprofits were doing so in an attempt to avoid the hard work of making them sustainable through patient fees. They were hoping that there was a pipeline of grant money somewhere to pay for ordinary people being able to get acupuncture. So becoming a nonprofit was, like so much else in the acupuncture world, basically an example of magical thinking. These days, everybody knows that it’s better if a nonprofit is financially self-sustaining — especially if you have to keep it going for 10 years. And we know a lot more about doing that now than we did back when WCA tried to become a nonprofit. Hello, annual survey!

    I agree with Michelle that there is still a lot to consider before taking this route, and at the top of the list is your tolerance for administration/bureaucracy. Running a 501c3 nonprofit is worlds away from being self-employed. Not everybody is cut out for it.

    The thing is, though, if you do this, you’re not going to have to do it alone. You will have comrades to help. POCA is designed to assist with projects like this — not least in that it provides a ready-made culture for the people who will support your 501c3. If you need people (volunteers, staff) to understand what you’re trying to do, you can have them join POCA and there will be plenty of tools. You don’t have to build the culture on top of managing the administration. And you don’t have to figure out how to manage the administration alone. I’m hoping a lot of us will do this together, just like we do so many other things together.

  7. I am so happy and excited that you have blazed the trail for CA non-profit status! Thank you! You have taken the time and had the patience to carve a new path in our CA journey! I’m so grateful to you:-) I would like hear more about the apprentice program at Pinwheel this fall. Thank you again Michelle. Congratulations!

  8. Hi everybody,
    I recently joined POCA as a student (Midwest College of Oriental Medicine), and experienced my first 2 (1st as Birthday tx) CA treatments from David at Lincoln Square CA in Chicago, IL. From the moment I read about and discovered Acupuncture / Chinese Medicine I knew I wanted to find a way to practice and start a clinic that my friends , patients I met as an EMT, and generally the local community could afford…and discovering a community that’s already doing this and sharing the knowledge of how to do it is a phenomenal experience.
    While I’m finding and reading/ watching POCA through an obviously priceless vault of hard-earned knowledge, I’m having difficulty piecing together the timeline on some things. My Practice Management class ( which thankfully has an awesomely knowledgeable 20+ year instructor who is a local NADA instructor and advocate) had the assignment of choosing a business legal structure for our future practice. Being new to the forums I was apparently reading the older information and decided to follow the advice to go with S Corporation over 501C3. When discussing the topic and the rationale I turned in a classmate questioned my comment that 501C3 required patients to bring income verification papers to prove financial need of treatment on a sliding scale, to verify that the clinic is serving an underserved community. I then did another search and found Lisa’s posting of Michelle’s article and comments that WCA had reapplied and successfully gained 501C3 status due to changes the IRS made that are more friendly to the POCA business model.
    Would someone please point me towards where to find more information about these changes and following the development to now/ the present? Also, I saw reference to a file showing Michelle’s 501C3 application as an example of how to fillout the app reflecting a CA clinic, would someone have the link for that?

  9. Hello Will. Here are a few resources to help with your questions. A number of clinics have become 501(c)(3) nonprofits under the hospital category; others as public charities. Here is a link about the hospital requirements: I’m not aware of any requirements that people need to fill out financial forms in order to demonstrate that they can come to a community clinic in order to have nonprofit status–I’m not sure where that is coming from. However, the IRS will look to make sure that your clinic is serving the public and doing so on an affordable basis, as well as following many other requirements to be a nonprofit (there are many!). Here is a detailed summary of the requirements from the IRS:
    There are a BUNCH of resources under the POCA Wiki. Go to Mighty CA Wiki–Opening a POCA Clinic–operating as a nonprofit. And if you have more questions, let us know. Best of luck on becoming an acupuncturist who will help lots of people. We need you!