Let's Make a Deal
Loan repayment programs take the financial burden off new nurses and help fill short-staffed facilities

By Cathryn Domrose
April 17, 2003

Growing up on an American Indian reservation in North Dakota, Alyssa DeCoteau, RN, witnessed firsthand the work of the nurses with the Indian Health Service. She knew how valuable those nurses were to her community. She knew how desperately her family and others on the reservation needed them.

DeCoteau didn't just want to be a nurse, she wanted to be a nurse on a reservation. She wanted to make enough money to be comfortable and to buy her children books at book fairs-something her parents could never afford-but she didn't see nursing school as the ticket to a high-paying job. Her family couldn't afford to send her to school, so when she learned about a program that would pay for her schooling in exchange for two years of work for the Indian Health Service, she jumped at the chance.

"I planned to go home to a reservation to work," said DeCoteau, who has since returned to the Recruitment/Retention of American Indians Into Nursing (RAIN) program at the University of North Dakota in Grand Forks to become a nurse practitioner. "So it wasn't hard for me to do the payback part of it."

A pretty package

For some time, the government and nonprofit foundations have offered payback scholarships and loan forgiveness programs-also called loan repayment programs-to lure all varieties of health care workers, including nurses, to remote rural hospitals and poor, inner-city clinics.

But as the nursing shortage continues, nursing loan forgiveness programs are expanding or increasing as hospitals and clinics scramble to hire nurses. Many private hospitals now offer to pay off student loans as part of packages designed to attract new graduates. Some states have established new loan forgiveness programs for nurses who work in certain high-need areas. Pointing to a drastic national need for nurses, the federal government this year expanded its loan repayment program to practically any hospital in the country experiencing a nursing shortage.

Nurse recruiters at private hospitals say these programs seem to help attract some new graduates, but because most programs have just started, they still can't judge how effective they are at keeping new employees. Student advisers say they tell students to look closely at the programs and the institutions offering them before they commit themselves to two or four years of work. Those who run the government and nonprofit foundation programs, as well as the nurses who have participated in them, say the nurses who have the greatest success are those like DeCoteau, who choose a program because it fits in with their own career goals and not the other way around.

In a typical loan forgiveness program, a nurse or a nursing student signs an agreement to work at a particular hospital or clinic, or in a particular area, in exchange for full or partial repayment of student loans or nursing school tuition. The amount varies greatly from program to program. The largest of these is the Nurse Education Loan Repayment Program, administered by the U.S. Department of Health and Human Services Health Resources and Services Administration. This program offers to repay up to 60 percent of student loans in exchange for two years of service in "critical shortage facilities."

The HRSA program, which is accepting applications until March 31, has a long list of such facilities, including hospitals, nursing homes, home health agencies and public health departments. But the program's requested budget will allow it to make only 675 awards nationally. Applicants who show the greatest disparity between the amount of their student loans and their salaries and who work in hospitals serving a "disproportionate share" of low-income patients will receive first consideration for the awards, said Denise Geolot, Ph.D., RN, FAAN, director of HRSA's Bureau of Health Professions' Division of Nursing

"It isn't a huge amount," Geolot said, "but it makes a difference. That's 675 nurses who are providing service in facilities that have critical shortages of nurses."

She expects the program to eventually expand beyond its requested $15 million budget and make more awards in the future. "There's a lot of interest in the program," she said.

Some states, including Oregon, Texas and Florida, offer similar, smaller-scale loan repayment programs, often aimed at bringing nurses to specific areas. In Oregon's Nursing Services Loan Repayment Program, nurses either must be working in or agree to work in specific rural counties.

Although rural counties are no longer the only places with nursing shortages, Oregon's Legislature specified "rural and frontier areas" when it established the program in 2001, said Joan Bouchard, MSN, executive director for the Oregon State Board of Nursing. The program received 60 applications in 2001, and awarded eight nurses loan repayments of between $3,500 and $35,776.

Joint venture

In Pennsylvania, a student loan repayment service is partnering with private hospitals to offer loan repayment to nursing students. Participating Pennsylvania employers agree to match contributions from the nonprofit Pennsylvania Higher Education Assistance Agency to repay up to 25 percent or $12,500 of eligible loans during three years of employment. Hospitals can increase their contributions if they wish. The foundation expects to make nearly 13,000 awards in its first three years.

"There's definitely an interest," said Joe Manotti, nursing loan forgiveness coordinator for the agency. "We've had a lot of applications." The agency is paying for its contributions with proceeds from a series of refinanced bond issues.

The Health Professions Education Foundation in California pays for its nursing loan repayment and scholarship programs in part through a $5 surcharge on nursing license renewals. The education reimbursement programs, which began in 1990, offer nurses working in California up to $8,000 for tuition and supplies in exchange for two years of direct patient care in medically underserved areas, including all county hospitals. Nurses can reapply after two years to receive a maximum of $19,000.

The program has awarded 640 RN-to-BSN scholarships and 326 loan repayment grants since its inception, said Charles Gray, program director for the foundation.

Private hospitals may offer payments of anywhere from a few hundred dollars to $10,000 or more toward paying off student loans. Some hospitals offer to pay students' nursing school tuition before they graduate. Some offer loan repayment to new graduates as a kind of sign-on bonus. Others offer it to any employee who has student loans. All programs have some sort of work payback requirement, usually a year of work for every year of schooling.

The loan repayment and scholarship programs have become increasingly popular among private hospitals in the last three years, nurse recruiters said.

