OT - MGoPSA: Public Service Student Loan Forgiveness

Submitted by MGoBender on

Hey, all.  This is clearly off-topic, but I think it can be very helpful to several MGoBloggers out there, myself included.

Has anyone had any experience with the Public Service Loan Forgiveness program?

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/publi…

Basically, it is this: If you work for a non-profit company or some other identified companies for 10 years and you make a payment on your student loans each month of those 10 years, your remaining federal student loan balance is forgiven (120 qualifying payments).

I'm going through the process of getting started with the program - BUT I should have done this 3 years ago!  To all you recent and soon-to-be-recent grads:  Make sure you've looked at this.  It is surprising how many companies/services qualify.  I didn't think my employer qualified so never looked into it.  I was wrong and as a result, I might have lost 3 years (and $15-20k) of debt being forgiven.

There's a ton of weird rules.  My basic question is:  For anyone that's done this, how easy is it to track your qualifying payments?  I'm worried about lowering my payments and not hacking away at my debt if I don't get my Ts crossed and Is dotted. 

In my situation, I could have been on the Income-Based Repayment plan (which is under $300 per month for me).  $300 * 120 = $36000 paid before the remaining balance is forgiven.  However, for the first few years I was on other repayment plans and was making extra payments.  I thought this was smart - pay down my debt as fast as possible.  I've probably paid $20k towards my loans in 4 years, but none of those payments qualify for this program.  However, if I knew of this program from the get-go, I would have only ever paid a total of $36k for what was $62k in loans.

For other discussion:  Any college debt repayment strategies or resources anyone want to share?  For you recent grads, make sure you take advantage of the time you have this summer to look into all your options!

justingoblue

June 11th, 2015 at 4:35 PM ^

LeBron, with a net worth $375mm from a quick search, doesn't have Dan Gilbert money. For a little different perspective though, he is wealthier than anyone with a major party presidential nomination in at least thirty years (depending how you count the Heinz fortune) and that will almost certainly hold true again next year.

It's semantics, but IMO $375mm is clearly wealthy. 

CarrIsMyHomeboy

June 11th, 2015 at 1:46 PM ^

This program is one of the few things that makes it financially acceptable to have an MD in your thirties and forties. Obviously the degree pays off later on no matter what, but these (minimum payment) x (10-year forgiveness) plans go the longest way to remove the soul-crushingness of $350K debt.



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EGD

June 11th, 2015 at 1:47 PM ^

My loan servicer used to track my qualifying payments for me; I'm not sure where it got the information to do that from though. A couple years ago my loans were assigned to a different servicer (Great Lakes) who doesn't track the qualifying payments. I haven't really looked into it though, since I'm on schedule to pay off my loans about six months before I would qualify for forgiveness.

ak47

June 11th, 2015 at 1:54 PM ^

I could be wrong but I think you could still have your 3 previous years count.  You just submit after 120 to be forgiven but you should be keeping documentation.  There isn't that much help out there since people won't be able to see what actually happens until 2017, since that will be 10 years after the program started.

I'm pretty sure I'm gonna get fucked though.  Did AmeriCorps after college and now work at a non-profit but will probably go back to graduate school.  Those 2 years in graduate school will push back my forgiveness by at least 2 years and I'm not sure if taking a break in making payments would cause you to be disqualified.

MGoBender

June 11th, 2015 at 1:54 PM ^

That's kind of what I was worried about.  I changed my repayment plan often, but instead of paying an additional amount on my auto-debits, I would just submit an additional payment.  If neither of those was larger than the standard 10-year payment, I don't think they'll qualify.  It's semantics, but we're talking a massive gov't program here.

I'll definitely do my best to try to get them qualified, but am not getting my hopes up.

FreddieMercuryHayes

June 11th, 2015 at 2:03 PM ^

Payments do not have to be consecutive (at least under the most recent terms as far as I am aware of).  So you can take a 2 year break, resume paying afterward and you would still qualify.  Think of it more as something you do at the end of paying.  The 10 year thing is just a common sense thing, but it's actually the 120 payments that count.  You have to make 120 payments working at an acceptable institution under an acceptable re-payment plan. 

dbockle

June 11th, 2015 at 4:02 PM ^

I discussed this with the people at Fedloan Servicing before. According to them, payments made under a different plan (one that does not automatically qualify for PSLF) will still count toward your 120 as long as the dollar amounts were equal to or greater than the amount you would've paid under a qualifying plan.

 

Eck Sentrik

June 11th, 2015 at 1:55 PM ^

I consolodated and entered the PSLF which moved me to Fedloan Servicing. My account on their website displays x / 120 qualified payments that have been made. They are also fantastic about letting you know when any paperwork needs to be submitted.

FreddieMercuryHayes

June 11th, 2015 at 2:04 PM ^

I believe it will.  But only once you apply to the PSLF program.  So you could continue to pay, then in 2018 decide to go for the loan forgiveness, apply to PSLF, FedLoan buys your loans, looks at all the paperwork and then says "you qualify and here's how many payments you made that qualify", or "no, you don't qualify".

pescadero

June 11th, 2015 at 5:13 PM ^

You must be REALLY well off, and really poor at financial planning.

