I started giving advice to friends and family about student loans after our horrible experience with the Public Service Loan Forgiveness (PSLF) program and FedLoan Servicing.
My wife and I could have saved tens, if not hundreds of thousands of dollars on my wife’s student loans if we had only understood how the Public Service Loan Forgiveness program really works. I seriously wish this list of 40 tips existed back when we made all our mistakes.
Editor’s Note: In response to the economic challenges posed by the COVID-19 outbreak, the CARES Act suspended all auto-debit payments on federally held student loans automatically around early April. Any suspended payments between March 13, 2020 and September 30, 2020 count towards any loan forgiveness program you would have otherwise qualified for. For PSLF purposes, that means you needed to have been enrolled in an IDR plan on Direct loans as of March 13. If you made payments after that date, you can call your servicer and request a refund with no negative impact on your PSLF payment count! All $0 forbearance payments during this period count for PSLF as long as you have Direct loans and work full time for a qualifying employer. We recommend not making payments until September 30, 2020. Any more questions post them in the comments section. The rest of this article still applies.
- Filing the Public Service Loan Forgiveness Form and Moving to FedLoan Servicing
- How do you Qualify for the PSLF Program?
- How the Public Service Loan Forgiveness Program Affects Taxes
- How PSLF Impacts Investment Strategy
- Protect Yourself from Changes to Public Service Loan Forgiveness in the Future
- Could Public Service Loan Forgiveness be Repealed?
- What do Current Legal Battles over Public Service Loan Forgiveness Mean?
- Be Aware of Conflicts of Interest in the Student Loan Industry
Where things went wrong
The first thing we didn’t know? Apparently, only Direct loans qualify. Because of this, we lost four years of credit while she worked at a not- for- profit hospital. Then, we filed the PSLF form and had her loans transferred to FedLoan Servicing.
Despite her payments for over 3 years on Income-Based Repayment, half of her loans only showed 1 month of payment credit. We ran the numbers, and rather than fight FedLoan Servicing any longer, we just decided to refinance student loans and pay it back as fast as possible.
I don’t want anyone else to become a PSLF program horror story like us. I started Student Loan Planner to help clients with huge student debt burdens come up with a plan to pay back their loans and save every dollar possible throughout the process.
Find out the facts
These tips below have allowed me to help clients save millions on their student loans. To see how much the PSLF program could save you, make sure to pick up your own copy of my PSLF spreadsheet.
Public Service Loan Forgiveness Gives You So Many Ways to Save Money
Public Service Loan Forgiveness program is always in the headlines. A couple years ago, a number of borrowers at the American Bar Association were retroactively told they didn’t qualify. The ensuing panic and media coverage from this lawsuit inspired me to write this article.
Recently, the media made a ton of noise over the 99% rejection rate for the PSLF program.
How to avoid PSLF headaches
You’ll want to become an expert in Public Service Loan Forgiveness if you have an obligation of over $50,000 in student debt so you can be fully educated about this option.
Our PSLF calculator can help too. Also, consider listening to episode 2 of the Student Loan Planner podcast where I go over in detail why the program is not broken, despite what many in the media portray.
Perhaps you’d rather not be an expert in Public Service Loan Forgiveness and would rather hire someone to help you instead.
If so, see how we help clients who owe between 50k and $1 million. Feel free to take the “do it yourself” approach with these top 40 tips. Just make sure you don’t mess anything up because it’s easy to do.
What Jobs Qualify for Public Service Loan Forgiveness?
1. Work at a 501(c)(3) employer? Good:
This is the first kind of qualifying Public Service Loan Forgiveness job. Most doctors and pharmacists qualify for PSLF through working at a 501c3 hospital. The government has an obligation to determine eligibility by who your employer is, not what kind of job you do.
A 501(c)(3) is a tax-exempt charity that could receive a big check from a rich person who would get to deduct that donation from their taxes.
Think major academic hospitals, the Red Cross, foundations, private not for profit universities, etc.
You can literally look up if your employer is a 501(c)(3) online by Googling a site like Guidestar with extensive not-for-profit listings.
2. Work for the Government? Very Good:
If you work for a local, state, or federal government or government agency, your work should qualify for the PSLF program.
If you’re an assistant district attorney, teacher, city employee, professor at a public university, public health official, etc., you qualify.
Make sure you actually work for the governmental employer directly and not through an independent contractor arrangement. Also, don’t run for Congress thinking you can take advantage of loan forgiveness. They explicitly excluded themselves from this benefit.
3. Public Service Organizations. Less certain, and nobody knows what it means:
If I were dependent on the forgiveness of student loans for my financial health, the only employer I’d work for would be a 501(c)(3) or government.
The form for Public Service Loan Forgiveness lists another category of qualifying employment with a “not for profit public service organization.” It’s unclear why Congress included this category and what they meant by it. Perhaps they wanted to cover employers who provide service to the public but are not 501(c)(3) or government.
There’s big disagreement over what qualifies right now. As you might have heard, the American Bar Association sued the Department of Education after their lawyers were denied. Basically, the law seems open to interpretation here.
If I owed over $100,000, I’d only work for an employer that definitely qualified for PSLF.
4. What Jobs Don’t Qualify: Political Organizations, Labor Unions, and Churches / Synagogues / Mosques:
There are a lot of people doing good work at not for profits in these categories. Unfortunately, none of them qualify for Public Service Loan Forgiveness.
So if you’re writing memos at the Republican or Democratic National Committee, preparing policy briefs for the AFL-CIO, or preaching for a local congregation, PSLF doesn’t apply.
There’s a loophole for folks working for tax-exempt faith-based ministries whose primary work isn’t proselytizing. That means if you’re the full-time cook at the Catholic soup kitchen you qualify, but if you’re the priest, you don’t.
Sign Up for an Income-Driven Repayment Plan
5. PSLF gives you four choices to pay based on income:
Here are your four repayment options to qualify for a PSLF program.
All four programs ask you to pay a percentage of your income towards your student loans in order to qualify. This explains why they’re called income-driven repayment plans. But don’t worry, we’ll help you with the math.
The percent of your income required under each plan is 15%, 10%, 10%, and 20%.
Calculation based on percentage of Annual Gross Income (AGI) minus 150% of the federal poverty line for your family size
- Income-Based Repayment (IBR)- 15%
- Pay As You Earn (PAYE)- 10%
- Revised Pay As You Earn (REPAYE)-10%
Calculation based on percentage of AGI minus 100% of the federal poverty line for your family size
- Income Contingent Repayment (ICR)- 20%
The percentage you are asked to pay doesn’t change. No matter how high the total balance is. Although some payment plans are capped with a maximum required payment.
For IBR, PAYE, and REPAYE, you get a deduction of 150% of the Federal Poverty Line before they multiply by that respective percentage to determine the payment.
For ICR, they use 100% of the federal poverty line as the deduction. The only reason to use ICR is if you’re going for PSLF with Parent PLUS loans.
6. Most people should choose between PAYE and REPAYE:
PAYE and REPAYE both ask you to pay 10% of your discretionary income to your student loans. Remember that discretionary income is generally your AGI less 150% of the poverty line.
If you’re going for forgiveness, then obviously you want to pay as little as possible to maximize the amount forgiven.
Choosing between PAYE and REPAYE depends on your marital status, joint income, and how certain you are that you’ll pursue the program.
If you’re single, uncertain you want to do a PSLF program, and don’t make a ton of money, I’d choose REPAYE. If you are married, make a significantly different income from your spouse, and are fairly certain about pursuing Public Service Loan Forgiveness for 10 years, I’d choose PAYE. Either plan is likely a good decision.
7. If you aren’t eligible for PAYE, then it’s probably REPAYE, then IBR:
Some folks do not meet PAYE eligibility requirements. If you had loans before 2007 or didn’t take out any loans after 2011, then you aren’t eligible.
The only reason to choose IBR over REPAYE is if you are married, or you make a very high income and already have several years of PSLF payments. In that case, it might make sense to use IBR while filing taxes separately or because of the Public Service Loan Forgiveness cap in payments.
There are also some rare situations for married borrowers living in community property states such as California and Texas who might be better off using IBR instead of REPAYE. This is due to equal division of community income on federal returns in community property states. However, most people going for PSLF should be using PAYE. If that’s not an option, then go with REPAYE.
8. Don’t forget that IBR and PAYE have payment caps even if you’re a high-income earner:
Again, if you’re single, uncertain you want to do PSLF, and don’t make a ton of money, I’d recommend choosing REPAYE. If you are married, make a significantly higher or lower income than your spouse, and are fairly certain about pursuing PSLF for 10 years, I’d recommend choosing PAYE. Either plan is likely a good decision.
The impacts of earning more on an IBR plan
Way too many high income professionals make a huge mistake with PSLF when their incomes increase. They incorrectly believe that they will not meet eligibility requirements for an income based repayment program and refinance.
I’ve seen this cost borrowers over $400,000 before. If you’ve already built up more than five years of PSLF program credit, be extremely careful before refinancing. I’d highly suggest getting a second opinion before you do something irreversible like sell your loan to a private lender.
Payment caps to be aware of
IBR and PAYE have a cap equal to the 10 Year Standard Plan when you entered repayment for the first time. REPAYE has no payment cap. Hence, if your combined marital income is $500,000, but you owe $100,000, you could pay around $1,000 a month on IBR or PAYE but you’d pay more than four times that under REPAYE.
When a lower income spouse marries a higher income spouse, you need to be careful not to give up on Public Service Loan Forgiveness when you could take advantage of repayment caps.
*Update on FedLoan mistakes impacting high income earners
FedLoan has been messing up lately by sending out letters to high-income borrowers telling them they’re no longer eligible to make payments based on income. That causes panic and borrowers will call and ask what to do now that they aren’t eligible.
The clueless phone rep tells them to switch onto something else. That is a mistake.
You never get kicked off of IBR or PAYE. You merely have your payments capped. Ignore the letter, and your payments should be capped. If they aren’t, then you need to escalate to a supervisor.
9. No one except Parent PLUS borrowers should be using Income Contingent Repayment (ICR):
This plan is the worst option for someone pursuing Public Service Loan Forgiveness. Income Contingent Repayment requires you to pay 20% of your income with only a 100% federal poverty line deduction.
Sometimes ICR shows up with the lowest payment on the federal repayment estimator. I can’t really figure out why, since in most every case I’ve seen (and I’ve seen thousands), ICR shows up poorly for those with Direct Loans.
Remember the goal is to pay as little as possible to maximize the loan forgiveness benefit. If anyone is on ICR, please send us an email at help@studentloanplanner.com and take a look at switching.
One huge exception
If you have Parent Plus loans, then your only option to receive PSLF is to consolidate into a Direct Consolidation loan. After that, you need 10 years of qualifying service while on ICR. That plan requires you to pay 20% of your discretionary income. Hence, it probably only helps if you owe more than $50,000 of Parent PLUS loans.
Know that when consolidating Parent PLUS, you need to keep the loans separate from any in your own name.
There’s a huge gap in the number of parents eligible for Public Service Loan Forgiveness and those actually receiving it. If you’re working for a government or not for profit employer and have Parent Plus loans over $50,000, definitely contact me.
I’ve worked with several clients who were incorrectly placed on ICR. Clearly, the people they used for student loan help didn’t know what they were doing. If you’re convinced that ICR is the best plan available and you have Direct loans originated in your name only, I want to write a blog post about you.
Filing the Public Service Loan Forgiveness Form and Moving to FedLoan Servicing
10. Certify your employment status right away to create a paper trail for PSLF from the beginning:
If you’re going for the PSLF program, you want to get this process started ASAP:
- Fill out the free Public Service Loan Forgiveness form. This is also known as the Employment Certification Form (ECF).
- Send it in and wait a couple months to hear back.
- Don’t put this off. There is everything to gain and nothing to lose except a few hours of your time
I’ve heard stories that some loan servicers will tell borrowers to leave their loans with them for the full 10 years then apply with FedLoan. That’s terrible advice (and constitutes a clear conflict of interest).
After all, servicers only get paid if you leave your loans with them. If everyone who could qualify for PSLF applied, the other servicers would lose millions in revenue from servicing fees.
Why you need to move to FedLoan ASAP
To give the servicers the benefit of the doubt, I don’t think this is some grand profit hungry strategy. I just think that most phone reps give bad advice in general. Move your loans over to FedLoan ASAP if you plan to get PSLF since they’re the only servicer set up to track PSLF program credits.
Should you just give up on Public Service Loan Forgiveness because it’s hard to get? Only if your hourly wage is above $1,000. In that case, it might be irrational to spend your time dealing with FedLoan.
However, if you owe over $50,000 and plan to work in a qualifying job anyway, it’d be a poor decision to let bureaucratic incompetence get you down. Especially when folks like us are here to help answer your questions in the comments section below.
11. Send in the employment certification form at least annually, but preferably semiannually because it’s free:
Once you begin tracking your progress towards the 10 years needed for student loan forgiveness, you’ll want an extensive, documented paper trail. I anticipate a lot of folks will have trouble at the end of their 10-year employment verifying their status. We lost three years of credit towards PSLF thanks to FedLoan Servicing. Hence, I hold their competence in very low esteem.
To avoid problems, send in the ECF annually at the minimum. FedLoan sucks and the PSLF program form is free, so send it in every 6 months to create a solid paper trail. It forces the folks tracking the loan program to communicate often with you about your growing progress towards the 120 months needed for loan forgiveness.
*Update: FedLoan now allows you to complete and upload the Public Service Loan Forgiveness certification form online. Borrowers tell me it’s a vastly better option than mailing in the paper form.
12. Explicitly tracking progress towards PSLF automatically moves your loans to FedLoan Servicing, so you might as well get it over with:
Loan servicers are pretty bad as a group. Unfortunately, the federal government gave a monopoly to FedLoan Servicing for managing accounts for borrowers working towards Public Service Loan Forgiveness. That means if you’re happy with your loan servicer, you’ll lose that when you send in your employment certification form.
The benefits of tracking your progress toward PSLF sooner outweigh the inconveniences of a slightly more annoying loan servicer. No servicer is worth having an inaccurate paper trail when applying for PSLF.
How do you Qualify for the PSLF Program?
13. You have to have only Federal Direct loans if you want them forgiven:
If you work at a qualifying employer but your application for Public Service Loan Forgiveness is rejected, the reason is probably that you have non-qualifying loans.
If you took out loans in 2010 or earlier, you need to pay extra close attention to the type of loans you actually have. Most loans after 2010 will be made under the Federal Direct program. Loans from 2010 or earlier are likely on the old FFEL loan program, which doesn’t qualify for PSLF. You can fix this with a loan consolidation that converts everything into a Direct Consolidation loan. However, this resets the PSLF payment time clock since legally, it’s a new loan.
Loans that qualify for forgiveness
There are actually 17 different types of federal student loans that qualify for PSLF. Most need to be put into a Direct Consolidation loan. Some of the ones run through the Department of Health and Human Services don’t even show up on the NSLDS database. You have to request that they manually get added. In that case, the new Direct loan would qualify for PSLF.
Here’s a few types of loans that could be consolidated to meet eligibility requirements for PSLF that most people miss:
Examples of Health Resources & Services Administration Loans that don’t show up on NSLDS:
- Nursing Student Loans
- Health Education Assistance Loans (HEAL)
- Health Professions Student Loans (HPSL)
- Loans for Disadvantaged Students (LDS)
- Primary Care Loans
Institutional Loans that Do Show up on NSLDS that Must Be Consolidated for a PSLF program
- Federal Perkins (need to be manually included in consolidations)
If you didn’t know that these loans could be made PSLF eligible, you might accidentally view them as private loans and pay them off when they could be forgiven. One of the dead giveaways of potential PSLF eligible loans is a flat 5% interest rate. Heartland ECSI oftens services many of these kind of loans.
One example I had recently was a couple with $25,000 of HPSL and $25,000 of Perkins that were eligible for forgiveness, but only if they consolidated them into Direct Loan status.
Other possible forgiveness options
Student loans may also be eligible for forgiveness through Total and Permanent Disability (TPD) Program. If you become totally disabled while repaying your loan, your remaining balance can be forgiven through this program.
Eligibility requirements and repayment details vary from federal to private loans, but it is an option worth considering if you find yourself no longer able to work.
Borrower defense to repayment can make you eligible for forgiveness if you received misleading information by your school. If your school engaged in fraud or misconduct, you can apply for forgiveness under this plan with an online form.
14. Everything else doesn’t qualify, but sometimes you can turn it into a Direct loan that does qualify:
Federal student loans on the Federal Family Education Loan program (FFEL) do not qualify for PSLF. Neither do private loans, loans made to you by grandma, Health Professions loans, Perkins loans, or any other kind of loan.
If you have a Direct student loan, it will say “Direct” in the name and will qualify for Public Service Loan Forgiveness.
If the loan description just says “Stafford Unsubsidized” or “Perkins” without “Direct” in the front of the name, it almost certainly isn’t eligible for Public Service Loan Forgiveness.
Remember that consolidation is a remedy for many kinds of ineligible loans. You just don’t get to carry over any credit.
15. 120 Qualifying Monthly Payments on income-driven repayment, and no you can’t rush it:
You need 10 years of credit towards the PSLF program to have all your debt forgiven tax-free. The more precise definition is you need 120 months of income-driven payments at a qualifying employer. Those 120 qualifying monthly payments have to be made monthly, and you can’t make extra payments and speed up the clock.
Sometimes when you make extra payments, it puts your loans into paid ahead status. We often have to work with folks in this situation, so pay the minimum and no more.
In 2020, the Trump administration enacted a stimulus bill that suspended payments for six months on qualifying student loans. If you were working toward forgiveness at the time, the suspended payments will count toward the 120 you need.
16. PSLF payments are cumulative, not consecutive:
Luckily, the 120 qualifying monthly payments do not need to occur at one employer or consecutively. You could work 3 years at a not-for-profit then work in the private sector for a couple of years, and then work in government for 7 years, after which you’d finally qualify for PSLF. That feature encourages mobility of the labor force but only within the not for profit and government sector.
Remember that the PSLF program is not a payment plan. REPAYE, PAYE, and IBR are payment plans. You could continue payments and move between part-time and full-time status, all while slowly building credit towards the 10 years of full-time credit needed. If you don’t end up qualifying for Public Service Loan Forgiveness, you could get the 20 to 25 year IDR forgiveness on the same payment plan. Of course, if you’re not doing PSLF, you’ll owe taxes on the forgiven balance.
With PSLF, you owe no taxes at forgiveness.
17. You can get credit while on Maternity Leave or other Family Leave:
Under the terms of the Public Service Loan Forgiveness program, you can take up to three months of leave from your job per year. The technical term is the Family and Medical Leave Act (FMLA). If you’re taking time away from your job, ask your HR person if that qualifies as FMLA leave. If it does, then you’ll want to continue income-driven payments as it will cut down the time needed until your loans are gone. Please do not use forbearance or deferment.
Make income-based payments and get 3-month credit toward PSLF on maternity leave.How the Public Service Loan Forgiveness Program Affects Taxes
18. You need to minimize Adjusted Gross Income (AGI):
Your income-driven repayments depend on how much money you make for tax purposes. Minimize your taxable income with pre-tax contributions to get more PSLF forgiveness. The easiest way to do this is to max out all pre-tax accounts. If you’re married, you can also have you spouse do the same. This will lower your AGI as a joint economic unit. The most common pre-tax accounts I’m referencing are the 401k and Health Savings Account.
Here’s a list of more account types that reduce your AGI for PSLF:
- 403b
- 401k
- HSA
- 457 (can do in addition to 403b)
- Solo 401k (for any income earned while side hustling)
- Traditional IRA (can usually only deduct if no retirement plan is offered. Can use spousal IRA if spouse doesn’t work)
If you have more than a $3,000 loss on investments, you can write that off against ordinary income. There are other write offs as well available for real estate investing that I’ve seen borrowers utilize if they have side hustles or other business income outside their main job.
19. Calculate your tax penalty before filing taxes separately if you’re married:
If you have a spouse with a high income and little or no student loans, you might be tempted to file taxes separately. This subjects you to a tax penalty in most cases. Instead of doing this, a borrower could switch to another income-driven repayment plan. Additionally, they could max their pre-tax accounts. This switch and save strategy often eliminates the need to file separately.
However, sometimes filing separately gives you huge savings. Make sure to run the numbers yourself or hire someone like us to figure out if it’s worth it.
If you have loans and your spouse does not, filing separate might save you significant money. However, you should almost never file taxes separately if you both have significant federal student loans. I want to make a note that one of the most common and expensive mistakes we see is borrowers filing with the wrong tax status as married couples.
That’s one of our strong suits is helping you decide what filing status is best for your student loans. Your CPA is likely to be clueless about this. We’ll give you the exact info and questions to ask so you can figure out which choice is better. In some cases, you can even amend returns to get money back if you made a filing mistake. We’ll alert you if we think that’s something you need to talk about with your CPA.
20. Public Service Loan Forgiveness is the greatest tax-free student loan forgiveness benefit available today:
Remember that unlike private sector IDR student loan forgiveness, the PSLF program is a tax-free benefit. Private sector employees with big loans must save for the future tax penalty. In contrast, not-for-profit or government employees don’t have to cover this extra cost.