"You have to have it just to stay up with the Joneses," said Ken Joyce, a nurse recruiter for human resources at St. John's Mercy Medical Center in St. Louis. "It's become one of those fixed perks that graduate nurses will come out and ask about. If you don't have it and another hospital does, you run the risk of losing that candidate."

The variety of possibilities to pay for a nursing education could turn students and new grads into bug-eyed kids in a candy store, as they try to plan careers and financial futures. But student advisers say many nursing students seem to understand how to look at loan repayment and scholarship programs as part of a larger picture.

"They know they're somewhat in the driver's seat, that all the hospitals want them," said Brenda Hackett, MSN, RN, academic counselor and faculty member at Indiana University Southeast in New Albany, Ind., near the Kentucky border.

Hackett said the scholarship loan programs offered by private hospitals have not been as popular as she would have expected among students. "When they first came along, I thought the students would really be after these programs," she said.

But two years ago, fewer than 20 percent of students expressed interest in hospital loan repayment offers. "The hesitation is in having to make that commitment to work," she said, especially when they have so much to choose from.

The right fit

Hackett said she encourages students to research at least three hospitals they would like to work for, including the facilities' attitudes about nursing and patient care and how nurses feel about working there, as well as salary and benefits packages. She advises them to consider what best fits their needs and how they can make a contribution.

"I do like to let them know they have some negotiation power," Hackett said.

Elizabeth Johnson, a junior in the nursing program at Indiana University Southeast, was already working at Clark Memorial Hospital in nearby Jeffersonville, Ind., when she found out the hospital had a scholarship program that would pay for three years of tuition and books in exchange for three years of work as a nurse after graduation.

"I knew that I wanted to keep working there even after I got my degree because it's a really great place to work," said Johnson, who was a sophomore when she applied for the scholarship. Even so, she felt a little nervous signing a contract that committed her to three more years of nursing school, then another three years of work.

"I thought, I've just signed away the next six years of my life," she said, "but I was able to do it with great peace because I know I have someplace to go where I know I will be happy."

Administrators of loan repayment or scholarship programs-whether for governments, foundations or private hospitals-say applicants should want to work in the places they will do their payback.

"Applicants to this program should want to practice in a critical nursing shortage area for other reasons than the possibility of loan repayment," said Susan Taylor, special programs coordinator, grants and scholarships division, for the Oregon Student Assistance Commission, which administers the state's nursing loan repayment program.

Joyce of St. John's said salaries, the hospital's reputation and its fellowship programs are the biggest attractions for new graduates. "It's not the loan forgiveness program that brings people in the door."

At the same time, he said, the hospital screens nursing candidates carefully to make sure they fit in with the organization and its mission. "You can tell when you interview people who are in nursing for the purpose of caring for others. If people are in nursing for the money, we would not be considering them."

Students and new graduates also must take into consideration their families' needs before signing a loan repayment or scholarship contract. Johnson said a friend of hers decided not to consider scholarship loan programs similar to hers because she was not certain where her fiancé would be working after graduation.

Hackett said she has heard from a few students who signed agreements to work in exchange for tuition reimbursement, then found themselves overwhelmed by their first year of hospital nursing. But no one she knows of has defaulted on a work obligation.

Johnson said several people in her class have signed tuition agreements at hospitals where they have not worked before.

"I kind of worry about people who are in programs at the hospitals they've never worked at," she said. "It's wonderful not to have to pay for school, but I don't think I would do it without knowing what I was getting into. You really need to be someplace where you can be happy."

Although applicants are screened carefully, defaults do happen, said Gray of the Health Professions Education Foundation. Sometimes nurses who are in the middle of a work payback have to move or to decide to work in a different field, such as school nursing. Nurses who default must repay whatever remaining obligation they have with 10 percent interest, he said.

Here to stay

Hospitals programs also require repayment if a nurse defaults on a work obligation, and most require some sort of penalty or interest as well. Some hospitals add extra penalty fees if a nurse leaves early to work for another hospital within 100 miles.

While scholarship and loan repayment programs may not work for everyone, Hackett believes they are wonderful for many students, especially those who plan to stay in the area after graduating. "I think it's an excellent program," she said. "Some students might not be able to finish the nursing program without this type of opportunity."

Carmen Morales-Board, MSN, FNP, RN, is one of them. Now a case manager at Kern Medical Center in Bakersfield, Calif., and a newly appointed member of the California Board of Registered Nursing, Morales-Board had just gone through a divorce and was raising two young children when she decided to get a bachelor's degree in nursing. She received a grant through the Health Professions Education Foundation, which paid for her books and tuition in exchange for two years of work at Kern, a county facility.

"I wouldn't have gotten my degree had they not helped me," Morales-Board said. After working several years at Kern, she applied for a second grant to attend school in Los Angeles and become a nurse practitioner. She returned to Kern, where she said she intends to keep working.

"This type of nursing is where my heart is," she said. "As long as I have a job here, this is where I'll stay." Her experience and education have helped increase her salary and allowed her to learn about labor issues, help create safer environments for patients and nurses, do nursing outreach to schools and testify at the state Capitol about staff ratios. "They believed in me," she said of the program. "They said, 'We think you can do it.' It's a validation of your goals and your dreams."

After she completes her master's program, DeCoteau will again owe two years of service, this time as a nurse practitioner. Her family wants her to come back to the reservation, but she and her children are feeling ready to expand their horizons. She is considering applying for a job in Alaska.

"I'm kind of liking that Alaska thing," she said. "It would be kind of different. Different culture, different scenery. Kind of neat."

Contact Cathryn Domrose at kaguilar@well.com