 

Even in the states with the highest and most progressive state income tax structures - the average effective tax rate for all taxes (income, sales, property, etc.) combined is well under 40% even for the top 0.1% of earners.

 

 

 

 

gopoohgo

June 11th, 2015 at 8:00 PM ^

I live in Maryland. I pay 8.6% in state and local taxes. I have a very high salary, as does my wife. Maxing out one's 401k is the only way to reduce our pretax income. We are not lucky enough to pass through income through a corp, defer bonus income for tax advantages, nor do we make a majority of our income via capital gains. We can only deduct our home mortgage and property tax, and even that phases out at our income bracket. And I am NOT going to participate in retirement/life insurance programs to try to shelter pretax income. Given that my will be getting a pension, our future tax liabilities will also probably be pretty high. In addition, losing control of our money for a poor return is not worth any theoretical tax benefits But thanks for assuming I'm financially ignorant.

pescadero

June 12th, 2015 at 10:04 AM ^

Ok... so you're just REALLY, REALLY, REALLY well off and an outlier in that category.

 

I can't say i feel sorry for someone who is in the top 1% in the USA having to pay 40% in total taxes.

 

Erik_in_Dayton

June 11th, 2015 at 4:43 PM ^

...part of that is the result of the fact that we spend $15 billion per year more on defense than China, Russia, the UK, France, Germany, Japan, India, S. Korea, and Saudi Arabia combined.  So we do get something for our taxes - the world's most powerful military. 

ypsituckyboy

June 11th, 2015 at 2:03 PM ^

Just finished paying off $165k in loans in a little over 3 years. Feels incredible. If I could've done the loan forgiveness program, though, I totally would've gone that route.

ypsituckyboy

June 11th, 2015 at 2:13 PM ^

JD. Lived like a (poor) college student and put every penny I had toward the loans. Would've done a bit better had I saved instead, given the market increase, but my loans were between 6.5 and 8.5%, so it's not like they there cheap. Plus, I don't believe in trying to time the market. Figure financial self-discipline will pay off long term.

MGoViso

June 11th, 2015 at 2:32 PM ^

I wasn't expecting JD because I hear so much about a crappy climate for law grads, but it makes sense.

I like your mindset about shrugging off possible marginal gain by investing at a higher return than the debt is financed at - I have heard this advice several times, but I think it fails to offer a comprehensive understanding of risk. Just because the math theoretically works out in your favor doesn't mean that will happen nor that it is best for you and your financial management.

bluebyyou

June 11th, 2015 at 2:50 PM ^

I'd think that for most MD's not doing primary care, paying the loan off would have significant financial advantages over ten years of public service.  Lots of variables to think about, but if your debt load for MD's is typical (150K), you would be ahead by going to work in the private sector, living frugally and paying off debt asap.

MGoStretch

June 11th, 2015 at 2:58 PM ^

Unless you go into a pediatric subspecialty, in which case, you'll work more hours than a primary care doc, after more training, for which you'll be paid less money.  On the flipside, you're basically obligated to work for a not-for profit institution, so I got that goin' for me, which is nice.

FreddieMercuryHayes

June 11th, 2015 at 2:11 PM ^

Yeah, I did the calculations and it will save me about $170,000 once you figure in the crazy high interest over 10 years to do PSLF.  And I will still have paid about $130,000 in those 10 years back.  I was planning school to pay off the loans as soon as possible (which still would have taken like 1/2 a decade), but the PSLF is giving me the opportunity to actually start building a "life" earlier.  Like I am able put more into retirement savings, my wife and I are thinking about buying a house, etc with the extra money by using the reduced income based repayment and PSLF.

MGoViso

June 11th, 2015 at 2:03 PM ^

Not to be a pompous jerk, but my wife and I agreed to live well below our means, and we are on track to pay off $35K over an 18 month period. Appx. 50% of our household take-home income (we both work for non-profits) has gone to debt repayment.

Our credit is extremely good for being closer to 20 than 30, and we will have an incredible amount of flexibility with no standing debt. The peace of mind is easily the best part though.

MGoBender

June 11th, 2015 at 2:16 PM ^

That's awesome.  I was putting about 33% of take-home pay towards income - wish I could have gotten up to 50%, but I was able to knock out $20k in principle in about 3 years, which is pretty good.

However, now I've broadened the perspective a bit and I think putting more towards retirement, locking in a low mortgage rate are mathematically better moves.  Add on that a big chunk of my loans could be forgiven, and it seems the financially prudent move.

But I love hearing stories about people knocking out their student loans!  It can be done and is done all the time!

white_pony_rocks

June 11th, 2015 at 2:35 PM ^

yeah, I'll do income based and put as much towards retirement as I can while paying the interest amount on my student loans each month, eventually buy a house and when my forgiveness kicks in after 25 years and I get that big income tax hit I'll just refi on my house and pay it off that way