Many borrowers love the idea of working for 10 years and being totally finished without the worry of a big lump sum payment to the IRS. I sympathize.
You need a PSLF side account where you put money into a brokerage. That’s to make sure you have asset growth while you’re waiting around for loan forgiveness. However, you very likely will get to keep this money once you receive PSLF.
21. PSLF program is equivalent to a phantom pre-tax annual bonus for 10 years:
If you have $250,000 in med school loans and would pay back $300,000 with private lender refinancing, but only $100,000 with PSLF, then that’s a $200,000 benefit over 10 years. Adjust this benefit for taxes at a high marginal rate such as 40%. After the adjustment, you’ve saved over $330,000 in pre-tax compensation over that 10 year period, or $33,000 per year.
You should add this pre tax salary equivalent to any compensation you earn for a qualifying job to compare it to a position in the private sector. For example, in the case above if you earned $200,000 at a 501c3 hospital, you’d add $33,000. That $233,000 salary is what you’d need to earn in the private sector just for those two jobs to be equivalent financially.
In many cases, the non profit or government job has better hours and/or benefits. So you might need to earn significantly more in the private sector to make the two jobs at a break even level.
22. Use the annual tax adjusted Public service loan forgiveness benefit to compare job offers:
When comparing opportunities in the public and private sector, it’s important to adjust for the indirect PSLF program bonus for taxes so you can compare job offers. Take a med student with the $330,000 pre-tax Public Service Loan Forgiveness bonus from tip #21. That’s worth $33,000 per year over 10 years. Add the yearly value of PSLF into annual salary before comparing them to their private sector counterparts.
For lower earning jobs, I find the bonus can sometimes be greater than a borrower’s entire salary. Obviously PSLF is critical in that case. For higher-earning positions like Big Law associates or high earning medical specialties, you’re generally better giving up the PSLF program for greater income and refinancing with private lenders.
After helping thousands of borrowers, I’ve learned Public Service Loan Forgiveness is not good enough to pursue a public service job unless you’d do that anyway. Borrowers without a passion for public service should work in a higher paying role to maximize their income.
How PSLF Impacts Investment Strategy
23. Put $19,500 per year into your 403b, 401k, or Thrift Savings Plan:
If you’re an employee, max out your traditional pre-tax retirement account. The current max for 2020 is $19,500. For most public sector or not for profit employees, you will use a 403b. For federal employees, the Thrift Savings Plan (TSP) is the account to use. Sometimes you might actually have a 401k and still be in a qualifying job.
I suggest choosing index funds with rock-bottom expenses of 0.2% per year or less. Consider putting in 120 minus your age in stock index funds and the rest in a bond index fund. So if you’re 30, you’d put 90% in stocks and 10% in bonds. For the stock funds, I’d suggest a 50/50 split between something like US Total Stock Index Fund and International Total Stock Index Fund. Two Vanguard funds that correspond to these options are VTSAX and VTIAX.
If you have an option like a target retirement fund, I’d keep things simple and just go with that.
24. If you’re eligible for a 457, put another $19,500 in that:
I’ve had clients who worked as employees at a state or municipal employer or hospital system that had both a 457 and a 403b. In that case, you can put up to $19,500 per year in both accounts. That’s a max of $39,000 in pre-tax income you can remove from your AGI. That amounts to $3,900 in savings per year for those pursuing Public Service Loan Forgiveness using PAYE or REPAYE.
If your spouse has access to a 403b and 457, you could have him or her max their account as well. That’ll save you money if you file jointly.
The highest amount of money you can put into pretax investments as an employee married to another employee with the same eligibility is $39,000 times 2 + $7,000 for your health savings account. Truly if you can afford to contribute $84,000 a year pre tax, you will be very well off one day.
If you don’t have access to all these accounts, don’t sweat. Focus on maxing what you can and putting the excess in a brokerage account for general purposes.
25. By going for PSLF, you get an indirect matching contribution for your retirement:
Most people save in their retirement accounts because they receive an employer match. However, that match does not go any higher if they choose to contribute more. In contrast, the Public Service Loan Forgiveness match is 10 cents on every $1 of contributions all the way up to the maximum.
Don't leave free money on the table by losing out on the 'PSLF match.'What I mean is that these contributions reduce your taxable income, which reduces the required Public Service Loan Forgiveness payments since REPAYE, IBR, and PAYE require less in monthly payments with lower taxable income. The government doesn’t directly contribute money to your retirement account if you contribute the max pre-tax amount. Rather, it just takes less out of your pocket in mandatory student loan payments.
26. Don’t forget about Health Savings Accounts (HSAs).
They can also reduce AGI: If you’re single, you can contribute $3,500 to an HSA. Married people can contribute $7,000 to the family HSA. If there aren’t already enough reasons to love a triple tax-exempt account like an HSA, you also receive an indirect match from the federal government of 10 cents for every dollar contributed. To make the math easy, say you put in $5,000 to an HSA for your family and your income after adjustments for the federal poverty line is $100,000.
PAYE or REPAYE would require yearly payments of $10,000 towards your federal student loans. After saving $5,000 in an HSA, your income is $95,000 and you have to pay $9,500 on your student loans. Because you eventually get forgiveness tax-free, this balance doesn’t matter so HSAs are pure savings.
This might be one of the coolest and most overlooked areas where someone going for Public Service Loan Forgiveness can save money.
Protect Yourself from Changes to Public Service Loan Forgiveness in the Future
27. Create a sizable non-retirement investment account as PSLF insurance:
Even those who express doubt about the PSLF program must acknowledge the large chance that the program will not be repealed for those who currently have outstanding student debt. That means you should not be paying extra for loans that might be forgiven.
However, many clients of mine express deep concern about carrying six figures of debt. They worry this burden might eventually come back to haunt them. You can cure this worry.
Save at least 1% of your total loan balance per month as PSLF repeal insurance.
Place these savings in a taxable mutual fund or brokerage account. Over time you’ll build savings at a faster rate than inflation. Assume for a moment Public Service Loan Forgiveness repeal does happen. You’d be able to cash in the savings and start paying down the debt aggressively.
28. Choose a low-cost index fund provider to implement this side investment account:
Make sure your investment account charges less than 0.5% per year in total fees for investment expenses and advice. Low fees have a powerful wealth-building effect.
I suggest Vanguard for do-it-yourself investors. Most Vanguard investors pay between 0.05% and 0.2% per year in fees (I get $0 if you click on that link and set up an account).
For folks who want sophisticated portfolio and investment management and don’t like the idea of investing themselves, I suggest Betterment (referral link). If you set up an account through that link, you get a month to one year managed free.
Most Betterment customers will pay between 0.30% to 0.45% per year total. Since they use mostly Vanguard funds, their fee is essentially 0.25% per year over the cost of Vanguard.
Choose the right investing account for you
It really comes down to how much you want to be involved in managing your investments. Both places will leave you thousands of dollars richer in the long term compared to going with a typical investment company that charges at least five times more.
Realistically, 0.25% of a small amount of money is a very small fee. You could try them out to learn how they invest and then cancel in the future if you decide you know enough to manage your own investments.
29. Consolidating your loans could be a dangerous step if you’re going for PSLF:
There are a ton of fly-by-night student loan consolidation factories and even law firms on the internet that charge gobs of money to complete student loan consolidation forms as their one-size-fits-all solution. That could be a horrible decision. Current loans have Public Service Loan Forgiveness in the promissory note. There are two reasons someone going for the PSLF program should consolidate their loans.
- You have non-Direct loans that don’t qualify for PSLF. These non-Direct loans include FFEL, Health Professions, Perkins loans, and some others.
- If borrowers want to start qualifying PSLF payments faster, they could consolidate right after graduation. By consolidating the day after you graduate, you can shorten the normal grace period.
Do not consolidate loans for which you have already made PSLF qualifying payments.
Doing this will eliminate any existing progress towards forgiveness.
Could Public Service Loan Forgiveness be Repealed?
30. Some Democrats want to see PSLF means tested:
This is the single most realistic threat to the program’s use by current borrowers. This is especially true for individuals with six-figure student debt burdens. President Obama proposed a $57,500 Public Service Loan Forgiveness cap in 2015 as a max benefit. That was roughly the max amount an undergrad could borrow at the time.
The administration responded to the disproportionate benefit that the PSLF program provides to high-income earners. Of course, that proposal did not pass due to opposition from Congressional Democrats.
However, I would expect means testing to come back into the conversation eventually, but only for future borrowers. The primary threat for people using PSLF is means testing, not repeal. If a $300,000 borrower does not receive tax-free student loan forgiveness in 10 years, that’s probably going to be the reason.
To be clear, I think the risk of that is 5% to 10%, since Public Service Loan Forgiveness has shown that it has bipartisan support.
31. Republican proposals generally try to eliminate PSLF entirely, but only for future borrowers:
Folks who don’t currently have loans outstanding are always in danger of not having PSLF as an option. Once you start a graduate program though, you should be allowed to continue borrowing loans that will be eligible for PSLF so long as your promissory note includes mention of the program.
With split control of White House and Congress, it’s anybody’s guess as to what will happen with the next round of student loan reform.
Grad students just starting their programs in fall 2020 might have some legitimate worries, but will probably be safe. Borrowers with current loans and those about to finish school have very little to worry about. Any Republican plan for repeal should grandfather them into a PSLF program.
Update on attempted legislation
The Republicans have attempted to pass the PROSPER ACT, which would do away with PSLF. It would grandfather in anyone who is already graduated or enrolled in school on that date. That program is effectively dead.
House Democrats tried to pass The Aim Higher Act, which would protect and expand PSLF for future generations. That proposal is just an opening salvo.
Senator Lamar Alexander chairs the Senate HELP Committee responsible for student loans. I would expect he and future chairs will protect the program and that the final compromise legislation will look a lot more like the Aim Higher Act instead of the PROSPER Act.
32. Yes PSLF could be repealed, but it’s highly unlikely:
Could the PSLF program be repealed? Yes, it could. However, Public Service Loan Forgiveness has a diverse and powerful set of backers. We have the absurdly high cost of grad school to thank for that. Therefore, the chance that current borrowers who already have loans don’t receive PSLF at all is unlikely. This is primarily due to political reasons.
There would also be a massive number of lawsuits. There’s a very good argument that PSLF is a contract between borrowers and the federal government that can’t be broken.
The PSLF program will cause labor market distortions that are yet to be realized. It also creates a huge disparity between private and public sector employees. For those reasons, I do expect that the PSLF program’s days are numbered. However, I would put the odds that current borrowers don’t receive the full benefit at 10% or less. That number includes the risk posed by means testing PSLF.
What do Current Legal Battles over Public Service Loan Forgiveness Mean?
33. Do Not Trust FedLoan Servicing:
The Department of Education really hurt some lawyers at the American Bar Association when they overruled FedLoan Servicing that the ABA qualified for loan forgiveness. The lawyers lost two to five years of credit towards Public Service Loan Forgiveness thanks to the error. These lawyers are currently suing FedLoans, arguing that FedLoan rulings should be binding as an agent of the federal government.
Regardless of the results of that suit, you clearly should not trust FedLoan Servicing. Verify your own status yourself for Public Service Loan Forgiveness and make sure you’re taking the right steps.
Update: The lawsuit resulted in a judgment by the DC court of appeals that the government and FedLoan acted in an “arbitrary and capricious manner.” Three of the four affected borrowers will probably get credit for their PSLF service. Further proof as to how durable this program is.
34. Be aware of Government and 501(c)(3) job openings as a backup employment plan:
As I mentioned earlier, the Public Service Loan Forgiveness employment certification form explicitly lists all 501(c)(3) organizations and local, state, and federal government employers as qualifying for the PSLF program.
Based on current PSLF lawsuits, I would only work at a 501(c)(3) or government employer.If you’re working at a not-for-profit employer that’s not the government or a 501(c)(3), keep track of possible job openings in case FedLoan Servicing pulls the rug out from under you and voids your progress towards PSLF.
35. The average borrower doesn’t need to worry about lawsuits over PSLF:
The media loves to blow things out of proportion. That’s exactly what happened in my view over the latest string of PSLF program lawsuits. Pay attention to the policy that matters, like whether current borrowers will be grandfathered in or if the government will impose a means-test on the PSLF benefit. Follow the tips in this article. If you do, worry a lot less about what the media says.
Here’s a few stories I’ve seen cause massive numbers of anxiety laden emails to be sent to my inbox over the past few years:
- “Government Lies About PSLF Eligibility for Public Interest Lawyers”
- “PSLF Has 99% Rejection Rate”
- “New Republican Proposal Would Repeal PSLF”
Is there any wonder borrowers don’t trust this program? Ignore the noise and stay focused.
Be Aware of Conflicts of Interest in the Student Loan Industry
36. FedLoan Servicing probably wants to hang up on you, not help:
The federal government gave FedLoan Servicing the exclusive rights to manage the PSLF program borrower accounts, so they have no incentive to help you. Put yourselves in the shoes of their executives. They earn a flat fee with no penalty for poor performance and no bonus for great customer service. Hence, FedLoan wants to keep staffing costs down at their call center.
Hence, short phone calls mean lower costs and more profit. Don’t ever let a rep from a student loan servicer rush you off the phone. Furthermore, if someone gives you odd information, call back. Speak to as many reps as you need to until you find one that sounds competent.
If you need to appeal your payment count, know that it’ll take at least 6 months. Call back semiannually to track progress, and know that your count needs to be correct when you’re finally eligible, not today. That means it’s not worth losing sleep over.
I recently discovered a secret phone number there that you should call if you’re having a ton of trouble: (717) 720-7605. Some of my readers who’ve used that FedLoan phone number instead of the generic one report getting their problems fixed in days instead of months.
37. Beware of sites that promise Obama Student Loan Forgiveness or Trump Student Loan Forgiveness.
There are a ton of sites and companies in the student loan world that just want your money. If you find a vaguely federal government looking website with words “document preparation service” and hyped up language about Trump or Obama Loan Forgiveness, don’t work with them.
These folks game the system to rank for high search volume keywords. They hire people off Craigslist and pay steep commissions, and their answer for every problem is student loan consolidation.
I’ve seen people lose over $80,000 when loans got consolidated that already had eligibility for forgiveness.
Moreover, the fee for this service is frequently over $1,000. We charge 5 to $595 and actually create a custom plan. In fact, we don’t even do any document preparation because it’s easy to do on your own and that’s not where value creation happens. That comes from having a clear plan provided by a CFA or CFP® professional.
There are reputable companies and websites out there that charge far lower, transparent fees. Additionally, they help optimize federal student loans with a rigorous, customized analysis. (Hopefully, after reading this, you feel that way about Student Loan Planner). Don’t pay 2-10 times as much money for a junk service.
38. Financial advisors usually don’t understand the details of Public Service Loan Forgiveness:
There are some exceptions to this rule, such as fiduciary Registered Investment Advisors who specialize in specific professions. However, as a general rule, financials advisors don’t know the intricate details of how these loan forgiveness programs work. A good advisor should admit what they don’t know. He or she would steer you to resources that can help you.
If the advisor does not know how to model tax filing strategies and explain what your monthly payment will be, then you need to look elsewhere for assistance. Financial advisors are generalists. Even the highly knowledgeable ones might make five student loan plans in a month. We easily do more than twenty times that.
“Fee only fiduciary” does not mean expert advice in all areas. Working with us, you’ll probably pay a lot less and get better advice because all we deal with is student loan debt.
39. Personal finance blogs make a lot of money on private refinancing:
Personal finance blogs make a ton of money from referral bonuses when people refinance their higher education student loans through affiliate links. That includes this site. However, we give away a majority of our commission back to the borrower with cash back bonuses between $200 to $1,000. I want Student Loan Planner to be known as having the highest level of integrity in the entire student loan universe.
Don’t refinance if you qualify for the PSLF program. You’ll permanently lose that option. Luckily, I have a business case for going into extreme detail about PSLF. After all, I consult with borrowers on how to maximize the value of the program.
However, other websites take a hands-off approach. Their sole revenue source is from refinancing partnerships.
Even if they are ethical, they will always have an unconscious bias towards private refinancing lenders. If you’re on track for Public Service Loan Forgiveness, you will lose that benefit forever if you refinance simply because a friend said you should do it, or you saw the Superbowl ad. Think before you click.
40. Implement these Public Service Loan Forgiveness Tips on Your Own, or Hire Us for Student Loan Help
You’ve made it to the end of my top 40 tips. Clearly, you’re going to be in far better shape than your peers. Many will save thousands of dollars from these tips.
Call FedLoan Servicing now and implement these best practices directly. If you’ve benefited tremendously from this article, please share this post with a friend or comment with questions below.
Maybe you skimmed this and are overwhelmed with the details, or you’d rather hire somebody to analyze your loans for you. We’ve advised thousands of borrowers like you. There’s a good chance I’ll catch something that even the most diligent person might miss. Read how to hire us and let’s see how much money we could save on your student loans.
Let us know your questions, we’re here to help
If you just want to share what you’re going through, use the contact button or comments section below and let me know your concerns. I founded Student Loan Planner to make your life easier, save you more money, and give you back hours of time that might’ve wasted worrying about how to pay back your student loans.
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Can you explain more about the retirement match for PSLF? Does that mean the government is contributing to my account for me? How does that work?
Sure Peter. Your payment for student loans is based on your income right? For anyone going for PSLF, this should probably be on the REPAYE or PAYE program because it’s 10% of your discretionary income and you want to minimize payments on something that’s going to get forgiven.
Discretionary income is what you earn minus 150% times the federal poverty line for your family size. Say that exclusion is $20,000 and you make $100,000 a year. Your income for student loan payment calculation purposes is $100,000-$20,000=$80,000. Under PAYE or REPAYE, you’d owe $8,000 per year in student loan payments.
However, what if there was a way to reduce your income besides just earning less money, which of course would defeat the purpose. There is, and it’s saving in pre-tax retirement accounts and Health Savings Accounts. The max for a 401k is $18,000 per year, and the max HSA contribution for a family is $6750. Say you’re able to put away $20,000 in these pre-tax accounts. Then your income goes from $80,000 to $60,000 and you now owe 10%*$60,000=$6,000 per year on your student loan payments. Since the balance will be forgiven tax free, that $2,000 is after tax money you get to keep. So the government doesn’t contribute to retirement directly, rather you end up with more money in your pocket on an after tax basis. So that’s what I mean about the 10 cents on the $1 PSLF match. Notably, you can take advantage of that all the way up to the cap on contributions to pre-tax accounts. It’s just a way to optimize the payment strategy under PSLF
Hi Travis,
Thanks for all this great info. One question about the HSA: don’t most HSAs only carry over ~$500-$1000 each year? Meaning that, if you saved the max of $6750 you would have to spent say $5750 on qualifying health expenses for this to be a viable savings plan? I’m not sure that I spend that much on qualifying health expenses, especially since HSAs tend to really limit what’s eligible.
No that’s FSAs, HSAs carry forward in full + investment earnings
Hi.
I recently read about a proposed bill to have your student loan payments that you were making NOT in the PSLF count if you were employed by a 503B company. To give you an example, I was working for a hospital for 10 years and was NOT in the Direct Loan, and when I applied for Student Loan Forgiveness, they denied me saying I was not in the right program. I have now been in the PSLF program for 3 years now, and have 7 years left. Have you heard of this “grandfathering” proposed bill? I think it was part of the CARES act.
That’s being discussed but not w the CARES Act, but only a Democratic Congress and White House would pass that
My parents may be willing to pay off some of my higher interest, unsubsudized Direct Loans, before I am out of the grace period. Will this impact my qualification for ibr plan and pslf? I work in nursing at a nonprofit hospital.
Hey Travis,
My wife works for the govt and we have been doing the pslf program for about 4 years. She has loans and I do not. She makes about 50k and I make about 70k. We were wondering what options we would have if we started filing jointly or if we should keep filing separately? We want to make sure we stay in a program to have the loans forgiven but get the most out of our dollars. Thanks for any advice!
I would file separately unless the penalties are large and I don’t think they will be
Thanks for the reply! What would you do once kids come on the scene?
Also we are on ibr right now what would be the next step? PAYE?
I am currently with great lakes on income based payments , if I apply for forgiveness and go to fed loan does the payment usually stay the same when you switch.
It’s always based on prior year AGI so it shouldnt depend on what servicer youre using
Hey Travis, I had been giving the AGI aspect of PAYE some thought, and it seems like a benefit of this many people haven’t recognized is for those working in public service abroad. Should I work for an American non-profit abroad, as long as my tax home is abroad, then the first $100,000 or so that I earn is removed from my AGI. So with no AGI, I make no PSLF payments under the PAYE program for the duration of my time working abroad. It’s a pretty narrow case, but it seems like it could be a very useful thing to know for people consider that sort of career path.
That’s a really fascinating case. I admit I didn’t know about that and it’s the Foreign Earned Income Exclusion and you basically get to avoid paying tax on quite a bit of income abroad. Obviously you’re probably paying taxes on that money to wherever you’re living, but you could definitely get credit and avoid having to pay anything.
