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107 Tips to Get Public Service Loan Forgiveness

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Comments

  1. Mike June 4, 2021 at 9:03 AM
    Reply

    I have a question regarding the PAYE payment cap for a direct consolidation loan. You mention that even if your income increases (i.e. resident salary increases to attending salary), the payment will be capped at the standard 10yr. In tip #23 you mention that the standard 10yr payment goes away if loans are consolidated, and the replacement “Standard Repayment Plan for consolidation loans” doesn’t qualify for PSLF – does this mean that after losing the partial financial hardship status, the new capped payment wouldn’t count toward PSLF?

    I currently have direct loans and was planning for direct loan consolidation to bypass the grace period and start PAYE/PSLF early, but I don’t want to pursue this if the consolidation process will prohibit me from making qualified PSLF payments under the PAYE plan once an income increase pushes me above what would be the standard repayment amount.

    Thanks!

    • Abel at Student Loan Planner September 2, 2021 at 1:59 AM
      Reply

      Hey Mike! Here is what our consultant Meagan has to say:

      This might be a helpful article. But the consolidation does not change the 10-yr standard payment cap, so you could proceed with that to forgo the grace period. Here’s the technical definition from StudentAid.gov:

      “Partial financial hardship is an eligibility requirement under the Income-Based Repayment (IBR) and Pay As You Earn Repayment (PAYE) plans. It is a circumstance in which the annual amount due on your eligible loans, as calculated under a 10-year Standard Repayment Plan, exceeds 15 percent (for IBR) or 10 percent (for Pay As You Earn) of the difference between your adjusted gross income (AGI) and 150 percent of the poverty line for your family size in the state where you live.”

      You must have a partial financial hardship to be accepted into PAYE or IBR initially, but you can’t be “kicked off” the plan if your income gets to a point where you no longer have a partial financial hardship later on.

      What would happen is your payment would cap-out or stop at that Standard 10-year amount, and that’ll be your payment going forward unless income decreases in the future.

  2. Bria Schurke June 24, 2021 at 1:41 PM
    Reply

    Thanks much for this article! A few clarification questions.

    1) If I am both an employee (w2, nonprofit, qualify for PSLF at 30 hrs/wk) and self employed contract (1099) and want to lower my AGI as much as possible, can I max out a traditional IRA, SEP IRA (amount based in my self employed side gig), and 403B? ( I also max my HSA). I currently have a ROTH and am considering converting to a traditional IRA if it helps lower my AGI. I max out my Roth, 403B and SEP IRA.

    2) For the student loan interest deduction is the $85,000 limit pre or post tax?

    • Bria Schurke June 24, 2021 at 1:42 PM
      Reply

      * my total income is below $125000

    • Abel at Student Loan Planner September 1, 2021 at 3:26 AM
      Reply

      Hi Bria, here is what our consultant Molly has to say: For your first questions, it’s best to check with a tax pro. Maxing out PRE-tax retirement accounts lowers your AGI, so it’s worth it to switch your contributions from a Roth IRA to a Traditional IRA from a student loan perspective. Don’t convert your current Roth IRA, just open a Traditional IRA and start maxing that out.

      For your second question, the phaseout if you are filing your taxes “single” is $70,000-$85,000 as of 2020, and $140,000-$170,000 for “married filing jointly.” The Student Loan Interest Deduction is based on your MAGI or Modified Adjusted Gross Income, which is typically close to your Adjusted Gross Income. Your AGI is a pre-tax number, generally close to your gross income minus your pre-tax retirement contributions.

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