One cautionary point with getting the payments to qualify, it’s probably by far the easiest if you’re working directly for the US government. If you’re working for a not for profit abroad, you really have to make sure it’s a 501c3 registered in the United States that’s directly paying you. If you’re receiving your salary from some sort of subsidiary that’s not registered in the US, then the public service credit wouldn’t count. But it’s definitely a fascinating case, thanks for bringing it to our attention Alex!
With the small caveat that U.S. gov’t work abroad does count for PSLF but DOES NOT count for Foreign Earned Income Exclusion!
Even if it’s with the state dept or the military in a combat zone? Thought their pay was tax free? I reviewed my notes and I actually had a client using the FEIE but not for PSLF. They were living in one of the countries without a local income tax as well, so he was making a ton of extra income but was utilizing the interest subsidies under REPAYE for maximum impact
https://www.irs.gov/individuals/international-taxpayers/u-s-government-civilian-employees-stationed-abroad
Hi Travis, this was a very informative article, thank you. I am in grad school and besides my loan for grad school I also have a consolidated loan from my undergrad years that is on an in-school deferment. I currently have full time qualifying employment for PSLF but am still about 6 months away from graduating, so I have not yet made any qualifying payments and am not yet on a qualifying repayment plan for either of my loans.
Is there any benefit to submitting the ECF to confirm my employment and get me registered for PSLF? I’m thinking of a scenario where they make changes to the program and if it’s possible that whether you are grandfathered in or not is based on whether you have submitted any ECF forms. Or do you think it’s more likely that changes would be applied based on when the money was borrowed?
It will most likely depend on if you have PSLF in your promissory note or not. You would, and thus the ECF wouldn’t matter. I don’t see when you submit the ECF to matter too much in terms of who gets it and who doesn’t. After all the ABA lawyers submitted the forms and had their approval revoked bc they didn’t work for a 501c3. So I think it’s “do you have PSLF in your loan agreement or not.” If you do I think you could not submit the ECF at all and in theory be ok. In practice FedLoans would probably mess up something and hurt your PSLF chances. Hope that helps feel free to ask more questions Todd.
Hi Travis, can you point me to where you got your info that independent contractors don’t qualify for PSLF? Are you deducing that from the general definition of “employed”? I’ve read the last two versions of the PSLF FAQ from the Student Aid site and can’t seem to find in there any specific mention of that. Thanks.
In general for PSLF it matters who your employer is not what you’re doing. So if you’re an independent contractor usually that means you aren’t employed officially by any not for profit entity. Additionally, you have to be employed full time and contractors are by definition not employees. After all you’re paying your own social security taxes.
Question: I know that if loans are forgiven they are tax free under PSLF, but do I have to worry about paying the interest that has collected since my payments aren’t enough to cover them at the end of the 10 years?
No they forgive that too tax free
Hey Travis! So under no condition if you are an independent contractor could you’re employment be qualified as public service? I am working for a county government and my paycheck is coming from the government through a state funded grant.
Thank you for all his great information!
Correct. If you’re 1099 you’re out of luck for pslf. Has to be a qualifying employer paying you through a w2
Hi Travis, thanks. I just changed to REPAYE and I’m happy with my monthly payment. I have 2 loans with 116 payments left while the others are around 94-96 payments left. It appears, I consolidated the last 2 late in 2014. What does that mean?
Means you’ll have a group of loans forgiven in 2014 and the rest a couple years later. Not that unusual actually. Sounds like you’re on a good path Zinkeng
Can my spouses loans (owe $60k) qualify for PSLF if I work for the government but he does not? Also it appears that I only qualify for ICR for my own student loans (owe $11k). Guessing I should just stick with the standard repayment plan? We decided to file our taxes as married filing separately since my AGI was $76k and my spouses was $47k. Didn’t want them to take my AGI into account when calculating his monthly payments but I’m not sure if this was the best decision?
It has to be the loans of the person working in govt so no pslf 🙁
Generally speaking only 5 percent of the ppl who file separately for taxes actually should. I’d think you are probably costing yourself money by filing separately
I thought I was on the home-stretch to forgiveness. I recently sent in my yearly employment recertification, and they didn’t count any of my payments for 2019.
I have worked 10 years at the same 501c3 charter school and they have verified 84 qualifying payments… now suddenly they didn’t give me credit for the past 12 months. Don’t know what to do. Absolutely nothing has changed, yet now it doesn’t qualify? Doesn’t seem right. This now puts me 3 years away, and having to find new employment that does count. I’ve already lost payment credit due to delay in my payment plans being switched, bad servicer advise, and non-counting payments for when they switched my plan to FedLoan. The closer I get, the further to end point moves away from me. Should I re-submit my from with proof of my school’s 501c3 status and employment proof?
Yes that’s what I’d do I expect there could be a paperwork error that’s minor that caused them to reject it.
Great article! I have a question it didn’t address though. Have you ever encountered an employer who refused to sign the employment certification form? My employer recently told me it was their “policy” not to sign them and suggested I check the box on page 1 (which specifically says ‘because the organization has refused to certify your employment. The Department will follow up to assist you in getting documentation of your employment.”) I checked the box and sent the form off. The Department did not follow up. They mailed me a letter letting me know it was closed because my employer didn’t sign it.
Have you ever encountered a situation like this?
It’s not surprising in the least that they never followed up. In my experience the way things are supposed to work and the way they actually do work are super divergent.
I’d contact the head of the division for whoever made the decision not to certify to understand why. If he or she gives a questionable response I would seek a meeting with the individual to show the burden the company or organization is causing you.
Please let us know what the outcome is!
Hi Travis, I have three questions for you.
Before I considered pursuing PSLF, I aggressively paid ahead on my loans. When I entered the PSLF program, I set up the direct debit for the interest rate reduction it offered in case anything ever happened to the PSLF program. However, because I had paid more than was required in the past, the amount I owe monthly is significantly lower than what the direct debit is charging me. Direct debit is charging me as if I never paid ahead but my statements clearly show that the amount I owe is that much lower amount. I was wondering if I should be paying “the amount owed” instead of the amount that direct debit is charging me. I am afraid that if I only pay the amount owed, those payments won’t count for PSLF. I called FedLoan and every rep I talk to tells me something different. Most stated that I should be paying the amount owed and suggest that I stop my direct debit. However, I once asked for a manager and she told me that my payments won’t count if I only pay the amount owed. I don’t know who is right or wrong so I kept paying the larger direct debit amount and continue to do so. Any thoughts on who is correct? I suspect that the manager is right as the full amount is the 15% of my income for IBR.
My next question is, I am on IBR and have made 1.5 yrs of payments toward PSLF. I have a large amount of grad school debt and a ton of interest. I am not eligible for PAY but would rather be on REPAYE so I only have to pay 10%, Would I lose my PSLF progress if I switched plans? Also, even if I don’t lose that progress, my interest will capitalize ($230k loan with apprx $30k interest) if I switch and I believe I would also lose progress towards the 25 year repayment I have with IBR (if anything ever happened to PSLF). Do you think it would be unwise to switch at this point?
My last question is that I submitted my first PSLF form in September 2016 (it was signed in this month by employer). My government employment started around June 2016 and I continue to work there presently. This is proof that 4 payments have been made and they are full qualifying payments in IBR (every one at FedLoan agrees). However, to this day, my statements always show 0 qualifying payments toward forgiveness. Every time I call, the rep or manager says they’ll have that department that calculates payments look into it. Presently, a year has gone by and it still says 0 payments. Any ideas on what I should do? I will be submitting my next verification form to cover the whole year shortly but I don’t understand why those 4 payments were never verified.
Sorry for the long post, thanks for any advice you have for me. Sadly, I can never get competent answers form FedLoan.
Not surprising Dan. First off, it’s gonna be the larger amount that’s 15% of your income. They do that for the purposes of the standard plan and that wouldn’t help you with PSLF. It’s an accounting convention with FedLoan that would mess you up.
I’d switch to REPAYE if you’re going for PSLF. There’s a few exceptions but they’re pretty uncommon (like large spousal income pushing you above the standard 10 year monthly cap). I wouldn’t worry much about 30k accrued interest.
I’d stay on FedLoan Servicing about the 4 payments they haven’t listed yet. Be a pest. Don’t let them tell you “someone from calculations will look into it.” Plainly, that’s a load of baloney that some underpaid rep is making up to get you off the phone. Always escalate, keep demanding answers, ask for deadlines. Then call back in a month and do it again. Keep being annoying until they actually listen to you. That’s a big time waster, but I think it’s the only way to get them to pay attention.
Travis, thanks for your earlier reply. I haven’t switched from IBR to REPAYE yet but my re-certification has come due and I had a few more questions. I am almost two years into PSLF (paying on IBR).
If I switch to REPAYE, would it reset my PSLF payments?
If I switch, would I lose 1 months PSLF payment for the month I switch? I believe I can opt for forbearance for that one month, how much do I have to pay that month?
I am concerned that if anything happens to PSLF, I will be resetting the 25 year clock for IBR/REPAYE. Which is part of my hesitation with switching.
Also, I read about the interest subsidy with REPAYE, would that apply to my direct grad plus loans? My understanding is that 50% of my interest would be forgiven since my monthly payments don’t cover the interest accrued each month.
Lastly, do you have any insight as to the current status of REPAYE, do you expect the plan to be sticking around for some time?
BTW, I discovered why I had missing PSLF payments on my account. Apparently, since my account is in “paid ahead status,” it caused their system to miss some of my payments. They offered to remove me from it but I chose to stay as paid ahead in case there was a reason I was no longer in qualifying employment for a period of time (I’d be able to pay a lower amount). I believe all my payments would still count regardless.
Thanks for any advice you have.
Switching to REPAYE does not reset payments, and it also does not reset the 25 year clock. The only downside is the capitalization of interest, which isn’t a big deal if you’re going for PSLF. Also, make sure you owe a lot and that REPAYE is actually lowering your payments bc it doesn’t have a 10 year PSLF payment cap.
You will lose 1 month but can opt for a $5 one month forbearance to make sure you don’t throw a bunch of money at it while making the switch.
REPAYE interest subsidy is on all federal Direct loans, so yours would be included, but it’s half of the leftover interest that you’re not paying, not 50% of the total interest.
REPAYE will be around for a while I suspect for folks who started their grad programs prior to July 1, 2018. For those entering this fall all bets are off.
Anyone on PSLF I would advise to disable the paid ahead status. Hope that helps Dan.
Hey Travis,
Great article. Thank you. I currently have 24 payments towards PSLF as of feb 2016. I need to re-certify to get that caught up. I know your article mentioned doing that 2x/year. I got nervous as my wife and my income raised so just didn’t bother. Let’s say I do that this week and that puts me at 63 qualifying payments. I owe $32,000. We are in a position to be able to pay that off in 2-3 years. Doing the math at what I would pay under the PSLF and it’s about 4000 less but of course I’m nervous that it won’t pan out for me if I wait and they reject the final $15000 to be forgiven.
I know the interest we pay helps with our agi at tax time but just curious your thoughts on how you’d approach that. Refinance through bank for lower interest and simpler pay-off or stick to the program 5 more years at the $500 per month we are paying now.
Much appreciated,
Jordan
Depends on what your time is worth. If you have a typical hourly wage I’d go for it. If you’re a very high income individual I’d probably pay it off and save yourself the annoyance.
If you get a better paying job but keep paying the same payment amount from your last job will they disqualify you?
Also, when you reapply for the next year and you let them use your last year’s tax return amount to figure out your payment will they disqualify you next year when they see the next year’s tax return and realize that you’re making way more than they thought?
Under current rules using the last year’s tax return is a legal way to verify. And I don’t expect they’ll be as diligent auditing everything as some expect. As long as you’re making an attempt to follow the rules, you should be fine.
I have one burning question that wasn’t addressed:
Should I wait to submit the PSLF Employment Certification Form if I’m still taking future loans for graduate school?
There’s never a disadvantage to submitting the form as soon as you’ve made a qualifying payment on Repaye or Paye. Just will move it to fedloans if it’s not there already.
Right now there’s a big debate as to pslf for loans taken out post fall of 2018. Some folks think that all loans taken out for a course of study that begins then will be eligible. I’m skeptical as I think they could change the promissory notes. It’ll be hard to differentiate those documents for up to 4 years after enrolling in med school for example.
That’s what I’m thinking about most right now. If you’ve already got direct loans you should be grandfathered in.
Does that mean that once submitted, no future loans can be considered for forgiveness? I have $80k in Direct loans now, but one more year of Graduate school loans to take out. I am a full-time community college professor.
There isn’t a point of submitting the form until you’ve made at least 1 payment on either REPAYE, PAYE, or IBR. It doesn’t affect eligibility to submit the PSLF form ever.
Dear Sir,
I have sent Navient 30 something pages to prove that I am disabled from doctors and total disability determination.
I was told that they could discharge my obligations, but that it would just fall to my husband and daughter. I received letters in the mail stating which loans would go to my husband and which to my daughter. I believe three loans would be fully forgiven.
I was told that my husband had co-signed on several of the loans, so those would automatically be transferred to him. Also, because the loans were for my daughter that she would be responsible.
I do NOT want any of the loans transferred to my daughter and since she was in school at the time without an income, she couldn’t have co-signed and didn’t. The Navient representative told me that it doesn’t matter that is how it works.
I thought that I was taking out Sallie Mae Parent Plus Loans; however, I have been told by some reps that I have some private loan while others have agreed that they are Sallie Mae.
What are my rights in this situation? Is this correct that the loans would automatically transfer to my husband and daughter? If so, can we have all of the ones that are not forgiven transferred to my husband and zero to my daughter while still accepting forgiveness for the 3 loans Navient said could be completely discharged?
Thank you in advance for your assistance!
Carolyn
This is a private loan situation otherwise the loans would be totally forgiven. I think you need to consult a student loan attorney like Jay, Josh, or Adam. Here’s their emails below. They practice in different states.
jay@moneywiselaw.com
jcohen@thestudentloanlawyer.com
asminsky@minsky-law.com
Hi Travis, glad I found your site. I just got a job with a nonprofit hospital and have a payment due for my direct loan on October 3rd. I am currently in IBR. Would it be better to be switched to REPAYE before submitting an application to be in PSLF or can I transfer once my loans transfer to FedLoan Servicing? Does your repayment plan just transfer over to FedLoan Servicing or do they do their own assessment of which program is best for you?
You can do either one but I suggest getting on REPAYE asap. Dont ever believe or rely on info from FedLoan Servicing as someone who experienced them first hand with my fiancee’s loans
So if my loans are with navient rather than fed loan, none of the time thus far has counted toward pslf?
Not necessarily. If they’re Direct loans and youve been paying on an income driven repayment program with Navient, then it should count. You just need to send this ECF form asap and get them transferred to Fedloan. Make sure you document your payments with Navient to challenge FedLoan if needed: https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf
Hi Travis,
I read more about REPAYE and am interested in applying for it, however the nonprofit organization I work for is only for a year since I’m a resident. I graduated Dental school so my debt is pretty significant. I’m hesitating on applying for PSLF because sites are limited and Fedloan servicing does not sound great to deal with. I’m currently in my Grace period now though but if I apply for REPAYE would that be better to take care of the interest accruing? Also if I feel limited with the PSLF sites and If I opt out of the REPAYE, would the interest forgiven be added back?
Hey Sarah it wouldn’t be added back. I’ve only seen a couple dentists who have persisted in going for PSLF bc of the tough volume based environment of community health centers. So Id say going for PSLF isn’t that realistic for you. If you want to eventually refinance, then depending on your debt to income ratio paying down interest could make a lot of sense.
Hi!
I have a question about managing my PSLF. I submitted my employer certification form last year and was certified for PSLF (I work full time for a community college) and entered into REPAYE. Does Fedloan add each month or do you have to recertify your employer every year to see the payments towards PSLF increase? Also, as I understand it, in REPAYE the government pays all or some of the interest for direct loans while in the plan. But, my statements are showing that interest is continuing to accumulate although it has not yet been capitalized. What is going on here? I tried to get information from Fedloan and they just directed me back to their website information on REPAYE. Very unhelpful! Any advice or insight you can give is much appreciated!
Hey Heather thanks so much for commenting! This calculator shows in the 3rd tab ‘Calculations’ in column Q exactly what your REPAYE interest subsidy is. Only catch is entering your email to get it: https://www.studentloanplanner.com/free-student-loan-calculator/
Yes you need to submit the Employer Certification Form once a year at least to keep tabs on them. The interest is growing bc your subsidy w REPAYE is not 100% of interest but maybe some number between 0% to 50% of the stated rate, hence the growth.
It looks likely that PSLF will end going forward for any new student loans issued after July 1, 2018, but it will remain in effect for all student loans disbursed before then. How will that affect a consolidation loan disbursed after July 1, 2018 that consolidated loans that were eligible before consolidation. Will the new consolidation loan be eligible for PSLF?
Great question Michael. As of now I’m not going to be recommending any consolidations starting May 2018, which could carry over after this new July 2018 date. I want to see the promissory notes. My assumption is that all consolidation loans would be non-PSLF eligible after this date as well.
This question is worth an update. I assumed this post was in relation to proposed legislation (PROSPER Act) that didn’t pass, or should I say, hasn’t passed YET. I believe that midterm elections will have an impact on the outcome of the bill.
Is this in relation to something else?
Really great info!!
Good point it is worth an update. I’m comfortable with folks consolidating right now as the Prosper Act has stalled after it passed the House HELP (Health Education Labor and Pensions) committee. The Senate does not look poised to take this up until after the 2018 midterms, when we could have a very different looking Congress. Status quo for now, so folks should continue consolidation bests practices.
Curious if you have any further updates/thoughts on this now that a few months have passed. Not sure if there has been any movement on the Prosper Act as of late but I definitely want to take precautions to preempt any repayment slip-ups. I definitely have a bit of a unique situation/question regarding my own loans:
Majority of my loans are Direct PLUS loans from graduate school, but I have three relatively low balance FFEL loans remaining from undergrad, with all loans disbursed before July 1, 2018. I intend to apply for PSLF, and was told by my servicer and studentloans.gov that I need to consolidate all my loans to avoid denial (b/c of my ineligible FFEL loans). However, if my subsequent consolidated loan is technically considered a “new” loan, I’m worried it would potentially void my eligibility for PSLF since the consolidation will have taken place after July 2018. I’m thinking I should just consolidate my low-balance FFEL loans into a separate direct consolidated loan (rather than consolidating the FFEL’s with my higher-balance direct loans) and divvy up payment by group to avoid any possibility of denial for having non-direct loan payments or a “new” loan originating after July 2018. My thinking is that I’d still want all my loans to be direct in case the July 2018 deadline no longer exists, but if that deadline does exist, I don’t want to void my high-balance loans eligibility by consolidating (since they’re already direct and don’t necessarily need to be consolidated).
Am i complicating things too much? Should I just consolidate everything if the Prosper Act hasn’t listed firm dates yet? It’s been tough getting someone who understands my question over the phone with my servicer/studentloans.gov so I’m hoping you can shed some light on my predicament (and that my question/thinking makes sense to you!). Thanks!
Well technically the Prosper Act says July 2019. Let me know if I need to correct anything. So I think the separate consolidation strategy is the “safer” way to go Kirsten. That said right now you could also consolidate the whole thing and the new promissory note still very much has PSLF in it.
I’m one of the many that was Sallie Mae – then Navient – then FedLoan. I certified for PSLF every year with Sallie Mae and Navient, but Fedloan when I went over to them, advised me to consolidate and that they will not honor my 3.6 years of payments with Sallie Mae/Navient. Do I have any recourse?
Unfortunately no Jennifer, so sorry to hear that. You just have to look at it as glass half full and move forward. At least the program still exists.
Every year FedLoan took months to recertify me for income-dependent repayment (rejected the pa ystub it should have accepted as alternate documentation of income) and stuck me on forebearances I didn’t ask for. I still made payments during these forbearance periods, and the payments I made were for an amount that exceeded the income-based payment amount that FedLoan ultimately calculated, albiet belatedly. Therefore these payments I made were still qualifying PSLF payments since all requirements were met 1. correct payment amount (based on disposable income and the formula), 2. qualifying employer, 3. on-time payment, 4. in a qualifying payment plan (REPAYE), with a qualifying federal direct loan. The fact that FedLoan erroneously stuck me in a forbearance despite having adequate income documentation is its own error, and violates the PSLF regulations and, by extension, likely violates FedLoan’s obligations under its servicing contract with the Department of Ed. Are you aware of anyone that’s gotten FedLoan to acknowledge payments during forbearance as qualifying PSLF payments. It seems a clear case of this contractor not following the law.
Unfortunately I’ve never heard of anyone getting that recognized. I agree with you and there is basically no accountability for them right now.
What do you think about just applying after 10 years. US DOE has already said that it doesn’t have to honor the servicer’s PSLF decisions (ABA v. USDOE), so it should be able to certify all payments at that time.
If I leave my 501(c)3 job to work in the private sector, with the hope of returning at some point to a PSLF-qualified position, how do I manage my loans/payments while I’m working in the private sector so that I can pick up where I left off when I return to a non-profit job?
Depends on the probability that you’re returning, but if it’s 100% then I’d use my 3 years of economic hardship forbearance during the away period to maximize forgiven amounts. Otherwise I’d stay on something like PAYE / REPAYE until the point you return.
Hi Travis. I have a few different loans with Fedloans, but none of them are direct. This means I need to consolidate them first. I’m worried, because it will make the total interest rate at 8%. I have some that are 6.5% and others at 8.5%. Apparently, fedloan takes the average at time of consolidation. Is this something I should do? I have already been in repayment for 7 years now, but I still have $87,000 left to pay. I just got a job with the Federal Government. What would my first step be?
I would call the Dept of Education consolidation group first. Their phone number is 1-800-557-7392. Tell them the goal is to get your loans set up for PSLF. The weighted average interest rate they take on the consolidation shouldn’t really increase the total interest you’re paying much. I would focus on if the math will allow you to have a significant balance forgiven in 10 years or not. If the leftover projected balance is less than $20,000, I wouldn’t mess with it and would just refinance to a lower interest rate. Most likely if you manage your AGI well you’ll be able to get a nice benefit though.
I work over 30 hours a week for a startup 501c3 nonprofit. Nobody draws a salary yet. Do I qualify for PSLF?
Probably not unless you’d meet the legal definition of employee. My guess is that if you’re not getting any compensation then you’re legally a volunteer.
This is a great list of tips. I wish I had this years ago!
I just wanted to add a tip of my own based on my horrific experience with FedLoan Servicing.
For anyone who has been on the receiving end of an error by FedLoan, consider opening a file with the Consumer Financial Protection Bureau. When my student loans were transferred from Nelnet to Fedloan, the number of qualifying payments I’d made towards PSLF were way off. I requested the manual review and checked in once a month for 7-8 months with no progress. In parallel to this fiasco I was going through a messy transition from IBR to REPAYE, also thanks to the inconsistent and frequently inaccurate advice from their customer service. Feeling helpless, I opened a file with CFPB as a “hail mary”. Within a month, everything was fixed and as it should be! Of course I can’t promise everyone will have the same results, but certainly worth trying for anyone that finds themselves in a similar situation.
My greatest concerns about sticking with PSLF are
1) Regarding news about employment certifications being rejected as qualifying employment in the final year of the 10-year forgiveness term. I believe I remember reading earlier in the year about a 501c3 that employs lawyer to represent veterans? I work for a hospital that is a 501c3 as a primary care physician and it concerns me that if an employment as noble as the one above gets disqualified, how likely is it that a hospital in a relatively affluent area will viewed.
2) I am worried that my income will eventually disqualify me for one of the IBR plans. Over the course of the next 6 year (already 4 years of IBR repayments) my income has the potential to grow to $350-400K, yet the current balance of my medical school loans is $300K and we have a family of 4. As I pay more and more doesn’t it seem likely that 10% of the remaining balance on my student loan in a standard repayment plan will no longer exceed 10% of $350-400K minus roughly 37,500 after accounting for discretionary income? This is an awfully individualized question but I’m curious what you have seen in similar circumstances.
Thanks for you help, the article was thought provoking.
Hi Travis,
Thank you so much for putting this together and giving back to the community and us.
My wife and I currently file our taxes separately to reduce our loan payment, can we amend our filing a year or two later to MFJ?
basically to have our cake and eat it too :))
BTW: I think the material you have on the blog is ready for publication on Amazon as an ebook
Haha I could do that but in my experience ebooks arent really worth the effort from a financial perspective unless you have a publisher. You can amend and yes you could probably have the cake and eat it too. It’s a big loophole that would probably be shut down at some point
Hi Travis,
Short and long versions of a question – short version: if you’re in qualifying employment and on an income-driven repayment plan under which your monthly payments are $0, do those payments count toward your 120 required for PSLF?
(I’m pretty sure the answer is yes, as implied here https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service/questions#qualifying-payments – but maybe I’m missing something?)
Long version: I was unemployed for some time after graduation, long enough to run out of grace period. I started on an income-driven repayment plan (REPAYE), since my income of $0 meant my monthly payments would be $0 anyway. A couple of months into the repayment, I started qualifying employment with the Federal Govt. On starting employment, I immediately submitted a PSLF certification form. However, since income certification for REPAYE is only -required- annually, I haven’t re-certified income yet, so monthly payment is still $0. FedLoan being FedLoan, it took about 3 months before my loans finished transferring to them. During that time, I made 3 monthly payments of $0 under REPAYE (a qualifying repayment plan), while in qualifying employment. Despite that, I just got my first bill from FedLoan, which claims my PSLF qualifying payment count is at ZERO.
I think this is a mistake on FedLoan’s part, as I have made 3 payments on a qualifying repayment plan while in qualifying employment, even though those payments were $0. Am I right about that?
Yes you’re right those 3 payments should count since the certification is required annually. You should challenge that.
Good to know, thanks! I will do so.
[puts on body armor and crash helmet] Wish me luck as I wrestle with FedLoan!
Hi there!
Question about the “pay ahead” setting. If each month we were still making payments at the proper direct debit IBR amount, but “pay ahead” was not disabled, will those payments still qualify for PSLF? FedLoan is the literal worst so thanks for this.
SD it depends if you were not making payments for a while because you made extra payments that put you into paid ahead status, then those payments would not count. If you continued making IBR payments and weren’t put into a pause then you should be good. Depends on your situation.
Hi Travis,
I just graduated from pharmacy school in May 2018 and have approximately $200,000 of debt. I am currently single making less than $50,000 for the first two years of my career working for a qualifying non-profit. During year #3, my personal income will likely increase to approximately $90,000, and I will be getting married, and my spouse will make approximately $200,000. Therefore, our combined income will be approximately $300,000 starting in year three of the program. Right now, I know that I will qualify for the PAYE repayment program. However, I am uncertain if I will qualify for this program starting in year 3. Your update to point #8 (see copied below) states that I cannot be kicked out of the PAYE program part way through even if my income increases significantly. Is this still true as of 7/2018? I spoke to Fedloan servicing today, and they seemed to indicate that I would not be eligible for PAYE as of year 3, so I am a little confused.
“*Update: FedLoan has been messing up lately by sending out letters to high income borrowers telling them they’re no longer eligible to make payments based on income. That causes panic and borrowers will call and ask what to do now that they aren’t eligible and the clueless phone rep tells them to switch onto something else. That is a mistake. You never get kicked off of IBR or PAYE, you merely have your payments capped. You need to ignore the letter and your payments should be capped. If they aren’t then you need to escalate to a supervisor.”
Thank you so much for your help!
Correct FedLoan is spewing misinformation. You can remain on PAYE but your payments would be capped at the standard 10 year plan, even if it’s a consolidation loan though the language in the promissory note is very unclear. Essentially the payments get capped and should leave you with a healthy balance left to forgive. If you decide to file taxes separately you might have a lower overall student loan plus tax cost. You really have to run the numbers to decide what’s best for you. Of course we do that for clients as well.
Hi Travis,
I found this blog and the information has been extremely helpful.
I’m in residency making around 50k and my husband works for a private company making around 70K. . I’m in the IBR and my payments were very $80 per month. However, I recently got married and filed a joint return and I received a letter from the Fedloan stating my payments would go up from $80 per month to $800 per month.
If we amend our tax to filling separately, would they only look at my individual AGI?
Would they reverse the payment to a lower monthly amount?
Which Repayment options would be best?
Thank you for your advise
This is a classic case where you’d want to compare filing joint w REPAYE vs filing separate w IBR or PAYE and decide if the payments and tax penalties of filing separate make sense. The calculator is the best way to do that and it’s free: https://studentloanplanner.com/free-student-loan-calculator/
Thank you for this informative article. It was not only helpful but easy to understand. I have a question and hoping for reassurance I’m on the correct path. This month (July 2018) I started my grad student loan repayment. I am pursuing public school loan forgiveness and my employer and I just completed the certification form and I received verification from FedLoan Servicing that it was received. I am on standard repayment, and understand that I need to get on one of the income-based plans so there is an amount left to forgive at the end of a decade of on-time payments. From your article, it sounds like PAYE is the way to go. I’m married, file jointly, and have $53,000 in student loan debt. I’m a bit confused about the clock resetting. If I switch to PAYE, do I ‘lose’ a month that would count toward my 120 payments? Thank you in advance for your expertise. Wendy
You won’t lose any credit that already exists to PSLF. Main risk is that you “only” owe 53k and that you might not get a ton forgiven.
Thank you for your prompt reply. That is reassuring. Wendy
Hi. What is the effect of deferment or foreberance on your qualifying payments. Does taking either start your qualifying payments over? What happened to the principle that your payment did not have to be consecutive ?
It does not have to be consecutive Anthony. You can resume payments without losing any built up credit on PSLF so this is something you shouldn’t have to worry about.
I found out that with my employer, I can qualify for PSLF (work in behavioral health for a non-profit hospital system). I am currently in year 4 of IBR (graduated grad school in 2013 and my annual re-cert was just approved). I do have some FFEL loans that would need to be consolidated from what I’ve read. Can I consolidate while in IBR? I am currently with Navient and they are no help on which loans would needs to be consolidated. They list my loans as consolidation(x2), Stafford(x7) and direct loan (x5). My coworker who is enrolled with PSLF has been knowledgeable, but any advice is appreciated. I know I am going to have to reset the clock (and that is fine), just any advice as this is nerve-wracking!
Thank You!
Ryan you can consolidate only the FFEL loans by calling the federal govt’s hotline number at 18005577394. Then you check only the FFEL loans and have them guide you on it. You can also see your info if you login to nslds.ed.gov.
Does my payment increase with consolidation? My friend told me it would jump up a lot? But I plan on staying on IBR.
It would only go up if your prior year tax return showed a big increase from the year before that. Then it would go up but it should’ve gone up anyway.
Thank you. My returns are round about the same every year. I am going to meet with my HR rep Thursday
Hi Travis,
Thank you for this excellent article and for all of your responses in the comments section.
One issue that I cannot find a straightforward answer to is regarding the family size question in the annual income re-certification form for IDR plans. Both my husband have $125K+ each in Direct loans. He is in REPAYE, and I am in PAYE. We file our taxes separately and have 2 children together that I claim as dependents on my taxes.
The form asks “How many children…are in your family and receive more than half of their support from you?” First, how do couples who file jointly each in IBR plans answer this question separately? Second, how do my husband and I, who file separately, each answer this question when recertifying our incomes? Can we both put 2 dependents or should it align with the dependents listed on our taxes? (It does not ask how many dependents we claim on our taxes…) If my husband puts 0 dependents on his form his payment will increase significantly.
Thank you!
If you’re on PAYE and he’s on REPAYE, then I do not understand why you’re filing separately. It makes no sense to me as they’d count both of your incomes on REPAYE and since you both have debt there’s really no benefit to filing separately probably. You’re only creating additional revenue for Uncle Sam.
Just be careful because they love to forget to calculate your payments taking into account your spouses loans. Happens to use every time we re-certify. I calculate what our payments should be myself and call them to let them know they messed up again.
On a side note, thanks for all the info, Travis. I’m in a dilemma that involves a student loan assistance program. My employer will give 10-20k a year plus 2.5-5k (tax assistance) for student loan assistance. I’m in my 5th year of payments, and have somewhere in the neighborhood of 47 certified payments so far. I don’t have to take it but it seems stupid not to?
Really you should argue with the employer that this money should be salary or a bonus and not required to go to your loans. After all they don’t receive a tax deduction for it, so why should they care what you do with it?
I agree, but this has been tried and the program was set up to reduce the burden of student loans and thus, must be used for that. It has to be paid in one lump sum to the creditor (would be nice to just have 12 monthly payments covered instead!). It obviously will affect my income and thus my monthly payment under REPAYE but it seems stupid not to take it?
Hi Travis,
Thank you for your extremely helpful tips. I graduated from grad school in May 2018, with approx. $66K in direct unsubsidized and PLUS loans and approx. $5K in interest. I am in my grace period now. I am in a position to pay $5K toward either paying off the interest before capitalization or paying off a few of the smaller, higher interest rate PLUS loans. 1) If I plan to do PSLF and am very confident I will be working for a government employer for 10 years, should I save my $5K and put it toward something else (retirement) if I know my loans will be forgiven? Or should I pay what I can now, in case something goes wrong or I get screwed by PSLF down the road?
2) My loans are all with one servicer right now. What is the order I should do things? Should I get them transferred to FedLoan first, then apply for PAYE? Or apply for PAYE, then get them transferred? I don’t want anything messed up if I try to do two things at once.
Thanks!
If you havent made any payments yet then I’d consolidate first and move it to FedLoan and apply for PAYE as part of that. Prevent any payments with the old loan servicer as things are being moved. Take the 5k and put it in retirement.
Thank you. I have not made any payments yet. I know all my loans currently have PSLF in their promissory notes. Does the current consolidation loan promissory note include PSLF language? Is it still safe and advisable to consolidate? If I *don’t* consolidate, but still transfer my loans to FedLoan, does FedLoan still use my total loan balance to determine eligibility and monthly payment under PAYE? For example, I have 3 PLUS loans under $5K, but I want those factored into the grand total that I owe, so that I qualify for PAYE and my monthly payment is as low as possible.
Yes they should take it into account. Only Parent Plus loans could complicate things, so be cautious if you have any of those. Otherwise you should be ok
Hi! I am currently enrolled in PSLF, yet have placed my loans in forbearance until I begin my new job in two weeks. I will be making significantly more money than I previously made — by about $70,000 per year, so I expect my bill to increase significantly as well. I’m wondering if the repayment options such as PAYE and REPAYE bill for a percentage of your salary before or after taxes are taken out. Meaning, do I pay 10% of my actual paycheck or of my overall salary?
Thanks!
Hi AM it’s actually 10% after you deduct 150% of the federal poverty line for your family size. Keep in mind that you can cap your payments on the PAYE plan no matter what you earn. That might be the better option if you’re worried about breaking through the 10 year standard cap.
Hi Travis: I am on the PSLF program and about 30 qualified payments in. Initially, with my single status filing and lower starting salary, I was making more affordable payments under the REPAYE program. Then I got married, had a wedding, traveled, etc. and my consumer debt ballooned to about $50K. My spouse and I each enjoyed a good salary increase, but with the joint income and newly married status, my student loan payments shot up. The recalculated REPAYE payment was unaffordable so I switched over to IBR and filed married filed separately. (The IBR switch was not great, but necessary, as my loans don’t qualify for PAYE).
My question is this- my priority right now is to kill my debt as quickly as possible. I cut our expenses drastically, BUT we also save 15% to my 401K to keep our AGI low. It feels good to save but it doesn’t leave a lot to pay down the debt aggressively. Conventional wisdom says to decrease retirement savings until the debt is paid off, but I want to keep my AGI low to keep my student loan payments reasonable.
Should I minimize my savings, pay off my debt, and just deal with the huge student loan payment for 1-2 couple years? Or would I save money with the lower student loan payments? I feel like PSLF applicants are in a unique situation because they are so AGI sensitive. Anyone else have this problem? Appreciate any help you can provide Travis!
I would limit your retirement contributions to your match you get at work (4% for example). Everything above that goes to the consumer debt. I would avoid forbearance since PSLF is in the picture, and would drastically cut lifestyle expenses until you have no consumer debt and 10k in the bank. You’ll need to say no to some things that you’d rather not say no to. On top of that, pick up additional work or side hustles and devote this extra money to the debt. I’ve found if you can house hack or sell your car if it’s newer and swap for an older one, you’ll get out of debt in no time. Low AGI for PSLF isn’t as important as getting rid of the consumer debt.
Hi Travis,
I currently have about $94000 in federal student loan debt all with nelnet. I’ve been making payments on an income-based plan for 3 years under a qualified non-profit employer however $35,000 of my loans are FFPL loans. All the rest are direct loans.
1) If I consolidate the FFPL loans to direct loans, will that restart the payment clock on all my loans or just the consolidated ones?
2) If I submit the employer certification form without consolidating those loans first, will it be rejected because some of my loans do not qualify?
Thanks!
Sarah
I think you’re referencing FFEL loans. For 1), only the consolidated FFEL loans would have their clock reset. The rest would retain your 3 years of credit. For 2) you should have the form accepted with 36 mos of credit towards PSLF on the eligible debt, and they would transfer you to FedLoan.
Correct. I was referring to FFEL loans. Is it best to consolidate the FFEL loans before or after submitting the ECF? Thanks!
Does anyone out there Happen to have an ombudsman case worker that is working on your case/complaint with FedLoan Servicing ? If so, after you provide information, do you ever hear from them again? If so, do you have a time frame in mind from the time that you communicate your problem initially Until they make the next contact with you? Any help would be great. I pray this is not another devastating dead end.
Persistence pays off. I would just keep calling the Ombudsman line: 7177207605
Hi Travis, thank you for all the information you have posted about the PSLF program.
I am 40 years old and still paying off my $150,000 student loan debt. I am in year 5 if the PSLF program and am trying to switch to the REPAYE payment plan from IBR. I am worried that something will happen that will ruin my loan forgiveness. Is it true that forbearance (due to switching plans) will erase my credit towards forgiveness? Should I still make a payment while in forbearance? Thank you!!
You have to make a 1 time $5 payment to switch from IBR to REPAYE. It does not affect your credit at all Christy. Only consolidating can erase prior credit. Sounds like you’re doing the right things!
Thanks for writing this blog about PSLF… it was incredibly helpful! Just making sure that I am understanding correctly that if you apply for PSLF that your loans are transferred from your current servicer to FedLoan no matter what?
I also have a questions as to what is considered “full time”. I have found several definitions…
From Federal Student Aids website: For PSLF, you are generally considered to work full-time if you meet your employer’s definition of full-time or work at least 30 hours per week, whichever is greater.
From PSLF Employment Certification Form: Full-time means working for one or more qualifying employers for the greater of: (1) An annual average of at least 30 hours per week or, for a contractual or employment period of at least 8 months, an average of 30 hours per week; or (2) Unless the qualifying employment is with two or more employers, the number of hours the employer considers full time.
Just curious if you knew if this meant that at minimum you have to work an average of 30 hours per week or that as long as the employer says that you are full-time that is what matters? And does it just have to be for 8 months of the year? (For example if you take a week or two off for vacation or something does that still count it?)
The 8 month explanation is mostly to explain that people like teachers get credit for the year. The 30 hours a week is the minimum. Your employer can’t say you’re full time if you’re at 25 hours for example. However you could piece together two part time jobs.
I finished my Masters Program and am looking to go into a PhD program next, which wouldn’t start until Fall 2019. My loans are coming up due for my MA in Feb. If I sign up for the PSLF now, what happens to any additional debt I accrue with the new degree? Can you have more than one PSLF deal in place, or can the two loans be combined down the line? Trying to figure out the best course of action.
Yes you can do PSLF for new loans but the years you serve now won’t count for the new loans so that would be a new 10 year clock.
Travis,
I really enjoyed reading this article. I didn’t understand everything in it so I have 2 questions, if you don’t mind answering them.
1) I’m married, filing separate and am on the PSLF program with IBR payments. I pay about $194 right now. Would it be wise for me to switch to PAYE or one of the other ones you mentioned?
2) Most of my loans are on the same schedule except for two of my biggest loans. These 2 loans are a year behind with qualifying payments, since I took them out during grad school. How can I get all of the loans forgiven? Do I have to wait for 11 years of payments so I can get them forgiven at once? Do I forgive most of them after the 10 years and then pay the reminder myself? The bigger ones total 30k so I’d rather have them be forgiven if possible.
Any advice would be much appreciated!
1) PAYE filing separately is ALWAYS better than IBR filing separately, so if you can switch and can be sure that it’s PAYE and not REPAYE, then yes that sounds ok to switch.
2) The first batch of loans would get forgiven first and then the second batch would be forgiven so in total it would take 11 years but you could apply two times.
My tax preparer told me that we can go back up to 3 years and amend tax filings. Any thoughts on folks who are filing Married Filing Separately, going back and amending to file jointly to reap the lost tax benefits? That way the payments are lower and we still can take advantage of filing status. My spouse has private loans so his income is taken into account but not his loan burden.
I think it’s ok but I would only do that because you made an obvious mistake like filing separate when you both had debt. I would not do it a forward looking strategy because the program will likely be audited eventually and I can’t imagine auditors would be excited about this approach unless it was a mistake.
Hi Travis,
I have couple questions regarding PSLF program and IDR payments as a married couple. I am a resident and have about $200000 in student loans. My wife is a pharmacist and also has about the same amount of student loans. We are both in PSLF program. We have been filing separately because my wife’s income is over $100,000 and wanted to keep my payments low. Is this the right thing to do or should we be filing jointly? If we file jointly, wouldn’t my payments significantly increase? My wife is currently paying close to $1000/month under IDR payments.
Thanks for your help.
This is a common mistake I see with borrowers who both have debt. This is a mistake to file separately you should be filing jointly because you both have debt and the payment should be close to the same and proportionately distributed.
You can also amend up to 3 years of previous tax returns and get the money back from the IRS as a refund.
Great site thank you for all the useful information!
Question: it seems that if you are currently in the 6 months grace period after graduation, then any payments toward the loans are not considered a qualified payment for the PSLF. If this is true, then is the only option (besides waiting the 6 months) to consolidate the loans immediately to get out of the grade period? Thank you!
Right consolidation can cut a 6 month waiting period down to 2 months after graduation, so it’s very useful for folks going for PSLF as long as you have no previous qualifying credit
I believe that the Fedloan Servicing is not correctly tallying/calculating the months I have made payments. I filed for PSLF forgiveness and also for the TPSLF. I have been making regular monthly payments for at least 8 years (maybe 10) and working full-time at the same qualifying 501 C-3 agency since 2006, but their system has my employer listed with three different names and many of the payments I made are not being counted. How do I independently check into this instead of taking their word for it?
Just calling the Ombudsman line at FedLoan is your main remedy: 7177207605. Other than that, you don’t have a lot of options. Our consult service could tell you how much credit you should have and arm you w that information: https://studentloanplanner.com/hire-student-loan-help/
That said, my guess is you have some FFEL loans or consolidation dates in there that are causing a different repayment count. For the employer name problem that’s bizarre I have no idea.
What a great resource this is! Thanks for your work on this.
If I do administrative type work for a faith-based 501c3, I think I’m fine, but have you seen any information about what they consider “proselytizing”? Or how strict they are about it? Thanks in advance 🙂
I haven’t heard a lot of stories about this except to say that if you have minister in your title you probably can’t get it. But if you list your title as administrative assistant or something like that, then I would think that would count based on the rules.
And thanks Stacy please share it with friends 🙂
I see that for REPAYE and PSL they want a copy of your paystub. When I read my twice monthly gross from my paystub I was told by my lender that I wouldn’t qualify and they quoted me more than my standard monthly repayment. When I read her my AGI from last year’s taxes instead, suddenly I qualified for REPAYE to the tune of $367 less a month. How does it work? I’m still in my grace but nervous if they want paystubs which show I make way more than I actually receive. How do you navigate this issue? Can you provide taxes even though they ask for paystubs?
Yes you’re allowed to give them your tax returns instead as long as it’s an accurate reflection of your income. That’s unfortunately subject to a giant gray area that no one knows how to interpret for sure. I generally suggest people refuse to give paystubs and just give tax returns on the theory that at least that number is defendable. After all paystubs could be leaving out income like dividends or side hustles whereas the tax return captures all of it.
Thank you, Travis for the informative post. It is really helpful for me. I have two questions that I would appreciate your comments.
1) I joined PSLF one year after joing federal agency. Is that possible to ask the program to consider the payments I made while I wan not enrolled in PSLF?
2) if I certify my income this year, my PAYE monthly payments will be doubled. i called thr FedLoan Service and a rep told me that if I don’t certify, I have to pay a bit higher but not as high as if I submit my paystubs. Does that cause any problem for my forgiveness program application?
1) You should ask them to certify your old credit as long as you were in an income driven payment plan. That might take them up to 6 months as they’re really backlogged right now.
2) You can use paystubs or your tax returns. It just has to be an accurate reflection of your income. As long as the loan servicer takes it and you’re willing to promise via a signature that it’s your real income then you’re fine.
Thank for your prompt respone. Regarding the second question, I would rather not certify. They accept the paystubs. If I provide the paystubs, the installment would be doubled. It seems that I have the option of not certifying and just pay a bit higher installment. I would happy with this option as it is much less that certifying with new income—my wife started working and providing both hers and mine will almost double the current payments.
This was super informative and helpful! One question I have is how does it work if you are married, both making around 100k a year, and both wanting to do PSLF using REPAYE? Would each of your monthly payments double based on the doubled income?
Not if you both have loans. Otherwise your spouse’s income who does not have loans does count against your payment if you’re the only one doing PSLF.
I understand that perkins loans do not qualify for PSLF forgiveness, but wonder if I can keep my perkins loan and work toward having it cancelled while also working toward PSLF for my other loans under REPAYE. As a nurse working for a 501c3 my perkins loan is deferred and will be fully cancelled in another 2.5 years, meaning as long as I work full time as a nurse I don’t need to make payments. My loans will all be deferred for another few months as I just finished a school program. Currently my direct loans are with Great Lakes. I have a few FFEL loans to consolidate and since I have not yet made any qualifying payments on any of my loans am considering just consolidating everything except the perkins loan and selecting FedLoan as my servicer so I can then upload the employment certification file rather than mailing it.
Eli that sounds smart to me. Your case is a rare one when not consolidating the perkins makes some sense as long as no payments are required. I wouldn’t wait long to consolidate everything else though.
Great article, thank you. My wife has $77k in student loans and earns around $73k per year. She is on a standard repayment plan. I am retired and have no income other than draws from a beneficiary IRA in my name. We need to pull around $80k out of the IRA to finish our house. We can pull some this year and some next. Would it benefit us to file taxes separately the next couple years to bring down her AGI? We also will be doing our best to max out her 403b next year. Trying to make sense of the PSLF options and keep her AGI as low as possible. Another thought is for me to start an IRA and fund that from her pay, as I am older than she is and could get to the money years earlier. Don’t know if that is feasible. We are in Ca. Thank you very much for your advice.
If she’s on the standard plan Steve, then your AGI doesn’t matter because she’s already at the cap. Just make sure it’s the Standard plan that happens when her income is too high. Also make sure it’s not the Standard Repayment Plan for Consolidation loans, which doesn’t qualify for PSLF. The Standard 10 Year does though. It’s kinda confusing.
This is all fantastic, thank you. My wife has no student loan debt. She makes more than I do, and I am carrying more than 300k and we have 3 kids. We are thinking about a “strategic divorce.” Basically get legally divorced and then I file alone and claim the kids. Side agreements and rock solid wills would handle the messyness of not actually being married, but what am I missing? I could lower my AGI by over 100k over then next several years and get my payment down to only a couple hundred a month. I can’t think of many government programs that disencentivize marriage, but the requirement to include her income is killing me.
If you live in a community property state and can use the PAYE plan you might be able to get some relief by filing separately and using alternative documentation of income. But yes, getting a strategic divorce is probably mathematically the best option with PSLF. I’ve had clients do that before but it’s rare.
Hi Travis,
This is a great article! Very helpful and explains many nuances of murky waters of the student loans. Currently I have all 3 of my loans (undergrad and grad) with Great Lakes:
– Direct Stafford Loan (direct subsidized and direct unsubsidized) from 2010 with a total balance of $78K with fixed interest rate. I’ve paid for 3 years thru extended graduated repayment plan.
– The other two loans are relatively small FFEL Subsidized Stafford loans from 2007 with a total balance of $6K with fixed interest rate. I’ve been repaying those for 3 years under graduated repayment plan.
I work for a university and plan to pursue PSLF. I’ve realized that the payments that I made so far were made under non-eligible repayment plan.
I am wondering whether consolidating all three of my loans would be a smart step. Or should I play safer and consolidate only two FFEL loans (taking into consideration Prospect Act)? If I happen to consolidate only FFEL loans, would I need to separately enroll for IDR repayment plan and re certify my PAYE eligibility every year for consolidated loan and direct Stafford loan separately?
Thanks for your help.
You can consolidate the FFEL loans only and do IDR certification all at one time Marianna. Yeah get on an income driven plan ASAP so you can build credit towards PSLF.
Travis, do you think I may have a chance to use TEPSLF opportunity and still submit for PSLF the employer certification forms. The loan was eligible, employer too, but I was on non-eligible repayment plan. Do you think I might have these three years of payments to count towards PSLF?
Thanks!
Marianna
Great article. Thanks for the information. I’m currently paying approximately $400/month with REPAYE. Income is 92000 and loan debt is approximately 125000. I’m currently legally married (file jointly; he makes less and has more loans, so it keeps my payments down); however, we will be divorcing next year. I should be fine for recalculations this year, since they go off of income taxes (and we will be filing jointly one last time). Is that right? However, do you have any suggestions on plan, and what I can anticipate for payment, the following year, after I file as single/divorced? I believe I hit my 120 payments in Nov. 2021.
It’ll probably only jump about 100 to 150 a month. Make sure you’re maxing your retirement accounts. Also this is very late to say this, but there are major changes taking place to the taxation of alimony for all divorce and separation agreements after Dec 31. I’d talk to a lawyer about that asap just to make sure it doesn’t apply to you.
So I’m hoping you can clear up some confusion regarding my loans.My grace period ends in a couple of days. I am slated to begin repayments in the first week of February. I am completing the IDR forms (evidently I sent them in too soon before and they were denied, so now resending) hoping to get a lower payment. I am a public school teacher and am looking to also apply for Public Service Loan Forgiveness. This is where the confusion lies. I’m being told by colleagues that I should fill in the PSLF paperwork as soon as I begin repayment next month. My lender, on the other hand, says I should wait until all 120 payments are made through them to begin the PSLF paperwork. Can you shed some light on this process? Once I qualify for IDR and start paying back 02/2019, what is my next step? I know by applying for PSLF my lender will change to Fed Loans?? and that is one downside- I love my lender now and how they work with me, but given the nature of selling off loans, that could change anyway. I want to get in on the PSLF asap in hopes that 1) it exists in 10 years so I can benefit and 2) they know the payments qualified since I made them directly to them. Any guidance would be more than appreciated in terms of my next steps.
Fill this form out asap and let it be transferred to fedloan. Most of the people have problems now are folks who took advice similar to what your servicer is saying: https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf
Also I’m suspicious of that advice from the servicer, because they get paid if you don’t submit that form but not if you transfer your loans and get certified for PSLF.
I’m so grateful that you’ve put this blog together, and I have a question that hasn’t come up yet. In November 2028, I completed the 120 payments at qualified workplace, and did the ECFs annually as you suggest. I completed the Application for Forgiveness, having to resubmit and upload these a few times until they finally agreed Dec 28, 2018, that I’ve fulfilled all the PSLF requirements. However I have real notification that I’m really done with the paperwork. I calledFedLoan on Jan 9, 2019 to verify my status. I was told the loan is forgiven, but they don’t intend to send me verification until I work 6 months more -June 28, 2019. I find this very fishy and a breach of the agreement which wanted 120 quailified payment while working 120 for an employer that met their approval. I feel I should be receiving some verification now that I have met the PSLF rules. Hopefully no one else has this problem, but what can I do about this? Could the individual be wrong? Thank you for your response.
If you do indeed qualify already then FedLoan will refund any excess payments you make after the point you became eligible. We’re seeing this happen with the TEPSLF program right now, so I don’t think you have anything to worry about. I’d suspect the govt shutdown might be impacting things a bit too in terms of contacting Dept of Ed on any issues they have. Not sure on that though. I am sure that as long as they confirm you qualify you don’t need to worry
I have a bunch of loans (approx. $180k) on which I’ve started making progress toward PSLF. I’m 99% certain those are on track (Direct loans, Federal employment, REPAYE plan), and I’ve made about 8-9 payments so far, a little under a year.
I also have a couple of smaller Federal loans (approx. $11k) which do NOT qualify for PSLF – they’re FFEL (about $4k) and Perkins (about $7k). I’d hoped to meet one of the Perkins-specific forgiveness criteria but that seems unlikely.
I know I -could- consolidate those smaller loans into a new DCL, put that on REPAYE as well, and that would work for PSLF too. The question is, should I? Would it interfere with my receiving PSLF on the bulk of the loans ASAP, would it risk screwing up the clock on that, etc.? I know I’m less than a year in on those, but hey, every month counts. Do we know if people can receive PSLF on some of their loans at one date and on other loans at a later date?
This information was fantastic and quite helpful. One quick question, I qualify for public service loan forgiveness, however, my loans are currently in forbearance because of a recent job transition. The forbearance will end in September, what time tables should I be on to consolidate all my loans (I have a bunch of direct and stafford loans due to undergrad and grad school), and then have my PSFL certified and begin payments? Our goal is to pay off some credit card debt before September. Should I worry about any issues with PSFL not being included in the new promissary note, if i start consolidation in July or August?
I think you should be fine but you can always come back and comment again to see. I would suggest you not miss out on any credit though if you’re employed unless your cc debt is really bad.
I was just approved for REPAYE and will begin making payments in March. I am a public school teacher and will be looking to go for PSLF. My question is when do I apply? My current lender says AFTER I make the 120 payments and until then I should stay with them. Other colleagues say I should apply now and make the switch. When /what do you suggest? Thanks!
That should be illegal for them to tell you that Amy. They’re saying that bc they dont make money on you if you get transferred now. Submit the PSLF certification form now: https://studentaid.ed.gov/sa/sites/default/files/public-service-employment-certification-form.pdf
It’ll move you to FedLoan but as least you’ll be tracked for PSLF, which you wanna do annually. If you leave it at another servicer, when they transfer the loans you’ll go through an arduous process of certifying credit for 10 years in the past. It’s lousy of them to suggest that just for a small amount of money.
Hi Travis,
Great article.
I have read the above mentioned comments and questions and I don’t know if my situation is directly applicable to the other scenarios so I thought would ask, sorry if redundant.
I will be starting a job at a non profit in April and will apply for PSLF at that time. Currently I am on PAYE with all direct loans, I believe I should be set for PSLF.
My biggest question is, I got married in 2018, My spouse makes 75K and I make 122K. My student loans from PA school are 230K. Currently I pay $790 on PAYE. My spouse has NO student debt.
I did a preliminary tax calculator and my refund is a $7K difference if we file together. Is this the best choice or is filing separately still better with her income and lack of student loan debt?
Thanks
This is a really rough rule to use, but take 8% of your spouse’s pretax salary (bc it’s 10% of discretionary income), divide by 12, and that’s somewhat close to the added payment. So take 75k times 8% / 12 and I get $500 a month of added payments if you filed jointly. Since that’s less than your tax penalty, I would file jointly and try to get her to put more money into retirement to lower the impact on AGI. But obviously we run those numbers in greater detail to confirm for clients.
Does this calculator work for those who are an Income Contingent Repayment not IBR? I have been in repayment since 2010. My concern is that for 2018 by AGI increased by 20k for a family a 5. My concerns is that when we complete our annual certification that our payment is going to double with FedLoan.
The only reason to be using ICR is if you are doing PSLF with Parent PLUS loans, or if you accidentally consolidated other loans with Parent PLUS. If that’s the case, no that calculator won’t model it correctly, but we do have a Parent PLUS calculator and article dedicated to it: https://studentloanplanner.com/parent-plus-loan-forgiveness/
I’m hoping you can give me some advice regarding whether I qualify for PSLF. I am a healthcare professional in a for-profit medical group that’s housed under a larger hospital non-profit 501c health system. I had my HR department complete the PSLF application form and it was approved when sent in with a pay stub. My loans were transferred to FedLoan and placed under the PAYE repayment plan. The second time my HR system completed the application form, I noticed what I believe to be a discrepency (the forms were completed the same way both times). The application form states my employer is the Health System with a 501c qualifying EIN, while my W2 form states my employer as the Medical Group with a different EIN (that I believe is not eligible for PSLF). I contacted my HR system and they have no knowledge about this situation and stated that’s how they complete all forms. I’m worried that after making 120 payments while working for this employer, that I’ll apply for forgiveness and be denied on the basis that my W2 and application are not identical. Have you encountered this situation before? Nobody seems to have any information and I’m at a loss as I owe $185,000 in loans that I was hoping would qualify for forgiveness.
Based on your description that does not qualify under the rules. If they’re submitting the form under a different EIN than your W-2 they’re (perhaps unknowingly) committing fraud. I would doubt that you’d actually get it when you have to certify. They’re just erroneously completing the application.
Hi Travis,
Would you be able to reach out directly?
Sure
Is it possible to have some loans on income-driven repayment plans, and some on standard repayment?
I have a large number of Direct loans I’m going for PSLF on, and a couple of FFEL/Perkins loans which are not eligible for PSLF.
Ideally I’d like to keep the Direct loans on IDR, to benefit from PSLF, but would like to put the rest on Standard repayment so that they don’t accumulate too much interest. Is that even allowed / how would I do it? I’m about to recertify income for IDR, and when I started it off, all of my loans were put on IDR.
I was married in October 2018 but have not filed my taxes yet for 2018. I have spoken to 5 different reps at FedLoan and been told 5 different things. I had to do my annual recalculation of my loans in January and when I did, my payments went from $104/month to $1,014/month because they are taking my husbands income into consideration. He makes double what I make, but we cannot afford $1,014 payments, even if we could make those payments, my loans would be paid off twice within the 8 years I have remaining with PSLF, so it makes no sense. Among other things, I was told to file separately but I was also told to send the form in again saying that I am married but “cannot reasonably access my spouse’s income information – you will be treated as single” (Section 4a, question 7 on the application). This rep told me to send the application in by paper mail so the IRS isn’t automatically linking my husbands income. I asked multiple times if he was sure this was legit and he said yes. I just called again and spoke with a different rep because my first payment of $1,014 is due in a few days and it’s going to overdraw my bank account, when I told her what the last rep told me to do she said “oh my goodness, no you should never have said that, that’s lying. Honesty is always the best policy”. As I said, this is now the 5th person I have talked to in the last two months about this issue and I’m so lost. Every time I hang up the phone I think I am all set and then I get a letter of denial. Two people have told me my loans are in forbearance until the issue is resolved, but they still aren’t and the payment is going to be taken out.
Hi Danielle try out the married filing separate calculator on this page: studentloanplanner.com/married-couples-pslf
If that tax penalty shows a low amount, you could file separately and do either PAYE or IBR (not REPAYE), and your payment will be lower than it would be otherwise. You should not check that “cant access spouse’s income” box it’s not a truthful representation despite what the fedloan person told you.
Thank you so much!
Where in the tax code does it point to regarding the PSLF in terms of that amount forgiven? Does anyone have a link?
I can’t point to the exact link but it’s pretty clear according to the government. See first paragraph: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service/questions
Oops I found it courtesy of Mark Kantrowitz: 26 USC 108(f)(1) https://www.law.cornell.edu/uscode/text/26/108#f_1
Sorry if this is has a really obvious answer – I am pretty fresh out of undergrad and am already looking into Masters programs to start sometime in the next couple of years. Assuming no major changes to PSLF between now and then… how does adding graduate loans affect my PSLF? Since I’ve already started making the qualifying payments on my undergraduate loans, do I just continue from there, or does the 120 qualifying payment rule reset itself once I start/finish my Masters? Is there anything else I should know about how grad school would affect my PSLF before deciding on a program?
You’d have 2 different forgiveness dates. So you’d have 0 credit on the grad school loans after your masters program. I’d be very careful as PSLF might be altered in between now and then.
Why is ICR the only option for Parent Plus borrowers? Paying 20% of my income per month is unmanageable. I’m hoping to take advantage of PSLF but that 20% makes it difficult to make ends meet.
It’s because of Congress. They limited Parent PLUS to ICR only. Perhaps one reason is if parents in their 50s or 60s could switch to REPAYE then there would be 0 incentive not to borrow six figures and pay almost none of it back. That said, there are still some pretty good forgiveness options for middle class folks with big Parent PLUS loans, some of which dont include PSLF: https://www.studentloanplanner.com/pay-off-parent-plus-loans/
Hi Travis,
I previously had Navient 81129 my loan servicer. After I started working for a PSLF qualified employer I submitted my application for PSLF and my loans were transferred over to FedLoan. Now looking at my account it looks like all the interest has been capitalized into the principle balance. Is that part of the deal when enrolling in PSLF?
That sounds like a mistake in how they transferred things. It doesn’t matter if you’re sure you’re going for PSLF. So it’s generally not worth the time to fight it but I understand if you’d prefer to
Hi Travis,
Peace Corp and Americorp appear to qualify for PSLF. Part of Americorp is SeniorCorp. Since it seems like Americorp and SeniorCorp are under the same umbrella, does Senior Corp qualify as work for PSLF? Thanks.
It probably does Sandra. Especially if you’re full time and SeniorCorp is a non profit organization. This is especially true with the recent ABA lawsuit
Hi Travis,
Thank you SO much for all of this information– it was extremely helpful! I have a couple of questions I’m hoping you can help me with:
1) I am a public school teacher and have had my employment certified since 2015, with qualifying payments tracked successfully. I read that you recommend the PAYE plan and I have been on the IBR plan. Should I switch?
2) I got married this past summer. My husband has a similar salary to mine (he makes $61,000 and I make $58,000) and he has no student loans. We’re unsure if we should file our taxes jointly or separately only because I don’t want it to affect my PSLF payments. I’m not sure what’s best.
Thank you again,
Maria
Actually, ignore my first question! It appears I am on the PAYE plan. Sorry about that.
Sounds like PAYE filing separately makes a lot of sense in your case.
Hi Travis,
THANK YOU for sharing all this helpful information! I see that you recommend ignoring any letters from FedLoan stating you are no longer eligible to make payments based on income–great advice! Unfortunately, I came upon your page too late; in an effort to be pro-active, I called FedLoan as soon as I received such a letter. The rep told me I had to leave IBR and switch to a different plan. I said okay.. I later learned that if I would have done nothing, my payments would have been capped at $900. Now, because I am married and filed jointly last year, all my other options are significantly higher than that. I’ve called 4 different times since this one rep switched me off IBR, in an effort to fix this. I get a different answer each time but 3 different reps have tried different things to get me back to that capped payment and another rep said there is no way to go back to that capped payment once you leave IBR. I’m starting to believe that this cannot be corrected since i’ve talked to multiple supervisors at this point. And if there IS a way to correct this , no one knows how to do it in their system…Do you know if it’s possible?? If so, any advice on what to tell the rep so that it gets done correctly? This whole situation is making me sick. 🙁
Yeah that really stinks Stephanie unfortunately once you switch there’s no way to switch back. And I’ve heard the Ombudsman fedloan group telling people this, and they’re supposed to have more expertise. It’s true that you won’t be able to switch back without a partial financial hardship.
Hi Travis,
Nice to see an adviser who understands the intricacies of PSLF. My wife is a 3rd year medical resident and we’re perusing PSLF. I make $47K per year currently and her about $60k. She will make around $250,000 after 3 years of fellowship. I may end up making a bit more money, but I would assume I will stay under $100k. We’ve been on REPAYE but I’m now questioning if this is the best plan for us.
Is there a point (maybe now) where we should switch to PAYE once our combined income reaches a certain point?
Thank you!
Kevin
You should probably already be on PAYE and filing separately, and this is probably a couple thousand dollars a year mistake that could be corrected in future years. It’s why folks hire us to navigate it 🙂 But I’d seriously check out the filing separately calculator we’ve built: https://www.studentloanplanner.com/married-filing-separate-paye-and-ibr/
Hi Travis,
I have been a teacher at a PSLF qualifying school for 12 years. I have been repaying my Navient loans under the extended payment plan since 2007 and received a Teacher Loan Forgiveness Repayment amount of $5,000 in Dec. 2013. My remaining subsidized and unsubsidized direct loans total balance is currently $12,900. Would it be worth it to transfer to a REPAYE loan at this point since I’d have to wait until Dec. 2023 to apply for PSLF (thats if my $409.28 – $445.95 per month payments on the beginning balance of $47,700 would even be considered as qualifying under to extended payment plan)? Under my current repayment plan and as of today’s current balance, I’d pay $131.78 per month with the current estimated total amount to be paid as $20,015. I recently made a $1,600 payment to get rid of one of the loans and I wish I had waited. Thanks!
Probably makes sense just to pay that off Yvette
Hi Travis, thanks for making such a helpful resource. This is sort of a tricky question, but it sounds like if someone is pretty sure they want to use PSLF and their profession is pretty accommodating of 501c3 employment (such as physicians), is there any downside of taking out the maximum amount (full cost of attendance) in Direct Unsubsidized and Direct PLUS loans? It sounds like the accrued interest doesn’t really matter because payments are based on income and not the principal of the loans. As a student, I could live a very frugal life, but if I have the option to get more money and pay back the same amount, I would definitely take more. Am I missing something here? Thanks!
You’re not. That’s the incentive right now is to live it up and even invest the money you’re borrowing. I don’t think that’s a wise policy move, but it is what it is. Also note it’s not a risk free strategy. You might change your mind and do private practice or PSLF could be changed (low probability for those in school)
Hi Travis,
I am in the PSLF program and have worked for the same government employer for the last 9 years. My payments have always been direct debit and I should have my 120 payments in 2020. Fedloan servicing is crediting me with 60 payments. What are my chances of fighting this and getting four years of payments credited to my account?
People say that if you file a complaint w the CFPB it increases your chances of getting it corrected faster
I consolidated my school loans with my wife back in 2000. I just received notice that through TEPSLF about 40% of my consolidation loan was forgiven. I contacted FedLoan servicing, and they said it wasn’t completely forgiven since the remaining was originally my spouses portion. I thought that when i consolidated them, they all went under my name. FedLoan servicing said that wasn’t the case. Is there anything I can do to get the remainder forgiven?
Thanks!
Wow that’s a very specific situation im glad to hear you got any forgiven. I’ve never actually met someone that got PSLF on a spousal consolidation loan Doug, youre the first. I’d say it’s unlikely you’d get forgiveness on the other portion
Hi Travis,
My fiancé and I are planning to get married in September of this year. We both completed grad school in 2018. I now work for a 501(c)(3) and he is a public school teacher. We both went back to grad school in our 30s, borrowed for undergrad before 2013, have consolidated our loans, and are on REPAYE. PSLF was part of what led both of us back to grad school. We make roughly the same amount—mid 50s—but he has around 40K of debt whereas I have 100K.
The questions is, should we get legally married? As far as I can tell, our income for the REPAYE calculation would be calculated as our combined income, causing BOTH of our payments to at the very least double, which seems crazy. We put aside some of our salaries into our 403(b)s and HSAs, but aren’t really in a position to completely max them out. Finally, I’m not sure how the whole thing would shake out taking the tax break for filing jointly into consideration, but as far as I can tell it seems like it makes more sense for us to be married in our hearts than on paper. All that being said, we would like to be legally married, esp. as we contemplate kids, etc.
Any advice you can give would be much appreciated. Thanks!
Thats a popular misconception. REPAYE doesn’t double count your income like that. The payment is roughly the same as if you were both single since you both have debt. You can get married
That’s great to hear! Thanks so much for the response. It is greatly appreciated.
I am graduating in May and am very interested in the PSLF program since I have accepted a residency position at a 501(c)(3) hospital. I really want to refuse my grace period on my loans and start paying right away when I start my job in June because my IBR plan would be $0 since I made below the poverty level while still in school. I contacted my loan servicer and they said that this was not possible. Looking at the IBR application on studentloans.gov, they mention in the application that I can stop my deferment/forbearance now if I check a box. I don’t know if this works or how long it takes to start the payments when I submit this. I noticed in this article that consolidation might be something I want to do in this case, I am however worried about losing the promissory note that mentions PSLF. What would you recommend in this case? Thanks in advance!
You’d have to consolidate with the govt. The lender isnt mentioning that bc then theyd lose the fees associated with servicing your account. Conflict of interest!
Would consolidating with FedLoans lose the PSLF in the promissory note?
Travis,
Great info, thanks! Apologies if this is a very basic question, but can PSLF be used for both undergrad and grad school loans?
Yes
Hi Travis – thanks for all these helpful tips. Question for you – I’m graduating this month and planning to do PLSF as I currently work for a 501c3 and plan to keep doing so. However, I’m already on the cusp of making enough income compared to my loan balance that depending on how my income grows in the next few years I could either have 20k forgiven or nothing. Given this, I’m wondering if I should pay off the interest before my deferment ends knowing it might save me in the long run to not have this capitalized? Thanks for your help.
If you think you might want to do PSLF, paying off the interest would be a terrible decision. If you just want to pay it all back based on a small projected forgiven balance, I wouldn’t say there’s a right or wrong decision there.
I was allowed to be on the REPAYE plan in July 2018; my re-cert is coming up in July 2019. I noticed though, my outstanding balance 59k did not even budge because all my payments have been going to interest. I was eligible last year, and am now eligible for PSLF and will be submitting the apps this week and in it – I will indicate last years payments and request them to be counted towards PSLF. My Question is: At the end of ten years, my outstanding balance might not change much – will this be a problem? Do I have to start paying more? Please advise and shed some more light in this matter. Thank you sir or madam.
No just keep paying the min. You dont need to pay more than they request.
This is a very helpful article. I am currently on track for the PSLF program and have been submitting my employment certifications and have verified qualified payments towards the 120. Upon submitting my re-certification documents this year, I discovered that I have a few loans that will qualify for the program if I consolidate (FFEL loans). The paperwork from the student loans site recommended I consolidate and select the PAYE repayment plan. I have been on the IBR plan because the FFEL loans can’t go on the PAYE plan (learned all of this over the past few days). If I consolidate those few FFEL loans and select to go on the PAYE plan: (1) is it possible that all of my loans will move to that so I can reduce my payments per month? (2) Is it going to require that all the loans remain on the IBR plan since my current Direct loans have been on that repayment plan the entire time? Thanks so much!
You should consolidate ONLY the FFEL loans and switch everything to PAYE. The FFEL ones weren’t on track to qualify anyway so it makes sense to consolidate those. You will keep the IBR credit towards PSLF on the rest as long as you dont consolidate them.
If you have full-time employment at a qualified employer and you pick up a side job at a non-qualifying business, is your eligibility for PSLF compromised?
Nope you can do side hustles all day long. Might just increase your payment a bit since it shows up on your tax return
Very helpful article. We recently applied for consolidation of all of my husband’s loans (he has 14!) because he is in a PSLF job and somehow two of his loans had gone into default. It’s a mess. We just received a letter from FedLoan asking if he’s sure he wants to consolidate, because some of the loans are direct loans and he may have credit towards PSLF (and consolidating would reset the clock on his 120 payments). How do we find out whether he’s been making qualified payments? Does it matter that the existing loans are with different servicers, not FedLoan? Would filing out the ECF track that? He has not been on an income driven repayment plan up to this point. I am also serviced by FedLoan for my loans but have always done IBR, not sure why – should I be switching to PAYE or REPAYE??? I have about 3 years into PSLF myself but I am on hiatus right now as I’m not working full time. Thanks for any insight.
Yes you should both probably be on REPAYE unless your debt is less than your income. For the prior payments it can get complicated. If he’s done it for 9 or 10 years then he might qualify for TEPSLF so you need to tread carefully and potentially get expert help from a place like us.
Thanks Travis. Definitely has not been 9 or 10 years, if anything only a handful. I have to look at which loans are direct to be sure. Our debt is astronomically bigger than our income. We consolidated mostly to simplify, to get on track for PSLF, and to get the loans out of default. I
was planning to hire you with our tax return money which was unfortunately garnished due to the defaulted loan. I will see what we can do, it sounds like it would be worth the investment.
Did some digging, the Direct loans are the ones in default. Haven’t been paid on in 4 years and even when in repayment they were on a standard 10 year repayment plan – this would mean they wouldn’t qualify towards PSLF or TEPSLF, correct?
Hi Travis- This is amazing! Two questions:
1. I don’t start my officially full time job until September, but I am working per diem for the summer (30+ hours, so i believe this will qualify as full time.) Should I wait to fill out the PSLF form? My job this summer and my new job are both at 501 c 3 organizations.
2. If I do, I should request to cancel my grace period right? I just graduated this week and am in my grace period per Nelnet.
I would consolidate your loans and move them to FedLoan right away and get on PAYE most likely. And send in all the forms as soon as you can
Thank you so much for this article. Since 2017, I’ve worked for a community mental health agency which doesn’t qualify for PSLF. However, from 2011 to 2017, I worked for a contractor at a state prison (all medical services are subcontracted in this state), which when I checked into it did qualify for the PSLF. I made 24 payments while working there but did not submit certification. I started out with an IBR or ICR in 2013 and then switched to REPAYE, which I’m currently on, and my loans (aproximately 158,000) are consolidated, both Direct Subsidized and Unsubsidized. My loan servicer is Navient (was Sallie Mae when I started repaying in 2013). I’m currently in forbearance until January 2020 as my payment more than doubled due to increased AGI last year. I didn’t particularly want the forbearance but the new payment would have stretched me pretty thin. I’m single with one dependent. Should I pay the interest as I go so it doesn’t capitalize in January? Will the payments I made while working at the prison count toward the 120 payments? Should I switch servicing to FedLoan now, or wait until when/if I begin working for a qualifying entity again, or is it moot because those payments won’t count because I didn’t certify them? Thanks again!
If you were a contractor and paid by a for profit corp with a contract w the prison then unfortunately the answer would be no. If you were W2 w the prison as your employer on your paystub then it would count.
Travis:
I recently posted a draft article on SSRN that you might find interesting; the link is below. I plan to include in the next draft of the paper some of your interesting reasoning in your “PSLF Snowball Effect” posting that does a much better job projecting the likely fall in future denial rates than other stuff that I have seen.
Crespi, Gregory S., Why Are 99% of the Applications for Debt Discharge under the Public Service Loan Forgiveness Program Being Denied? (June 3, 2019). Available at SSRN: https://ssrn.com/abstract=3397656
Thanks for sharing Greg!
I went in to StudentLoans.gov to see about consolidating my non-direct loans and the PSLF. I have worked for a private non-profit for 4 years. Before that I worked at a county courthouse as a clerk for 4 years. And before that I worked for Michigan Secretary of State for a year.
Currently my loans say Nelnet, Navient and Dept of Ed/Navient. I owe approx $127,000 (with all interest added in over the years). I graduated in 2012. About $47,000 of that are Direct loans and about $79,000 of that is not Direct.
All that being said, I never knew I should have been applying for the PSLF all along. I thought I was supposed to wait until I was at 10 years. Will this mess everything up for the ones that are already under Direct? I’m planning to consolidate all except those so the remainder become Direct. I’m aware the 10 years will begin once I do the consolidation. I’ve been on forbearance or IBR ($0 monthly payment) for most of this time.
Now that I’ve covered all that, I have a few questions. I’m certain the job I’m at now will qualify for the PSLF. Do you know if the previous 2 will as well? Could I nearly be at 10 years with the ones listed as Direct now? Also, if I was going to school while working at the previous 2 jobs, will that make those jobs not eligible?
I see you say several times to go right to FedLoan. When I go to apply for the consolidation on the StudentLoans.gov site, it sends me to Studentaid.ed.gov to complete the information. There it asks me to choose a servicer. Are you saying that regardless of who I choose there, I will end up with FedLoan either way? Should I go directly to them for the consolidation instead of using the site I’ve been using?
I’m sure I have other questions as well, which I’ll probably think of after I click send. 🙂
Oh! When my IBR plan had me at $0 monthly payment, I hear that those are still considered qualifying. Is this correct?
Thanks!
~Carla
Yes IBR 0 dollar payments are qualifying. You need to consolidate all non direct loans and send them to fedloan so thats accurate. I would send it all to fedloan and submit the PSLF form every year. That’s a big thing that you could change and it would be a good decision.
I will be going on unpaid maternity leave, and then returning during the leave period and receiving a lower salary. After my leave period, I will go back to receiving my normal salary. Due to my change in circumstances, can I apply to have my ibr payment recalculated? If so, I am also right to think that I do not have to apply to have my ibr payment recalculated once my salary increases, only when required to by my servicer on the annual date for recertification of income? I am under that impression because of this paragraph on the government’s website:
“You’re not required to report changes in your financial circumstances before the annual date when you must provide updated income information. You can choose to wait until your loan servicer tells you that you need to provide updated income information at the normally scheduled time. If you choose to wait, your current required monthly payment amount will remain the same until you provide the updated income information.”
Finally, this situation does not affect public service loan forgiveness, as long as my employer considers me to be working full time during my leave time, correct? I appreciate any advice you could provide.
Yes you could do that but since the maternity leave is more FMLA type leave then the safer thing to do if you’re doing PSLF is wait til you get the reduced paycheck and then recertify your payment, in other words after the unpaid maternity leave. I’d be suspicious that they’d mess it up if you recertify to 0 a month for 12 months.
Hi Travis,
A couple of questions:
1. I just reconsolidated my FFEL loans ($130K) to direct loans and moved to FedLoan from Navient. I am planning to go back to school in the Fall (additional $100K). Would you recommend taking advantage of deferment while in school and starting qualifying payments under the PSLF program 6 months post grad? I will continue to be employed by a qualifying employer throughout school.
2. Secondly, do Grad PLUS loans qualify for PSLF? Or would I have to reconsolidate again once I begin the PSLF process?
Thank you for the great info. Much appreciated.
1. I would keep the payments going on the old stuff through in school deferment waiver to get 2 different PSLF dates.
2. Yes they do but I’d probably consolidate them when you graduate anyway to get a 2 mos grace period instead of 6
Hi,
I just recently had my federal student loans forgiven through PSFL. My husband also has loans through FedLoan servicing, but they won’t be eligible for PSFL for another 4 years or so. I’m trying to anticipate what our FedLoan payments may look like next year now that my loans have been forgiven. My husband is on the PAYE plan (I was on REPAYE). We file taxes jointly. Would it make sense that my husband’s PAYE payments would increase to the sum of what our individual payments were prior to my loans being forgiven? Example- say I previously paid $400 on REPAYE, my husband paid $600 on PAYE. My loans are forgiven, so the next annual recalculation of my husband’s loans would then be around $1,000/month (not accounting for any salary changes)?
Heck yeah on PSLF forgiveness! I’d file separately for taxes so you can base the PAYE pmt on just his income
Travis great stuff here. Had some questions regarding my situation. I am currently On a REPAYE with a $10 payment with my first payment coming up on August. I’m also going to file for the PSLF. I have $35k in loans and my Fiancé has $35k also. I am currently entering my second year of teaching and my Fiancé Is a stay at home mom. Now The question is when we finally get married should we file taxes separately or joint? Reason is I would not like for her payment plan take into account my income. We also have 1 child that I claim. So for family size I’ve been told to put I have 2 dependent which is my daughter and fiancé until we are married.
Now are my payments going to change once we get married? I would really hate for my payment and her payment to go up after our marriage.
Also am I on the best repayment plan? I know it’s low right now but in the long run is there a better plan that I could be on.
Thanks,
Edgar
Edgar I think REPAYE for both of you makes sense right now. You can get PSLF on yours when your loans get forgiven you’ll have to figure out how to handle your fiance’s loans. That could mean switching to PAYE and filing separately for taxes or deciding to pay the 300 a month it’ll take to pay it off.
Okay, I see what you mean but when I get married in the next month or so, will my fiancé’s payment go up since it will be taking into account my income since she is on the REPAYE plan? She’s currently at a $0 payment. So would her payment go up since we are married?
Now after my loans get forgiven after the 120 payments and my Fiancé still has all her loans you suggest she file for PAYE right?
Thanks
Edgar
Right but its pretty complicated your payment gets distributed proportionately by the size of your debt so yes her payment could go up but your overall payment might not
Anyone out there on PSLF then moved abroad, and their employment no longer qualifies for PSLF repayment? That’s me. I paid five years toward PSLF, then moved to the UK with my family (British husband). I work part-time in England and by US Dept of Education calculations, I make under the federal poverty level thereby qualifying for deferment. I’m desperate to be rid of my student loans, but I want to pay under PSLF (as opposed to entire amount, which is prohibitive and working in non-profits = IMPOSSIBLE). Any suggestions? In the past, I have looked for US companies with 501(c)3 status in UK, or jobs at US embassy. At moment, I could not afford commute into London/ child care/ other cost of living and student loan payments. Appreciate any guidance.
I would keep the debt on an income driven payment and eventually you might get a qualifying job. Since PSLF is not consecutive, you could pick up where you left off. The embassy jobs idea would make a lot of sense.
Thank You for the informative artice. I am a nurse that just graduated and have both federal and private loans. All of my federal loans are direct loans. I am not currently working in a 501c3 but am hoping to become employed by one soon. My question is regarding the statement you made about consolidating them right away. Does signing up for repaye automatically consolidate them? Do I wait untill starting at a nonprofit hospital to do this? Thank you
Sabrina
No it doesnt you would consolidate first at studentloans.gov.
Amazing article! Although I need clarifications on some apparent contradictions please.
Here and elsewhere, I see conflicting information about about when/why to transfer loans to FedLoan servicing. For me, it’s already done. My loans this month were all consolidated into an IBR with FedLoan. However, they were likely already eligible for PSLF with my old servicer Great Lakes because they were all already Direct Loans. Although no harm done payment wise because I started my new PSLF eligible job just recently as well. So I’m asking for this clarification because some friends are hesitant to switch to FedLoan and want to do so after 10 years.
Also, a local company named My Education Solutions is managing my loans. They seem to have a decent local reputation and have booths and reps at my place of work (a hospital). I decided to use their services due to anxiety revolving around how complex PSLF is. However, as I’ve studied up more, I feel like I could be doing this on my own. They charge $49/month. That’s already quite a bit, and contract says they can increase that some day (over next 10 years, I’m sure they will).
I want to ask them for forms and documents so I can keep my own paper trail. Because who knows – this company may go out of business – What if THEY are doing it wrong? – I may move or lose my PSLF job – Or I might feel confident enough to manage my own PSLF and avoid their fees.
What exactly should I be asking to collect? I guess the ECF they just did? Anything specific generated from FedLoan I need? Thank you so much.
-So I’m asking for this clarification because some friends are hesitant to switch to FedLoan and want to do so after 10 years.
A: Send in the PSLF ECF right away. Don’t wait the accounting will be even worse if you do.
-They charge $49/month. That’s already quite a bit, and contract says they can increase that some day (over next 10 years, I’m sure they will).
A: That’s why we don’t do paperwork for folks. It’s very easy to do yourself once you understand why you need to do it.
-Because who knows – this company may go out of business – What if THEY are doing it wrong?
A: That’s why I recommend managing it yourself by sending in the PSLF ECF form yearly.
-What exactly should I be asking to collect?
A: Just login to your servicer and you should see a payment count if you’re at FedLoan. Gets updated when you send in the certification forms yearly.
Hi Travis, thanks for this article, it is really informative for someone like myself who is recently graduated and working for a non-profit organization. My first payment is due in a week, and I’m looking at consolidating my loans, which are currently through Nelnet.
For reference, I have approximately $36,600 in Federal Direct loans, $10,000 in a PLUS loan, and another $13,000 in private loans (one, $8,000, may be a PLUS loan, I am waiting to hear back from my dad on this–I acknowledge that I should be keeping better track on that, that’s what I’m trying to do now).
Should I consolidate my Parent PLUS loans with my Fed Direct loans? I’m about a week away from having to make my first payment, and I want to make sure I’m doing everything right so I a. Don’t screw over my parents’ retirements, and b. Don’t screw over myself when I go to apply for PSLF in 10 years.
My income is approximately $26,000.
Also, do I need to re-file the PSLF form every year to be eligible?
Thanks so much for making this so relatively easy to understand. My head has been swimming trying to understand everything, primarily what to consolidate and which payment plan to choose (PAYE!).
Hi Ana,
Thanks for the nice feedback on the article! The Direct Loans should be eligible for PSLF without consolidation. The private loans won’t be, nor will any loans in your parents’ names (unless they, too, are working for a nonprofit). The private loans could be refinanced if you can get a better rate and paid back as fast as you can.
Yes, be sure to file the employment certification form at least annually and check that each loan is updated with the proper credit toward PSLF.
Hi, Travis.
I will be applying for the PLSF.
I just graduated from a dental school with a debt of 440k.
Right now, my payment is in the standard 10-year repayment plan.
In order to switch to REPAYE, will I need to contact my loan servicer, which is Mohela, or the government?
Also, once the switch is complete, how can I show the loan servicer or government my proof of income?
I just received my first paycheck. However, I did not work last year and thus did not file any taxes.
I will be maxing out my 401k and would like to deduct as much tax as possible to lower my monthly payment.
TIA.
You probably need to consolidate and consider PAYE if you’re sure about PSLF. However, most dentists dont last the 10 years needed for various reasons. Of course if you need help you know we make plans for folks.
Why do you recommend PAYE over REPAYE ?
Hi Travis,
I have two questions.
Firstly, I have been on the Income Based Repayment Plan since the beginning of me applying for PSLF. I send in my application yearly but may start every 6 months since I’m so close. I work for local govement as a Teacher. I saw you mention it’s best to move to PAYE or REPAYE. I am currently already at 90 payments towards forgiveness. Should I stay with the IBR?
Secondly, my current Salary and my loans with interest are currently around the same amount $95,000. I’ve been worried about making too much and not qualifying. I saw you said you cannot be kicked off PSLF. Should I have any other concerns about this since my income increases annually?
On IBR your payment is capped, but sometimes the cap doesn’t matter because your REPAYE payment is below the cap. PAYE is better than IBR so if you can switch to that I would, otherwise the answer is that it depends.
Hi Travis,
Is there any way for prior federal service to apply? I am currently a federal employee coming up on 16 years of service. 4 years ago a went to school and accumulated federal student loans in excess of $50k and that have a balance above $50k. I’ve been paying against that loan for a bit over a year, so is there there a way to get this past year to count toward my 10?
If I decide to pursue another advanced degree, my payments would go on hold normally. Would it be better to not take the break in payments or will my ongoing time in service still accrue, or is it the payment and service that is what counts?
Thanks for the great article by the way! I have several coworkers looking at college programs while being federal employees and I have pointed them to this article so they can think ahead of time about their student loan repayment options. Since most folks here stay for at least 10 years before moving, it seems like a shame if they don’t take advantage of the information you’ve provided.
Kristen
Based on your length of service, you probably didnt have the right kind of debt to accrue credit (you need Direct loans). If you have loans from after 2010, then yes prior federal service would qualify. It’s a problem w the way PSLF was set up and they’re in the process of slowly fixing it.
FedLoan charged me 500 dollars( one time payment) according to them there will be a case manager working with me to get PSLF,cthey sent me a packet with all my info and specifically said ” payment is not apply to my loans.
now that I am reading this info I learned that forms payments plans are free.whay they changed me?
Hi Monica,
I can’t say why FedLoan would have charged you for changing payment plans, but I hope FedLoan can sort that out for you quickly.
If FedLoan isn’t working with you to get you set on PSLF, you may want to look into reaching out to your congressional caseworker. You can find more about this here: https://www.studentloanplanner.com/fix-pslf-qualifying-payments/
I have ten payments from 2010 and 2011 that Fedloan refuses to add to my payment tracker for over two years now. They did a manual review and it says these ten payments count and that they were made at a qualified employee with my payment history they sent me. However on the payment tracker for that employer it says 0 for number of qualifying payments. I even sent them the payment history that they did with the manual review and had the person at fedloan look at it on the phone with me but they claim they can’t do anything about it, it has to go to some other department for “manual review” which is how I got this payment history breakdown to begin with. They keep saying it takes several months to fix but its been two years. What can I do to get this fixed and stop getting the run around. I need these ten payments added and it will bump one of my loans into forgiveness in 2022. Thank you for your help.
It takes them about 6 mos to a year to get it corrected. If you want it done faster contact your congressperson’s constituent services office and ask for them to intervene.
https://www.npr.org/2019/09/05/754656294/congress-promised-student-borrowers-a-break-then-ed-dept-rejected-99-of-them
Travis,
I was considering PSLF and articles like the one I added scared me away from it. How are only 1% of cases being approved? Do you feel with the advice you’re giving that people are set up for approval by the dept of education ?
They are set up correctly based on the rules. People don’t understand the rules because everyone has ineligible loans for PSLF from 2009 and before, which is why the rejection rate is so bad.
Thanks for this post. I’ve been on the IBR plan for 4 years, but turns out I’m eligible for PAYE as you mention, so now I can pay 5% less a month (wish I knew sooner! Where is the PSLF handbook, ha). I have 2 questions for you: 1.) I have credit card debt… so in terms of maximizing pre-tax contribution, might it make sense to contribute more to retirement and then do a loan on my retirement to pay the debt (lets say $10,000)?
2.) you mention a max of 3 months for maternity leave. My employer allows 6 months, though of course a lot of that is unpaid. FedLoans said that I could continue making qualifying payments during that time, possibly $0 based on pay, and seemed unaware of a time max for leave. Did you get the 3 month max from somewhere?
Do the min for your match to retirement and focus on the cc debt. The 3 mos max is the most you can get PSLF credit for. You can get low payments for 6 mos but only 3 might count for PSLF.
Hi Travis,
Thanks for a great article. I am currently on a PAYE plan and have been for the past year with my loan servicer, Great Lakes. I started working for a non-profit hospital 6 months ago and was wondering if the payments during those 6 months could somehow count towards the 120 payments if I decide to do PSLF now. I have not yet sent in any form for PSLF and the loans are still serviced through Great Lakes. I know it’s only 6 payments so, in the grand scheme of things, most likely won’t make or break my payment plans but would like to know if there is way to “retroactively” qualify those payments (assuming that they are eligible based on the other criteria for PSLF). Thanks again for your help!
Yes send in the PSLF ECF form and it should count.
I have a direct consolidatation loan that I began paying in early 2014. It has a 20 year repayment term. I am ineligible for income driven repayment plans, so have been making equal monthly payments. Does the term length make me ineligible for PSLF?
Yes you wont be eligible unless youre on REPAYE PAYE or IBR so sounds like you need to switch to one of those or refinance.
Travis,
Do borrowers need to re-certify annually for each loan individually (if they don’t consolidate) or will re-certifying at the “borrower level” be enough to qualify all loan repayments for PSLF? Or is this issue apples and oranges?
Borrower level you dont need to do it at the level of each individual loan.
So my husband who hasn’t started paying his loans yet sent an employment certification form to pslf & they rejected it saying that its the wrong form & he has to submit it after the 120 payments. That’s why it was rejected.
He is a para professional looking for a teaching position & he works in a Title I school which does qualify for pslf. That’s what nelnet told us & they even sent us the form which needed to be sent. He may have understood something entirely different than what pslf told him but is this true that he has to wait 10 yrs to find out if he qualifies or not??
His loans are with fedloan servicing as of now who sent him a 700$ bill PER MONTH. He called them back & said he can’t afford that so they put his account on hold for 60 days as of now & asked him to send his latest tax return which is MFJ. I’m afraid based on that income, they will force him to pay an amount he doesn’t save per month. Should we postpone the payment until we file our taxes separately for next year?
I have my own exams & bills & books to pay for so I cant contribute more plus i’m working less than last year so i can study but they are only seeing our income for last year & not our current income which is stupid.
I don’t know whether to ask this here but if we do a phone call with you guys will you be able to access all his info on his fedloan account? How does that work?
Im sleepless over this situation.
We can definitely help figure out what to do https://studentloanplanner.com/hire-student-loan-help/ just depends on if its worth it to pay for.
Hello,
I am under the REPAYE plan. I wish to take advantage of $0 payments for the first year after medical school. Can this only be done if you apply after graduating but before you start your intern year while you have $0 income? What if you already started working as an intern and have income? Is it too late or can I still take advantage of the $0 payments counted toward PSLF? Thank you.
Prior year tax returns now work to certify.
Hello,
I just graduated law school in May with around $200,000 in student loans. I work as an assistant district attorney, so I am trying to do PSLF. I am married with no children. My husband is an RN with no student debt. My loan repayments start back in November.
I have sent the ECF to my employer and will mail it in next week. I was applying for the income driven payment plan on Studentloans.gov when it asked the following, “If placed on the ICR plan, do you want to repay your Direct Loans jointly with your spouse?” I was not sure what to answer, because I do not understand what that means. I do not want my loans to negatively affect my husband, especially since he does not have any.
Thanks for your help!
You just answer no that’s an outdated question they should remove.
Hello. This was a really helpful article. I have two questions. I am currently in year 3 of the PSLF program. I called FedLoan to verify my payments and was given a letter saying I will qualify for loan forgiveness by 2027. I also have another loan, which I believe is a direct loan, from another servicer that did not consolidate when I signed up for the PSLF. If I want to bring that into the PSLF, will that set me back again to 0 payments to qualify for the PSLF? Secondly, I am married, filing jointly and on the IBR. I wasn’t sure about the PAYE or REPAYE because customer service at FedLoan does not really explain which is better. My husband also has loans and makes less than I do. Would it be better to switch plans? Thanks again for all this information.
Depends on a lot of things. If your husband has small loans that might not be forgiven, then he might be better off on REPAYE while you file separately and do PAYE to lower your payments substantially. FedLoan won’t be able to help you with that but we can tell you if it makes sense or not: studentloanplanner.com/hire-student-loan-help/
Hi,
I am currently under the ICR plan with Navient. I originally had Plus loans that I took out for my daughter. Once they went into repayment I consolidated and applied for the ICR plan which I have been paying on for 10 months. The consolidated loan is approx $193,000 I received a letter from Navient about a month ago stating that I could apply for PSLF and provided me the link to do so (send in my ECF). I completed the ECF and sent it back and received a response about a week ago that I am eligible for the program due to working for the government (I have worked for Government for 20 years and plan on working at same job at least another 10+ years) and fedloan servicing will be requesting transfer of my loans so they can track my qualifying payments. A few days prior to receiving this letter I applied for forbearance for a couple of months to get finances in order due to unforeseen circumstances. I realize if I make any payments while in forbearance those payments will not count towards my qualifying payments. My question is this: Does being in forbearance make me ineligible to receive PSLF? Or can I still have a forbearance period and pick up with qualifying months when I am done with that period? Thanks in advance
You can pick up where you left off when you get off forbearance Terri.
Thank you for the important information. I am 67 years old with about $60,000 of student loan debt. I was told by Navient and AES that my loans do not qualify for forgiveness. I have been making payments on the IBR since 2009. I was disabled for several years, then I went back to work as a teacher. This is my 6th year of teaching at a community college. I feel like I am too old to switch to Direct. Are there any programs for forgiveness because of age? If the schools would alert you to these options when you take out the loans, a lot of grief could be avoided.
There aren’t but if you’re 67 then shortly you’ll be doing Social Security and that shouldn’t be included in your student loan payments.
I have been working for a non-profit hospital for over 10 years and have been paying monthly standard payments in the past. I just finished by BS in applied health this summer and my grace period is about to end for those student loans. My current loan balance is $35,000. I am planning on applying for grad school and continue my education in healthcare and will likely have near 100k in student loans when I’m done. I will still qualify for PSLF after graduation. Do I sign up for PSLF now or wait until I’m done with grad school?
You need to wait til you’re done w grad school
The Senate committee is HELP rather than HEAL.
Fixed it thanks
My parents may be willing to pay off some of my higher interest, unsubsudized Direct Loans, before I am out of the grace period. Will this impact my qualification for ibr plan and pslf? I work in nursing at a nonprofit hospital.
That would be a terrible idea since unsub Direct stafford are PSLF eligible
You mention “traditional IRA” to minimize income. Would a Roth IRA also work? Thanks!
I found my own answer 🙂 If anyone else had this same question:
No, a Roth IRA does not minimize income. A Roth is after tax dollars so any contribution to a Roth is included in income.
Travis,
Thanks for all your information! I am a full-time public school teacher and have been paying on an IBR plan for 8.5 years (the first two years making payments of $0) but only sent in my employer verification form this year, and I’ve worked for the same district during that entire time. Now, the statements I’m receiving show that I have ZERO payments on all my qualifying loans. I haven’t yet contacted Navient regarding the issue and thought I’d seek out advice from you prior to doing so. Any suggestions? Can you foresee any reason that Navient might argue their calculations are correct? Some of my payments were late, and I did make double payments at times (when paying a late payment together with the following one), so I know that those payments will not count, but the majority were on time and made separately. It’s very confusing to me, too, that even the $0 payments made on IBR aren’t showing as eligible payments. Thanks so much for your help.
Sounds like the servicer files didn’t transfer properly. Contact your congressperson’s constituent services office and ask them to help you fix it.
Great article! Thanks for caring enough to write it. I’m a 66 year old public school teacher who was originally told I would qualify for the Teacher Forgiveness Program, but when came time to apply (about 13 years ago) was told I didn’t because I had consolidated my loans. Then I learned about PSLF. My 120th payment will be made on June 13, 2020. FedLoan advised me to apply for forgiveness with them as soon as the 120th payment posts to myfedloan account. They said I must stay employed in public service until they approve it and then they send it to the Federal Government for final approval which they say can take 2 – 6 months. They also said I can put my payments into forbearance so I don’t have to pay more than the 120 payments. PSLF is the only thing standing between me and teacher retirement. I’ve worked for the same district for 21 years and have wanted to do something different for years. I’m sooo afraid they are going to come back at me like they did with the other program. I have been diligent about turning in all required forms. Just recently got my employment recertification done with my FedLoan paperwork stating I have only 7 qualifying payment left. WOOHOO!
I have two main questions:
1. Should I really go into forbearance and not make more payments after the 120th payment.
2. Does it really take up to 6 months. This sucks because that means I’ll have to sign another teacher contract rather than retire at the end of my contract in July 31st.
1. No dont go into forbearance they have a great track record of refunding overpayments
2. You probably need to sign a new contract but to make it clear you plan on quitting as soon as your loans are forgiven. Explain why and I bet an administrator will work with you.
Travis this is by far the best post I’ve ever read on PSLF, and I’ve read many. Thank you so much. My question is that for the last 3 years I believed (for whatever reason) that PAYE and REPAYE were not an option for me, or that IBR was the only option if I wanted to do PSLF. Now, not only am I seeing that PAYE/REPAYE are eligible for PSLF, but from the various calculators available, it looks like my payments could be much lower. I’m afraid to switch! But the savings could be huge. I’m 3 years into PSLF, work for the govt, and I’m single. My monthly payments right now are about 18% of my monthly net. I do have old undergrad loans from prior to 2007 that could disqualify me from PAYE but they’re almost paid off and I’m not trying to get them on the PSLF program. So that might leave me with REPAYE as the only option. Is it worth switching from IBR?
Usually the answer is yes. And if you want to make sure then you can hire us and we’d be happy to figure it out studentloanplanner.com/help
Awesome article, thank you! I started with $168,000 of medical school debt and immediately entered an IBR repayment for residency. Aside from missing out on 12 payments during a 6-year residency (I was kicked off for getting a Masters and automatically entered into “deferment” even though I was paying back loans, and I am still fighting to get these payments counted…) I now have close to 7 years (80+ payments) counting as PSLF eligible. I was late to the PAYE game, but switched from IBR to PAYE at the beginning of this year (year 8) in order to lower my monthly payments. Finally after 8 years of surgical training my salary will increase from $65,000 to $350,000 in August of 2020. My question is, how can I predict what my payment “cap” will be? Will this be based on the original $168,000 loan total when I started repaying, or based on the $140,000 loan total when I entered “PAYE”? (The amount at year 7 was lower than year 1 because I did some aggressive payments initially, as I was worried that PSLF may fall through.) My biggest fear is that they will recalculate the 10-year payment cap to be based on 3 years since I was 7 of 10 years in when I switched from IBR to PAYE, but I (fingers crossed) really doubt that.
Thank you !
Should be the 140k amount so about 1400 a month. But regardless verify its PAYE not REPAYE or else youll get hit w a lot bigger pmt than that.
Yep it’s PAYE for sure. My husband makes a higher salary so we file separately. Thank you!
Hi – My understanding is that PAYE requires the income of married couples to be factored together, regardless of whether you file separately or not. In fact, my partner and I were planning to put off getting legally married until my loans are paid off for this very reason. Are you married and able to factor just your income in your PAYE payments? That would be amazing!
PAYE factors in just your salary if you are married, filing separately.
correct
This was such a helpful article! Finally, I got much of the information I was looking for since I am enrolled in this program and have four years left before applying for forgiveness.
I have one question. I read something recently (not sure this was an accurate website) where a borrower could be denied for forgiveness at the time of their application because they were a high income earner? Is this true? Does your income at the time you apply have any bearing on their decision to grant you forgiveness?
No it doesn’t but the thing theyre citing is if you were not making payments based on your income and sometimes high borrowers get misled into the wrong payment plan by their servicer.
Great information Travis!
I am in my last year of family medicine residency and will be doing additional fellowship training year at a 501c3 hospital system. My principle direct federal unsubsized stafford loan balance is ~238K with ~11K of interest. I am making monthly payments with REPAYE. Unsurprisingly, my monthly payments apply toward interest and do not cover the entire monthly amount. I am sick of looking at my interest grow and none of my payments apply toward my principle.
I have been moonlighting and I have extra cash. Does it makes sense to pay off my interest now if I have the cash or wait until my salary increases?
Thank you for all the work and help that you do!
-Steven B
Well you dont know for sure where you’ll end up for your attending job, which could also be at a 501c3, so I’d wait. If you’re positive youll be at a private practice, then it would be fine to pay extra but it’s not as critical as you’d think. It’s more important right now to save and have plenty of cash with no credit card debt, no big car loan, and no giant mortgage.
Great. Thank you!
Hello: Can you speak to having your payments recalculated between recertification periods? Every year I have to send FedLoans documentation that shows that I am still working for a qualifying employer. Around the same time, I have to send FedLoans my tax returns so that they can recalculate my monthly payments. I used a lot of the tips that you recommend about to reduce my AGI in 2019 ( thank you :). My question is this, do I have to wait until my next recertification to send FedLoans my tax returns? Seeing as I just finished my 2019 tax returns and my AGI is lower than it was last year, I am tempted to send my 2019 tax return to Fedloan now so that my monthly payments can be recalculated and my monthly payment will go down. Do you see any downside to doing this? Is there a reason why you wouldn’t recommend it? Thank you!
You can just tell them that your new tax return shows a lower income last year and that you’d like to send it in early they should accept it and give you a lower payment. Try to avoid sending pay stubs bc that wont take into account your higher deductions
Hello Travis,
Currently I pay under the REPAYE plan. I got married this last year so I’m trying to figure out to file together or separately. Is my spouses income put in automatically if we file separately. Is it better to switch to PAYE?
Thanks
Probably it’s better to be on PAYE. You can run the numbers with our calculator! https://www.studentloanplanner.com/free-student-loan-calculator/
I was also wondering. I know you had brought up retirement that we could take it off of our income. Do we need to send something showing how much we have paid on retirement, or just take it off ourselves, or is that something I need to tell my tax person. Thanks for this article, its great.
Just make sure you talk to your tax person and give the loan people your tax returns and you’re set
Great article! I’m going on my tenth year of working in the public school and somehow only have 83 qualify payments. I’ve always been on the proper repayment plan, correct loans, etc., yet I know when I first started I didn’t have Fed Loan Service. They were transferred from another provider that still qualified for PSLF and after a year or two were transferred to Fed Loan. I was told this past March 2019 when I questioned my payments, they had to be recalculated because some were overlooked when they were with that different provider…..? Now, I’ve been waiting almost one year and every time I call, they keep saying they have no timeline of when I’ll have the proper calculations. I also found out one month years ago I paid .25 cents more on one month’s bill and for a few months after I was short money so then those didn’t count and I wasn’t notified of this. Lastly, it seems every time when I’ve submitted my annual income, they don’t count those payments that I STILL pay but are in transition. So frustrated because I know after ten years, I should be much further along than 83 payments.
You need to contact your Congressperson’s constituent services office. Tell them what you’re going through and ask them to intervene and I think that will speed up the review process.
Hi Travis,
Thank you for this article, this is really helpful. I’m wondering if you could provide some advice to my situation: I’ve just completed grad school for which I took out direct loans, have undergraduate loans and previously worked for a 503 (c)(3) where I made 16 PSLF qualifying payments towards my undergrad loans. Unfortunately–due to lack of understanding the system–I did not switch to ab IDR plan and made those PSLF-qualified payments towards a standard repayment plan. Now that I’m aware of my mistake, and planning on switching to a PAYE plan, I’m worried that the PSLF-qualified payments I’ve already made will not count towards the PSLF as they were not under the PAYE plan. Any advice would be appreciated, thanks!
The Standard 10 year plan counts for PSLF, so if these loans were not consolidated then the payments would count towards PSLF
How do you balance doing Roth since likely going to be in higher bracket later on VERSUS doing traditional if you’re going to be participating in the Public Service Loan Forgiveness Program? Also WhiteCI did an excel on this, do you agree with it?
My view is if you’re in a state with an income tax rate above 5% and you’re doing PSLF then you should do traditional. It’s not so much about your future tax rate as it is building wealth. Even if you’re in the 22% bracket, add 10% for PSLF and 5% for state and you’re at 37%, which is almost 40%. Can you say you’ll be at a 40% tax rate in retirement? If so great you’ll have a huge RMD you could contribute to charity and just spend all your dividends.
Interesting take on this. Can you please explain the 5% rate? Is that arbitrary or based on calculations? And for building wealth, are we talking about having an emergency fund/investing Vanguard style?
You can save about 5% to 10% into a brokerage account for a good PSLF side fund amount. I suggest 6 mos expenses in cash, max retirement, then any remainder in Vanguard mutual funds like VTSAX and VTIAX and some in bonds if you’re older.
Wow. this has been so informative! So if in Texas/Florida/South Dakota/etc and doing PSLF, then go Roth?
You could certainly defend that if you’re in the 12% federal bracket, bc w PSLF you’re in the 22% bracket and that’s kind of Roth territory
Quick question regarding interest payments. What is the benefit of paying the interest on loans if going PSLF? First year payments of zero, but still have interest. Would you recommend paying this? Why/why not?
My understanding is interest capitalizes when changing plans. Resident to attending/getting married transition is when I might change plans and will result in capitalization. Does it matter if all the interest capitalizes if PSLF?
tl:dr only make monthly payment, not extra interest
Very much enjoy your work Travis.
Any extra payments on interest if going for PSLF is wasted effort. You want the most forgiven possible and there’s no PSLF cap so you’d want the max forgiven, not the least.
Hi Travis Hornsby,
HSA: is not there a penalty for using it for non-health items? This article was very well written. You should start a service based solely around this! Give good information, and the people will COME! oh! COME!
There is a penalty but generally you just need to keep receipts of any large healthcare expenses since there’s not a time limit of when you can pull the money out (years later for example).
Similar question – why suggest contributing to iras first and then hsas? Is it just the age withdrawal?
Mostly because of the limitations on how you can use HSA money. IRA withdrawals aren’t limited to only medical/health purchases in retirement.
Got two questions./U already know/
1) Thoughts on traditional 401k during residency with PSLF, and converting to Roth after graduation.
2) When would the mortgage deduction be substantial enough for ownership to make sense?
I wouldn’t convert to Roth unless you were taking a year off. I’d say mortgage interest deduction is never good enough to buy a home. It’s more based on is the price of a home divided by the annual rent below 20 or not? And are you going to be living in that home for 5 years or more? If yes to both then it’s a decent decision to purchase vs rent.
Similar question to 1.
Would you recommend traditional then straight ram through the backdoor option after first year residency (due to earnings accumulated,etc)? Then do roth afterwards?
No I would just max my 403b at work traditional style and not worry about the Roth, especially if you’re in a state with an income tax.
Hi Travis, after reading through all these comments, I hope I’m not asking a question that’s already been answered. (I really appreciate this post!)
Just found out my institution does not offer 403b to its residents….so, does it still make sense to do the traditional IRA for 3-6 years and then clear/pay taxes on all that, if I ever to take advantage of the backdoor Roth option? Or should I start with the Roth IRA and HSA to begin with?
I live in a state with an income tax slightly less than 5% .
Thank you Travis.
For income above 50k, I’d use a traditional. For income below that, I’d use a Roth. The reason is that the 22% federal bracket starts around 50k and thus any AGI reduction down to 50k gets you savings at 37% tax rate (federal 22 + state 5 + student loan 10). For income below 50k, that rate would be 27% and you might choose a Roth only for that.
Hi Travis, after reading these comments I’ve had most of my questions answered. Thank you for taking the time to write up this post and respond to our questions. You mention using Roth for those living in states with an income tax < 5% as well as those earning less than 50K. My question is what about those with say, 60K but zero income tax state, and those earning 35K with 4.6% income tax? Thanks again Travis!
It’s a personal choice in that case. 50k is the end of the 12% federal bracket so id do the 10k between 50 and 60k in traditional. W 35k id probably go all Roth
If employer does not match 401k, should I still contribute just to lower my AGI for PSLF, or is there a better way to build wealth? Can you also explain the 10% or 22% range that was referenced in the couple posts above? Completely New to finances and greatly appreciate this.
I would still contribute. Basically if you look at tax brackets (https://turbotax.intuit.com/tax-tools/calculators/tax-bracket/) you’re in a 12% bracket until 39k of income, and you get a 12k standard deduction, so that means any dollars above 51k get taxed at 22% federal. Anything below 51k gets taxed at 12%. The lowest rate is 10%.
So if you earned 60k then putting 9k in retirement would save you 22% for federal lets say 5% for state and 10% for PSLF so thats almost 40% in tax savings, pretty good for someone making 60k.
I thought the 12K deduction was on interest payments?? Wouldn’t we not do this if going towards PSLF?
When in residency and PSLF route, are there any advantages to doing the Roth IRA over the traditional. I read an article that details why we should do it and am a bit skeptical to say the least. Great article above btw.
Yeah if you’re in a state with no income tax you might consider Roth, but generally Traditional i think is better for PSLF.
So the money I save by lowering AGI, what should I do?
What are your thoughts on those only Ally saving accounts? Is there a better option like a CD?
That’s a safe way to store savings for short term goals, but I’d look at investing for the long term instead. Once you’ve maxed your 401k or 403b I’d open something like a brokerage account at Vanguard
Hi Travis,
Great article! I am an attorney and I work at a non-profit 503(c) for the past 2 years. I did not make any payments my first year because I was placed on automatic forbearance due to my borrower defense application. I am on my second year decided to be taken off the automatic forbearance. There has been no decision on my borrowers defense application. I recently submitted my PSLF employment certificate 11/19. It was approved, I’m single on a IBR plan with a zero monthly payment. I am sick of staring at the interest growing. I am unsure if zero qualifies towards the 120 payments and if it does how do I keep track of the payments since the requested amount is zero? I would really appreciate your advice.
Login to the site below.
https://studentaid.gov
Hover over your name in the top right. Select “My Aid” and click “View Details.”
After you click “View Details,” click “Download My Aid Data” (blue link in the middle to top right of the page)
You’ll see a real ugly TXT file and if you try to read it, it’ll say if you’re in repayment or not. We have a program we use to parse it for clients but that’s a surefire way if you dont mind reading a lot of weird looking text.
Thank you! I am currently on IBR- for my first year. (payment is zero). Can I simply switch to PAYE? I plan on submitting a new certificate employment on my six month, should I also include my income or taxes? Should/Can I wait a year to change from IBR to RAYE? I wish I would have known before I signed up.
Additionally, I am planning on consolidating only two loans that are not direct to make them eligible about $5K. I also have a parent plus loan 50k it is my understanding that it will not be eligible for PSLF, since only my employment is eligible and not my fathers, he is retired and does not work. Any suggestions?
He will have to pay off his Parent PLUS or try the double consolidation loophole: https://www.studentloanplanner.com/parent-plus-double-consolidation/
You can switch to PAYE now
Great article, Travis!! Thanks for sharing all this information.
I have some questions. I am a parent with Parent Plus loans and I want to do the double consolidation to get access to the PAYE. When should I send the ECF? When I get approved for the step 2 consolidation (final with FedLoan)?
I want to do this because my first son will graduate in May, and I want to consolidate and star paying all loans I have, all Direct PLUS for parents. I still need three more loans before my two other kids graduate. What would be the best strategy to pay the last three loans?
Thanks a lot for your help
Youd want to wait until you get all of your loans then try the double consolidation and wait on the ECF, unless the 3 loans are small then Id just pay them off
hey travis, my non-profit only offers an hsa (no 401 or 403). Should i still put some money in? given the economy and i think i will make a big purchase before 59.5, what other options do i have (CD vs under the mattress vs you name it)? i guess what im asking is should i put some money into the hsa and therefore reduce my agi for my student loans and with what i have left what are some excellent short term options?
Yes you should. We have an investing course actually that goes into detail about this. https://studentloanplannercourse.com/
I now understand (thanks for your tips) that pre-tax retirement contributions will reduce my IBR payments (I’m going for PSLF). Unfortunately, I wasn’t on top of that in 2019 and didn’t contribute anywhere near as much as I should have to my 457b. Is it possible to make an additional contribution before taxes are due, as with an IRA, or am just out of luck (other than the potential six months of stimulus forbearance, obviously!) for this coming year’s worth of IBR payments? (My income is increasing a bit this year too, so I’m not sure recertifying my income showing additional contributions withheld on the latest paychecks would help.)
I’d focus on it for next year
My classmates told me to file an income tax of zero to help with PSLF the first year, but my parents listed me as a dependent. Can I still file one; is there an IRS document that speaks to this scenario? Thanks Travis.
Yes you can still file as a dependent
Very informative article Travis.
I am a medical student planning to take advantage of PSLF. I am going into residency this year and thinking of selecting REPAYE to take advantage of interest subsidy, but was wondering if I switch to PAYE during the third year of residency (while still eligible), does this switch to PAYE reset 120 month payment counter for PSLF
Thanks
No it doesnt reset the clock
I wanna do pslf and read over how to maximize it with retirement accounts. The issue is my employer doesn’t offer them to me…should I still do pslf and if so, what can I do to plan for the long term (start my own roth ira)? Not planning to do any side hustle/2 jobs right now.
Yeah just do a Traditional IRA
Why not do a Roth IRA (I’m currently a resident), is it due to PSLF?
If doing traditional IRA, convert to backdoor Roth the year I graduate residency?
It’s just because a Traditional gets you an extra 10% tax write off that makes it more appealing than it usually would be as a resident.
Hey Travis man,
Got abt 150k in an old 403b-what to do with it? Will be starting residency soon & PSLF is def in my future. Been kinda busy with USMLEs but shld have read ur blog earlier. Cost me dearly lol!
(Shld have converted to roth earlier in med school)
Roll it over to your new 403b or your own IRA
If I’m considering PSLF, what’s a good time horizon/investment mix for a starting resident?
100% stocks if you’re young
Given COVID-19 and recent CARES Act, changes are being implemented rapidly. Initally, stated PSLF should still be made even with interest rates at 0% interest. Now, states all loans will be placed on forbearance –> any borrowers with a Direct Loan with prior qualifying payment plans AN D cont to work full time do NOT have to make any payments thru 9/30/2020 and will still receive credit during these months. Can you please confirm? Is this your understanding as well? thanks
Don’t make payments. That credit will count even though you’re not paying anything
Question
I am on IDR and PSFL and have 5 years left. I file the paperwork and track it religiously. Due to the current pandemic we lost one income. I also have auto withdrawal of payment every month. FedLoan said to reapply for the loan in order to drop my payment. If I do, do I lose the years of credit toward PSFL that I’ve already achieved?
No you keep the credit
I did a consult with you a couple of years ago, extremely helpful and I’m more than halfway to forgiveness under PSLF! My question is, I have > $300k in loans and am recently married, husband has none. We will be married filing separately in order to exclude his income from my repayment, but it occurred to us, is there any downside to combining bank/brokerage accounts? Theoretically, the IRS doesn’t look at which bank accounts the money goes to (and therefore FedLoan doesn’t care), but I want to make sure I am not missing anything before we combine. Thanks!
Combined bank accounts won’t impact your tax filing status, so you’re good there. If you want a follow-up consult to go over any changes in your plan since you were recently married, you get a discount as a repeat client. If that’s something you decide to do – no pressure!
Travis, in PSLF and contributing to retirement accounts to lower AGI like you mentioned. However, after looking that the options, I’m planning to switch to another fund. Is VIIIX any good? Or should I just get the match and put my money elsewhere, say VTSAX?
VIIX and VTSAX are the same, so either way is good.
Same question as Julia and following up on Amy’s comment….
VIIIX (triple I) is the same as VTSAX? I thought one was only for US large cap stocks? or are both of them good funds to invest into?
You’re right Henri – VIIIX is for large cap and VTSAX tracks the market overall. When I say they’re the same, I mean they’re “very similar.” There are slight differences but both are an excellent option for investing and lowering your AGI.
After making PSLF payments for 6 years, I was injured on the job and qualified for federal disability retirement. I’ve had my loans in forbearance for the past 6 months while not working and waiting for the disability retirement application to process. I owe $170k on student loans and was counting on PSLF…am I out of luck on forgiveness because I had to retire early, or can my disability retirement somehow count as full or part time federal work for the purposes of PSLF calculations?
You probably need to ask your servicer if you qualify for disability discharge. You should if the SS admin considers you disabled.
Thanks Travis! This is very well-written and incredibly helpful! I have a quick question I’m wondering if you can help me with! I currently meet all of the criteria for PSLF (REPAYE plan, public service position etc,) but I am only 4 months into my payments for my heftier loans and I’m not sure if PSLF is right for me or if I I want to stay in public service for 10 years. If I decide to certify just in case and switch my loans over to FedLoan- is it possible to switch back to my current loan provider if I later decide against the PSLF?
More importantly, I read in your reply to another reader that she should maybe just pay off 53k in debt instead of pursuing PSLF. My bigger question is what do you think is the cutoff for this route? I’ve been struggling back and forth. I currently have about 51k in debt, making 36k a year. I plan to go back to grad school for a PhD within the next 2 years. I won’t need to take out any more loans, however interest on my current loans would continue to accrue for those 5-6 years. Do you think I would be a good candidate for PSLF or should I take advantage of the current interest suspension and pay off as much as I can?
Thanks so much in advance!! You’re doing incredible work!!
No you cant switch servicers once you’ve moved over
Hi Travis and Amy,
I am going to be a new resident with PSLF in mind. Thank you for this timely article. Do you know of any posts or sites which explain whether someone in my situation should place their PSLF side fund in a traditional or Roth IRA? Any insight into this would be great! Thank you again.
Traditional and Roth IRAs are excellent for retirement savings. A side investment account is a little different. It’s a regular investment account that doesn’t have retirement rules (like for early withdrawal and such). Betterment is an excellent choice if you want some guidance (otherwise Vanguard is who we recommend for more hands-on).
Hi Travis,
I will be starting residency this summer at a program that is not a 501c3. I was originally very interested in PSLF. Could I consider forbearance while in residency and then try for PSLF after that since the loans will be forgiven anyways, or should I just use an IDR plan and start paying them off? I feel conflicted about not knowing if I should be trying to make just the minimum payments (aiming for PSLF beyond residency) or trying to pay off my loans aggressively if PSLF will not be in my favor because I will be losing those 3 years of residency. Thanks!
What about after residency if you’re in a position for PSLF? We rarely recommend forbearance – would be better to get on an IDR plan and pay according to your income, which should keep payments pretty low for now.
First of all, thank you so much for this article. Sometimes I feel as though PSLF is purposely so convoluted and difficult just so people cannot untangle it. Your efforts are MUCH appreciated!!
I have been in PSLF for 3 years now and just submitted my annual IDR request. My question is, somehow, my monthly payment went down (only by about $40/month) despite my income going up (only by about $2,000/year, a cost of living raise). I am on the PAYE program. Are there any situations where this makes sense? Does the IDR calculation take cost of living into consideration or is there some other factor I may be missing?
I’m not complaining by any means, but would hate to pay this new monthly payment for a whole year, only to be informed that these payments did not meet the appropriate qualifications and did not count towards my 120 payments for PSLF. That would be the worst!
They count there must be some weird family size thing that changed.
The article mentions that traditional IRA can only be deducted to lower AGI if there are no other retirement plans offered. Does an HSA count? Could you please elaborate on this, or how we know if our contributions are deductible?
Yes HSA counts too
Hi Travis,
Great article and lots of helpful information. I have worked full-time for the Federal Government (USDA and DOT) for the past 15 years. During that time I have made all of my payments under IBR except for the first 2 years where I did interest only payments, and I may have done some forbearances over that time as well. I contacted by loan servicer, AES, about a year ago to assess my eligibility for PSLF. They told me I was not eligible because my loans had to be with FedLoan, even though I had been sending paperwork to them for years. I’m positive that I have made the 120 required payments, but I’ve been with the wrong servicer this entire time. Is there anything I can do to qualify for PSLF? I’m hesitant to move my loans unless I know I will receive forgiveness because my current student loan interest rate is 2.2% and I’m sure FedLoan won’t give me a rate that good.
Thank You!
Your loans would probably not be direct loans. This is a situation where not getting a professional review could be costing you thousands of dollars or a lot more even. Bc if those are FFEL loans AES could be earning interest income on them and thus they have a negative incentive to tell you that you might be wasting the payments and could have converted them into Direct loans long ago, but they have a vested interest not to tell you that, although I suspect it’s just incompetence.
Hi Travis,
Thanks for this informative article. I have a question: Can someone apply for PSLF more than once? I have some direct loans that I think will qualify for PSLF in March 2021 and others that won’t qualify for a few more years because of consolidation to a direct loan (which happened in 2012 and then a few months of forbearance here and there). Once I have 120 payments while working 10 years at a qualified employed, can I submit a PSLF application just for the loans that I have been making payments on since 2011?
Thanks,
Kristen
Absolutely you should apply more than once if you have loans qualifying at different times.
Several of my colleagues say that before we consolidate our loans for PSLF, we have to wait until we have ‘graduated’ status within the system. Is there any truth/advantage to doing this?
That’s correct you wont be able to consolidate until they update your status
Two simple questions
1. Does contributing to an HSA qualify for the Saver’s Credit?
2. How do traditional IRAs work? Vanguard states that funds can be transferred from a bank; wouldn’t those funds be post-tax though?
That’s just to fund a Vanguard IRA. Not sure about HSA saver’s credit
After persuing the 1040 forms and its schedules, I see HSA and IRA as lowering AGI, but don’t see the 401k/403b option? I totally believe you and everyone else that reinforces this on the net, but wondering what line it would fall under?
And for residents, is a traditional IRA recommended? Program not offering 403b…
Would I only be able to deduct this if I’m not using the standard 12400 deduction?
Great tips! 1) I am starting residency in a couple weeks and will be going for PSLF. The entirety of my $332k debt is comprised of 6 direct unsub and 6 gradPLUS loans, all still in grace period/COVID forbearance/no payments made yet. Since all of them are eligible for PSLF already, is there any reason for or against consolidation? I’m thinking yes, for the sake of simplicity… 2) PAYE vs REPAYE? I am single, have no kids, and will make $56k in 1 year of residency. I anticipate ~$120-150k after this year, and for the foreseeable future. I qualify for PAYE, whose payment caps will keep my total costs a little lower. Should I go with the payment cap of PAYE, or the interest subsidy of REPAYE? Since I’m shooting for PSLF, it seems like PAYE makes more sense… Thanks so much for your help.
Actually, at that pay grade, it looks like both PAYE and REPAYE payments are below the cap…
This is exactly the kind of stuff we help with. We can show you the numbers behind which approach is best. You can find more info here: https://www.studentloanplanner.com/hire-student-loan-help/
Can you confirm that the “PSLF Qualifying Payments” counter has not updated each month since implementation of the CARES Act? I know these months are supposed to qualify. Also, is there any action borrowers should take now to ensure the count updates correctly come fall? I’m especially concerned because I have had a handful of discrepancies over the years with FedLoan Servicing.
Thank you for this great article!
I understand your concern. It’s written in the CARES Act specifically that these payments WILL count toward PSLF. The software the servicers use isn’t set up to handle a situation like this, and they’re having to play “catch up” to work out the kinks. I’m not surprised the PLSF count isn’t going up right now – but these months of $0 payments will count.
That’s what I figured. I didn’t know if you had heard other first-hand accounts of the count discrepancy. Thanks for taking the time to respond!